Internationalisation Path Taken by General Motors - Assignment Example

Corporate and Global Strategies Section A 1. Critically analyse and evaluate the internationalisation path taken by General Motors in their entry and development of key overseas markets. Identify and evaluate internal and external internationalisation triggers and methods used by GM at different stages. (30marks) Going by the actual date General Motors (GM) the company celebrated 100 years in the Automotive business in 1997, because the first ever unit of the company, Old’s Motor Vehicle Company Inc., was organized by Ransom E Olds with a $50,000 capital. This first unit of GM launched the Oldsmobile vehicle. (Source Official Website of GM viewed on 18th May, 2007 at http://www.gm.com/company/corp_info/history/gmhis1900.html) The company employs more than 300,00 people all over the world and is valued at 16,587 billion dollars. With headquarters an the Renaissance Center, The company manufactures and markets vehicles from 33 countries all over the world. (Source: “General Motors (NYSE:GM) at a Glance”, Forbes.com, Free Trial Issue, viewed, 16th May, 2007) These milestones (see Appendix 1) indicate the global enterprise of GM and its collaborations to make the Chevrolet, Cadillac, Buick, Vauxhall, Holden, Opel Astra, Pontiac and the heavy duty Allison Transmissions. The list also indicates successful joint ventures of GM with Fuji, Suzuki, Daewoo and the SAIC, to name a few. Broadly, the internationalisation practices of GM can be summarised as Starting on a small scale initially in countries it already had business dealings with Gradually branching out to more countries as sales and popularity of vehicles picked up Waiting and watching moves and enterprises/ventures of other and rival automotive companies to assess feasibility of launching particular vehicles in specific countries in specific times. An illustration for this would be the stalling of the production of the Vectra vehicle up to 200, when it was launched successfully. Financial setbacks occurred a few times and GM diversified, cut costs/production and decentralised administration as and when situations arose in order to set the Company back on to a profitable track Business Model The business model of GM integrates its value propositions, basic capabilities and talent, target of marketing, its various overseas branches, value configurations, cost benefits, revenue models, customer/sales personnel relationships, online marketing strategies and partnership issues. The model has to consequence in successful completion of all projects of the company at the operational level. The basic corporate structure of GM assumed a dynamic form to cater to changing times and management needs. This has facilitated, in spite of several setbacks, an ever important forward thrust in progress, enterprise and market value of the company. (Source: “Business Model design”, from Wikipedia, the fee encyclopaedia viewed on May 18, 2007 at http://en.wikipedia.org/wiki/Business_model_design) Structure: a brief note Asia, Latin America, Europe and North America had regional presidents, reporting to the CEO responsible for all business operations of GM in respective regions 13 Global process leaders were responsible for production and marketing of the vehicles; both together formed the “Automotive Strategy Board” They report to the GM President and Head of Operations (Appendix 2 lists some of the many business models adopted by companies all over the world.) The internal triggers of GM The internal and external internationalisation practices facilitating it can be encapsulated as follows The basic ingredient of GM’s success has been its ability to integrate a strong internal thrust with equally powerful offshore ventures to evolve a sustained global enterprise. GM ventures outside of the US tapped into the local available and abundant talent to ascertain the right perspective to create a demand for its vehicles within that specific socio-economic set up. That is why you had the small, compact Spark made for Indian roads, the Chevrolet Cruz for Japan and the AvtoVaz venture for Russia. Another telling factor that helped GM revive after every setback and continue to be the world’s No#1 automobile company is because it “relies on a pre-existing internal division of labour, that has allocated GM Europe responsibility for international affairs, meaning for the whole world outside of North America.” (Bordenave Gerard and Lung Yannick, “The Twin Internationalisation strategies of US carmakers GM and Ford”, Equipe Industries Innovation Institutions, University Bordeaux IV, France, Working Papers of E3i Series, 2002, viewed 16th 