Suppose General Motors Wants To Replace One Of Their 434324

Suppose General Motors Wants To Replace One Of Their Traditional Lines

Suppose General Motors wants to replace one of their traditional lines of vehicles with all-electric models. How could GM use game theory to identify and assess the major risks to this decision? Identify two major risks that would result from GM converting an existing line to an all-electric line. Provide a brief discussion of each risk, and your assessment of the levels of inherent, current, and residual risk, using GM’s five-point scale. 1 Page without reference APA Format Scholarly reference needed

Paper For Above instruction

In the rapidly evolving automotive industry, General Motors (GM) faces significant strategic decisions concerning the shift from traditional internal combustion engine vehicles to all-electric models. Implementing such a transition involves not only technological and operational challenges but also complex strategic risks that can be rigorously analyzed through game theory. Game theory provides a structured approach for GM to anticipate competitive responses, evaluate potential outcomes, and accordingly manage inherent and residual risks associated with this strategic shift.

One primary risk GM faces in transitioning to all-electric vehicles is market acceptance and consumer adoption. Despite the increasing popularity of electric vehicles (EVs), consumer preferences remain varied and influenced by factors such as price, range anxiety, charging infrastructure, and brand loyalty. The inherent risk here is high because the market response is uncertain, and competitors may adopt aggressive strategies to capture market share. The current risk is moderate, reflecting ongoing market developments and existing consumer skepticism. Residually, as the market evolves, acceptance could either improve or decline, making this an uncertain but critical risk period for GM’s transition (Faria et al., 2020).

A second significant risk involves competitive retaliation and strategic responses from established automakers like Tesla, Toyota, and emerging EV startups. These competitors are actively investing in EV technology, charging infrastructure, and brand positioning. The inherent risk is high, as intense competition could lead to price wars, increased marketing costs, and innovation races that diminish profit margins. Current risk levels are also considerable, given existing competitive behaviors and technological advancements. Residual risk involves the potential for disruptive innovation by competitors or market entrants that could negate GM’s early advantages, should the company fail to stay ahead technologically or strategically (Cheng et al., 2022).

In assessing these risks through GM’s five-point scale, the market acceptance risk can be rated as high (4), considering the uncertainties and consumer behaviors. The auto industry’s competitive retaliation risk also ranks high (4), given the aggressive posture of competitors and technological developments. Both risks require strategic management, including investments in consumer education, infrastructure, and innovation. GM’s use of game theory can facilitate scenario planning, anticipate competitors’ moves, and identify optimal strategies to mitigate these risks, ensuring a more resilient transition plan (Fudenberg & Tirole, 1990).

References

• Cheng, H., Wang, L., & Liu, Z. (2022). Strategic competition in electric vehicle markets: An analysis of innovation and rivalry. Journal of Business Strategy, 43(2), 112-125.
• Faria, R., Moura, J., & Almeida, P. (2020). Consumer acceptance of electric vehicles: Analysis and future prospects. International Journal of Electric and Hybrid Vehicles, 12(3), 319-334.
• Fudenberg, D., & Tirole, J. (1990). Game Theory. MIT Press.