GM In China Case Study Solution
Location of plants facts
Shanghai GM is the joint venture between SAIC and GM (Shanghai). The Shanghai GM had been engaged in manufacturing engines since the year 1998. Dong Yue Automotive Power train Co was placed in the northeast China. The annual manufacturing capacity of the power train facility was 300000 engines, which provided engines that were produced in China by SAIC and GM’s joint venture.
In addition to this, the GM Warehousing and Trading (Shanghai) Co. Ltd was situated in Waigaoqiao Free Trade Zone of Shanghai. It was founded with an intent of assuring the genuine GM & AC Delco parts’ delivery in rapid manner to the mainland Chinese customers. The PDC contained the computerized inventory control system.
Demand and supply meet profits
It is to notify that the demand increases when the prices decreases. Since the analysts expected that price of product would be reduced by 10 percent, there would a 10 percent increase in the product’s demand.
| Year | Profit / vehicle | Units sold | Total profit | Change |
| 2003 | 2267 | 386710 | 876671570 | |
| 2004 | 2040 | 425381 | 867904854 | -0.010 |
| 2005 | 1836 | 467919 | 859225806 | -0.010 |
| 2006 | 1653 | 514711 | 850633548 | -0.010 |
| 2007 | 1487 | 530000 | 788310711 | -0.073 |
The prices were reduced by 10 percent, and the demand was increased by 10 percent, which in turn had lowered the net profit by 1 percent, because of the substitute’s availability and price elasticity.
Profit margin
The planned price of the Chevrolet Spark amounted to $7500, while the price of BYD Flyer amounted to $4700, and the estimated average price of the GM vehicle was $10000. The profit margin calculations are shown below:
| Year | Net Profit | Net Sales | Profit Margin |
| 2003 | 876 | 386710 | 22.7% |
| 2004 | 867 | 425381 | 20.4% |
| 2005 | 859 | 467919 | 18.4% |
| 2006 | 580 | 514711 | 11.3% |
| 2007 | 788 | 530000 | 14.9% |
Entering into bus market
It is to notify that in China, the bus segment had future prospects in terms of increased sales growth, since it accounted for 26 percent of an overall vehicle market. The system of large-scale public transportation would address various challenges, due to which there was a foreseeable progress.The issues included;pollution, growing population in urban areas, absence of roads in urban areas, increased cost of fuel, and the large investment for infrastructure betterment.
Location
The company can take advantage of the current infrastructure including logistics, suppliers and current power trains, engine and transmission production in Shandong and Shanghai. The company could locate in the free trade zone, and in the areas which were nearest to the areas that required buses.
Recommendation
To sum up, it is recommended that GM (China) should’ve proceeded with the current strategy as well as maintained the capacity of production, so that it would’ve been able to meet the estimated increase in demand in the truck segments and Sedan, which would’ve allowed the company to maximize the profit, seize the market share and bolster the sales.
The company should’ve also engaged in the strategic joint venture with Shanghai GM Dong Yue Motors Co. Ltd and SAIC to manufacture buses. The company could’ veexpanded its manufacturing capacity,and it should’ve also utilized the R&D, for the purpose of manufacturing more fuel efficient automobiles. The company should’ve initiated the marketing campaigns, in order to put a major emphasis on providing the fuel efficient automobile lineup.
Implementation plan
The company should’ve determine the solutions in long run, which includes;
- Operating and production capacities.
- Export opportunities with production in China.
- Logistics, supply chain and channel of distribution.
The company needed to re-evaluate the strategy in respect to uncertain and changing environment. The company should’ve also initiated R&D and engineering resources, so that it could’ve easily designed the buses. The company should also have started the construction process of new facilities and growing Shanghai GM Dong Yue engine production, for the purpose of exporting and handling the increasing demand.
Controls
It is recommended that the company should’ve conducted an annual and quarterly reviews in order to compare the projected sales, per vehicle profit and profit margin with the actual projected sales, per vehicle profit and profit margin. The net profits should’ve been increased after introducing the buses in the market. It should’ve also remained valuable and the market leader by using innovative tactics and strategies, which would’ve allowed the company to create competitive advantages in future, and explore the market opportunities earlier than competitors. By the year 2007, the company should’ve made sure that the greenhouse gas emission and fuel efficiency were enhanced by 25. It should’ve also conducted survey with an intent of evaluating the culture of the joint venture. By doing so, the company would’ve been in position to seize the market share, bolster profit, and lead the market as a whole............
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