GM's E-Business Strategy

The building up of inventory at the dealers made the company even more desperate, and most often it resorted to higher dealer incentives which reduced the company's profits significantly.

This again forced GM to produce more cars to compensate for the eroded profit margins.

Commenting on the dilemma GM faced in the late 1990s, John Paul MacDuffie, Professor, Wharton Business School, explained, "That belief in volume, and doing whatever it takes to keep volume, has driven a lot of their decisions. GM's labor costs are fixed, meaning they remain the same regardless of what the volume of sales is.

Analysts added that the reason for the decline in GM's US market share was that it had failed to introduce new models that customers wanted in quick time.

To address this challenge, GM made e-business a strategic priority. It wanted to reinvent itself by embracing e-business across its value chain.

In August 1999, after a year of research in collaboration with Forrester Research⁵, GM launched a business division called e-GM that was responsible for all of the company's websites and its OnStar communication system⁶...