Lesson 4. _____________________________________________________________

Date: 2015-10-07; view: 452.

General Motors was the world's largest automaker for 77 years. In 1979, it was also the largest private sector employer in the U.S., with over 618,000 employees. But it ultimately became a victim of its own success, as a bloated cost structure and poor management saw it rapidly lose market share to aggressive Japanese automakers such as Toyota and Honda, from the 1980s onward. As a result, GM's share of the U.S. market declined from 46% in 1980 to 20.3% by the first quarter of 2009. This very substantial erosion of market share, coupled with the company's huge overheads, resulted in GM's financial position deteriorating at an accelerated pace during the recession, with total losses of close to $70 billion in 2007 and 2008.

The moral of the GM story is that a company needs to update its product or service in order to counter competition, well before its financial situation deteriorates. GM was literally in the driver's seat for decades, but squandered its lead by virtue of being unresponsive to its customers' requirements. As a result, its gas-guzzlers steadily lost mindshare and market share to the more fuel-efficient Accords and Camrys.

Likewise, an individual also needs to keep skills current in order to remain competitive in the workforce. This assumes greater urgency at times when the unemployment rate is high and household balance sheets are under a great deal of pressure, such as in the second half of 2009, when the jobless rate approached 10%.