2007, http://ideas.repec.org/p/iii/wpeiii/2002-1.html) As a consequence, after 1996, GM put in a more concerted effort to define stronger off shore platforms. Now more vehicles were manufactured and sold outside of the US unlike earlier when only marketing went overseas and production was confined within the country, Some innovative approaches that refurbished the existing global management structures of GM are Global platforms were reduced to 7 from 14 Production of cars were ceased or stopped in countries where there were political setbacks or a slump in economy. Small and large cars were manufactured as per the need of the specific geographic region and its economic framework of purchasing power Highlights When the marketing of Chevrolet Prism, Pontiac Sunfire and Cavalier models turned out to be financially lucrative, their production was suspended and later delegated to the Delta platform (GM has three main platforms, Delta, Epsilon and Gamma) just when there arose a need and purchasing capability in the public for the same. A close watch was kept on the Chrysler and Ford models of cars to see their marketability before similar cars from the GM workshop were released. Until now GM had managed all its operations from a centralized set-up. The growth on foreign shores was present and reasonably successful. However the company tasted genuine success in the overseas operations after a series of restructuring processes in 1998. External Internationalisation Appendix 1 gives a detailed, chronological report of the external operations of GM. Observation of the same indicates GM started small and grew from strength to strength in a phased planned and well-managed manner. Small, cautious stakes initially increasing to larger stakes in joint ventures brought more success overseas A few ambitious expansions saw the enterprise bite dust, especially the Housing schemes on more than one occasion In the early 90’s for the first time GM consumed more cash than it brought in and its market value declined. In this regard it can be pointed out that GM is well advised to concentrate on research on a lesser number of car models, like its contemporaries like Toyota to make the optimum models for its overseas markets. (Source “Why GM’s plan won’t work”, Cover Story, Business Week, May 9, 2005) GM increased its businesses, production and marketing in more countries, like Russia (after the USSR fell apart), in India, Korea, Malaysia, Indonesia, Philippines and China, to mention some of the countries it GM’s Asia enterprise. GM’s “Keep America Rolling “ campaign post 9/11 not only boosted its business in the US, boosted the US economy, but also recreated the image GM as a socially responsible and successful company, to its partners and clients all around the world. By and large venturing into more and more countries has made GM a household name to be trusted for quality and pricing in automobiles. “A strong foothold in India is a key to GM’s growth globally”, according to General Motors Chairman and CEO Rick Wagoner, during the launch of GM-Daewoo’s Chwevrolet Spark, in India.. (Source: “India , Spark to light up the GM unit”,in Journal, Just Auto -Authoritative and Timely Global Business Information, 17th April, 2007.) What were the main benefits of Internationalisation to GM at each stage of their international development? The various strategies remodeled and adapted over time brought in varying degrees of success in GM ventures. Among the various moves and strategies adopted by GM these stand out as the most striking/beneficial for the company. 1939 to 1945 GM delivers more than 12,300,000,000 of war material to the Allied forces that included trucks, tanks, airplanes, airplane engines, parts of airplanes, marine diesels and guns and shells 1981 Suzuki, the world’s leader in mini compact vehicles, sign an agreement for supply and distribution with GM’s 5% share in Suzuki which later increased to 20% 1996 GM becomes a digital enterprise and its CIO, Ralph Szygenda was named IndustryWeek’s 2001Technology Leader of the Year. (Source: “Technology Leader of the year:- Transforming GM”, Journal, Industry Week, 2001, viewed on May 18, 2007, at http://www.industryweek.com/ReadArticle.aspx?ArticleID=995&SectionID=38) 1999- GM creates the eGM a new business group for Internet marketing and onStar single Global organisation Production of Chevrolet Prism, Pontiac, Cavalier and Sunfire was ceased when they turned out to be commercially unviable. This helped prevent a huge loss the company would have incurred in case production had continued. “The Saturn Aura which shares its vehicle architecture and design language with the Opel/Vauxhall Vectra, was named “North American Car of the Year” at the Detroit Auto show, ahead of Toyota Camry and Honda Fit (Jazz in Europe)” , (Source: GM Studio Social Media Newsroom, January 8, 2007) viewed on May 18, 2007, available at ) Joint ventures and partnerships with other automobile giants in the world helped in successful dissemination and transfer of information and technology, mutually, for making better and more suited cars for specific geographic and international demands One of the consequences of this is the establishment of a common platform for the production of GM Corsa, Fiat Punto and 178 Collaboration with Fiat considerably strengthened GM’s foothold in Latin America and Europe as Fiat had sizable resources in these countries Collaboration with Japan, helped increase the GM’s enterprise in light utility vehicles Which of Bartlett and Ghoshal’s four typologies best describes the strategic position adopted by GM? Has this changed over time? In my opinion, General Motors has characteristics that typifies multinational, and transnational, as the parameters in both typologies are best suited to define the profile of GM. To illustrate, according to Bartlett and Ghoshal the multinational typology defines a company that is “a strong local presence through sensitivity and responsiveness to national differences” (“Managing across borders: An empirical test of the Bartlett and Ghoshal (1989) Organisational Typology” Web article viewed May 18, 2007, at http://www.e-sgh.pl/ccm/managing_across_borders.pdf). The decision to launch a small car in India has been successful with the Chevrolet Spark creating waves. Te car is designed to be fast, comfortable and is specially suited to mange the traffic jams and highways of the Indian motoring roads. This indeed is an example of the company’s special responsiveness to the particular quirks of Indian roads and driving conditions. (“Light my fire” by Srinivas Krishnan, Journal article from “Business Standard Motoring” Issue – 27 April, ’07) The transnational typology is considered to be a coordinated federation, suiting companies with a reputation for professional management. This implies a willingness to delegate responsibility, while retaining overall control, via sophisticated management systems and specialist corporate staff”(“Managing across borders: An empirical test of the Bartlett and Ghoshal (1989) Organisational Typology” Web article viewed may 16, 2007, at ). This can be illustrated by the fact that GM continues to have its main administrative core at Detroit with Rick Wagoner at the helm. The overall structure of the company remains similar to what it was decades ago, with the same sophisticated management set-up. What has changed within the Company, over the years,(making it more suited to be classified under the transnational typology) has been its successful bid to delegate responsibility and involve highly specialised staff to steer the various units into successful and sustained business enterprise. The Global Coordination team of GM “manages the overall operations and directions of the Public Policy Center (PPC). Within the team there are members who represent our four operating regions and the respective regional strategy boards. This management structure provides the GCT with a direct link to the strategy and business decisions taken by the Automotive Strategy Board and the regional strategy boards.” (Web article in the official GM site, “Management Structure (GRI 3.6) viewed may 18th, 2007 at http://www.gm.com/company/gmability/sustainability/reports/04/300_company/341_man_man.html) Section B Choose THREE of the following themes and apply theory applied on the module to your experience in the Czech Republic. Reflect upon what you have learnt from the experience: (each question is worth equal marks) 1. MNE and FDI activity in the Czech Republic 2. Internationalisation paths: triggers, methods and strategies of Czech MNEs 3. The Global versus Local debate 4. Cultural Aspects of doing business in the Czech republic 5. National Competitive Advantage of the Czech Republic MNE and FDI Activity in the Czech republic 1999 was a year of the most significant changes in Czechoslovakia. The Velvet Revolution in 1989 and the subsequent move to democratse the nation created a scenario of monumental economic reforms and the beginning of a transition towards a state more globally involved in business, enterprise and networking than ever before. As a natural consequence there has been a steady flow of multinationals into the Czech Republic. Multinational Enterprises (MNE) and Foreign Direct Investment have stepped into this strategically placed European nation. To an extent these FDIs and MNEs