In our paper, we want to discuss the three major reasons of the failure of General Motors (GM), which has been known as one of the world’s largest automobile manufacturer. To begin with, GM used to operate under inappropriate financial policy. The strong support from government for national industries made GM mostly rely on the U.S. government to prevent bankruptcy. Secondly, GM started losing comparative advantages and falling behind industry average due to lack of innovation and ignorance of potential competition in the industry. Lastly, GM ended up with bankruptcy because the United Auto Workers had festooned the company with rigid work rules and extravagant costs. In addition to these reasons, we also want to discuss the implication of the failure from a microeconomic point of view.
1. Identify the market structure within which GM operates.
2. Explain the nature of Economis of scale and whether or not GM benefited from increasing returns or suffered from diseconomies of scale.
3. Provide a Breief explanation of GM ‘s failure to develop
and introduce fuel efficient automobiles and its consequent loss of market Share
to Toyota and other auto manufactures.
Outline of the Paper:
Hypothesis (Rationale) – Do this
1. financial policy
2. lack of innovation – Do this
3. labor union policy and costs