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Demand and Supply Analysis of General Motors 

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Introduction
A general motor, an American automobile company, is one of the world’s most renowned automobile companies in the world. Its headquarters is located in Michigan. It is famed for being a manufacture of most of the household motor vehicle names such as the Buick, Chevrolet, GMC and Opel. In this paper we will have a look at the supply and demands of the company’s products, having a key focus on the forces that affect the both its supply and demand. The paper will also look at the price elasticity of its products (Price, 2013). It is through the analysis that we will understand the pricing and distribution strategy of the company in general.
The demand and supply model is usually used to determine the response at which vehicle manufactures respond to the changes in the prices of their products in reference to different factors in the economy. Traditionally, a reduction in the price of products results to an increase in the quantity purchase and inversely an increase in price results to the quantity supplied of products. However, this being the going notion of the demand and supply of product, not all products reacts in the same way. One of the products that is subject to a different reaction is motor vehicles, which happens to be the primary product of general motors
General motors’ Demand
Demand in its general definition is the quantity that consumers are willing to purchase at a particular price at any given time. Having this in mind, general motors as any other company is subject to the same rules of demand and supply. General motors have a large banquet of products ranging from its budget vehicles to luxury motor vehicles, the different products are subject to different demand subsets. The company has over the years had a relatively constant demand. The demand has been constant i.e. it has been increasing with a direct relation to the growth in the gross domestic product of the country. The related increase in the prices of the prices of general motors has resulted to a positive response of the company’s products by the American and worldwide consumers (Online.wsj.com, 2015). General motors falls under the category of cyclical industries because it deals with durable products. Cyclical industries usually have one aspect in common; they are usually sharply affected changes in income in the short run. Such goods have been noted to be very vulnerable to slight changes in the macroeconomic conditions.
Notable is the high income elasticity the products have in the market, a slight change in the incomes earned results to a large change in the quantity demanded. The thought is attributed to the fact that the company’s products are usually classified as not necessities. In addition to the income elasticity the products hold they also have significant price elasticity, they are affected in both the short run and the long run with a price change. However, not all products in the general Motors are affected by price elasticity. The products that fall in the luxury category have a totally different elasticity which inverse to the others. The demand for the products increases with the increase in price forming a demand curve similar to a supply curve.
General motors being one of the most prolific automobile companies which significantly follow the demand and supply aspect. But, just as the other companies General motors traditionally follows the ethical process of demand and supply (Encyclopedia Britannica, 2014). Demand trend or better to say demand forecasting helps to estimate the product quantity or the service quantity that will be purchased by the consumers. In this scenario of general motors it can be find out that the demand in trend is quite constant irrelevant of the increase in the prices of the general motors, until the fact the product of general motors are considered as necessity. The automobile industry is a flexible one which is directly related to the GDP of the country along with the price elasticity of the product. General motors have different products for its wide range of different consumers. There are different categories of people who opt for different products. For some it can be a necessity but for some it is a luxury to so all the products with general motors value different price elasticity. With the change in price of the products, the firm will face a huge impact along with the demand curve both in long and short run.
So, in this scenario general motors have to use the demand forecasting techniques to figure out the price estimation which will be suitable to keep a constant demand following. So it mandatory from general motors prospective to figure out the pricing of the products which will enable the demand to be constant (General Motors - global market share from 1999 to 2013, 2015).
SALES YTD SALES % MARKET SHARE
February
2015 February
2014 % Chg 2015 2014 % Chg February
2015 February
2014 YTD
2015 YTD
2014
General Motors Corp. 231,378 222,104 4.2 434,164 393,590 10.3 18.4 18.6 18.0 17.8
Total Cars 71,325 89,813 -20.6 136,720 160,373 -14.7 5.7 7.5 5.7 7.3
Domestic Car 71,227 89,491 -20.4 136,498 159,851 -14.6 5.7 7.5 5.7 7.2
Import Car 98 322 -69.6 222 522 -57.5 ... ... ... ...
Total Light Trucks 160,053 132,291 21.0 297,444 233,217 27.5 12.7 11.1 12.3 10.6
Domestic Truck 160,053 132,291 21.0 297,444 233,217 27.5 12.7 11.1 12.3 10.6

General Motors supply
Supply can generally be defined as the quantity of goods or services that a particular producer is willing to bring to the market at a particular price. As earlier noted, General Motors mainly deals in durable products i.e. motor vehicles. The company is subjected to a relatively elastic supply in both the short run and the long run. This is generally because the products they sell can be reused over and over. Therefore, with an increase in price there is a high probability for the consumers to reduce the quantity of products they purchase and as a result causing an oversupply in the products and as a result causing the price of the products to fall. With the reduction of the price and the high elasticity of supply the products the company uses in production of the motor vehicles the quantity supplied drastically reduces (Florian, Gendreau & Marcotte, 2002).
Notable is the continued differential in the supply elasticity in the different products that in the general motors. The differential was noted during the recent credit crunch where traditionally the price elasticity of their high end product was not affected by the changes of income the products under the category suffered a notable income elasticity which was not as usual (Gm.com, 2015).

The above stated figures show the different types of cars that have been sold to the consumers on a monthly basis. There are few instances that show the percentage change from the year March 2014. This prolifically leads to affect the price elasticity of the product of the company. The high prices have virtually affected the products demand with less consumption from the consumers (Information, 2015). This directly affects the supply elasticity as the stock of the products goes much higher i.e excess supply of goods rather than demand.

The above stated figure shows the sales invoice of the general motors of the year 2014-15. It can be easily figured out the percentage change in sales. The change has been negative just because of the price elasticity as the prices of the product have been raised (Wikinvest.com, 2015). The percentage change clearly focuses on the sales that has diminished has also affected the supply elasticity along with the market share due to certain increase in price.

Conclusion & Recommendations
In conclusion, from the analysis of the demand and supply, General Motors products have a relatively high price and income elasticity of demand. The elasticity in demand has caused the company to adopt a pricing strategy that is focused on fluctuation. Their prices in relation to the real gross domestic product should maintain a relatively stable order in terms of quantities supplied. In relation to the supply, the company has tried to maintain a high elasticity in demand. The elasticity helps the company avoid an oversupply of their products and as a result maintaining a stable price.
From the scenario it can be well seen that the market share of general motors have been affected in huge terms just because of the less demand due to the increase in price. Basically from my point of view it would be better to figure out the market analysis so that the price of the products must be moderate which will impact the sales and demand both of the company in positive terms.



 

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