The big three roar back Harvard Case Solution & Analysis

The big three roar back Case Study Solution

Introduction

The three roar companies refer to Ford Motor Company, General Motors and Chrysler. As these companies own highest market shares in the automobile industry. These companies have been facing difficulties throughout their operating lifetime. All three companies are headquartered in Detroit, Michigan, which is experiencing highest economic stability at that time in United States.

In 1973, due to increase in oil prices and OPEC services, it increased the fuel prices. In addition, with the increase in fuel prices, the gasoline prices were also increased. Consequently, the Japanese automobiles were being used by the people, which decreased the reputations of all these companies. As a result, Chysler applied for government aid and received loan of $1.5 billion under federal loan guarantees. However, after few years, these big firms were earning higher profits, as the oil prices were decreasing. However, it increased the foreign competition of the company. Still, the companies were able to make record-breaking profits.

However, in the 2008 as economic recessions began, the as prices increased, which again decreased the company’s profitability up to 32% which I the lowest in 25 years. It has been analyzed that American’ companies were paying much higher benefits and salaries, compared to Japanese companies, which is the main reason of company’s expenses.

As a result, Ford recruited a highly experienced professional CEO from Boeing. Moreover, the company amended its business profitability. Therefore, they planned to borrow $23.5 billion from bank that will mortgage the company and dividends to shareholders would be suspended. On the other hand, General Motors started downsizing, but this step was too late and very little compared to the problems faced by the company. However, the strategies played by both the companies were failed and thus, both ran out of cash.

All three big companies tried to get government financing as bridge loans. Therefore, the biggest industry loan was made which totaled $36.4 billion. As this was insufficient for GM and Chrysler, both the companies filed for bankruptcy in 2007 and 2009, respectively. However. The government did not accepted their sue filing and thus, pushed their administration hard to make restructure planning on the governments expense.

As the business management, labor and government worked altogether, the company’s operation were revived. A new agreement created new salary structure, which lowered the salaries and save much expense of the company. Moreover, under this agreement the companies also focused to increase their product quality and advanced technologies. A new management was created at General Motors, which solved the company’s problem of poor management and replaced many of its employees in order to create better environment. In addition, an Italian automaker company purchased 30% shares of the company, which enhanced the company’s technology and efficiency.

In November 2010, the General Motors announced its IPO, which resulted in payment of government loan and increased company’s profitability. In addition, the Ford Company further invested $16 billion in the company, which enhanced the company’s technology and improved its long-term relationships. Moreover, it also helped the company to increase its product capacity and sustained annual growth.

Problem Statement

The economy of Detroit was highly dependent on these three giant companies. However, due to these fluctuations, the government was unable to achieve significant benefits from these companies. In addition, it also wanted to be analyzed that if this industry was able to increase its workforce in order to make stronger competition in new ear. In addition, the growth stability of these companies is also an important question.

Analysis

In order to make deep analysis of the city, PEST analysis framework has been used:

Political:

This industry and specially these three big companies are highly impacted by the change in any political structure, as these are the main sources for Detroit’s economy and development. Moreover, the fluctuation in the political structure would also effect company’s profitability and its workforce power.

The big three roar back Harvard Case Solution & Analysis

 

 

Economical:

These three big companies plays an important part in developing economy of the city, as their profitability is the main source for development of the city. As the Detroit’s economy has highly suffered due to decrease in their profits and sustainable growth. Furthermore, the economy of the city as well as country also plays an important part in development of these three giant companies. As the country’s economic development, help these companies to be revived again to sustainable growth

Social:

The social status of these companies are highest as these are the main pillar of company’s society. Moreover, these companies were facilitating their employees with higher benefits, which was playing an important part to improve the social level of the company and its employees.

Technology:

Advanced technology is the key of development of these companies. As they are automobile manufacturing company, advanced technologies and its maintenance is highly required. Moreover, the loans and equity financing was mainly invested in purchasing and maintenance of advanced technologies as it helps the company to increased its profitability along with the decrease in their operating expenses......................

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