In this post, we are going to conduct Porter’s five forces analysis of General Motors to analyze how these critical five factors affect its competitive position and growth.

A Porter's Five Forces Analysis of General Motors

General Motors is among the largest and most well known automobile manufacturing companies in the world. It was founded in 1908 by William C Durant and the company was incorporated in 2009 as a Delaware corporation. Since its foundation, the company grew faster in its early days by acquiring several car companies. General Motors is headquartered in Detroit, Michigan, United States. The company has grown into a global brand with operations across more than 100 countries. It makes and sells cars, cross over, trucks and automobile parts. The company has divided its business operations into two main segments that include General Motors North America and General Motors International.

The General Motors family includes Buick, Cadillac, Chevrolet and GMC brands. It has also maintained a strong presence in the Chinese market through a local partnership. GM offers a wide range of vehicles, from compact cars to full-size trucks and luxury SUVs. Chevrolet and GMC brands focus on mass-market vehicles, while Cadillac is the luxury segment of General Motors. The company also operates manufacturing and assembly plants in North America, South America, Europe and Asia. The company is planning to transition to an all electric future and investing heavily in electrical cars as well as autonomous driving.

In this five forces analysis of General Motors, we will take a look at how Porter’s five forces affect the competitiveness of the company and its competitive position in the US and international markets.

Bargaining power of suppliers: Low

The bargaining power of General Motors suppliers is low. It is mainly because of the smaller size of the supplier firms as well as their position. These firms are scattered all over the world in various corners and are much smaller in size compared to General Motors. Moreover, most of these suppliers depend mainly on large manufacturers like General Motors for business. There is little to no threat of forward integration from these suppliers either. It is why the bargaining power of GM suppliers is low.

There are several factors that help General Motors moderate the bargaining power of suppliers. General Motors has managed a large and resilient supply chain. It has managed strong supplier relationships to ensure regular and continuous supply of raw materials and parts. The company is in a financially strong position and can switch to new suppliers easily. All these factors have helped General Motors, which is an established automobile manufacturer, the bargaining power of suppliers under control.

Bargaining power of buyers: Moderate

The bargaining power of buyers across various industry sectors including the automobile sector has increased to a significant extent driven by increased competition and availability of substitutes as well as other factors. Buyers consider several factors before buying vehicles and do a lot of research and comparison related to prices, features, safety, maintenance and brand image before making the purchase. Companies are aggressively investing in attracting and retaining customers in the automobile sector. Apart from product quality and innovation as well as customer experience, companies including GM and its rivals invest in customer loyalty programs to maintain higher customer loyalty.

Some of the factors that have helped General Motors moderate the bargaining power of buyers include its brand image, switching costs, marketing and innovation as well as customer experience. The company also offers a vast range of vehicles catering to different choices and preferences of various customer segments. Its brand image is also a key strength that helps moderate the bargaining power of customers. The company has maintained a strong brand image in the global market. It is known for producing reliable and high performance as well as stylish vehicles. The moderate switching costs also deter customers and moderate their bargaining power. GM has also maintained a strong focus on innovation. It is investing in electric mobility as well as autonomous driving, The Cruise segment of GM is dedicated to autonomous driving technology. GM enjoys high customer loyalty because of its focus on customer experience. Overall, the bargaining strength of GM customers is moderate.

Threat of substitutes: Moderate

GM faces a moderate threat of substitutes. The threat mainly arises from other brands making similar products as well as the public modes of transportation. However, car ownership is on the rise in key markets including the United States. In 2022 37% of the households in the US had two cars. It has proved to be favorable for leading car brands like General Motors, which sold 6.2 million vehicles in 2023. Increased car ownership has also reduced the threat from public modes of transportation.

However, the market is full of products made by rivals including Toyota, Ford, Hyundai, VW and others. The number of substitutes for General Motors’ products is high. Toyota, Volkswagen and Ford are among the other leading players whose products are very popular in the North American market.

Some of the leading factors that have helped General Motors moderate the threat from substitute products include brand image, reliability, switching costs, customer experience and the wide variety of choices. General Motors has maintained a strong brand image. It is among the most trusted brands of automobiles in North America. The moderate switching costs as well as strong focus on customer experience also moderate the threat from substitute products. Strong focus on innovation has also helped GM moderate the threat of substitutes.

Threat of new entrants: Low

The threat of new entrants in the automobile sector for established players such as General Motors is very low. It is because the barriers to entry in the automobile sector are fairly high. New companies trying to enter the market face several challenges. They need a lot of capital investment to raise the infrastructure as well as technological knowhow and human resources. New brands also need to invest in marketing as well as supply chain management and human resource management and marketing to grow their market presence.

However, the biggest challenge for the new players comes in the form of the competitive pressure from the leading and established players such as General Motors, Ford, Toyota and others. The established players are highly aggressive when it comes to maintaining their market share and customer base. These brands invest heavily in research and development as well as marketing. It is something that is not possible for new players until they have started operating profitably. Establishing a significant automobile brand takes time while regulatory and other pressures and the whole complicated set up makes it very complex for new players to enter at a local level and expand internationally. Overall, based on these factors the threat from new players for GM is low.

Intensity of competitive rivalry: High

The intensity of competitive rivalry in the automobile sector is very high. The list of General Motors competitors is quite long and includes several established names such as Ford, Toyota, Hyundai, Volkswagen, Honda, Nissan and others. Since the company is faced against several established players, it has to invest significantly in innovation and marketing to maintain its market share. All the leading players are engaged in an aggressive battle for market share. North America is the main market for General Motors. However, both in the US and international markets, the company competes against several leading players.

Some of the factors that have helped it moderate the competitive pressure include its strong brand image, leading market position, financial strength, focus on innovation and marketing as well as customer experience. While these factors have helped it moderate the competitive threat to some extent, the overall intensity of competitive rivalry is still high because of the presence of market leading brands like Ford, Volkswagen and Toyota. These brands are also investing heavily in innovation and marketing. Despite the strong competition, the brand has performed well and has entered into partnerships with local brands in China including SAIC and Wuling.

Conclusion:

General Motors is in a strong competitive position in the US and the global markets. In the Chinese market, it has partnered with local brands to grow its sales. The company is strongly focusing on electrical mobility since it believes that the future of mobility is electrical. It is strongly desiccated to innovation and investing in modern technologies including autonomous driving. It performed impressively in 2023 as its sales grew by more than 4%. In this Porter’s five forces analysis, it is evident that the competitive pressure is among the most significant forces faced by GM. However, the company has maintained a strong focus on innovation and a strong brand image. These factors have helped it manage the competitive pressure. Its resilient supply chain and focus on marketing have also helped the company maintain its edge. Its wide product range which caters to the different needs of various customer segments is also a key strength that gives it extra edge over the rival players.