GM IN CHINA (Abridged) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

CASE SUMMARY:

General Motors is a well renowned multinational company, which is best known for selling cars, the company has earned economies of scale as well as the company has also earned the confidence and satisfaction of its customers by facilitating its customers with excellent products and exceptional customer care services.

Thus, the company has earned the loyalty of its customers over the period of time which has increased the overall customer base of the company as well as this has also allowed the company to trail blaze the entire industry in which the company is operating by securing a leading position in the entire industry.

The top management of GM targeted Chinese market as a potential market, and has made various operational and productive strategies to tap into entire Chinese market efficiently and effectively. The top management of GM, keeping in view the strategies made, tap into the Chinese market, and intensified the overall competition in the Chinese market by bringing a number of challenges for the existing firms in the Chinese market.

The top management of the company has shown efficiency in running the operations of the company efficiently and effectively, which has led the company to compete strongly in the entire Chinese market. By 2004, the company owns two foreign enterprises and owns a workforce of approximately 10,000 highly skilled professionals, in addition to this, the company also operated 6 joint ventures.

In addition to this, the company has a manufacturing capacity of approximately 530000 vehicles by 2004, as well as the company has made a joint venture with a leading corporation named SAIC which has also enhanced the competitiveness of the company.

Lately, the structure of Chinese market started changing rapidly, and every player in the entire industry started innovating its products in order to cope up with the changing requirements and needs of the customers. The entire industry seemed highly potential as the trend of demand and supply projection are such that it promises a robust growth in overall sales and profitability of the industry.

Instead of such trend of demand and supply in the entire market, the overall growth rate in the entire industry of china started declining. The reason for such decline is that the Government has started intervening in the entire market, the Government of China started imposing certain restrictions on Joint Ventures, as well as the competition in the entire market has been increased due to increase in Government owned assembly firms.

Furthermore, the company is also facing serious threats from Local Chinese manufacturers, as they started copying the product of the company and started selling that product at a comparatively low rate than the company. This has effected negatively in the interest of the company as it had decreased the revenue and profitability of the company to some extent.

In addition to this, the Chinese Government has imposed certain laws and regulations in the industry which has also effected negatively on the market environment. In addition to this, the Chinese government is unable to control the rising inflation in the country.

The Chinese Government is unable to construct effective strategies and create effective monetary and fiscal policies in such a way that overall inflation in the economy could be alleviated. However, the Chinese Government has intentionally undervalued the currency for a long period of time which is adversely effecting the business of GM.

The top management of the company is making various strategies in order to overcome these problems. The top management of the company has focused on extending car loans to its customers, for which the company has been granted the permission by the Chinese Government.

This option does not proved to be an optimal option as certain regulations were laid down by the Chinese government regarding credit restrictions and interest rates, which has limited the revenue of the company to some extent. In addition to this, the Chinese Government has urged the World Trade Organisation (WTO) to reduce the tariff rates as well as to reduce import quotas in order to accelerate the automobile industry in the Chinese market.

Furthermore, the top management of the company is unable to decide whether the company should use local labour of China in order to manufacture its product at low cost and export it North America and Europe. Honda has already decided to use China as its export base which has increased its overall competitiveness as it has enabled Honda to manufacture its product at low cost. ......................

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