Shanghai General Motor:

The Rise of Late Comer

YP50A Syndicate 6
Alexius Justianto
29113332
Dwi Aprilia
29113338
Denia Fadila Rusman
29113360
Talitha Marcia Farid
29113382
Delfi Kusumawardhani
29113545

No.1
Why was GM so determined to enter into partnership with SAIC in 1997, a
time when automobile industry was expecting overcapacity, plummeting
demand and dropping car sales?

 Before the formation of Shanghai-GM in 1997, despite

having worldwide revenues, General Motors was in
crisis. Market in USA has been saturated which only
offers a limited space for GMs business expansion and
growth potential. Also, car sales in Europa was
dropping.
But market in Asia continues to be an important part
of GM expansion strategy and China is an example,
GM Management observing that China auto market is
growing rapidly. Chinese sales of new automobiles
grew 18% each year annually.

 So, GM insist to find a way to put a stake in China,

Even though GM is little bit late when it comes to
enter China market, who already been filled with
Volkswagen (the first investor to make business
operations profitable in China), to Daimler-Chrysler,
Ford Motor, Toyota, Honda and Nissan.
But still, GM top management believed that the IJV
(International Joint Venture) business model could be
an excellent platform for establishing and expanding
business within China and GM actually had a lot of
previous international alliance experiences. So, they
move forward with their strategy to established GM
contribution in automobile market in China.

No. 2
Examine the joint venture relationship between GM and SAIC. What is
the agenda of GM and SAIC respectively?

GM & SAIC Relationship

The joint venture (JV) between General Motors (GM) and Shanghai
Automotive Industry Corporation (SAIC) in 1997, was regarded as the
largest single foreign investment ever made in China.
The JV was considered by many as a high-risk investment for GM at that
time. Eight years after the signage of the joint venture, GM proved to
the world that its investment in China was justified, with its growing
market shares and successful partnership with SAIC.
GM and SAIC have their own strategic aliance. Their relationship
contributes to the success and rapid growth of GM in China. It also
analyses the strategies adopted by GM and the potential threats and
challenges imposed on foreign automobile companies in China.
By Using JV, it was closing the gap with sales increased by 26% year-onyear to 252.896 units. But SGMs growth rate down drastically in 2004.

GM & SAIC Relationship

GM was determined that its venture in China was long term and willing
to invest in the development of Chinas automobile market.
Because too many local automobile industries, they merged into 3 or 4
large scale motor vehicle conglomerates within 15 years.
Market-for-technology strategy accelerate the countrys absorption of
foreign investment
GM estbalished JV with Chinese enterprise because China was a huge
potential automobile market

Join Venture Policy

Joint venture increased capacity more than twice the
current demand
Consolidate the dozens of automobile companies into Big Three in
US.
Foreign ownership in JV was limited to 50% to give more control and
bargaining power
All JV had to localise their parts and components by at least 40%
Encourage knowledge transfer to the local firms, give Chinese vehicle
producers enough time for competition
Net profit margin for entire automobile sector as about 30% in 2004.
SGMs own margin was 10%, that was twice its global average of around
5%.

Join Venture Agenda

GM & SAIC did the Joint Venture in some areas
of Supply Chain :

Localised sourcing

New product development

Distribution

Logistics

Sales & Marketing

Join Venture Agenda

Key strategy of GM foster auto component
production in China
GM bringing their latest technology of vehicle to develop Chinas auto
industry
GM established a sophisticated research and development centre for
SGM
GM sent Chinese engineers to Cana to observe the start-up production
of new cars models
SAIC established 50-50 Joint ventures with Volkswagen and General
Motors
GM wanted to compete on both product level and the basis of whole
system built holistic Supply Chain

Join Venture Agenda

GM could establish its own distribution and sales
network in China and reproduce Supply Chain.
SGM adopted similar systems and process of GMs
Global Purchasing and Supply Chain department
SGM implemented a quality control process
The Buicks were redesigned to suit customer
preferences in Chinese market
SGM Goals : build a comprehensive product portfolio that
could satisfy the diverse and changing demans of Chinese
customers and become pioneer among its competitors.
SGM Product Structure targeted diferent customer segment
High, Mid High, Medium, and Low-end

