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Cover Story
 

Enter ‘Tactical’ Strategy
In a Superlative & most Insightful analysis, B&E Documents how Corporate Leaders have Transformed their Organisations & Implemented continental strategic shifts that have Rewritten Global Management case books
Issue Date - 17/02/2011
 
Says Timothy Lee, President – International Operations, GM, “Wagoner’s successors – Fritz Henderson and Ed Whitacre – tried their hands on the wheel and infused a spirit of believing in smaller vehicles. This was very different from what Wagoner and his predecessors believed in. Then, Dan Akerson took over as CEO, and brought on table the customer-focus approach that was missing for years. Earlier, we used to think that GM will eventually become an engineering powerhouse. Now, I am convinced that the company will become a customer-focused company.” Apart from this, the company has also increasingly targeted emerging and high-growth markets in the past couple of years – shifting its head office to Shanghai is one big proof. Sample this: in 2010, for the first time ever, GM sold more cars in China than it did in US! And as far as India is concerned, from a puny share of under 1% in the compact, mid-size and executive segment in the country in 2006 (before the launch of the Beat), the company today commands 5.2% of the Indian market (figures for April-December 2010 as per SIAM). As for China, Lee says, “We closed 2010 with a 13% market share in China. We expect the market to grow by 10-15% in 2011 and we will grow our share.” News is that GM’s Chinese partner SAIC, has already inked a deal with GM India to form a JV in India. GM is serious about the BRICs, and that’s bad news for its rivals.

A decade back, a GM zero-gas burning car would have seemed unimaginable. Today it is not. The Chevrolet Volt is on sale in US since mid-December 2010, and will be sold in five more market by end-2011 – Australia, Brazil, China, Japan and Canada. Though numbers sold so far barely cross the 700 unit mark, what’s most important is that the Volt indicates an old, creaky GM’s willingness to bend and squeeze through to win over a “friendly, favourable” mask.

Though new product line is a concern yet for GM (Credit Suisse predicts that while GM’s portfolio was 40% new in 2007, the figure fell to 14% in 2009), Akerson seems to have this issue sorted out. The company plans to spend $7 billion in 2011 in R&D – 40% more than in 2010, to try and put in place some new products in quick time. The shift in mindset at GM has also played in favour of the carmaker’s financials. Having already reported net profits of $4.77 billion in the first three quarters of FY2010, the company is expected to record a topline of $140 billion in 2010 (higher than Ford’s $120 billion), easily landing it a spot amongst the top ten names on the Fortune 500 list of 2011.

The new GM looks better designed and given the speed at which it is advancing, there will be others who will want to take a shot at trying what the once symbol of American success did – change.

 
“We are a total customer-focussed company...”
A veteran at the company, Timothy E. Lee, President – Intl. Operations, GM, talks about new GM’s philosophies and strategies.

B&E: You were appointed as the President of GM’s International Operations during a phase which is counted amongst the worst in the history of GM. Much has changed since then. The new GM – what’s it like?
Timothy E. Lee (TEL): I have been at GM for over 40 years now, so I am typically from the ‘old GM’ as you might want to call it. So thankfully, even as we were moving towards becoming a ‘new GM’, I was one of the six chosen by the management to head the global sales for GM. It felt like I was representing every ‘old GM’ fellow – the retiree, every active worker from the shop-floor to my desk – at the new company. But to say what new GM is like, I would put it thus – all the cars and trucks we have in the marketplace today, be it the Cruze, the Beat, the Spark, all these products didn’t happen a day after we emerged from bankruptcy. They happened over a period of time. Our new business model is based on brand equity, profitable market share capturing, a focus on consumer sentiments, a concentration on better mileage vehicles, leveraging of growth opportunities in both mature and emerging markets. All these provide a low risk-high growth scenario for the new company.

B&E: How differently does new GM put the understanding of the emerging markets into practice?
TEL: The formula to succeed in any market is to understand consumer requirements & engineer those into a great product. And then, you can rely on a great manufacturing and distribution team to make them and sell them. That would call for customisation, which is happening in a big way in our company today. This is a philosophy that new GM sticks by. Wherever we sell, we are a total customer-focussed company – emerging or mature market.

B&E: So you mean to say that technology might even take a back seat in the future, if you have to choose between customer focus and technology?
TEL: Both would go hand-in-hand. Let me assure you, no other company has a Chevrolet Volt to offer. If you have a chance to drive the Volt, I am sure you will be unbelievably impressed with the performance of the vehicle. It’s a statement of the new GM’s technological capability to the world. However, what our new CEO has brought to the table is the customer-focus approach. The mistake we made in the past at old GM is that we looked at our business as an engineering company and not as a customer-focused company. But this is changing very fast.

B&E: China has been a big revenue earner for you. Is there any other emerging market on your radar?
TEL: In 2010, GM China’s sales volumes grew by over 40%. But this growth in China will slow down to around 10-15% this year. So overall, you will find us targeting all growth markets like India, Russia or even Vietnam.

          

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