Management Economics: Factors Influencing Demand for General Motors

This article discusses the factors that influence the demand for General Motors vehicles and how they affect the market equilibrium. It explores the impact of customer preferences, price of substitutes and complements, and other variables on the demand for GM products. The article also highlights the strategies adopted by GM to overcome these challenges and maintain its market position.

MANAGEMENT
ECONOMICS
Assessment 1

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
1. Pick a business that you know something about or can find information on. Describe the business
and its main product or service................................................................................................................3
2. Identify Demand and Market Equilibrium. For each of the factors that influence Demand, describe
how your main product or service is affected. Does the factor indicate that demand is increasing or
decreasing?..............................................................................................................................................4
3. How factors influence the products and services of General Motors.................................................10
CONCLUSION.............................................................................................................................................13
REFERENCES..............................................................................................................................................14

INTRODUCTION
Management economics describes market management as a philosophy that allows a
productive combination of key components such as sales and spending, capital etc. In fact,
management within an organization follows this definition, which includes a variety of primary
ideas and decision making techniques, to address certain business-related issues (Teece, 2019).
In other words, M.E. is one of the key principles that distinguish various economic theories as a
contrast of market strategies in order to make rational decisions. Such choices are focused on
cost savings and productivity maximization by productive companies and outputs. The report
would focus on how the market economics principle is utilized by businesses to understand their
previous behavior and to predict potential company success. General Motors is selected in the
report that work with the car market as it is based in many regions, where availability of raw
materials and shifts in economic conditions have a greater effect on the product production.
Different factors which help to determine whether the demand for GM products is elastic or
inelastic are assessed in this report to explore this subject.
MAIN BODY
1. Pick a business that you know something about or can find information on. Describe the
business and its main product or service.
The automobile industry is a most established industry which extends its global
business commercially. Companies engaged in the manufacturing and delivery of
millions of vehicles, trucks and other transports per year in different nations (Sfeir-
Younis, 2019). Essentially, this will further grow a country's economies and lead greatly
to creating opportunities for millions of citizens explicitly or indirectly. For fact, the
automotive sector is often liable for gasoline or oil use. Therefore the selected automobile
field is more beneficial in the analysis of the principle of managerial economics, as it
analyses whole aspects essential to the study of them. For instance, General Motors (GM)
is one of America's biggest companies, which is selling its goods around the globe. A
variety of technologies are being produced for luxury car production, like Chevrolet,
GMC, and Cadillac, which enable this business deliver the highest amount of premium
vehicles annually in contrast with other companies.

Economic analysis has determined that GM is among the largest car firms in the world of
which revenues roughly. At over USD192.6 trillion in sales, 9.17 million quarterly
(General Motors accelerate transformation, 2018). This has also shown the competition
for GM goods is stronger than many businesses like Honda, Nissan, Volkswagen and
more.
2. Identify Demand and Market Equilibrium. For each of the factors that influence Demand,
describe how your main product or service is affected. Does the factor indicate that
demand is increasing or decreasing?
There are a range of factors which have ability to impact demand of various kinds
of products and services. This is so because a product is launched in the market and due
to which a vital amount of factors contribute in an effective manner such as customers
need, demand their perspective about product (Grimsrud, Graesse and Lindhjem, 2020).
Hence, this becomes essential for a company to focus on all those elements which have a
significant amount of impact. In the absence of consideration of these factors there can be
a lot of issues for a company to increase demand of products. Among all the factors,
customers are one of the main variable because they are only who can increase the
demand of product. Thus, it is important for above company to consider the below
mentioned factors in an effective manner that can raise demand.
The production and demand for a specific product or service, according to economic
theory i.e. rule on supply and demand, is interrelated. The two dominant concepts are

