Assessing fit between the business level strategy and the industry of GM’s cars and light truck division
Sep 23rd, 2015 by Scott Hebert
The general consensus is that General Motors operates a Product Pyramid profit model. This model is characterized by offering a myriad of product options that cover a wide range of buyer preferences. High volume, low profit products make up the bulk of sales, with low volume, high profit products providing excellent margins (De Kluyver & Pearce, 2012). This is exactly the strategy that GM follows with their various brands. Each brand is focused on a different segment of the market and is priced accordingly. At the bottom of GM’s product pyramid is Chevrolet. This is the high volume base that earns tremendous revenue for GM. At the top of the pyramid is Cadillac with its focus on high-end buyers (General Motors, 2015).
GM also employs Profit Multiplier model. This model focuses on using a product, character, or trademark to drive revenue. As de Kluyver and Pearce point out, this profit model can be “a powerful engine for businesses with strong consumer brands” (2015, p. 107). GM employs this strategy with their drive to earn customers for life by building the value of their brand. GM understands that product innovation and design will bring new customers to the brand, but earning repeat business requires a focus on “ leading the industry in quality and safety and delivering on [their] commitments“ (General Motors, 2015, p. 29). Clearly, GM realizes that retaining customers through the strength of their brand is a powerful profit model.
De Kluyver, C. & Pearce, J. (2012). Strategy: A View From the Top (4th ed.). Boston: Prentice Hall.
General Motors. (2015). 2014 Annual Report. Retrieved September 21, 2015, from http://www.gm.com/content/dam/gmcom/COMPANY/Investors/Stockholder_Information/PDFs/2014_GM_Annual_Report.pdf.