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. 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.

General Motors (GM) is considering replacing one of their traditional lines of vehicles with all-electric models. In order to identify and assess the major risks associated with this decision, GM could use game theory as a strategic tool. Game theory provides a framework for analyzing situations where multiple decision-makers (players) interact and make strategic choices. By applying game theory principles, GM can anticipate how competitors, suppliers, and customers may respond to their decision and evaluate the potential risks involved.

One major risk that GM could face with this decision is market acceptance. Switching to all-electric models may encounter resistance from customers who are accustomed to traditional vehicles. Customers may have concerns about electric vehicle (EV) performance, range anxiety, and the lack of charging infrastructure. These factors could impact the market demand for GM’s all-electric line and potentially lead to decreased sales and market share.

In terms of risk assessment, the inherent risk of market acceptance can be considered moderate. While there is a growing interest in electric vehicles, the mass adoption of EVs is still relatively low. The current risk level would also be moderate, as there are existing competitors in the electric vehicle market who have already established their presence and gained market share. The residual risk level would depend on GM’s ability to effectively market and differentiate their all-electric line to address customer concerns and build a strong brand image. If GM can successfully address these challenges, the residual risk level could be reduced to low.

Another major risk associated with converting an existing line to an all-electric line is the dependency on battery technology. Electric vehicles heavily rely on battery technology, and any disruptions or advancements in this area could impact the viability and competitiveness of GM’s all-electric models. Rapid development of battery technology by competitors or the emergence of alternative energy storage solutions could render GM’s all-electric line less attractive or obsolete.

The inherent risk of battery technology dependency is high, as it is a critical component of electric vehicles and subject to technological advancements. The current risk level may be considered low, as GM may already have access to reliable battery technology through partnerships or suppliers. However, the residual risk level would be moderate, as advances in battery technology by competitors or changes in the market could still impact the competitiveness and appeal of GM’s all-electric line.

In summary, by using game theory, GM can identify and assess the major risks associated with replacing one of their traditional vehicle lines with all-electric models. Two major risks to consider are market acceptance and dependency on battery technology. Assessing the levels of inherent, current, and residual risk using GM’s five-point scale is crucial in understanding the potential impact and probability of these risks. This analysis allows GM to make informed decisions about the feasibility and potential outcomes of their all-electric line conversion.

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