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General Motors SWOT & PESTLE Analysis

ID : 52354053 | Feb 2018

COMPANY PROFILE - General Motors

Business Sector : Automobile

Operating Geography : North America

About General Motors : General Motors is an American automobile MNC that was established in 1908 by William C. Durant. It is headquartered in Detroit, Michigan. It manufactures full range of vehicles from cars to trucks. Chevrolet, Buick, GMC, Cadillac, Holden, Baojun, Wuling and Jiefang are its automotive brands which carry its operations in 6 continents across 125 countries i.e. North America, South America, Australia, Europe, Asia and Africa. It also has a subsidiary, General Motors Acceptance Corporation (GMAC) for financing, insuring, mortgaging and commercial financing. It has a market cap of $50.8 Billion (May 17). It has 181,000 employees across the globe as of 2017. General Motors is #70 in Just Companies of Forbes & #40 in Global 2000.

General Motors Revenue : $166.38 Billion (May 2017)

Competitive Analysis of General Motors

The SWOT analysis for General Motors is presented below:
Strengths
Weaknesses
1. Strong Financial Performance
2. Strong sales growth in International Markets
3. Strong footing in Chinese market
1. Complete product recalls
2. Dip in market share
3. High Dependence on Full size Trucks , SUVs & sales volume
Opportunities
Threats
1. Automated Driverless Cars
2. Advancement in Electronic Vehicles to cater to a larger customer base
1. Uncertainty around new Product offerings
2. Risk due to Global Economic conditions

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Detailed SWOT Analysis of General Motors

 

Strength

1. Strong Financial Performance: General Motors reported an increase in the Return on Invested Capital on adjusted net average assets from $39.8 billion in 2015 to $43.3 billion in 2016. For FY2017, the Return on Invested Capital improved by 25%. Net automotive cash provided by operating activities improved from $10 billion in FY2015 to $14.4 billion in FY2016. The total sales and revenue improved from $152356 billion in FY2015 to $166,380 in FY2016. Total assets also improved from $194,338 in FY2015 to $221,690 in FY2016. GMNA‘s sales in FY2016 industry sales to retail and fleet customers showed a 1.7% increase to 21.9 million units from 2015. It targets 10% core margins for sustained profit growth. This growth was driven by increase in consumer demand due to greater credit availability, low interest rates and low fuel prices.

2. Strong sales growth in International Markets: In FY 2016, 46.3% sales of the wholesale vehicle sales volume of automotive segment came from its international sales. The worldwide sales grew by 100% to 6247 thousand. In FY 2016, 45.8% of global retail vehicle sales came from Asia/Pacific, Middle East and Africa region. GME’s automotive industry sales to retail and fleet customers in Europe (excluding Russia) grew by 6.1% to 18.8 million units in Y2016 in comparison to 2015. GM has shown increased competitiveness in European markets despite Brexit.

3. Strong footing in Chinese market: General Motors sold a record high 4 million vehicles in 2017 which was an increase of 4.4%. Cadillac’s highest sales were recorded in China in 2017 & Chevrolet recorded double digit growth in second half of 2017.GMIO industry sales in China grew by 12.9% to 28.3 million units in FY2016 compared to the corresponding period in 2015. The wholesale vehicle volumes surged by 4.9%, recording growth from $3794 to $4013 thousand compared to the corresponding period in 2015. Total net sales and income grew from $44,959 thousand to $47150 thousand. The growth was driven by diverse product portfolio and technological advancements which met the diverse consumer demand.

Weakness

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Opportunity

This section is available only in the 'Complete Report' on purchase.

Threat

1. Uncertainty around new Product offerings: Automobile industry is constantly evolving. If General Motors fails to move in tandem with the changing customer demands then business could suffer. They have competition from the likes of Ford, Toyota, Fiat , etc. & there are high chances of new entrants in the industry. There is an increased pressure to innovate to take the first mover advantage in the upcoming segments. Inaccurate forecasts about technological improvements, market expansions and shifting customer needs may adversely affect sales, profitability & its competitiveness in the long term. R&D is a gradual process, a new car takes at least 2 years to develop, involves high fixed costs & still technological advances may not be commercially practical & feasible. Thus, offering new commercially viable products before their competitors poses a threat to GM’s market share and thus earnings to multi-trillion dollar TAM.

2. Risk due to Global Economic conditions: General Motors has sales across 125 nations which imply that there is more reliance on international supply chains for raw material, components, systems and parts. Any alterations in international political framework, laws affect production. High import tariffs on Mexican products, fluctuations in foreign exchange rate and interest rates, economic slowdown in operating regions affects sales and profit margins. An economic slowdown in China would negatively impact GM’s overall sales as Chinese market has by and large supported its growth trajectory. Entry barriers for trade, restrictions on local requirements’ procurement would increase productions costs and hence reduce profit margins. Therefore, any change in these parameters would create space for new entrants and reduce GM’s market share. Moreover, Brexit may create entry barriers for local sourcing or withdrawal from free trade agreement will increase.

