Hambrick And Fredrickson’s Strategic Diamond Model: Analysis Of General Motors

Hambrick and Fredrickson’s Strategic Diamond Model

Discuss about the Hambrick and Fredrickson’s Strategic Diamond Model.

Developing an effective strategy is very important for the growth and success of an organization. In today’s competitive business environment, each and every organization makes efforts to formulate impactful strategies and tactics so that they can survive in perspective industry. The resources, strategies and capabilities play a vital role in operations of a company so that it can beat the competing brands in global market. Nowadays, autonomous vehicle industry is growing with a significant growth rate. There are various leading players like General Motors, Tesla and Maymo (Google) which are posing competition for each other. To stay competitive in the automobile sector, these companies are implementing different strategies. For this essay, General Motors is taken into consideration.

Among all the companies, General Motors is the organization that is able to attain the largest market share in the market. General Motors is an American Corporation that is headquartered in Detroit. This automobile company is established in the year 1908. It manufactures trucks and cars in more than 35 nations. Currently, it has employed approximately 180000 employees who work for people by offering exclusive automotive vehicles (GM, 2018). As of the year 2017, General Motors was able to capture 18% market share in international autonomous vehicle market. This essay is focused on the in-depth research and analysis of one of the element of Hambrick and Fredrickson-Diamond Model. This essay emphasizes on the “Vehicles” element of Hambrick and Fredrickson- Diamond Model. The vehicles of General Motors are included in-depth and it includes how the company is using them to attain its strategy and objectives.

In the year 2011, James Fredrickson and Donald Hambric have introduced a Strategy Diamond that provides a brief way to reflect how the parts of a company’s strategy fit with each other. This is one of the most useful tools for business owners and managers in different variety of markets (Expert Program Management, 2018). However, there are various strategic models which are available for managers to formulate a strategy, but very few specify what elements should be included in strategic development process. Strategy is a significant part of organization’s business operations. Thus, this model includes the strategy formulation and assists to answer the questions about what strategy is and what it will be in the near future. This strategic framework recommends that effective strategies include different aspects of strategic process i.e. growth vehicles, target market segments, financial deliverables and path and speed of strategic change.                                 

Vehicles for General Motors

There are five pieces that make up this strategic diamond of Hambrick and Fredrickson. In brief, these components are discussed below:

Arenas:

This element of strategic diamond answers the question i.e. “where will the company be active?” It determines different aspects like geographic markets, product categories, market segment and value chain activities of an organization.

Staging:

Staging refers to the arrangement and speed of strategic actions of company that helps in recognizing the decision points since strategic actions do not have a single path (Austin, Bentkover, and Chait, 2016).

Differentiators:

Differentiators are the factors which make a company different from its competing brands. These factors are such as price, product quality, brand image, customization and service. It enables the firm to compete effectively.

Economic Logic:

This refers that every business strategy should describe the how the long-term profits will be produced. It is meant to put all the factors together in the name of profitability.

Vehicles:

This is an important component of strategic diamond as it affects how quick the company is able to grow (Burgelman and Siegel, 2008). Vehicles recognize the extent to which the strategy depends on internal growth efforts in relation to partnering with external partners. The below-report includes the in-depth analysis of vehicles used by General Motors to run its operations.

After clearing this that where the company will be operating its business, it is significant to determine that how to reach there. Working a leading organization in Autonomous vehicle industry, General Motors is using various vehicles to get credibility and presence in desired product categories, geographical area, and target market and value creation process. The organization has used different vehicles to enter into a new market or make profits in the domestic market. Generally, General Motors has used partnership, strategies alliance and acquisition. Each and every vehicle has different advantage and disadvantage depending on form of arenas the organization is making efforts to enter and the expertise and knowledge the organization has (Parker, 2016).

Before defining the vehicles of General Motors, it is essential to define its arenas. As mentioned above, organization is operating its business in global automotive industry and it deals in different product categories like automobiles, commercial vehicles and automobile parts. Currently, General Motors is serving in 6 continents with the dedicated and diverse workforce. In 2016, GM approached the milestone of selling more than 10 million vehicles internationally. With a strong distribution network, it is selling the automobiles through 20,000 dealers in 125 nations (GM, 2016). There are various different ways and strategies which have been used by General Motors as its vehicles to enter into international markets.

GM’s Partnership with Cruise Automation

The vehicles used by General Motors are stated below:

To develop its business operations in autonomous vehicle industry, in 2016 General Motors announced that it is purchasing Cruise Automation, San Francisco firm that is emphasized on manufacturing driverless cars. It is a clear sign that this automaker is seeking beyond including autonomous specifications toward the day when it creates fully autonomous robo-rides and places them in ride sharing network. There will not be any human driving and car ownership. GM has acquired this start-up for $1 billion so that it can jump start its self-driving operations (Bhuiyan, 2016). Through this partnership, GM intended to utilize the people and technology of cruise automation to quicken its efforts to manufacture vehicles which can run without a driver, possibly as part of ride sharing services.                

It was a profitable deal for GM as Cruise has been operating its business to develop software and hardware which can be installed in the vehicles to allow a car to drive itself on a road, without driver braking or steering. Now, both of the companies are working on their commercial autonomous ride-hailing service.

Apart from above vehicles, GM announced in January 2016 that it is going to introduce a car sharing service with the assistance of its strategic partner Lyft. The company has updated its strategy and other plans related to this new business. The company entered in this business by buying 9% equity ownership interest in Lyft for $550 million. The major objective behind this strategic alliance is to capture the enhancing demand of mobility-on-demand sector. There are various automakers which are engaged in similar operations. Tesla has been able to demonstrate the limited specifications of its autonomous driving technology (Smith, 2015).

