General Motors Company's (GM) foray into China was a successful one. Of all the leading auto markets, China was the highest growth market
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International Business
CASE STUDY (20 Marks)
General Motors Company's (GM) foray
into China was a successful one. Of all the leading auto markets, China was the
highest growth market for GM as could be seen from the fact that it sold 2.35
million vehicles in FY 2010, 29 percent more than in 2009. This was the first
time in the 102-year-old history of GM where it had sold more cars and trucks
in China than in the US. Going forward, GM China had set ambitious plans to
garner a market share of 14 percent and produce 5 million units by 2015. Its
decision to launch a new brand, the Baojun 630, in 2011 was viewed as an attempt
by the company to target first time car buyers living in Tier II and Tier III
markets in China and also to compete against domestic car manufacturers in
China. Some experts opined that GM China's changing strategy was a bid to cope
with the change in the industry structure in the rapidly growing Chinese auto
market. According to a September 2010 draft plan by the Ministry of Information
and Industry (MII) in China, foreign automakers in China were required to
transfer their technology to their Chinese partner. The plan was in stark
contrast to the partnership deals the foreign automakers had with their Chinese
partners. The partners had a 50:50 stake in the JV where the foreign partner
could keep its intellectual property and technology with it while the local
partner would offer it market access. The proposed plan received mixed reactions
with some foreign automakers feeling that the move was a "technology
shakedown" as they were forced to share their technology with their
domestic partners and eventually their rivals. Moreover, industry analysts felt
that low-cost brands such as Baojun could become a threat to GM's existing
brands. They were of the opinion that the move to go down market to target the middle-class
segment could jeopardize the brand image of GM which enjoyed the reputation of
launching quality brands in the Chinese automobile market. This case is meant
for MBA/MS level students as part of their Strategic Management/ International Business
Curriculum.
Answer
the following question.
Q1.
Debate whether the Chinese automobile industry was witnessing structural
changes and what GM could do about it
Q2.
Give an overview of the case.
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