case study
General Motors in China
Introduction
In July 1994, when the Chinese authorities initiated the task of making China's automotive sector as one of the country's strongest industries, the market had opened up for the foreign companies. However, the foreign car companies were required to qualify few pre-conditions: they were required to first invest in the components industry and transfer the technology to the Chinese partner in a joint venture, where the share of the foreign partner would not exceed 50%.
General Motors (GM), in an effort to gain access to the Chinese automotive market, invested in technical assistance projects, which facilitated technology-transfer to the Chinese automotive sector.
By 1996, GM had set up a number of joint ventures to manufacture auto components in China.
Eventually, GM got the permission and so, set up a manufacturing unit investing between $1 billion and $2 billion to manufacture mid-sized cars in China. But the company's Chinese odyssey has not been very smooth. It not only had to deal with fluctuating car demand but also with its joint venture partners who proved to be tough negotiators.
Despite the problems, GM continued to focus on China and the perseverance seemed to pay off with the company tripling its sales in 2003.
Porter's five forces analysis
Threat of new entrants
The passenger car market in China continued to expand in 2002, with a 42.8 percent increase to 0.5 million units sold. The rapid expansion of China’s automobile market has attracted global automobile manufacturers. GM entered the Chinese market with a $1.5 billon investment in its Shanghai joint venture with SAIC in 1997, which is the biggest Sino– American joint venture, producing its famous Buick Saloon. Soon after GM's entrance various other manufacturers entered the industry making it more competitive
Toyota made its alliance with China's largest automobile manufacturer, FAW, in 2002, and will manufacture Toyota's luxury "Crown" model in
Introduction
In July 1994, when the Chinese authorities initiated the task of making China's automotive sector as one of the country's strongest industries, the market had opened up for the foreign companies. However, the foreign car companies were required to qualify few pre-conditions: they were required to first invest in the components industry and transfer the technology to the Chinese partner in a joint venture, where the share of the foreign partner would not exceed 50%.
General Motors (GM), in an effort to gain access to the Chinese automotive market, invested in technical assistance projects, which facilitated technology-transfer to the Chinese automotive sector.
By 1996, GM had set up a number of joint ventures to manufacture auto components in China.
Eventually, GM got the permission and so, set up a manufacturing unit investing between $1 billion and $2 billion to manufacture mid-sized cars in China. But the company's Chinese odyssey has not been very smooth. It not only had to deal with fluctuating car demand but also with its joint venture partners who proved to be tough negotiators.
Despite the problems, GM continued to focus on China and the perseverance seemed to pay off with the company tripling its sales in 2003.
Porter's five forces analysis
Threat of new entrants
The passenger car market in China continued to expand in 2002, with a 42.8 percent increase to 0.5 million units sold. The rapid expansion of China’s automobile market has attracted global automobile manufacturers. GM entered the Chinese market with a $1.5 billon investment in its Shanghai joint venture with SAIC in 1997, which is the biggest Sino– American joint venture, producing its famous Buick Saloon. Soon after GM's entrance various other manufacturers entered the industry making it more competitive
Toyota made its alliance with China's largest automobile manufacturer, FAW, in 2002, and will manufacture Toyota's luxury "Crown" model in