What are GM’s motivations/incentives to expand to overseas market? How can GM benefit from the expansion?

What are GM’s motivations/incentives to expand to overseas market? How can GM benefit from the expansion?

Strategy Case: GM in China Please write 1-2 page answer to the discussion questions for the case GM in China, and submit your answer to Blackboard by the due date. You will need to read three articles for this case: Mini-Case GM in China, Bloomberg’s report on GM’s electric car Bolt, and Reuters’ report on electric vehicles in China. Please answer the following questions (not those listed after the mini case or in the Case&PaperGuideline). You can write one short paragraph for each question or organize your answer as an essay. Discussion questions for Case GM and Chapter 8 International Strategy: 1. What are GM’s motivations/incentives to expand to overseas market? How can GM benefit from the expansion? 2. What international corporate-level strategy/strategies is GM using? Multidomestic/localization, Global, or transnational? Is this strategy suitable for GM’s core competency? Is this strategy suitable for the target overseas market, China? Think of the two needs/pressures in the target market (needs to localize and needs to lower cost or integrate globally). 3. Which stakeholder groups are affected by GM’s expansion into China? How? You can think about capital market stakeholders (shareholders), organizational stakeholders (GM workers in US and in China), and product market stakeholders (consumers, suppliers, environment). 4. What are the potential negative impact of GM’s expansion in China? You can think along those stakeholder groups in Q3. What can GM do to alleviate the impact? What are the caveats of these approaches? Required reading for Case GM in China: 1. Mini case GM in China 2. Bloomberg, Nov 2016, GM’s Electric Car Bolt https://www.bloomberg.com/news/articles/2016-11-30/gm-s-ready-to-lose-9-000-a-pop-and-chase-the-electric-car-boom3. Reuters, Jan 2016, In coal-powered China, electric car surge fuels fear of worsening smog http://www.reuters.com/article/us-china-pollution-autos-idUSKCN0V51BH The main takeaway from these articles are: 1. GM views China as next big business opportunity; but the expanding auto industry in the country has worsened air pollution; 2. GM launched its full electric car model Bolt in US in 2016, partly as a response to California and other states’ regulation on emission; the performance of Bolt rivals Tesla’s mass market EV Model 3; 3. Electric car might not solve the problem of air pollution in China due to its coal-powered power plants. Page 492MiniCase 22GIVEN THE SHEER size of the U.S. automotive market, the “old” GM concentrated mainlyon its domestic market. GM once held more than 50 percent market share in the UnitedStates and was the leader in global car sales (by units) between 1931 and 2007, before filingfor bankruptcy in 2009.1 In its heyday, GM employed 350,000 U.S. workers and was anAmerican icon. The future for the “new” GM may lie overseas, however; most notably inChina. Some 70 percent of GM’s revenues are now from outside the United States. This isquite a high level of globalization for a company that once was focused on the domesticmarket only. GM sold more than 3.6 million vehicles in China, 37 percent of total GM carssold. The Chinese market is becoming more and more important to GM’s performance,accounting already for almost 30 percent of total GM revenues of some $155 billion (in 2014).With a population of 1.4 billion and currently only 11 vehicles per 100 people—comparedwith a vehicle density of 81 per 100 in the United States—China offers tremendous growthopportunities for the automotive industry. Since China joined the World Trade Organization(WTO) in 2001, its domestic auto market has been growing rapidly and has now overtakenthe United States as the largest in the world. Although the growth of the Chinese auto markethas slowed in recent years because of the economy’s downturn, GM CEO Mary Barra remainsconvinced that China offers significant long-term growth opportunities.Unlike some of its main rivals, GM entered the Chinese market early. In 1997, GM formeda joint venture with Shanghai Automotive Industrial Corp. (SAIC), one of the “big four”Chinese carmakers. SAIC is one of the largest companies worldwide and ranked 60th on theFortune Global 100 list. Over almost 20 years, GM was able to develop guanxi— socialnetworks and relationships that facilitate business dealings—with its Chinese businesspartners and government officials.Mary Barra, General Motors CEO© Tomohiro Ohsumi/Bloomberg/Getty ImagesGM’s China operation has been cost-competitive from day one. The company operatesabout the same number of assembly plants in China as in the United States, but sells moreStrategic Managementhttps://jigsaw.vitalsource.com/books/9781259760679/epub/OEBPS/mini…1 of 312/1/2016 9:35 PMPage 493vehicles while employing about half the number of employees. Chinese workers cost only afraction of what U.S. workers do, and GM is not weighed down by additional health care andpension obligations.Although struggling in the United States, GM’s Cadillac luxury brand is in high demand inChina, where owning a Cadillac is considered a status symbol. GM’s best-selling model inChina, however, is the Wuling Sunshine, a small, boxy, purely functional “micro van” pricedbetween $5,000 and $10,000 depending on what options the customer chooses. TheSAIC-GM joint venture sold almost 2 million Wuling vehicles in China in 2014. The WulingSunshine may help GM further penetrate the Chinese market; it also may be an introductorycar for other emerging markets, such as India. GM’s low-cost strategy with this vehicle hasbeen so successful that the firm is planning to expand the Wuling product line and offer thevehicle globally. GM already sells the Wuling Sunshine in Brazil under the Buick nameplate.Frank T. Rothaermel prepared this MiniCase from public sources. This MiniCase is developed for the purpose ofclass discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient orinefficient management. All opinions expressed, all errors and omissions are entirely the author’s. Revised andupdated: August 18, 2015. © Frank T. Rothaermel.Taken together, China and other emerging economies in Asia, Latin America,and the Middle East are becoming more and more critical to GM’s futureperformance as it strives to become a lean and low-cost manufacturer of profitable small cars(at least for its non-U.S. markets). To back up its strategic intent, GM has quadrupled itsengineering and design personnel in China and is investing a quarter-billion dollars to build acutting-edge R&D center on its Shanghai campus, home of its international headquarters.Moreover, GM is spending an estimated $14 billion to build five additional manufacturingplants to support anticipated annual sales of 5 million vehicles.Yet, given the slowdown in the Chinese economy combined with devaluation of the Chinesecurrency (the yuan), the competitive intensity in the world’s largest automobile market isbecoming more intense. Moreover, several government-supported domestic carmanufacturers in China are initiating a cut-throat price war to gain market share and with itscale. In contrast, low gas prices in the United States have fueled high demand for sportutility vehicles (SUVs) and trucks, where GM and Ford hold strong positions.DISCUSSION QUESTIONSWhat explains the resurgence of the “new” GM in the United States? Do you think GM cansustain its competitive advantage in the United States? Why or why not? Buttress yourarguments.1. How important are non-U.S. sales to GM? What implications does this have for GM’sglobal and business strategy? Think about the integration-response framework to informglobal strategy and different strategic positions to inform business strategy.2. In 2014, GM held almost 15 percent market share in China, while Ford held only 3percent. Why was GM so successful in China, while some of its rivals, including Ford,struggle to gain a stronger position in the world’s largest automobile market?3. What are the challenges GM is currently facing in the Chinese automobile market? Howshould GM’s CEO address them? Be specific.4. Strategic Managementhttps://jigsaw.vitalsource.com/books/9781259760679/epub/OEBPS/mini…2 of 312/1/2016 9:35 PM

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