Case 7


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Case 7

  1. 1. CASE 7 PG-31 Prerna Rai PG-32 Pritam Patil PG-33 Raul PintoPG-35- Rohan Kapuria
  2. 2. Description of Case StudyGM and Daewoo motors enter into a Joint-Venture in 1984.Each invest $100 million.Day to day management under Daewoo.
  3. 3. 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.
  4. 4. GM’s ObjectivesEnter 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.
  5. 5. Daewoo’s ObjectivesTechnical 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.
  6. 6. Problems Faced by GMIn 1987 Korea became a democracy and frequent labor strikes reduced productivityDaewoo ended up doubling salaries to workmen, costing edge lost due to higher wagesQuality issue-poor workmanship affected sales and attracted negative publicityUS sales dropped 86% within 3yrs
  7. 7. Problems faced by DaewooGM did not allow Daewoo to expand in the US or EuropeFearing exploitation of technology, GM did not share the same with DaewooGM refused to invest another $100 million to double manufacturing capacitiesDaewoo accused GM of not properly market the product
  8. 8. Final ResultGM and Daewoo dissolved partnershipDaewoo bought out 50% stake of GM for $170 million, payable over 3yrsAbout a decade later GM, along with Suzuki and SAIC bought 66.7% stake in DaewooInvestment made was $400 millionDaewoo brand having suffered, GM branded Daewoo vehicles as Chevrolets
  9. 9. AnalysisDaewoo did not receive the technology backup from GMGM’s superior quality standards could not be met by Daewoo, due to operational differencesDiscord was caused due to inability of both parties to achieve their main objective of entering the Joint-Venture
  10. 10. Analysis (contd.)GM: To enter Asian markets successfully and produce compact cars at cheaper costsDaewoo: To gain superior technology and enter US and European marketsSince Daewoo brand was diminishing, GM made a smart move by marketing the cars under the brand Chevrolet
  11. 11. Alternative SolutionConsidering that eventually GM bought Daewoo at a higher cost, organizational restructure would have been better than outright selling the last time roundGM executives should have made an effort to understand Korean business cultureCultural Differences could have been sorted out as trust issues kept cropping up