Sep 22nd, 2015 by Scott Hebert
There are four stages in the typical evolution of an industry: emerging, growth, maturity, and decline. Mature industries are marked by slow growth. Firms involved in a mature industry focus on market segments that represent high growth, further refining their strategy as a differentiator, and generally manage to cut costs by streamlining processes (De Kluyver & Pearce, 2012). As Daniel pointed out, this perfectly describes the cars and light truck industry (SIC 3711). From 2012 to 2013, GM experienced growth of 2.1%. From 2013 to 2014, growth slowed to 0.3%. During this same period, GM’s market share has been stable (General Motors, 2015). This suggests a market that is growing at an extremely slow pace. Common sense tells us that the cars and light truck must grow at a similar pace to the population.
Additionally, GM is performing all the actions necessary to try and be more competitive. Daniel mentioned that GM is working heavily to grow in China and other emerging markets. They are also developing innovations to differentiate their products from the competition. To meet the third demand of firms in a mature industry, GM is working to reduce costs by improving their processes. They refer to this program as “Operational Excellence” and have even created a new executive position focused on developing Six Sigma practices at GM (Colias, 2014). By implementing all three necessary strategies to compete in a mature industry, GM is a textbook example.
Daniel has speculated that the cars and light truck industry is hypercompetitive and he makes a strong case. Although Daniel is right and the industry does seem hypercompetitive, I think an argument can be made that the cars and light truck industry is actually fragmented. The main argument here is that fragmented industries are those in no firm has enough market share to control the industry (De Kluyver & Pearce, 2012). GM has the largest market share, yet they only control about 17% of the US market (Wall Street Journal, 2015). Clearly, if the largest manufacturer controls such a small percentage of the market, there is no single firm controlling the industry. Other than that, the industry does not portray other characteristics described by De Kluyver and Pearce. For example, the entry and exit barriers are not low and there are plenty of economies of scale (De Kluyver & Pearce, 2012).
Colias, M. (June 23, 2014). GM creates ‘excellence’ post, names new N.A. manufacturing head. Automotive News. Retrieved September 21, 2015, from http://www.autonews.com/article/20140623/OEM02/140629957/gm-creates-excellence-post-names-new-n.a.-manufacturing-head.
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.
Wall Street Journal. (September 1, 2015). Auto Sales. Retrieved September 21, 2015, from http://online.wsj.com/mdc/public/page/2_3022-autosales.html.