The demand for automobiles in the 21st Century underscores the substantial need for the industry’s growth in a bid to satisfy the market. Dominant automobile organisations such as General Motors, Chrysler, and Ford have expanded their operations to various regions of the international market with the aim of safeguarding their market share (Bedwell 2009).
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The likes of Mercedes-Benz, Toyota, Nissan, Subaru, Volkswagen, and BMW have ventured into the international market, thus creating unease among the big companies such as General Motors (Canis 2011). For this reason, some automobile companies such as General Motors have been engaging in intensive market research in a bid to improve their marketing and sales through an analysis of their competitors’ strengths and weaknesses.
This report will investigate the Australian automobiles industry with regard to Holden General Motors, which announced the abandonment of its manufacturing capacities and diverge into full importation of automobiles by 2017. A recommended venture will then be put forward after conducting a critical analysis of the environment surrounding Holden General Motors and identify strategies that would increase revenue.
Background to General Motors
General Motors was founded in 1908 under the leadership of William Durant (General Motors 2015). Having its base in the US, GM has ever since become a multinational company operating in not less than 120 countries. According to Vlasic (2011), the major brands that GM operates in include Cadillac, Chevrolet, Holden, Isuzu, GMC, Holden, and Opel. GM has been on the frontline towards facilitating technological advancements in the automobile industry with the continued innovation of electric vehicles, improved batteries, and power controls (McLaren 2012). The transnational company upholds the essence of corporate social responsibility that has seen it initiate developmental projects in sectors like health and education in six continents.
Recommended GM-Holden venture Proposal
Given that GM Holden will close its manufacturing plant in southern Australia and shift towards the importation of automobiles by 2017, venturing into new markets could also be a viable option. For this reason, merging with the Australian Transit Enterprises (ATE) would be a viable strategy that upholds the core values associated with GM.
The road transport network in Australia is full of opportunities especially in the commuting and freights aspects (Infrastructure Partnerships Australia 2008). In this light, Holden could seize the available opportunities by merging with ATE and build a formidable image in Australia. Innovative strategies include the importation of sophisticated commuter buses and freight vehicles from reputable organisations like GM. The company’s experience with GM would enhance the ease of navigation in the new venture.
The Australian transport industry is reported to have an average annual growth of 4.1%, thus earning over $52 billion in terms of revenue (Tourism Research Australia 2014). Holden’s partnership with ATE would translate into increased revenues, thus leading to the growth of the company. The leveraging of prices advantages in the road-freight transport sector would enable Holden to capitalise on the economies of scale.
Opportunities presented by macroeconomic factors would thus enable them enhance speed, reliability, and convenience (Laird & Bachels 2001). In this regard, the partnership would be in a position to turn the threats experienced earlier into opportunities that allow the companies to compete with other industry players (DePamphilis 2013). This aspect would allow them to compete profitably with water, air, and rail freight.
The partnership’s target market would be individuals and groups that use commuter and freight services. ATE has a competitive edge in the industry. The company owns over 900 vehicles that offer transport services. In March 2015, Keolis Downer, one of the largest tram systems companies in the world, acquired ATE after signing a $163 million deal (Keolis 2015). This move will enhance the GM’s competitive advantage since various sources of financing the operations would be available.
Pricing is an important aspect to be considered in the joint venture (Levinson & Khan 2014). Holden and ATE have to find the current Australian systems of road and railway charges facilitated by the PAYGO (pay as you go) approach. The National Transport Commission (NTC) in Australia recommends pricing according to the distance covered through the PAYGO system (Lee 2010). Fair pricing systems would enable the venture to be viable since it would set competitive standards owing to its formidable financial base.
The management of the new merger implies restructuring both Holden and ATE’s systems for efficient operations. The ATE’s operations director, Wayne Mountjoy, has had a remarkable record in enhancing the company’s services in Australia (ATE 2015). In this regard, operations management that entails the transformation of inputs into desirable outputs is a necessity for efficient and effective operations of the merger.
The management of production processes involving assembly of buses, trucks, trams, and vans would be the primary responsibility of Holden GM. On the other hand, ATE would be focused on the management of operations on the provision of services. In so doing, the two entities would play central interdependent roles that aim at transforming inputs in terms of materials, decisions, finances, and technology into outputs that are portrayed by quality road and rail transport.
Both Holden and ATE are expected to employ effective operation tools such as the DMAIC approach. In this light, Holden would lay down strategies that are geared towards cutting its assembly costs whereas ATE economises on the provision of quality commuter and freight services at affordable rates.
The proposed venture would likely alter the navigation of operations at Holding GM. This aspect means that Holden’s manufacturing plants in Southern Australia would be required to accommodate the production and service of buses. Operation managers at Holden would be required to cooperate with those at ATE before operations decisions are made. Therefore, the proposed venture would alter the management of operations at Holden GM due to the ATE‘s nature of operations.
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The joint venture would necessitate managerial changes at the top to accommodate the new aspects of operations. Therefore, a new board of directors would be constituted to facilitate efficient running of the venture to achieve success.