References

1.https://www.gm.com/investors/contacts/gm-financial-information.html

2. http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_GM_2016.pdf

3. https://archive.epa.gov/epawaste/conserve/smm/wastewise/web/pdf/gm_factsheet.pdf

4. http://www.gm.com/mol/m-2016-sep-0909-environmental.html

5. http://www.industryweek.com/corporate-finance-tax/gm-reports-52-billion-loss-charge-us-tax-reform

6. https://www.gm.com/content/dam/gm/en_us/english/selfdriving/gmsafetyreport.pdf

7.https://www.ft.com/content/6bde8390-0b39-11e8-8eb7-42f857ea9f0977.8.https://www.gm.com/company/about-gm.html

8.https://www.gm.com/shop-for-a-vehicle/future-vehicles.html#/9.

9.https://www.bloomberg.com/news/articles/2018-02-06/trump-did-gm-and-ford-s-foes-a-major-favor-by-cutting-u-s-taxes

10.http://www.gm.com/mol/gm-mobility-solutions.html

The PESTLE/PESTEL analysis for General Motors is presented below:
Political
Economical
1. Government Regulations affecting Cost
2. Adverse Impact of Brexit
1. Risk due to Foreign Exchange Rate
2. Interest rate Risk
Social
Technological
1. Active Safety Arrangements for Driverless Cars1. Enhancing Connectivity & Data monetization
2.Applications on Android & App store for better user experience
3. Maven App to enhance on Demand Vehicle Access:
Legal
Environmental
1. Impact of Change in US tax laws 1. Sustainable Practices
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Detailed PESTLE Analysis of General Motors

 

Political

1. Government Regulations affecting Cost: Governments across the globe have different regulations for the automobile industry which affect cost and product portfolio which may challenge design, manufacturing and technology and may also lead to civil and criminal penalties. In view of the Environmental Regulation matters, German and European governments have ordered inquiry about CO2 emissions & emission enforcements respectively. Any changes in the regulatory framework will lead to more testing and re-testing of GM’s vehicles and scrutiny of their emissions control systems. Failing regulatory requirements implies increased cost, penalties and will sabotage the brand image. The outcome of these investigations is uncertain and so is the future of GM’s cars in Europe.

2. Adverse Impact of Brexit: General Motors will be affected by Britain's exit from EU due to change in free trade norms. Earlier cars were built and sold in Europe for free trade of automobile parts across Europe. Trump's border tax on Mexican goods affected operations and so will be the operations and costs of production in Europe be affected on UK's departure from EU. Brexit caused pound versus euro devaluation and affected GM's car sales. It may also divest the Opel-Vauxhall business. Regulatory costs will also increase and there can be capacity cuts which would affect profit margins and may lead to GM pulling out some of its models there. Opel and Vauxhall are its two major brands in Europe which have a market share of around 6% fell by 9% since 2000 which shows its weak footing in Europe. Thus, brexit will make market conditions difficult for General Motors.

Economic

This section is available only in the 'Complete Report' on purchase.

Social

This section is available only in the 'Complete Report' on purchase.

Technological

This section is available only in the 'Complete Report' on purchase.

Legal

1. Impact of Change in US tax laws : General Motors posted a loss of $3.9 billion during FY 2017 & a loss of $5.2 billion in the fourth quarter of 2017 . This was primarily due to the new tax law which cut the US corporate tax rate from 35% to 21% in December 2017. This change led to onetime costs which affected its earnings. After the enactment of the law, non-cash costs of $7.3 billion were recorded due to writing down of deferred tax assets. The loss is also due to the $7.3 billion charge tied to the changes in tax law. In the coming years , this rate cut will be beneficial for GM as the levies for repatriating overseas profits has also been cut. General Motors also bore a charge of $7.3 billion in the fourth quarter as the value of its deferred assets in loss has fallen due to cut in corporate tax cut. This implies that their tax payments will now fall.

Environmental

1. Sustainable Practices: GM is committed to reduce its carbon footprint and waste and to increase the recycling of its waste. It intends to achieve its target of meeting 100% of their electric power demand through renewable energy by 2050. They had the highest ever landfill free certifications and also achieved its landfill free target in 2016. General Motor also manufactures hybrid and fuel efficient cars . It launched a Do Your Part drive under which plastic water bottles are collected from 6 GM facilities and the residents of Flint and Michigan. This plastic is transformed for the benefit of society to 3 new materials. Its partnership with WasteWise has considerably reduced its waste by 35% and greenhouse gas emissions. In 2016 GM was ranked in the Dow Jones Sustainability Index.

References

This section is available only in the 'Complete Report' on purchase.

References

1.https://www.gm.com/investors/contacts/gm-financial-information.html

2. http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_GM_2016.pdf

3. https://archive.epa.gov/epawaste/conserve/smm/wastewise/web/pdf/gm_factsheet.pdf

4. http://www.gm.com/mol/m-2016-sep-0909-environmental.html

5. http://www.industryweek.com/corporate-finance-tax/gm-reports-52-billion-loss-charge-us-tax-reform

6. https://www.gm.com/content/dam/gm/en_us/english/selfdriving/gmsafetyreport.pdf

7.https://www.ft.com/content/6bde8390-0b39-11e8-8eb7-42f857ea9f0977.8.https://www.gm.com/company/about-gm.html

8.https://www.gm.com/shop-for-a-vehicle/future-vehicles.html#/9.

9.https://www.bloomberg.com/news/articles/2018-02-06/trump-did-gm-and-ford-s-foes-a-major-favor-by-cutting-u-s-taxes

10.http://www.gm.com/mol/gm-mobility-solutions.html

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General Motors SWOT and PESTLE analysis has been conducted by Kanupriya Sheopuri and reviewed by senior analysts from Barakaat Consulting.

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