Join Venture Agenda

Built brand name and developed modern marketing practices and used
attractive website
GM launched SGM BuyPower (e-commerce system) enabled customers to
select option packages & order online.
GM strengthened its relationship with SAIC by setting up 3 way joint
ventures with Local chinese companies and other new joint initiatives
GM & SAIC joined to purchase Yantai Body Workd in east China, which
enabled SGM to concentrate on making Buicks

No. 3
The partnership between GM and SAIC can be considered a learning
alliance. Discuss the balance of power between the two parties.

 GM transferred technology know-how to the

venture, and helped boost sales.
SAIC could use GM expertise and technology to
transform itself into a global auto powerhouse that
challenges the American car maker down the road.
Both parties agreed to pursue the development and
commercialization of hybrid and fuel cell vehicles in
China.
Since pairing up with SAIC in a joint venture, GM
has become the dominant foreign player in China,
the world's second-biggest economy and busiest
auto market.
Along the way, GM helped rear SAIC into a fullfledged auto maker, with top-tier designers,
engineers and marketers.

No.4
Discuss the potential conflicts that can arise in GM-SAIC joint venture. Do
you think the GM-SAIC partnership will sustain? What are the factors for
sustainable joint venture partnership?

Potential Conflicts That Can Arise In GM-SAIC

Joint Venture:
Miscommunication between GM and SAIC.
Lack of understanding between partnership.
Lack of patience and motivation among partners.
Benefits lower than expectations.
Operational difficulties due to geographical location
of the partners.
Incompatibility of culture and management styles of
both partners.

Do You Think GM-SAIC Partnership Will

Sustain?
Yes, I do. The partnership between GM and SAIC is strong and gives
benefits to each party. They are both more profitable as a joint
venture than doing on their own alone.
In fact, today GMSAIC is still exist, being the market leader for
commercial minivan in China. Back in 2002, GMSAIC adding Liuzhou
Wuling Motors Co. Ltd. As their third partner and soon become the
largest mass-volume micro vans manufacturers in China.
Majority of their products are sold in China, but starting 2009, they
exports some of their cars to South America, Middle East, and North
Africa under GM Chevrolet brand.
This year, their plan is to expand their Asian market, including the
project to building factory facility in Indonesia in 2015, aiming
Indonesia and South-East Asian markets.

Factors For Sustainable Joint Venture

Partnership:
Good communication, cooperation, and
coordination among partners.
Common goals and shared vision among partners.
Dedication towards success and long term
sustainability of Joint Venture.
Proper sharing of profits and benefits among
partners.
Joint Venture works towards benefit of all partners.
Proper planning and research prior to the
incorporation of the Joint Venture.

No.5
Perform a SWOT analysis of GM in 2004, a year that it has achieved strong
growth in market share and profitability. What are the success factors that
contribute to GMs rapid growth? What are the threats and opportunities
faces by SGM in the competitive automobile market?

SWOT
Strength

Weakness

1.
2.
3.
4.

1. Unperfect production result,

sometimes there are car
recalls
2. The culture of bureaucratic
3. High cost structure

Strong Brand Portfolio

Strong Presence in China
Global Presence
Well brands performance

SWOT (2)
Opportunities

Threats

1. Its high technology can bring

it to economical fuel
consumption, it is good
opportunities due to the
increasing of fuel price
2. The changing of customer
needs

1.
2.

3.
4.
5.

The fuel price is fluctuated.

The increasing price of raw
material
The green emission standard
Exchange rates
The Japanese/Korean Car
which provides better
models and cheaper price

Success Factor
The more reliable quality than other brands (Japanese or Korean
Brand)
Provide the model which is suitable for young generation people
Simplify the bureaucracy to make the decisions through market
responds
Anticipating consumer tastes more sensitive