The difficulty lies, not with the new ideas, but in escaping the old ones.
John Maynard Keynes
This essay explores with the theory of path dependence why some organizations stick to in the long run loss-generating strategies and why do some companies miss to develop new strategies to adapt to changing market conditions. Path dependence can be defined as a dynamic theory assuming that initial events can increasingly restrain present and future choices. Due to the current market situation this essay will connect the theoretical considera-tions of path dependency with the crisis management. On the basis of the main literature and with applying the theoretical model of Burgelman it will be examined in how far does the model of path dependency explain the failure of the insolvent automobile manufacturer Gen-eral Motors. In this regard some limitations of the Burgelman-model were discovered.
Table of Contents
1 Introduction
1.1 Problem outline and objective
1.2 Course of work
2 Theoretical Background
2.1 Crisis Management
2.2 The strategic process as aperiodicity: induced vs. autonomous strategic action
2.3 Path dependency and the basic concept of strategic paths
3 Strategic Consequences of co-evolutionary Lock-In
3.1 The application of Burgelman’s insights on the example of General Motors
3.2 Recommended Procedures for GM
4 Critical Reflection
4.1 Critical reflection of the path dependence theory
4.2 Limitations of Burgelman and recommendations
5 Conclusion
Appendix
1 Development of the oil-price
2 Development of the petrol price
3 Development of the Share Price of General Motors during the crisis
4 Number of Insolvencies from 1999 until 2009
5 More detailed explanation of path dependency
6 Reasons of GM´s failure
Objectives and Core Topics
This essay investigates why organizations persist in loss-generating strategies and fail to adapt to changing market conditions by applying the theory of path dependency and Burgelman’s evolutionary framework. The primary objective is to analyze the bankruptcy of General Motors, explaining how past strategic decisions and structural inertia contributed to its failure, while exploring potential pathways for organizational renewal.
- Path dependency and strategic lock-in
- Crisis management and turnaround strategies
- Burgelman’s evolutionary framework of strategy-making
- Co-evolutionary lock-in in the automotive industry
- Strategic analysis of General Motors' failure
Excerpt from the Book
3.1 The application of Burgelman’s insights on the example of General Motors
General Motors Corporation (GM) is a multinational automobile manufacturer founded in 1908 and headquartered in the United States. GM was the world's largest automaker as measured by global industry sales and has been the global sales leader for the last 77 years. As of 2008, General Motors employs about 266,000 people around the world. It manufactures its cars and trucks in 35 different countries and sold them under the brands of Buick, Cadillac, Chevrolet, GM Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall, and Wuling. Today GM has reduced its brand portfolio down to five nearly four different brands: Buick, Cadillac, Chevrolet, GMC and Hummer (which is up for sale but GM finds no buyer).
What put this huge company — it once sold more than half the cars in the U.S. market and now controls less than 20% — in such a hole was a series of missteps, an inability to change lanes quickly when the market or government veered.
The insolvency of GM was the result of long-lasting mistakes and key missteps which effects were boosted by the financial crisis. GM did a lot of mistakes which led the company into insolvency.
Summary of Chapters
1 Introduction: Defines the research problem regarding corporate failure in the 2008 financial crisis and establishes the objective of analyzing General Motors through the lens of path dependency.
2 Theoretical Background: Introduces the concepts of crisis management, Burgelman’s evolutionary framework of strategy-making, and the theory of path dependency as tools for analysis.
3 Strategic Consequences of co-evolutionary Lock-In: Applies the theoretical models to the specific case of General Motors to explain the strategic missteps that led to its insolvency.
4 Critical Reflection: Examines the limitations of applying path dependency and Burgelman's model to complex, multi-brand companies like General Motors.
5 Conclusion: Summarizes that successful organizations must balance autonomous and induced strategic actions to avoid long-term lock-in and insolvency.
Keywords
Management of Change, General Motors, Path Dependency, Crisis Management, Strategic Lock-In, Burgelman, Automotive Industry, Strategy-Making, Innovation, Insolvency, Strategic Path, Co-evolutionary Lock-In, Corporate Failure, Turnaround Management, Organizational Inertia.
Frequently Asked Questions
What is the core focus of this essay?
The essay explores why companies continue to pursue strategies that result in long-term losses and why they fail to adapt to changing market requirements, using General Motors as a central case study.
What are the primary theoretical themes covered?
The work focuses on the theory of path dependency, crisis management, and Burgelman’s evolutionary framework of strategy-making.
What is the main research objective?
The objective is to determine how the model of path dependency and Burgelman’s insights can explain the insolvency and failure of General Motors.
Which scientific methods are utilized?
The study employs a deductive analytical approach, applying established management theories to historical data and strategic decisions made by General Motors.
What does the main body of the text cover?
It provides an in-depth analysis of GM's history, the strategic consequences of co-evolutionary lock-in, and the specific reasons for the company's failure, such as the overreliance on SUVs and the neglect of alternative propulsion technologies.
Which keywords best describe this document?
Key terms include Path Dependency, Crisis Management, Strategic Lock-In, and Corporate Innovation.
How does the author explain GM's inability to adapt?
The author argues that GM became trapped in a "co-evolutionary lock-in," where previous success led to structural inertia and a focus on core business models that were no longer viable.
Does the document offer solutions for GM?
Yes, it recommends that GM view insolvency as a chance for renewal, specifically by listening to market signals and transitioning toward mass-producing alternative fuel vehicles.
- Quote paper
- Susann Carmohn (Author), 2010, An analysis and explanation of the failure of General Motors on the basis of the theoretical framework of path dependency in the field of Crisis Management, Munich, GRIN Verlag, https://www.grin.com/document/151790