considered to be the balance of the economy that significantly impacts the quality of
goods and services. There are a range of factors in the automobile industry which affect
demand for goods such as private and luxury trucks. The price covers alternatives and
additional products, user preferences & desire, market perceptions, trends, etc. The effect
of these variables on general engine demand may be evaluated in the following ways –
 Price of substitutes- A substitute good is a good in microeconomics and can be used
instead of another (Varshavskaya and Kotyrlo, 2019). Through market philosophy,
substitutes are products that are equally or comparably viewed by customers, such that
getting more than one product leads the customer to desire less of the other product. If the
price of a commodity which complements a successful decrease, the necessary amount
decreases and production for the other decreases. Unless the prices of a substitute good is
declining, the sum needed for the good is rising, however the market for the good is
offset by declines. Changes in the prices of alternatives on a given sector may often
impact the same demand directly. The availability of substitutes for motors in the
automobile sector leads to a strong vehicle sales. To this respect, GM's substitutes include
traditional and more efficient gas engine cars, zero emissions and plug-in electric
automobiles, respectively. Although, due to the extremely advanced technologies and
fuel-efficient GM cars, these alternatives' risk level is regarded as a weaker point.
 Price of complements-This factor includes the price of goods such as automobiles and
multiple types of vehicles, which have an effect on the market of individual cars.
Therefore, as other manufacturers' costs, including those in conjunction with GM, are
modified, their biggest rivals are Volkswagen, Toyota and other. It would favor GM by
changing the demand differently, since, when purchasing vehicle concerns, consumers
would first favor from the picture of their consumer regardless of the expense.

 Customer taste & preferences- Customer preferences are characterized as subjective
(individual) tastes of various packages of products determined by utility. We require the
customer to identify the bundles of products according to their degree of usefulness. The
willingness to purchase products does not influence the like or disliking of a customer.
This variable creates a big difference in the demands of every commodity, whether

positive or negative. Therefore, consumers tend to purchase certain cars which are
powerful and use less gasoline, primarily because they know that pollution is that, mostly
as a consequence of high consuming automobiles. Another explanation for shifting
consumer tastes is creativity and high-tech innovations through which they allow the
procurement of automobiles built and produced according to their personal patterns and
living condition.
 Expectation of customers- Throughout the minds of customers, consumer preferences are
established on the basis of their own expertise and understanding, coupled with their prior
experience and expertise (Rouziou, 2019). Customers have both overt and implied
requirements with regard to the good and service obtained. Customers from the
automobile sector wanted to buy vehicles that provide improved protection and secure
driving. They strongly expect cars to satisfy their needs as inexpensive, based on their
income, fuel consumption, emissions, and so on.
 Demographic- Demographic data relates to systematically articulated socio-economic
statistics, including work, schooling, wages, marriage, born and mortality and more.
Demographic trends are already affecting the image of automobiles where the activity of
the customer is heavily influenced by driving sport cars, self-driving vehicles, mobility
and much more. Auto riders then travel quickly to towns and take advantage of the
journey by train. This would also continue to increase the automotive industry's share of
sales by rising vehicle production. According to statistical evidence, the market for GM
Motors is increasing rapidly because of the breakthrough of the electric cars. The
demographic transition, i.e. human migration in the emerging world, the United
Kingdom, Norway, the USA and other industrialized countries, allows the passenger cars
the largest share (ELECTIC VEHICLE SALES – VISUAL CAPITALIST, 2018).

Hence it can be analyzed throughout the evaluation of variables that market fluctuations and
consumer tastes influenced the demand for genetically modified automobiles (Koval and
Mikhno, 2019). Highly innovated vehicles, such as fuel economy, electric plug-in, health and
more, have continued to sustain consumer demand for their goods. It will also allow them to
fulfil the standards. The demand for General Motors vehicles is now growing steadily on the
market, and can also generalize revenue output across the last 10 years, as seen below –

