Increase the market the market served by use of capital-intensive methods.

Inside General Motors
Elizabeth Wickham
Microeconomics
Southern New Hampshire University
Professor Criswell

General Motors as an international company that deals with sale and distribution of automobiles across the world incur various costs in its operations. These costs include:
Manufacturing costs
These are costs that can be traced to the final product the company produces. They include direct labor, direct material, direct expenses and manufacturing overheads. The manufacturing cost general motors company has been on decrease over time due to the enjoyment of economies of scale. Therefore, the profitability level has been increasing due to the reduction of cost. (Sloan, 1998).
Administrative cost
These are the costs associated with the general management of the company as a whole. They include; executive compensation costs, secretarial salaries expenses, depreciation of the building and equipment.
Administrative expenses of general motors have been increasing for last five years due to company expansion and the opening of new branches in other nations. This has eventually caused a decline in profitability levels
Non-manufacturing costs
They are costs that are not incurred in the manufacturing of products and services. They include; selling and distribution cost. They are costs that are necessary to serve customers orders and get the finished product into the hands of customers. Such costs include; sales commission, advertising costs, and delivery costs.
This cost has been reduced due to an expansion of the company with many branches. This has led to increasing in profitability levels.
The firm’s output decisions are affected by costs such as variable and fixed costs. Direct costs such as labor and direct material costs are can be traced to the final product the company produces. Fixed costs remain constant throughout the production process. If material costs of the products to be used in production are high, the company’s products will increase in price. This causes little demand for the company’s product in the market and hence low production capacity.
Similarly, if research and development cost are high, the company production cost will increase, and this might lead to low production due to lack of demand as a result of high prices in the market. However, research and development cost might lead to high output especially if it involves a gathering of relevant market information which can be used in the production process.
Low labor cost also can lead to high output levels which due to low production cost which finally leads to high product demand in the market due to low price levels.
Matching the results to its opponents, General Motors reported a decrease in the Total Revenue in the three-quarter 2015 year by -1.05 %, faster than a general reduction of General Motor’s competitors by -9.83 %, noted in the very same quarter. With remaining margin of 3.45 % of the companies having been reported to earn lower profits than its competitors.

Graph 1.
The figure above shows the market share of General Motors over an extended period. From 1920 to 1960, the market share has been increasing gradually while the import market share has been declining and getting as low as 6.8%. From 1960-2009, the G.M. market share fell while the import market share had shot up and bypassed the previous G.M. peak market share.

COMPANY NAME TICKER SEGMENT NAME OF TOT. REV. OF TOT. INC. MARKET SHARE
General Motors Company GM GMNA 71.55 % 106.29 % 58.11 %
Ford Motor Co F Ford North America Vehicle 58.95 % 82.87 % 41.89 %
Tesla Motors Inc TSLA North America – – –
General Motors Company GM GME 11.73 % – 33.14 %
Ford Motor Co F Total Ford Europe Vehicle 27.03 % – 66.86 %
General Motors Company GM GMIO 7.76 % 8.68 % 74.05 %
Ford Motor Co F Total Ford Asia Pacific, Africa Vehicle 3.11 % 4.89 % 25.95 %
General Motors Company GM GMSA 4.47 % – 53.46 %
Ford Motor Co F Ford South America Vehicle 4.45 % – 46.54 %
General Motors Company GM GM Automotive 95.61 % 92.54 % 50.51 %
Ford Motor Co F Automotive 93.54 % 71 % 43.24 %
Paccar Inc PCAR Truck 77.25 % 62.8 % 5.09 %
Tesla Motors Inc TSLA Automotive sales 91.01 % 96.69 % 1.16 %

Table 1
The table above shows different companies which are competitors of general motors. However, from the last column, it is clear that general motors have the highest market share compared to the counterpart. For example, general motors have 58.11% while Ford Motor Company had 48.89 percentage in GMSA and the trend is similar in all places. This shows that the company is leading and enjoys the economies of scale.
General Motors is a well-established company with a reputable name in vehicle dealing. This gives the company a strong standing in the market. The company doesn’t enjoy the conflicts of interest since only a few can get enough capital to compete with it. On top of it, due to its long existence, it enjoys the benefits such as economies of scale and customer loyalty. Only a few will trust new entrants into the market. This background is essential for the company’s future progress. The tomorrow of the company is confident and more secure because of the above reasons which greatly influence the potential of the company to withstand any competition that may arise in future. (Scherer, 1997).
The market structure for this firm is monopolistic. This is a structure where there is more than one firm, but one of the firms has very high market powers with over 50% market share. Due to this attribute. The dominant company can influence the market to a greater extent just like General Motors. Can also impact price since it supports over half percent of the consumers.
Since General Motors have a higher market share as compared to other companies in the market, it should develop strategies which will help it to manage its future production in the market.
Due high market share, the company should develop new methods of production, for example, production by use of the machine or employ more workers to increase its output to satisfy the large market share. (Klein, 2008)
To manage future production, the company also requires analyzing environmental issues. This includes internal environment to determine it strength and weakness. The company should use it strength to expand in the external environment by fitting them with opportunities in the external environment. It should also look at its weaknesses and find ways of turning them into strengths. It should also analyze its external environment to determine threats and opportunities available. It should match its internal strengths with the available opportunities in the environment to increase its production. Issues that pose risks in the external environments include; government policies, decrease in price levels and a threat of new entrants. The company should develop strategic controls such as premise control and implementation controls that will help it to monitor change in the external environment. This will help the company to develop its future production.
Since the firm has a large market share than its competitors, it implies that its profitability is also high since its outputs are high. This helps the company to enjoy economies of scale. Therefore, can finance the strategic plans recommended above. It can also increase the market the market served by use of capital-intensive methods. This due to high threats of new entrants.
Due to unstableness of demand in the market, and also, the existence of positive elasticity of demand, the firm should maintain it current pricing levels or reduce the production cost to minimize the price of its commodities to the market. Eventually, there shall be an increase in demand, and therefore, the firm can maintain its success.

References
Klein, B. (2008). Vertical integration as organizational ownership: The Fisher Body-General Motors relationship revisited. Journal of Law, Economics, & Organization, 4(1), 199-213.
Scherer, F. M. (1997). Firm size, market structure, opportunity, and the output of patented inventions. The American Economic Review, 55(5), 1097-1125.
Sloan, A. P. (1998). My years with general motors. Crown Pub.