An online monthly research publication by the Ivey Business School 

Previous Issues of Impact | Register for Impact

Volume 15, Number 6: Faculty Focus
June 2009

Listen to a 5-minute interview with Professor Roger More on market focus   Listen (4.3MB)   Subscribe

There is no better example that illustrates just how important market focus is than the case of General Motors. General Motors has an enormous and complex multi-level, interconnected corporate portfolio with divisions, brands within divisions, models within brands, market segments, manufacturing plants, supply chains, and dealers. GM’s website currently lists a product portfolio of over 95 cars!

In this issue of Faculty Focus, Roger More, Associate Professor of Marketing at the Richard Ivey School of Business identifies and explains the real and central cause of GM’s fall and how they can increase their chances of success.

Ashleigh Nimigan started by asking him how General Motors lost market focus?

A. General Motors is a very large corporation in the auto industry. What market focus means to them is that they should compete with cars only in market segments where they can both capture customers and capture cash flow from those customers – these are the two critical conditions.

There are about 18 fundamental market segments in the auto industry. General Motors not only competes in all 18 segments, but they have multiple car offerings across multiple divisions in virtually every segment. For example, in the mid-price car segment, they have seven different cars from six different divisions competing against, in the case of Toyota, Camry, well-positioned in that segment in such a way that it can capture customer choice and cash flow.

General Motors has six divisions. Each division essentially behaves as though it’s a separate company, offering cars across the entire price range, and in virtually all 18 segments. As a result, General Motors ends up competing with themselves more than they do with anybody else. In addition to this, they do things like rebadging, where they’ll have essentially the same car in several different divisions, wearing several different brands names, at more or less the same price point, competing for the same customers. An example is Pontiac Solstice and Saturn Sky. There are numerous other examples across General Motors.

Another way they lost market focus is through product proliferation –competing in all different segments and divisions competing with divisions. And this has a huge impact not only on the cash flow of General Motors, but on dealers and on suppliers. I’ll get into some of these impacts on dealers and suppliers later.

Q. How would you compare General Motors’ market focus to Toyota’s?

A. Toyota is an example of extraordinarily high market focus in the auto-industry, almost diametrically opposed to General Motors. If you look at the 18 fundamental segments of the industry, Toyota has one car per segment. They don’t have price cross-overs where several different models in a division are priced more or less the same, which General Motors has many of. They focus clearly on segments and they don’t have different cars crossing over different segments. And of course they have only one division, Toyota. They have an upscale division called Lexus.

In the example of mid-priced sedans, General Motors has seven cars competing in that segment, and Toyota has one! You can imagine the economies of scale, the effect on drive trains, on quality, on manufacturing costs, and the effect on dealers and suppliers when you have one well positioned car in a segment, as compared to having six different divisions, competing with seven different cars across all the different market segments.

Q. Can General Motors regain market focus?

A. Some think it may be too late. I would like to think it’s not. What I have done is suggested some directions they could take, and it appears they are taking:

• Reduce the number of divisions to two at the most, a low to medium car division and a high priced car division;
• Stop the rebadging: marketing the same cars rebadged under different divisions;
• Dramatically reduce the number of cars that they produce;
• Produce cars that have a chance of capturing significant share and making cash flow;
• Eliminate price cross-overs in the sense of multiple cars in the same price point.

More importantly perhaps, General Motors has got to get clear on its objectives. The objective isn’t how many cars you sell, what your revenue is, the objective is making net cash flow. The objective is really making cash flow.

Can they do it? That remains to be seen. They are currently hovering on the edge of a bankruptcy declaration, so we’re waiting with baited breath.


That was Roger More, Associate Professor of Marketing, at the Richard Ivey School of Business.