Sales Performance of General Motors from last ten years –
Year General Motors Annual
Revenue
(Millions of US $)
2018 $147,049
2017 $145,588
2016 $149,184
2015 $135,725
2014 $155,929
2013 $155,427
2012 $152,256
2011 $150,276
2010 $135,592
2009 $104,589

2008 $148,979
The above mentioned table is indicating that sales revenue of this company has been increased in
an effective manner year by year (Ketokivi and Mahoney, 2020). The reason behind this is that
their efficiency for selling their products is exceptional. The demand of products is also higher
that is leading as more sales revenue. Though, there was drop in revenue during year 2008 to
2009 as their revenues have been dropped by $ 44000. The reason behind this drop is the
innovation of new products in this year. Basically, when a company changes their strategy or
policy to produce their products then there can be reduction in demand. It is so because
customers can take time about whether they should believe on company’s new product or not.
Once if product is satisfied and as per the need of customers then sales revenue increase in an
effective manner. So this was happened with above company during year 2008 to 2009. After the
year 2009, their revenue never dropped, it started to increase in an effective manner. So this is
essential for companies to make loyal customers so that demand can be raise and higher demand
is an indication of more revenue from products and services.
3. How factors influence the products and services of General Motors.
As there are many variables such as customer expectations, prices of substitutes and
complements, etc. that have a positive and negative effect on automotive demand for General
Motors vehicles. This business therefore continually updates its goods and services to overcome
these problems and to preserve its brand identity (Xia, Schaafsma and Hooker, 2020). For
instance: turning GM 'S dream into zero pollution, zero collisions and zero pollution on a
worldwide scale to reduce the risks of replacements and enhances. It will help pace up the
transition of product production market policy by improving substantial cost savings and
capitalizing on financial versatility in the future. It involves reforming the corporate product
production structure, a fresh emphasis on main assets and processing capacity. In turn, the

relevant company frequently intends to take proactive action to boost overall market efficiency.
Such initiatives will help to increase their income rates further.
According to the statistical results, GM is evaluated to retain its dominant role in the
automobile sector by constantly improving vehicles and introducing more revolutionary
technologies to fulfil the clients ' needs. GM also builds its workforce at global level and systems
that push the world best standards of manufacturing and state-of-the-art technologies that
enhance the efficiency and attributes of its cars. In this phase, the respective organization intends
to improve good quality component sharing within its portfolio for effective product growth, in
particular those cars that are not recognizable and accessible for a target market (SCHAEFER,
2019). Specific considerations in the changeover of goods involve extending the usage of
technological platforms for reduced time and expense production by combining their vehicles
and driving teams. General Motors has already invested in modern and highly effective
automotive design, in particular in SUVs, pickups and crossovers that exceed consumers ' needs.

It also aims to focus future automotive production, in particular in its fuel-efficient and battery
powered design of next decade, which would boost its world market volume. The above chart is
indicating that there are three companies market share has been presented in graph. This is
showing that graph of market share of Renault company has been increasing in current year.
Though in previous years, this graph was fluctuating. While in the aspect of general motors’
company, this can be find out that their market share is decreasing in current year. As in the
starting year of 2005 this was on peak and higher from two other companies. After year 2007,
this graph of market share started to decrease which lead to lower market share. Similar with the
Toyota motor company, their market share was also higher in the starting year 2005 to 2007 but
after that this share started to decrease in an effective manner. The reason of this lower
performance was poor customer services as well as higher prices of their cars. On the other
hands, Renault Company focused on enhancing their customer services and keeps the prices of
their products lower and constant that leads to higher market share. So, both companies including
Toyota and General Motors’ try to focus on innovative strategies which can contribute to higher
market share and demand of cars.
According to market regulation, higher costs for both goods and less consumers ' buying
demands have been evaluated (Akpolat, 2019). The requirement of vehicles or certain
automobiles is thus assumed to be elastic. Since cars are not included in the luxury segment.
People may postpone the purchasing of new cars, especially because their costs are too big and
outweigh their income. The desire or specific desires of citizens to get a luxurious vehicle in
contrast to certain goods is not necessity. Thus, it has a strong effect on the demand for vehicles,
as citizens in high-class areas require expensive and technologically advanced places to buy. Yet
citizens in underdeveloped areas or in the middle class also use fewer budget vehicles.
In this sense, General Motors has to pursue an aggressive price policy to improve global market
efficiency. This requires positioning products that give consumers strong rewards at the best
sales rates. General Motors has to consistently that the price of vehicles to grab the attention of
modern automobile lovers. Consumer interest cannot be obtained without the main message that
is clear and straightforward pricing (Parnell, 2020). In that end, it will adjust the slogan, such as
'the Total Value Pledge.' Luxury car lovers should obtain publicity.

