GM In China Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

GM in China

Q.1. Joint Ventures have advantages and disadvantages. Extract GM’s joint venture advantages and disadvantages from the case study and contrast them critically.

Solution No.1

Advantages of Joint Ventures in China

China is the growing economy and offers ample opportunities for the business due to low labor cost and other policies. China consists of largest population and has an essential position in the world’s economy. There are various advantages General Motors have achieved to increase its market share, some of them are as under:

Shanghai General Motors Co. Ltd
SAIC-GM Wulling Automobile Co. Ltd
Shanghai GM Dong Yue Motors Co. Ltd
Shanghai GM Dong Yue Automotive Powertrain Co. Ltd.
GM Warehousing and Trading (Shanghai) Co. Ltd
GM (China) Investment Corporation

Shanghai General Motors Co. Ltd

It was Shanghai-based joint venture with equal number of shares with Shanghai Automotive Industry Corporation (SAIC). This joint venture provided a great amount of benefit to the General Motors in terms of market share. The planned estimates of this joint venture were$ 1.3 billion, with an annual production capacity of 200,000 vehicles. In this joint venture Shanghai GM assembled Buick midsize sedans, it was producing engine in 1998 and the Power train facility had facilitated the GM in a significant manner with a production capacity of 180,000 engines and 100,000 automatic transmissions. It also facilitated different areas as well, including sales, After sales and parts centers.

SAIC-GM Wulling Automobile Co. Ltd

This joint venture was consisted of $99.6 million joint venture started in November 2002. SAIC-GM was proficient of producing more than 180,000 vehicles per year. In that joint venture, General Motors had a 34 per cent stake and SAIC held 50.1 per cent and Wuling Automotive had 15.9 per cent in that joint venture. This joint venture was located in China and the items which manufactured was mini-trucks and minivans.

Shanghai GM Dong Yue Motors Co. Ltd

This was also one of favorable joint ventures for the General Motors. It consists of $108 million venture manufacturing facility located in Yantai. Shanghai GM had a 50 percent stake with General Motors China and SAIC hold 25 percent in it. The production of the Buick Sail significantly increased production capacity of more than 100,000 units.

Shanghai GM Dong Yue Automotive Powertrain Co. Ltd.

This joint venture was also situated in Yantai in North Eastern China. One of the main benefits of this joint venture for General Motors was that, it would own 50 percent of the joint venture stake. The annual manufacturing capacity under this agreement was 300,000 engines. These engines provided vehicle manufacturing in China by GM and SAIC.

GM Warehousing and Trading (Shanghai) Co. Ltd

This joint venture was based in Shanghai Waigaoqiao Free Trade Zone and signified a $ 3.2 million investment by the General Motors. It officially started operations in the August 1999, the parts which owned both the institutions were Parts Distribution Centre (PDC). This agreement also benefited the General Motors in a dignified way. The management and inventory control system under this joint venture was really efficient and encompasses of 25,000 unique parts.

GM (China) Investment Corporation

GM China was a solely owned project based in Shanghai. It improved the performance of the entire General Motor staff. The main objectives of GM China was to enhance the performance of several functions of GM including sales, marketing and after sales services. GM China also facilitated a network of approved service centers across China.

Disadvantages of Joint Ventures in China

There are several forces that can affect negatively on the companies engaged in Joint Ventures. Some of the disadvantages of joint ventures in China are:

WTO Provisions
Government Intervention

WTO Provisions

The WTO has various provisions and restrictions for the local as well as domestic investors. China had forced the companies to bear high tariffs and import quotas. All these restrictions posed various challenges to the General Motors to enhance the business as well as to involve in joint ventures are concerned. Due to the increasing tariffs on motor vehicles and other components, it created a negative impact on the performance of General Motors. Thought WTO rules and regulations encourage the foreign investment in China, but have several drawbacks as well.

Government Intervention

In 2004, the Chinese government imposed new restrictions and regulations for the foreign investment in China’s vehicle sector. Joint venture agreements in the country suffered to some extent due to these legislations and the private investors had to obey the laws in the industry. The government gave favors to the local companies rather than the foreign companies that made tougher for the foreign investors to participate in the industry.....................

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