General Motors

Strategic Management-2

1

Group 5Anand Kumar

12P127Ankush Singla

12P129Bhoomi Ashwin

12P131Aditya Ram Chadha

12P132Siddharth Bharadwaj

12P170Soumyajit Sengupta

12P171

Asian Alliances

General Motors: Strategic AlliancesUnified ownership for coordinated policy control of all operations throughout the world is essential for effective performance as a

global organization

Rationale

General Motors

Toyota

Isuzu

Suzuki

NissanDaewoo

Fanuc

Ancillaries

Joint Venture

Equity Strategic Alliance

Equity Strategic Alliance

Non-Equity Strategic Alliance

Joint Venture

Joint Venture

Hitachi, Nihon, Atsugi, Kyoritsu, Tachikawa,

Akebono, NHK

Backdrop

Earnings

Market Share

4.5 2.9 bil

Below 40%

General Motors-Toyota Joint Venture: NUMMI

General Motors• Gain access to a small car

to help expand its portfolio

• Learn about the famous Toyota Production System

Toyota• Get around the Voluntary

Export Restraints (VERs) agreed to by the Japanese government with USA

• To familiarize itself with US Markets

Parameter Description

Cash Contribution $200 million ( $100 million each by Toyota & GM)

Plant Fremont, California

Board Independent

Board Composition President, CEO & Top Officials (Toyota); 16 Executives (Maximum) (GM)

Annual Production Capacity

200,000

Apparent Benefits

General Motors: Other Alliances

GM paid $56 million for 34.2% stake at a period when ISUZU was struggling

GM would assist in designing, developing, manufacturing and

distribute through its global networkGM made agreement with ISUZU for building R&D and supply of engines,

parts

NISSAN was the fourth largest auto maker & a large industrial group like

Toyota

Nissan was supplying Engines and Transmissions, while GM was

supplying panels and Nissan was supplying Pulsar which was sold by GM

under the name Astra

GM paid $35 million for 5.3% stake in Suzuki,

Suzuki was looking for an International Partner, while GM was looking for

better technology, lower production costs

DAEWOO – Korean conglomerate group, second largest automobile

maker in KoreaGM would take management control as

Daewoo suffered heavy losses in preceding four years

GM supplied Opel engines and formed JV for building parts R&D with Daewoo

subsidiaries

GM-Isuzu

GM-Nissan

GM-Daewoo

GM-Suzuki

General Motors and FANUC each invested $5 million and created

GM Fanuc Robotics Corporation (GMF)

GM was the largest buyer of robotics

systems in the United States, buying a full

third of robots sold in the country, was

dissatisfied with its present robotics

vendors, GM wanted to sell their products & guard against losing

personnel to competitors

Fanuc was looking to build its robotics

business at a period of economic slowdown, competition and was seeking intelligent robot technology

present in U.S

General Motors – Fanuc Joint Venture: GMF

General Motors’ Alliances with Ancillaries Manufacturers

•Japanese equivalent of GE•Cooperative development and production in 5 areas •GM announced a long term agreement to buy electronic systems

Hitachi

•Joint venture to produce next gen compressors designed by GM•GM wanted to capture the Japanese Auto market•Nihon wanted to gain access to technology

Nihon Radiator

•Atsugi to supply parts and accessories•GM to provide technical assistance

Atsugi

•GM purchases 20% & shares Investor

Kyoritsu

•Supply seat cover technology to GM•Advanced technology not used at the time

Tachikawa Spring

•Owners were fierce rivals such as Toyota & Nissan. •Falling market share•Had world class technology that cost 20% less•GM to provide its electronics expertise and technology

Akebono Brakes

•Largest producer of auto spring in the world•No deep rooted affiliations with any auto makers•GM interested in its new Fibre Reinforced plastic springs cutting weight by 32 to 54 pounds

NHK Spring

Analysis of External Industrial Parameters on FirmIndustrial Organization Model

External Environment

Globalisation, Technological advances. The 70’s era was of technological innovations and improvements with increasing imports and U.S auto makers were suffering.

Attractive Industry Imports were increasing and the BIG THREE were suffering with their engineering, manufacturing and marketing efforts

Strategy Formulation

U.S Auto firms to fight competition and to improve their positions were forming cooperative alliances with Asian companies

Assets and SkillsU.S Auto companies were looking for Cost Minimisation and Value Maximisation i.e. were acquiring low cost technologies, improvements and practices of industry

Strategy Implementation

Ford invested in Mazda, Chrysler invested in Mitsubishi & GM invested in Japanese and Korean companies

Superior Returns Alliances formed joint R&D, supplied parts and engines and Japanese company cars were released under GM names – Opel, Pontiac etc.

Core Problem in General Motors’ Strategic Alliances

• General Motors’ Asian business partners have often benefited from GM investments of effort, financing, and knowledge, and used this to compete with the company, either directly or indirectly.

• The Fanuc partnership, which was undertaken in less than three months, is one example of a partnership which was undertaken too quickly.

1978 1980 1982 1984 1986 19870

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GM Market Share in USA (%)

%

* Source :-VEHICLE CHOICE BEHAVIOR AND THE DECLINING MARKET SHARE OF U.S. AUTOMAKERS, INTERNATIONAL ECONOMIC REVIEWVol. 48, No. 4, November 2007

Main Reasons•Loss of Control•Lack of Knowledge Protection•Short Term Growth Orientation•Declining In-House Product Development Capability

Probable Solutions

Centralization

Pros• Based on a

tried & tested formula (Toyota)

• Greater Discipline

• Better Relationships

• Better Supplier Monitoring

Cons• Innovation

Capability Limited

• Hindered First Mover Advantage

Effective Ownership

Pros• Greater

Management Leverage

• Ability to Hinder Partners turning Probable Competitors

Cons• Greater Costs

Incurred• Flexibility with

respect to Suppliers would be hindered

• May lead to Disruptions caused by an Equity Partner, if any

DecentralizationPros

• Easier to Operate on a Global Scale

• Better First Mover Opportunities

• Greater Supplier Base

• Would remain true to the Vision outlinedCons

• Difficulty in managing wide-ranging alliances

• Difficult to manage Distribution networks with Suppliers

• Chances of Creating New Competitors

Thank You!