have been the causal factors for accelerating the sweeping economic changes in the country. However, Trade Unions in some parts of the country are still to become aware of the impact in totality of these foreign companies, and how they will help improve the economic profile of the Czech Republic. Because of the phenomenon of the entry of MNCs in the country the following can be observed People in the Czech Republic are exposed to the operations of business giants They get to become aware of the latest trends in industrial relations, recruitment strategies and management techniques The FDIs and MNEs also step in cautiously and for a sustained presence in the region, will evolve strategies that do not intrude into the cultural individuality and basic socio cultural profile of the country In this direction analytical studies of pilot projects are utilized to evolve the best methodology for initiating a business operation in the region. Better pay scales are offered and this attracts better qualified to MNEs “The FDI in the EE C was found to be 7 billion US dollars of which 66% was divided among Hungary Poland and the Czech Republic (Source: The ILO SRO-Budapest Bulletin, Newsletter2-1995) Taking into consideration the importance of trade Union activities in the Czech, both MNEs and the local trade unions can evolve a sustaining business environment by Mutually helpful awareness strategies Operations to help improve local infrastructure for better business Initial operations of the MNEs need to indicate trends that bring about boost to the economy International Labour laws have to be strictly followed Cultural Aspects of Doing Business in the Czech Republic The strongly principled Czech who places family on top of his priorities is both an interesting and challenging partner to do business with, Within the framework of the rich tapestry of the Czechoslovakian social life, business is a sacred mission where honesty, punctuality, politeness, sincerity and mutual regard define the main framework. (Source: “Czech Social and Business Culutre, Doing Business in the Czech Republic”, Communicaid, Web article viewed May 18, 2007, at http://www.communicaid.com/czech-business-culture.asp) After the Soviet Union came apart, Czechoslovakia moved towards democracy and sweeping economic reforms. This, naturally, involved the concept of “going global”. The country opened its doors for multinational business and has never looked back. Yes there are hindrances, those that occur in initial setting up of a major economic enterprise. Banks play a significant role in helping the people set their standards and begin doing business with the giants from other countries. The basic nature of honesty, politeness and punctuality has helped many a business move from strength to strength. Also their careful attitude to go by rules and avoiding ambiguous situations helps cement better business ties. Advantageously placed in the center of Europe the Czech Republic prefer to follow these rules while conducting business Early to work and early to finish Long Weekends From early Friday Punctual, unambiguous business partners who are honest and dedicated Refraining from familiarity with a preference for formal working relationships Business distinctly separated from private life These sum up the basic aspects to conduct business with a Czech counterpart. National Competitive Advantage of the Czech Republic Czechoslovakia is famous for its high quality weapons, shoes, and beer. This implies the country has a formidable work culture of persistent hard work without compromise on quality. Combined with their enviable positioning on the Europe map, the Czech republic metamorphosizes into one of the most attractive countries to do business with, now that they have an open economy. A small country with a population of just over 10 million, the Czech republic has truly opened its doors to the world. Tourist influx has increased to a remarkable level, helping all the more in dissemination of knowledge about the country in all parts of the world. Contemporary business and management practices can further accelerate the economic growth of the country, Reviewing the above factors it can be said that the Czech Republic has a commendable heritage of labour and productivity, that can transform the country into a major player in the international business scene. Those MNEs that have set up their businesses in the country have not only helped boost the economy but have also found great satisfaction in the work culture. The gradual building up of its reputation will further attract more and more companies to secure a foothold in the country. Major Strengths Quality consciousness, local