QUESTION
Chapters 30, 31, and 34 presented three mini-case studies on ERM and risk. Each one presented a slightly different risk scenario. 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.
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Chapters 30, 31, and 34 presented three mini-case studies on ERM and risk. Each one presented a slightly different risk scenario. 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.
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To complete this assignment, you must do the following: 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.
A) Create a new thread. As indicated above,
ANSWER ALL OF THE QUESTIONS ABOVE IN YOUR THREAD
B) Select AT LEAST 2 other students’ threads and post substantive comments on those threads, evaluating the pros and cons of that student’s recommendations. Your comments should extend the conversation started with the thread.
ANSWER
Assessing Risks in General Motors’ Transition to All-Electric Vehicles Using Game Theory
Introduction
General Motors (GM) considering replacing one of its traditional vehicle lines with all-electric models entails inherent risks that can significantly impact the success of this strategic decision. To identify and assess these risks, GM can utilize game theory, a mathematical framework that examines the behavior and decision-making of various stakeholders. This approach allows GM to evaluate potential risks and make informed decisions based on predicted outcomes. This thread explores two major risks that may arise from GM’s conversion to an all-electric line, followed by an assessment of their inherent, current, and residual risk levels using GM’s five-point scale.
Risk 1: Infrastructure Development and Charging Network
One significant risk associated with transitioning to all-electric vehicles is the need for extensive infrastructure development, including charging stations and an efficient charging network. Establishing a robust charging infrastructure requires substantial investments in infrastructure development, deployment, and maintenance (Mastoi et al., 2022). GM’s ability to effectively address this risk will be crucial for the adoption and success of their all-electric line.
Assessment
Inherent Risk Level: High
The inherent risk level is high due to the magnitude of investment required, potential regulatory challenges, and uncertainties surrounding the pace of infrastructure development and public adoption of electric vehicles.
Current Risk Level: Medium
At the present stage, with advancements in charging infrastructure and growing demand for electric vehicles, the current risk level can be considered medium. The establishment of partnerships, collaborations, and GM’s commitment to expanding the charging network can help mitigate this risk.
Residual Risk Level: Low to Medium
As GM actively invests in and expands the charging infrastructure, the residual risk level is likely to decrease over time. With successful infrastructure development, the risk associated with charging network limitations can be mitigated to a low to medium level.
Risk 2: Consumer Acceptance and Market Demand
Another major risk in transitioning to all-electric vehicles lies in consumer acceptance and market demand. Shifting from traditional vehicles to electric models requires a significant change in consumer behavior and preferences (Lee & Brown, 2021). Factors such as vehicle range, charging time, and price parity with internal combustion engine (ICE) vehicles can influence consumer adoption and demand for all-electric vehicles.
Assessment:
– Inherent Risk Level: Medium
The inherent risk level is moderate due to the uncertainties surrounding consumer preferences, potential concerns about range anxiety, and competition from established ICE vehicle manufacturers. Consumer acceptance is essential for the success of GM’s all-electric line.
Current Risk Level: Medium to High
The current risk level can be considered medium to high as consumer acceptance of electric vehicles is growing but is still subject to fluctuations (Electric Cars Fend off Supply Challenges to More Than Double Global Sales – Analysis – IEA, n.d.). Factors such as government incentives, technological advancements, and the emergence of competing electric vehicle offerings can influence market demand.
Residual Risk Level: Medium
The residual risk level remains at a medium level, as it is challenging to predict the long-term consumer acceptance and demand for all-electric vehicles accurately. However, with effective marketing strategies, continuous product innovation, and improved customer education, GM can mitigate this risk and drive market acceptance.
Conclusion
By utilizing game theory, General Motors can identify and assess major risks associated with transitioning to an all-electric line of vehicles. Two key risks, namely infrastructure development and charging network limitations, as well as consumer acceptance and market demand, were discussed. An assessment of the inherent, current, and residual risk levels using GM’s five-point scale was provided for each risk. Understanding and addressing these risks strategically will enable GM to make informed decisions and implement effective risk mitigation strategies throughout the transition process.
References
Electric cars fend off supply challenges to more than double global sales – Analysis – IEA. (n.d.). IEA. https://www.iea.org/commentaries/electric-cars-fend-off-supply-challenges-to-more-than-double-global-sales
Lee, R. M., & Brown, S. S. (2021). Evaluating the role of behavior and social class in electric vehicle adoption and charging demands. iScience, 24(8), 102914. https://doi.org/10.1016/j.isci.2021.102914
Mastoi, M. S., Zhuang, S., Munir, H. M., Haris, M., Hassan, M., Usman, M., Abdollahi, M., & Ro, J. (2022). An in-depth analysis of electric vehicle charging station infrastructure, policy implications, and future trends. Energy Reports, 8, 11504–11529. https://doi.org/10.1016/j.egyr.2022.09.011
