CASE 7 PG-31 Prerna Rai PG-32 Pritam Patil PG-33 Raul PintoPG-35- Rohan Kapuria
Description of Case StudyGM and Daewoo motors enter into a Joint-Venture in 1984.Each invest $100 million.Day to day management under Daewoo.
Manufacture of a subcompact car, the Pontiac LeMans, which was based on Opel-Kadett, GMs successful German- designed car.Managerial and Technical advice was to be provided by GM executives.
GM’s ObjectivesEnter into the lucrative Korean market.Ability to increase its market share above 10% in the Asian Market.Easy entry into Asian markets with local partner.Cheap labor in South Korea would decrease overall cost.
Daewoo’s ObjectivesTechnical and Managerial expertise by GM executives.Access new technology and engineering skills developed by GM through technology transfer.Export to world markets mainly US and Europe on the back of strong GM brand name.Compete with Toyota Motors.
Problems Faced by GMIn 1987 Korea became a democracy and frequent labor strikes reduced productivityDaewoo ended up doubling salaries to workmen, costing edge lost due to higher wagesQuality issue-poor workmanship affected sales and attracted negative publicityUS sales dropped 86% within 3yrs
Problems faced by DaewooGM did not allow Daewoo to expand in the US or EuropeFearing exploitation of technology, GM did not share the same with DaewooGM refused to invest another $100 million to double manufacturing capacitiesDaewoo accused GM of not properly market the product
Final ResultGM and Daewoo dissolved partnershipDaewoo bought out 50% stake of GM for $170 million, payable over 3yrsAbout a decade later GM, along with Suzuki and SAIC bought 66.7% stake in DaewooInvestment made was $400 millionDaewoo brand having suffered, GM branded Daewoo vehicles as Chevrolets
AnalysisDaewoo did not receive the technology backup from GMGM’s superior quality standards could not be met by Daewoo, due to operational differencesDiscord was caused due to inability of both parties to achieve their main objective of entering the Joint-Venture
Analysis (contd.)GM: To enter Asian markets successfully and produce compact cars at cheaper costsDaewoo: To gain superior technology and enter US and European marketsSince Daewoo brand was diminishing, GM made a smart move by marketing the cars under the brand Chevrolet
Alternative SolutionConsidering that eventually GM bought Daewoo at a higher cost, organizational restructure would have been better than outright selling the last time roundGM executives should have made an effort to understand Korean business cultureCultural Differences could have been sorted out as trust issues kept cropping up