talent and indigenous innovation can help control prices of products Banks play a greatly supporting role in Czech enterprise as the State encourages globalisation Willingness and capability of the work force to learn new skills, network and practice them A major drive towards achieving computer literacy Networking via the Web to learn and disseminate information regarding the nation Integrity, family values and basic nature of politeness, hard work and sincerity provides for a welcome transparency in business dealings. Source: VSEM, Competitive Yearbook- The Czech Republic 2005 * * * * * References 1. Web article “General Motors” from Wikipedia the free encyclopaedia” viewed May 18th 2007 2. “Managing across borders: An empirical test of the Bartlett and Ghoshal (1989) Organisational Typology” Web article viewed may 16, 2007, at ) 3.Web article in the official GM site, “Management Structure (GRI 3.6) viewed may 18th, 2007 at http://www.gm.com/company/gmability/sustainability/reports/04/300_company/341_man_man.html 4. Web article in the official GM site, “The Company History” viewed on 18th May, 2007 at http://www.gm.com/company/corp_info/history/gmhis1900.html) 5Web article: “General Motors (NYSE:GM) at a Glance”, Forbes.com, Free Trial Issue, viewed, 16th May, 2007, ) 6 Web article “Business Model Design”, from Wikipedia, the fee encyclopaedia viewed on May 18, 2007 at http://en.wikipedia.org/wiki/Business_model_design) 7. Bordenave Gerard and Lung Yannick, “The Twin Internationalisation strategies of US carmakers GM and Ford”, Equipe Industries Innovation Institutions, University Bordeaux IV, France, Working Papers of E3i Series, 2002, viewed 16th 2007, at 8. Web article: “Technology Leader of the year: - Transforming GM” 9.GM Studio Social Media Newsroom, January 8, 2007) viewed on May 18, 2007, available at ) 10. “Czech Social and Business Culutre, Doing Business in the Czech Republic”, Communicaid, Web article viewed May 16, 2007, at http://www.communicaid.com/czech-business-culture.asp) Articles 1.“Light my fire” by Srinivas Krishnan, Journal article from “Motoring is it in your blood?” Issue – 27 April, ’07) 2“Why GM’s plan won’t work”, Cover Story, Business Week, May 9, 2005 3 “India, Spark to light up the GM unit”, Journal, Just Auto -Authoritative and Timely Global Business Information, 17th April, 2007.) Book VSEM, Competitive Yearbook- The Czech Republic 2005, Czech Republic Publication Appendix 1 The significant milestones of the world’s largest automotive company in Internationalisation are 1911 General Motors Export Company is launched to handle sale of GM cars outside of the United States and Canada 1918 General Motors Canada Ltd is formed. 1920 GM Export’s first far Eastern Branch is opened in Manila in 1920 1923 The General Motors International A/S is established in Copenhagen- the company’s first assembly plant in Europe 1924 GM Continental is launched with operations in Belgium 1925 General Motors do Brasil is established in Sao Paulo, a manufacturing unit in Argentina, GM Peninsular in Spain, GM (France), and GM Motors GmbH in Berlin 1926 GM Australia Pty Ltd, GM new Zealand Ltd, GM Japan Ltd, GM Near East in Egypt, GM Uruguaya, and GM South Africa launched. The South African venture was re established (after suspension) in 1997 when GM acquired a 49% share in Delta Motors 1935 GM de Mexico is set up as also GM Suisse SA in Mexico and Switzerland respectively 1938 GM Overseas Operation (GMOO) headquartered in New York is launched. This subsidiary was to encompass all issues related to manufacturing and marketing of GM vehicles outside the USA and Canada 1941 GM stops operations in Japan 1939 to 1945 GM delivers more than 12,300,000,000 of war material to the Allied forces that included trucks, tanks, airplanes, airplane engines, parts of airplanes, marine diesels and guns and shells. 1940 Germany seizes control of Adam Opel AG 1945 The GM del Peru unit commences assembling of trucks 1948 the first mass produced car – Holden, is manufactured by GM in and for Australia and also opens the first automated plant in Venezuela 1962 A new Opel plant is opened in Bochum, Germany 1967 GM celebrates the making of its 100,000,000th car. 1969 General Motors Chile comes into being. The same year GM also made navigation and guidance equipment for the Apollo 11 crew, the first to land on the moon 1971 GM and Isuzu collaborate for manufacture of trucks and GM acquires 34.2% stake in Isuzu. GM also launches GM Malaysia BHD in Malaysia 1972 GM Iran, Ltd begins production and marketing of the GM passenger cars in Iran. The same year, GM entered into a collaboration with Shinjin Motor Co. in South Korea In 1982 this became