Planning for the Chevy Volt

Closing Case 1: Planning for the Chevy Volt

1. What does the Chevy Volt case tell you about the nature of strategic decision making at a large complex organization like GM?

There are three dimensions to the nature of strategic decision making at a large complex organization like GM.

        Firstly, due to the fact that GM is not only large but also a complex organization, the flow of authorization will be through many levels. This dramatically caused the sluggish decision making process. To clarify, if there is an idea from the Research and Development Department, the idea has to initially be reviewed and approved by the managerial level, then passed on to the Head of the Department. The idea was not concentrated only on producing the new or innovative cars, but also on the available budget. Before the idea will reach the managerial level, the idea would not have been innovative anymore because other firm can take over the ideas and make it their comparative advantages, or even the first mover advantage. GM will fail to adapt itself in time if they still have a long line of authorization in decision making.

        Secondly, GM stuck with the idea that what have failed in the past will still failed. In 1990s, GM has launched an electric car, the EV1, which has failed miserably. The failure has left the company a huge scar emphasizing that electronic car is a failure. Once they learned that the electric car was a failure, the new project related to producing an electric car will be kept in the drawer. Lessons learned was a conservative way for doing business. The company should focus on why it failed, not just kept the production or the research about the electronic cars in the drawer. GM should also learned that both the internal and external factors and trends affect the success of a product, not only because the product was an electric car.

        Lastly, GM seems to lack the variation in its Research and Development Department because they heavily focused on what they invested. Moreover, they do not have a contingency plan in the case that the event/market did not go as they initially planned. GM wanted to make the best out of their investment. However, one size or one type does not fit all market or even suitable for all markets at all time. Therefore, GM should not only focus on the fuel cells that they have invested billions in 2003. The technology is now running at almost the speed of light, GM should also adapt itself with the changing environment as well.

1. What trends in the external environment favored the pursuit of Chevy Volt project?

The external environment that favored the pursuit of Chevy Volt are as follows:

1. Gasoline price

After 9/11 in 2005, the average retail price for the gasoline in the US has an increasing trend, which give rise to the factor that favored the pursuit of the Chevy Volt, the continuous rise of the gasoline price. The sharp downturn in the gasoline prices was only temporary due as a result of the credit crunch and sovereign debt crisis, then the price resume to the upward rising state after the temporary downturn.

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