Mark Bernhard is the Holden GM’s new Chairman and Managing Director whose primary target is to oversee the company’s successful transition into a National Sales Company by 2017 (Holden GM 2015). On the other hand, Jonathan Cook is the ATE’s Group Chairman and Managing Director (ATE 2015). The two executives are expected to spearhead operations in the merger trough transformational strategies that would lead to collective success.
For the attainment of an efficient merger, consulting experts in the transport sector would be appropriate. GTA Consultants is a reputable transportation company in Australia and it assists in planning, designing, and delivering services pertaining the transport infrastructure. The services offered by GTA Consultants revolve around the project life cycle through advice on initial planning and feasibility studies that incorporate engineering techniques (GTA Consultants 2015). In this light, both Bernhard and Cook should seek GTA’s consultancy services for the execution of collaborative and cooperative roles that would streamline overall management of the merger.
Financial planning is an essential aspect of business success (Maister, Green & Galford 2001). The proposed venture ought to be guided by a budget that covers operational expenses in a bid to enhance financial stability. The following figure indicates financial projections in the form of budgetary allocations.
|Cost item||Projected cost $|
|Facilities and integration cost||500,000|
|Organisation program integration costs||200,000|
|Public relations, marketing and branding cost||120,000|
|Total projected cost||870,000|
Considering the above cost items in the budget will ensure that the two organisations are merged successfully. For example, considering public relations, marketing, and branding costs will aid in creating sufficient market awareness regarding the new entity. Conversely, budgeting for contingency will enable the organisation to cater for emergent issues during its formative operation stage (Donnelly 2003). Subsequently, the likelihood of attaining positive post-merger performance improves substantially. The process of formulating the merger budget should be a collaborative process between the two merging entities.
Financing the merger should be conducted in three main phases, which include the pre-merger, merger, and the post-merger (Pignataro 2015). The pre-merger phase should involve the conduction of due diligence in order to avoid post-merger challenges. In implementing the proposed joint venture plan, the management of the two organisations should ensure that sufficient funds are availed. The organisations should consider sourcing funds from their retained earnings in order to minimise the cost of the joint venture if credit sources are adopted (Bena & Li 2014).
Holden GM’s joint venture with ATE would face challenges in the future since incompatibilities may arise due to their diverse backgrounds. The following are some of the challenges forecasted and their solutions:
Conflicts of interest may arise between the two entities, thus resulting in divergent views.
Solution: Holden and ATE should lay down clear provisions that deal with events of conflict of interest. Identification, revelation, and action should be taken to counter such occurrences.
Lack of experience in a joint venture may affect ATE.
Solution: Holden should take a leading role in enabling ATE to familiarise itself with how joint ventures navigate since it has had similar experiences as a subsidiary of the General Motors.
Fines for non-compliance that could amount to millions of dollars
Solution: Ensuring that all the provisions of the National Transport Commission are adhered to and consulting agencies such as GTA Consultants could be strategic.
Volatility of transport and logistics costs due to the global market trends (Drewry Maritime Research 2009).
Solution: The merger should consider financial plans that consider price fluctuations. Additionally, efficiencies in the management of operations are essential for cost control in production and logistics.
Inability to integrate Holden and ATE systems
Solution: New strategies that are in line with the different processes should be implemented for compatibility purposes.
A harvest strategy is essential for the planning of unforeseen future events that may have implications on the financial position of the proposed merger. A harvest strategy entails a plan that reduces or eliminates investments in a particular business venture because the resultant revenues are not worth the expenses incurred (The Entrepreneurs’ Resource 2015). In this light, the proposed merger needs to have a strategy that deals with the scenario whereby the venture reaches its maturity, and there is no requirement for further investments. The following are some of the harvest strategies applicable to the Holden GM and ATE merger.
Since the workers, founders, and other stakeholders would still have the desire to keep the business even at its maturity phase, buying it out could work as a harvest strategy (Tolson & Younger 2009). An agreement would be struck amicably between the Holden GM and ATE financiers to let interested parties including employees to buy the company.
Selling the venture’s ownership to the public could be a good harvest strategy since it provides the merger with an opportunity for growth. This strategy gives Holden and ATE some control over the operations even after selling its shares to the public.
A business venture needs some sense of direction that is geared towards the attainment of a particular objective. The Holden GM and ATE merger needs to have set milestones that would act as a motivational target that triggers the motivation within the merger. Some of the milestones that the organisations should consider are illustrated in the following Gantt chart. The organisations’ management teams should ensure that the milestones are achieved within the set timeframe. Additionally, the organisations’ managers will track the success with which the joint venture is implemented.
|Performing the cultural due diligence|
|Financial due diligence|
|Realignment of the organisation structure|
|Integration of the new entity|
|Operational efficiency of the new entity|
|Degree of organisational identification with the new entity|
GM Holden’s impending closure of its manufacturing plants by 2017 and diversion towards the importation of automobiles would affect the organisation’s operations. This move may allow its competitors to take over a sizeable market share. A recommendation to a joint venture with the Australian Transit Enterprises will be beneficial, as it would enable the company to make use of its strengths and opportunities in the Australian economy.
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