“Fill all niches” product and brand strategy adopter, GM, is falling on hard times

As I read about General Motors going before congress and the recent story, “Big Three May Need to Trim Number of Brands“, published in The New York Times, I have been giving thought to the “a car for every purse and purpose” strategy made famous by Alfred Sloan. The proliferation of products and brands is made crystal clear by the graphic in The New York Times article, which notably only captures a portion of GM’s total global line-up.

As I researched more, I found “GM: Live Green or Die” a story from BusinessWeek where it details how long it took for the Richard Wagoner Jr., Chairman and CEO of GM, to pursue hybrids. It was Bob Lutz that had vision but was not just not heard.

So what went wrong?

A lot… Gas prices, growing discrepancy between unionized labor contracts and non-union labor costs, soaring health care costs for retirees and union workers, and the list goes on.

One area that has yet to be covered in depth is how the fill all niches strategy for GM products and brands has burdened them with inefficiencies and growing trouble to differentiate between products. It is not clear to me how this issue manifested itself over the decades, but the result of all of this is represented below in GM’s stock performance (Black line) as compared to Honda (blue), Toyota (yellow) and Ford (red). {CHART NOT WORKING – Apologies}

The bottom line:

A “fill all niches” strategy works as a defensive measure when the company can more credibly deliver a product than the competition and thus prevent them from gaining sales. These strategies also work best in high margin environments like CPG (e.g. cereal, cigarettes) where if you need to abandon your defensive strategy you are not burdened with high fixed costs like specialized workforces, plant and equipment. Finally, please do your homework on the strategic economic impact both positive and negative of executing this strategy. For help on this last point, seek out David Ravenscraft at Kenan-Flagler Business School, UNC Chapel Hill for help on game theory.