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The recommendation given to GM is about more investment in Research & Development. It is worth stating that market environment in the car manufacturing sector has been dynamic in nature –market needs are changing rapidly. Competitors are more concerned about innovation -such as more innovative models of cars. According to Amison and Bailey (2014), importance and value of manufacturing flexibility in today’s market is greatly higher than the market observed decades back. Klink et al. (2014) also mentioned that when the world is going forward rapidly with smart interconnected devices, gaining manufacturing ability to apply innovation and adapt to customers’ requirements is an utmost solution. Especially, for the car manufacturers, the path to innovation fundamentally begins with the R&D. For example, in order to develop safe and secure products with long-term sustainability and affordable services under existing global market, simultaneously exploiting synergies in relation to pre-competitive issue, automotive sector in Europe has highly been involved in broader range of collaborative research and development projects (Van Den Hoed and Vergragt 2017). Investment in R&D will help GM to find more innovative features for their product.
Moreover, GM should not blindly invest in R&D as a need, objective will only work, if the organization pays attention to existing market issue. For example, carbon emission is major environmental concern. So, to resolve this environmental issue, organisation should focus on the research of combustion behaviour of engines to find the alternative fuels. This may include characterisation of fuels. Once GM is able to meet this goal of minimising carbon emission through R&D, it will receive governments’ back-up and reinforce its public image. Likewise, the further journey with R&D will help the brand to new trends of products and service in the car industry instead of adapting to existing trends.
Furthermore, it is worth stating that appropriate R&D effort leads to enhanced business process, which will further help to cut marginal cost as well as increase marginal productivity. In order to boast the importance of R&D investment, De Stefano, Montes-Sancho and Busch (2016) mentioned that existing players in the global car manufacturing sector should have a strong R&D into place; as per the existing data, manufacturers spend $102 billion annually on R&D. This certainly facilitates the techniques of adapting to dynamic customers’ needs as well as providing greater value for buyers.
For example, Tesla developed strongest focus on innovation with 14.35% of overall income spent towards R&D and this is compared to Fiat’s 2.64% of overall income on R&D (Perkins, and Murmann 2018).
Figure 1: Sales Ranking
(Source: Van Den Hoed and Vergragt 2017)
Therefore, General Motor should not take much time to join the race. Apart from the regulations, there is growing competition among the foreign companies like Honda, Toyota, and BMW in relation to energy efficient cars through R&D. The above figure is an estimated outlook of how GM can lose its rank in sales with lenient focus on R&D.
Amison, P. and Bailey, D., 2014. Phoenix industries and open innovation? The Midlands advanced automotive manufacturing and engineering industry. Cambridge Journal of Regions, Economy and Society, 7(3), pp.397-411.
De Stefano, M.C., Montes-Sancho, M.J. and Busch, T., 2016. A natural resource-based view of climate change: Innovation challenges in the automobile industry. Journal of Cleaner Production, 139, pp.1436-1448.
Klink, G., Mathur, M., Kidambi, R. and Sen, K., 2014. Contribution of the automobile industry to technology and value creation. Auto Tech Review, 3(7), pp.18-23.
Perkins, G. and Murmann, J.P., 2018. What does the success of Tesla mean for the future dynamics in the global automobile sector?. Management and Organization Review, 14(3), pp.471-480.
Van Den Hoed, R. and Vergragt, P.J., 2017. Institutional change in the automotive industry: Or How Fuel-Cell Technology is Being Institutionalised. In The Business of Sustainable Mobility (pp. 61-79). Routledge.
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