There are a number of market models that industries take as they carry out their business operations in the business environment. This research paper will focus on General Motors and its market model.
General Motors is one of the well known companies in the business of automobiles all over the world, which was established in 1908 and has its business headquarters are in Detroit, Michigan in the United States of America. According to the business statistics in the automobiles industry in the world for the year 2008, General Motors has been ranked as the second largest automobile company in the world immediately after Toyota.
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General Motors being an international company has manufacturing business operations in more than 30 countries all over the world, whereby it has provided employment opportunities to more than 200,000 thousand people. In addition to that, the company sells and also services vehicles in more than 100 countries all over the world, whereby the types of vehicles that the company deals with include Cadillac, Hummer and Buick as well as Chevrolet among many others (Ramrattan and Szenberg 2007).
Following the current economic crisis in the global economy, the company has formed part of the many companies which have managed to seek financial help from the government of the United States of America as well as Canada, to enable it deal with the financial distress issues as the consumer purchasing capacity had gone down thus reducing the level of returns for the company. The company has also managed to carry out a number of collaborations with some of the companies, that are involved in the business of automobiles such as Suzuki as well as Isuzu and Toyota companies among many others.
The major problem that General Motors is facing in carrying out its business operations include the slow rate at which it is carrying out its innovation programs, that put at stake the business operations of the company if the issue will not be focused in the future (Davies and Brant 2006).
Supply and demand
The current demand levels as well as the supply of the General Motors products and services can be explained by the figure I. As the prices for the automotive products and services of General Motors reduce, the consumers of the products and services will purchase more of those products leading to movements along the demand curve. In the case of a reduction of the price of the products and services in the market place, General Motors will be willing as well as able to supply less of its products and services to the automobile industry. These effects will lead to the movements along the supply curve for general motors (Ramrattan and Szenberg 2007).
When the other factors that influence the demand as well as the supply of the automobile products and services are taken into consideration, such as the income levels of the consumers and the prices of the automobile commodities of other companies, the demand and supply curve will shift as a response to the changes of those facts. For example (Figure II), as the income levels of the consumers of General Motors products increases, more products and services will be bought from General Motors, which will cause the demand curve to shift to a higher position. When the prices of the competitors’ increases and those of General Motors are held constant, the company’s commodities will receive a higher demand which will lead to the upward shift of the demand curve.
As for the cases of supply, when the income levels of the consumers rise the company will be more willing and able to supply its products and services to the market which tends to be profitable. With the price of the related goods going high, the company would increase its supply to the market, so as to cause the other firms to reduce their prices to maintain equitable market returns (Baye 2005)
Considering the activities that take place in the automotive industry at the global market place, the following characteristics can be used to describe the automotive industry, such as it involves the activities of designing, developing as well as manufacturing and marketing of automotive products all round the world. Recent automotive statistics of 2007 have demonstrated that over 70 million motor vehicles, which is the composition of private vehicles as well as commercial vehicles, were manufactured by various auto companies in the world (Ramrattan and Szenberg 2007).
Considering the above highlights of the automotive industry in the world, they have demonstrated the characteristics of an oligopoly market model. Whereby in oligopoly, the market is dominated by a few number of producers or suppliers of products and services, which is Toyota and General Motors besides the other small automobiles manufacturers. The two companies have managed to acquire most of the companies in the automotive industry, thus establishing their current large market shares (Ramrattan and Szenberg 2007).
The automotive market under which General Motors operates in has set limits as to the prices, that can be charged for the various automotive products and services and other limiting trade policies like market sharing among many others. These actions have in one way or another regulated the quantity and quality of automotive products, which General Motors among other automotive manufacturers may undertake at various period of time in their business operations.
This has been the case of General Motors and ford in the automotive industry in the United States of America, whereby the government of the United States of America has involved the automotive companies in the long range union agreements, which have in large part regulated the operations of the automobile industry (Ramrattan and Szenberg 2007).
The demand curve in oligopoly
(Figure III) this demand curve under the oligopoly form of market demonstrates that, the demand for the consumers at the market place is considered to be elastic, when the prices that the other firms in same industry charge are held constant, this is in cases for analysis the demand above the kink.
In the case of demand below the kink, the consumers demand for the automobile products and services is considered to be inelastic as most of the firms in the automobile industry will tend to reduce the prices for their products and services, actions which are likely to lead to the occurrence of the price wars. Following such actions taking place at the market place, it will be profitable for a company like General Motors to produce at E.
At point E, the automotive industry is considered to be at equilibrium and this is the point which is termed as the kink, given that it connects the upward sloping and the downward sloping demand curves in the automotive market which is oligopoly in nature (Baye 2005).
Generally the firms in the oligopoly form of market structure will carry out their business operations under imperfect competition. Whereby as a result of the price competition which exists between the firms as demonstrated by the upward demand curve, the firms will adopt the use of non price competition so as to enable them derive much more revenue as well as the market share (Davies and Brant 2006).
As analyzed above, for a company under oligopoly arrangements to be able to match its operations with the others at the market place, there is need for that firm adopts innovative strategies which will be able to meet the dynamic needs and expectations of the consumers of their products and services. One of the ways of carrying the innovation plans is through the company restructuring programs, which will ensure that the company places its business activities in a strategic position that is able to adapt to the changes in the market place. This is important for a company like general motors that would like to sustain its profitable, business operations.
Prediction for future
The firms in the automotive industry in the global market environment are likely to be involved in a number of competitive activities, which will reduce the forces of oligopoly market model.
- Baye, M, (2005). Managerial economics and business strategy. 5th edition. McGraw-Hill.
- Davies, P, Brant, J, (2006). Business, economics and enterprise: teaching school subjects 11-19. Routledge.
- Ramrattan, L, Szenberg, M, (2007). Distressed US industries in the era of globalization. Ashgate Publishing, Ltd.
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