GM Shock - System Failure

GM failed to adjust to Globalization system, which is why GM went to bankrupt, in my opinion.

What happened to the Cost Leadership of GM.

Harvard Business Prof. Michael Porter says that Differentiation, Focus, and Cost Leadership are the key factors for business success.

Can GM keep cost leadership while keeping majority of factories in the U.S, where the living standard as well as labor cost are the highest in the world?

Based on economic theory, GM will fail again unless it adjusts to fit into the Globalization System, which means the survival of the fittest.

Summary:
1. New System on old infrastructure – System Failure.
2. No more deregulation, please.
3. Revival of GM.
4. Can we live together comfortably?
5. Conclusion: Proposal of Adjusted Laissez – Faire

Background:

Business environment has been changed due mainly deregulation as well as globalization.
Majority of Major corporations have become global and source almost everything at most cost-justifiable way globally.

Many U.S. corporations moved factories out to developing countries in order to obtain cost advantage through getting inexpensive labor force.

The issue here is that factories moved out but factory labors stayed.

In classical economic theory, labor force can freely move to look for a job, which is not exactly true in globalization system.

Labor force can move freely within countries but not across borders. This is why I am saying system failure.

The U.S. has succeeded to create lots of high-tech jobs, which are not best suitable for factory workers and thus it bought in technical people from abroad because of efficiency.

First, Job mismatching occurred, second high-tech job vacancy was largely filled with immigrants or outsiders, the third the U.S. has got constipated.

In globalization system, labor force are supposed to freely move out, otherwise economic system or Laissez – Faire will not function properly globally.

In other words, if you bring in somebody, you are supposed to take out somebody.
Otherwise, you will get constipated.

A. Current Issues.

1. New System on old infrastructure – System Failure.
- In the long-run, we need global government.
- Business activities are global but governments and mobility of labor force are not global.

In other words, world has become one.

Since the U.S. keeps the highest living standard, the U.S. has become very expensive and prestigious residential and working area where only very competitive and high skilled workers can survive.

The U.S. is not comfortable place to stay for factory workers anymore, I guess.

Only high-tech high-skilled jobs will be left in the U.S. sooner or later in my opinion unless we stop further deregulation and more competition.

2. No more deregulation, please .

Deregulation and globalization made economic system more efficient due mainly to economy of scale.

Global Companies have got bigger and bigger and more and more efficient. However, pursuing for efficiency only also creates monopoly.

For example, we only need a couple companies by industry world wide. We only need search engine Google and yahoo, that’s it.

In automobile industry, we also need a couple of companies worldwide, which will happen if we keep deregulating our business.

This system makes very few people very happy and many people unhappy in my opinion.

Current system tries to raise standard of living such that we can consume more.

What for?

If we increase our consumption, global warming will be accelerated.

Could we live more friendly?

Why do we have to look for further efficiency?

3. Revival of GM

This is none of my business in the past but not anymore.

Whether you believe or not, GM’s future will affect not only your life but also mine because of globalization.

I am helping myself by raising my voice here.

A. The Name of the Game is Globalization.

Unfortunately only global companies will survive from now on.

Unless GM has become global, GM will fail again.

GM needs to regain cost leadership, which most likely means moving out some factories to developing countries such as India, Mexico.

Suzuki has a factory in India and Volks Wagen has a factory in Mexico.

B. Union is not a problem, job unavailability is a problem.

Labor force is supposed to move freely based on Laissez – Faire.

GM may want to find out to create jobs for union members other than factory job.

For example, Toyota has Toyota Rent A Car Service in Japan.

GM could open GM Rent A Car Service in Michigan, I guess.

My old friend Jim had taught English conversation in Japan even though he has a business major degree.

By the way, Japan needs a lot more Native English speakers for teaching English conversation at Japanese schools.

GM factory workers can also teach English conversation in Japan too, I guess.

4. Can we live together comfortably?

What is the purpose of our life?

Are we supposed to make very few people very happy and majority of people unhappy?

Should only very few people make tremendous amount of income while majority of people being not affluent?

That is exactly what we are trying to achieve through pursuing for efficiency only.

Do you know the end result of this?

We will face a danger of extinction because of global warming, since current economic system will accelerate it through efficiency and more consumption.

For the time being, I do not have an answer yet.

If Factory jobs move out to developing countries, factory workers also supposed to move out in the long run according to Laissez – Faire.

Actually it is not so bad to have international experiences.

I tend to believe that you will enjoy it if you are young enough.

5. Conclusion: Proposal of Adjusted Laissez – Faire

Since we all know what is wrong with current economic system, we should adjust it as follows:

a. Control population growth.
b. Control Monopoly.
c. Stop further de-regulation.

6.7 billion people on the planet are enough or too much.

De-regulation promotes efficiency but it will also create more competition and it will end up to a monopolistic situation.

We have already good enough living standards.

What is the reason to keep pursuing more efficiency?

In order to destroy Nature as quickly and efficiently as possible, right?

In my opinion, we have gone too far.

GM incidence is just a beginning.

Nissan and Honda could be the next since we will have only a couple of auto-mobile companies left worldwide if we keep pursuing more efficiency.

Therefore, please Control population growth, Control Monopoly, and Stop further de-regulation.

In other words, I am asking for Adjusting Laissez – Faire on necessary basis.

Thank you very much for reading.

Best regards.