In this way, these are the major vehicles which are using the autonomus vehicle manufacturing company i.e. General Motors. These vehicles offer various benefits to the company (Fagnant and Kockelman, 2015).

In addition to above vehicles, General Motors has used acquisition as the vehicle of strategic diamond. Acquisition is the transaction where one company purchases another company with the objective of more effective utilizing the resources and capabilities by creating the aqcuired one a subsidiary within business. The companies generally use this because it is less expensive than other methods like merger. After making investment in Lyft, General Motors has purchased the recently defunct player i.e. Sidecar. To stay competitive in emerging autonomous vehicle industry, General Motors  has aqcuired most of the assets, technoloies and employees of Sidecar for $39 million (Yeung, 2016). As a part of this deal, 20 employees of Sidecar have joined GM. It has included the chief technology officer and co-founder of company as well. In the future, the company will be using the techology of Sidecar to boost its initiatives in autonomous and ridesharing space such as the operations it has with the Lyft. Through this acquisition, General Motors is making an excellent puch amongst its competing brands to enter into ridehsharing and autonomous vehicle market. This company has been aggressive in its patnership and acquisition of Lyft and now Sidecar because the automotive sector is going through chaged at each level, from ride-hailing and connectivity of autonmous vehicles that may rule the urban areas in next 10 to 20 years (Smeets, Ierulli and Gibbs, 2016).

Strategic Alliance with Lyft

The above analysis of General Motors indicates that company is using different vehicles under its strategic diamond. These vehicles are working as effective strategies and assisting it to attain strategic objectives. The company has preferred to adopt above vehicles rather than others so that it can divide the risk with other parties and firms and to influence the strengths of each other. By using above vehicles, General Motors looks for a fundamental shift coming to the way companies drive and buy the cars (Corporate Newsroom, 2017). The company is using these vehicles so that it can compete with Uber. The above vehicles enable GM to have the resources and it has been acquiring the talented workforce with an eye to make self-driving cars a reality. The company is making a play to hamper Uber as Sidecar possessed a patent for method and system for tracking the transportation route that now belongs to General Motors. This patent can assist GM to acquire Sidecar as technology which is used to set up the rides and company is planning to slow down the expansion of Uber through enforcement of these patents. By establishing joint venture with different technology companies, the company is able to enhance its production system in various nations (Inkpen, 2018).

Moreover, this organization believes that joint venture with already established company in international market provides access to manufacturing, research and development and distribution channels. It makes easier to establish business in foreign market. The company is using strategic alliance with Lyft as its wants to diversify its products and services in other industry. It will enable the organization to increase its customer base in another sector as well. In addition to this, GM has acquired the suppliers so that it can have the auto part on time. It reduces the time and cost of production for General Motors Company (Fagnant and Kockelman, 2015). Thus, these are the major reasons that this autonomous vehicle industry giant is using these vehicles rather than others.

Autonomous vehicle industry is one of the most innovative and emerging industry that has various players like Wyama, Tesla, and General Motors etc. So, it is very important for the organization to use effective strategies and methods to stay competitive in the industry. Considering this fact, General Motors is focusing on different aspects of strategic diamond (Yan, and Luo 2016). The company is using different vehicles which support the organization to enter in new international market. Additionally, these vehicles assist it to enhance and diversify its business operations in domestic country. By entering into a joint venture, the organization is able to divide the risks and expenses associated with the operations. Under strategic alliance, the company can stay separate and independent. The above vehicles assist the organization to enhance its operations and increase revenues. It can be understood by seeing the growth and revenues of General Motors in overall automobile industry. The company is able to gain largest market share in the industry. Due to effective use of these vehicles, the company is able to expand its business in various nations. In this way, these vehicles are profitable for the growth and success of organization in autonomous vehicle industry (Litman, 2017).  

Conclusion  

In the limelight of above discussion, it can be concluded that it is very important for an organization to implement effective strategies if it wants to survive in competitive scenario. The above essay concludes that General Motors is one of the leading players in autonomous vehicle industry that has implemented various strategies and tactics. The company is using various vehicles like partnership, strategies alliance and acquisition. It has chosen these vehicles over others because these are profitable for its growth and success. Due to this, the organization is able to gain effective market share and customer base in international automobile industry.

References

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Burgelman, R.A. and Siegel, R.E., 2008. Cutting the strategy diamond in high-technology ventures. California Management Review, 50(3), pp.140-167.

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Inkpen, A.C., 2008. Knowledge transfer and international joint ventures: the case of NUMMI and General Motors. Strategic Management Journal, 29(4), pp.447-453.

Litman, T., 2017. Autonomous vehicle implementation predictions. Victoria Transport Policy Institute.

Parker, J. 2016, What to Expect from GM's Strategic Alliance with Lyft in 2016, Available from https://marketrealist.com/2016/02/expect-gms-strategic-alliance-lyft-2016 [Accessed on 17^th June 2018].

Smeets, V., Ierulli, K. and Gibbs, M., 2016. An Empirical Analysis of Post?Merger Organizational Integration. The Scandinavian Journal of Economics, 118(3), pp.463-493.

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Yan, A. and Luo, Y., 2016. International joint ventures: Theory and practice. Routledge.

Yeung, K., 2016, General Motors confirms acquisition of Sidecar’s technology and assets, Available from https://venturebeat.com/2016/01/18/general-motors-has-reportedly-acquired-sidecars-technology-and-assets/ [Accessed on 17^th June 2018].