CONCLUSION
The final economic strategy review concluded that the company should make successful
strategic improvements use core principles and hypotheses. A business may evaluate how
external conditions influence its profits and market rate and make adjustments appropriately
when introducing supply and demand regulations for goods and services. Throughout the
background of the automotive market, management economics points out that by exporting
millions of vehicles per year, the business plays a significant role throughout improving the
economy. Throughout fact, big businesses often contribute to the elimination in homelessness,
which eventually contributes to the growth in society.

REFERENCES
Books and Journals
Teece, D.J., 2019. A capability theory of the firm: an economics and (strategic) management
perspective. New Zealand Economic Papers, 53(1), pp.1-43.
Sfeir-Younis, A., 2019. Land and soil management: Technology, economics, and institutions. CRC
Press.
Grimsrud, K., Graesse, M. and Lindhjem, H., 2020. Using the generalised Q method in ecological
economics: A better way to capture representative values and perspectives in ecosystem service
management. Ecological Economics, 170, p.106588.
Rouziou, M., 2019. The contingent value of pay inequalities in sales organizations: integrating
literatures in economics, management, and psychology. AMS Review, 9(3-4), pp.184-204.
Xia, R., Schaafsma, A.W., Wu, F. and Hooker, D.C., 2020. Impact of the improvements in Fusarium
head blight and agronomic management on economics of winter wheat. World Mycotoxin
Journal, 13(3), pp.423-439.
SCHAEFER, M.B., 2019. SOME CONSIDERATIONS OF POPULATION DYNAMICS AND
ECONOMICS IN RELATION TO THE MANAGEMENT OF THE COMMERCIAL MARINE
FISHERIES1. Fisheries Economics, Volume I: Collected Essays, p.35.
Akpolat, H., 2019. Management, Business, and Economics. IJMBE, p.7.
Parnell, J.A., 2020. The contribution of behavioral economics to crisis management decision-
making. Journal of Management and Organization, 26(4), pp.585-600.
Ketokivi, M. and Mahoney, J.T., 2020. Transaction cost economics as a theory of supply chain
efficiency. Production and Operations Management, 29(4), pp.1011-1031.
Koval, V. and Mikhno, I., 2019. Ecological sustainability preservation of national economy by waste
management methods. Economics. Ecology. Socium, 3(2), pp.30-40.
Varshavskaya, E. and Kotyrlo, E., 2019. Graduates in engineering and economics: Between demand and
supply. Educational Studies, (2), pp.98-128.
Online
The Automotive Industry: Economic Impact And Location Issues. 2019. [Online] Available
Through:<https://www.industryweek.com/global-economy/automotive-industry-
economic-impact-and-location-issues>.
ELECTIC VEHICLE SALES – VISUAL CAPITALIST. 2018 [Online] Available Through:<
https://dutchreview.com/culture/society/5-illuminating-charts-from-visual-capitalist-how-
does-the-netherlands-rank/attachment/electic-vehicle-sales-visual-capitalist/>.

General Motors accelerate transformation. 2018. [Online] Available Through:
<https://investor.gm.com/news-releases/news-release-details/general-motors-accelerates-
transformation>