general motors and avto vaz of russia
Post on 02-Jul-2015
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Case facts
• Avto VAZ (Volzsky Avtomobilny Zavod)
• MOU signed in march 1999 (non binding)
• Manufacturing a new automobile in Russia, the Chevrolet Niva
• Investment required $332 million
• Too risky as a market place Russia
• EBRD gave $93 million as debt and $ 40b million invested in equity
Continued….
• Avto VAZ was to supply most important parts to J.V.
• Debate on several issues like cement pricing ,profit on supply of parts to J.V.
• Technological advancement to Avto VAZ from G.M.
• Huge market potential because of less production and more demand
• 68% to 97 % of the segment was able to purchase car below $ 10000
• Russian preferred cars made in Russia not assembled in Russia
Continued….
• Chevrolet tag with NIVA was very much acceptable to Russians(marketing research)
• Target price for NIVA II was $ 7500 and 90000 units
• Opel Astra(T3000) was expensive to produce
• After 1998 financial crisis weak ruble made Russian exports more competitive
Finally production starts
• GM and Avto VAZ each get a 41.5 percent stake in the joint venture, worth $ 99.1 million a piece
• Production started in 2002
• Price was $ 8000
• capable of producing 75000 units
Russia in 1996
OrientationOrientation Russia( Hofstede)Russia( Hofstede)
IndividualismIndividualism 5050
MasculinityMasculinity 4040
Uncertainty Uncertainty AvoidanceAvoidance
9090
Power DistancePower Distance 9090
Attitude towards Environment
US G UK J F, S I, R M ME, A
SEA c*----------------------------*------------------------------*---------------------------*------------------------* Controlling Adapting
A – Africa, C – China, F – France, G – Germany, I – India, J – Japan, M – Mexico, ME – Middle East, R – Russia, S – Spain, SEA – Southeast Asia, UK – United Kingdom, US – United States
Recommendations
• Promptness to come at an agreement
• Mutual benefit considerations
• Trust
• Uncertainty avoidance(Risk taking propensity)
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