Daewoo Motor CO. Ltd and GM had a 50% share in the company up to 1992 A European Advisory Council of business leaders is formed to advice the GM chairman on its business in the continent 1979 A 2-billion expansion programme in the Europe is announced 1979 GM establishes joint ventures with two Philippine automobile companies. Isuzu too joins hands with the venture, but production is ceased in 1985 1980 A 4-billion expansion programme for worldwide operations is announced. The same year the GM Terex operations are sold to IBH Holding AG of the federal Republic of Germany, and five new plants are begun in Europe. The same year GM experienced the a very major loss due to recession (the biggest since 1920) GM Truck and Bus Group is established for production and manufacturing of vehicles worldwide 1981 Suzuki, the world’s leader in mini compact vehicles, sign an agreement for supply and distribution with GM’s 5% share in Suzuki which later increased to 20% 1982 GM forms Industries Mecaniques Maghebines in Tunisia for light duty trucks and commercial vans 1984 GM acquires Electronic Data Systems Corporation, a leading telecommunication and data processing company, of the world. 1985 The Opel Kadett and the Vauxhall Nova are named Europe’s Car of the Year 1989 GM commences operations in Turkey 1989 GM gets 50% of Saab Automobiles Sweden to make and market Saab cars worldwide. In 2000 the stake is a complete 100% in Saab. It collaborates with Isuzu motors to make Holden automobiles in Australia. GM Holden’s 5,000,000th car is sold in Australia in the next year 1990 The first Opel Vectra is made in Germany. GM also makes an agreement with Villszov (Hungary) to make power and signal distribution systems. It also collaborates with Raba, a truck manufacturer to begin making of cars in Hungary by 1992 1991The Kuwait Iraq war results in decline of sales in GM vehicles 1992 A major revamping is done to cut financial losses and General Motors International Operations is established in Switzerland. The same year GM collaborates with Jinbei, China to form the Jinbei GM Automotive Company 1993 Toyota and GM sign an agreement for sale of the GM made Chevrolet Cavalier cars (with right hand drive) in Japan by Toyota. The same year a joint venture company is formed by GM in Indonesia for the making and marketing of passenger cars and light commercial vehicles 1994 joins hands with Hindustan Motors India to assemble, in the coming years, a hatchback version of the Opel Astra. 1995 GM and Shangai Automotive Industry Corporation (SAIC) sign a joint venture in China. The same year the GM owned Hughes Electronics becomes the largest supplier of communication satellites in the world 1996 The GM website is launched. The same year a housing initiative is launched in Mexico and the Renaissance Center is made the global headquarters of GM 1997 Saturn cars are sold in Japan 1999 The Shangai plant made and sold Buick Regal cars. The same year Gm entered into a 5-year agreement with Toyota for developing alternative vehicle propulsion technologies. GM acquired the Arriva Automated Solutions in UK 1999 GM creates the eGM a new business group for Internet marketing and onStar single Global organisation. The same year GM acquired 20% share in Fuji Industries Japan and also gets into agreement with Honda for Honda to provide engines for GM vehicles made in the USA 2000 The same year, GM acquires 20% equity in Fiat Italy. New plants are inaugurated in Mexico, Germany, England and Thailand. 2001 GM and AvtoVAZ, Russia collaborate for a light sports vehicle in Russia. Black Sail is launched in Shangai, China. The Chevrolet Cruz is launched in Japan After the 9/11 attacks GM announces “Keep America Rolling “ initiative for retailing automobiles which is instrumental in providing a boost both to GM and the US economy 2002 GM signs agreement in South Korea for bulk acquisition of Daewoo Motors’ assets The following years saw the 100th and 50th year of many a GM vehicle 2007 GM collaborates with Hindustan Motors, India to launch the Spark a small car Source GM official website http://www.gm.com/company/corp_info/history/ Appendix 2: Some of the various business models adopted by enterprises all over the world are 1. Open Business 2. The Pyramid Scheme 3. The multi-level marketing business model, 4. Monopolistic 5. Loyalty based 6. Industrialisation of services 7. Collective Business Model 8. Premium business model 9. Subscription Model 10. Networks Effect Model 11. Auction Model and 12. The online business and auction model Source: “Business Model” from Wikipedia, viewed on May 18, 2007 at the free encyclopaedia http://en.wikipedia.org/wiki/Business_model Read More