Case Study: GM

GM had experienced a level of success that developed a reputation as the world’s preeminent producer of automotive products. Because of its success, which produced substantial fiscal resources, the company was awash in cash flow, cash reserve, and lines of credit. GM’s management was the victim of 50 years of industry success. Management was characterized by a bloated, bureaucratic structure that impeded any attempt to improve the corporation. Top management established a fixed objective in the closed decision-making process towards GM’s strategic objectives. There was little to create a realistic Gap analysis, which made is easy to overlook the need to reinvent its management before undertaking the reinvention of the entire corporation.

Without the overhaul of its management, which had fixed objective also made their objectives unattainable. The corporation was in a state of out of control before the long-range strategic objectives were set in place. GM’s nominal long-range strategic objective “to use its vast financial resources to spend its competitors right into the ground” fell short on critical characteristics of practicability, flexibility, cost effectiveness, and accountability.

3. In what specific ways did GM’s decision makers confine themselves to the closed decision-making process?

• GM’s managers operated with tunnel vision when deciding its strategic objectives
• Ignored the Gap analysis
• Did not search for external and internal alternatives
• Disregarded most of the constraints that normally bound rational decision makers
• Cost limitations were not considered
• Cognitive limitations were not acknowledged
• Unilateral strategic choices were not considered
• Presumption of perfect information

4. How did GM deal with the risk-reward factor in its strategic

Top management had a high influence on the strategic decision made and had no doubt regarding the outcome, there was an unjustifiable presumption of perfect information and complete knowledge. The strategic decision to spend $40 billion to reinvent itself did not account for the new technology integration, which GM encountered many difficulties in integrating with existing technology. The implementation took place through the managerial hierarchy and budgeting mechanisms of the