Gm's asian alliances


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General Motors Asian Alliance HBR case

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Gm's asian alliances

  1. 1. 6/24/2013General Motors’ Asian Alliance 1 General Motors’ Asian Alliance
  2. 2. GM Relationship Types 6/24/2013 2 GM JV with Toyota Partnership with Small Asian car makers Fanuc Joint Venture Alliance with parts makers General Motors’ Asian Alliance
  3. 3. Joint Venture with Toyota 6/24/2013 3 • 50-50 JV established in 1983 • Invested $100 million eachNUMMI • Approved by a three-to-two votes • JV could only run till 1996FTC • 200,000 cars per year • Chevrolet NovaProduct • Gain quick access to a world class small car (Nova) • To learn about Toyota’s production systemGM’s Reasons • Familiarize itself with US market to establish long term presence there • To get around export restraints by manufacturing in USToyota’s Reasons General Motors’ Asian Alliance
  4. 4. Result of GM-Toyota JV Drop in absenteeism from 22% to 2% Produce 60 cars with 1/3 workforce Toyota decided to manufacture Corolla FX-16 and Camrys also at the plant GM implemented learning from NUMMI to other plants 6/24/2013 4General Motors’ Asian Alliance
  5. 5. Partnership with Small Asian car makers • Isuzu produced two vehicles for GM to sell in the US (Chevy Luv, Spectrums) • GM Spectrums comprised nearly 40% of Isuzu’s total production Isuzu • JV to manufacture small passenger cars • Daewoo entered into JV for capital and technology • Daewoo’s export accounted for 10% of all South Korean exports Daewoo • Manufactured Sprints for Gm • Established plant in Canada to manufacture the Sprint for GM and the Samurai SUV for Suzuki Suzuki • GM and Nissan were having trouble in Australia • Jointly produced Astra and VL Commodore • Nissan, GM and Deawoo produced passenger cars for sale in Korea and US Nissan 6/24/2013 5General Motors’ Asian Alliance
  6. 6. GM-Fanuc Joint Venture 6/24/2013 6General Motors’ Asian Alliance Need: •GM largest buyer of robotic system in US •Desire to large-scale modernization of its plants •Dissatisfied with its present robotics vendors GM Fanuc Robotics Corporation (GMF) was intended to operate independently of the two parent companies 75% of units manufactured by JV was sold to GM & rest to other auto companies GMF coordinated with GM and Fanuc to develop proprietary robotics technology
  7. 7. Alliance with Japanese parts makers Hitachi: Microcomputerized control for + Robots for Gm plants Nihon Radiator: Next-generation compressor for A.C. (V5 compressor) Atsugi: Sells sensor to Monroe, which sells suspension system to GM Akebono Brakes: 50- 50 JV to manufacture next-gen drum and disk brakes using electronic tech. NHK Spring: the JV produced fiber reinforced plastic suspension spring for GM 6/24/2013 7General Motors’ Asian Alliance
  8. 8. Key Problems NUMMI • GM had little control even after providing half the cash and use of its production facility • NUMMI had given Toyota the opportunity to familiarize itself with doing business in GM’s home market – US Isuzu • Isuzu received considerable financial and technical support from GM and was free to use it in developing its own products 6/24/2013General Motors’ Asian Alliance 8
  9. 9. Key Problems contd.. Daewoo: • GM gave up management control of ventures into which it had placed capital and technology, allowing Daewoo free reign with all the resources provided by GM • GM lead Daewoo to become a major player in South Korean market and in return received a car which was already developed by its Opel subsidiary Suzuki • The JV provided Suzuki an opportunity to greatly expand its manufacturing and marketing operations outside Japan, GM was only able to export 4000 vehicles into Japan • Suzuki’s JV with Izuzu increased the likelihood of Suzuki supporting vehicles that could compete with GM 6/24/2013General Motors’ Asian Alliance 9
  10. 10. Key Problems contd.. Fanuc • GMF was taking on the high-cost and low-return work of installing and supporting robotics system while providing new sales opportunities for Fanuc’s hardware • Low level of trust in partner which handicapped product development efforts Parts and Components makers: • Issue of loyalty • Risk of information leakage to Japanese competitors 6/24/2013General Motors’ Asian Alliance 10
  11. 11. Core Problem with GM JVs • Greater benefits for partners than for GM • GM failed to demand proper return for its investments, loyalty and proper level of control • GM failed to find the right partners which would • Help achieve its strategic goals • Share its vision • Not try to exploit the alliance for its own agenda • GM failed to acquire most knowledge possible about potential partners owing to its status as a relative newcomer to Asian market 6/24/2013General Motors’ Asian Alliance 11
  12. 12. Alternatives 1. Withdrawal/Centralization 2. Decentralization/Globalization 3. Ownership and Effective Equity 6/24/2013General Motors’ Asian Alliance 12
  13. 13. Withdrawal/Centralization • Toyota  Keiretsu style  High degree of centralization  High level of control • GM  problems  loose relationships, solutions  limiting business dealings ( with those who not willing to fall under its authority ) • Advantages: • Lighter control structure • More discipline and develop closer and more loyal relationships • Geographical proximity will lead to efficient distribution system • Disadvantages: • Limited its ability to innovate • Adversarial relationship with domestic automotive manufacturers 6/24/2013General Motors’ Asian Alliance 13
  14. 14. Decentralization/Globalization • GM’s 1966 Policy : coordinated policy control of all of its operations through the world • Lead to aggressively pursuing new opportunities & was motive behind its many Asian partnerships • GM can continue in its direction and learn from its mistakes and find best solution to its problems • Advantages: • Business at global scale  Economies of scope • Widest range of suppliers and partners(Best cost & quality) • Remain truly international • Disadvantages: • Difficult to manage wide range of partnerships • Trade-offs between trust and control • Risk of losing knowledge and tech. to competitors 6/24/2013General Motors’ Asian Alliance 14
  15. 15. Ownership and Effective Equity • GM didn’t have much control over its resources, knowledge, and technology where in its partnerships. • It can invest in only those partnerships where it does not have financial leverage so that it does not loose any control. • Advantages: • Dictate the terms of partnerships • Can force suppliers to prioritize • Harder for companies to end partnerships and start independent operations • Disadvantages: • Limit its options for suppliers • Dependent on equity providers • Ownership may not be desirable in each partnership 6/24/2013General Motors’ Asian Alliance 15
  16. 16. Recommendation • Global markets are going through tremendous change, implementing any one alternative may not work in all markets. • GM should analyze all its current partnerships and determine pros and cons of implementing each alternative. • Implement that strategy which will generate best result in GM’s interest and maximize return. • In terms of loyalty of suppliers and its partners: • GM should understand that cross cultural differences take longest time to overcome. • It has to build long term relationships with its suppliers and partners which will help in building trust and loyalty towards GM. • Finally GM should accept that not all of its partnerships will succeed, some will fail which will give be a lesson to strengthen its other relationships. 6/24/2013General Motors’ Asian Alliance 16
  17. 17. Thank you 6/24/2013 17General Motors’ Asian Alliance