General Motors Company in China Term Paper

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General Motors is one of the world’s automotive giants. The company has a long history of successes and failures as any other company of such scale. The beginning of the new millennium became one of the dark moments in the history of GM. A difficult economic situation in the United States at the end of the 2000s led to the severe decline in vehicle sales, and GM started to lose its market share to its direct rivals such as Toyota, for example. Three decades of domination on the U.S. market ended in 2009 with the process of entering protection from bankruptcy. By this moment, the company’s market share slipped from 44% to about 20%. Going through the bankruptcy, GM sold several brands and developed the new strategy for the company’s renewal. China became the strategic choice of GM.

The changes were needed, and GM decided to find promising markets abroad. In 1997, the company established a joint venture with SAIC, Shanghai Automotive Industry Corp. owned by the state. The market of China was very small back then (only about 400,000 car sales in the previous year), but the potential was enormous. The decision to establish a joint venture was dictated by the need of the company for connections in China that SAIC had and the Chinese regulations in this sphere, according to which a foreign company could not operate in the country as a standalone enterprise.

GM’s initial investment in the joint venture was $1.6 billion. From the world’s key automobile market players who entered the Chinese market also, only Volkswagen invested a similar capital. By 2007, the joint venture included such brands as Cadillac, Wuling, and Chevrolet to be sold to the Chinese customers. The Pan-Asian Technical Automotive center was created as well to provide two companies with the opportunity to design vehicles and the appropriate components for other markets in Asia as well, along with the Chinese market. About 8 million vehicles (light trucks and various brands of cars) were sold on the Chinese market in 2007. The market of China appeared to be the second in the world as referring to the volume of sales after the United Sates’ market.

The key to success was the stake made by the joint venture on the design and production of the vehicles for the needs of the Chinese customers only. Thus, a light minivan under the Wuling brand was created. “Sunshine” had only a 0.8-liter motor, allowing it to have the speed about 60 mph only and price near $3,700. It was a huge success for both companies. In 2010, the Chinese market became the largest in the world with about 18 million vehicles sold. GM and SAIC became the substantial part of this success.

The strategic choice was correct if to evaluate the success of the company on the Chinese automotive market. GM’s joint venture with SAIC and its decision to produce vehicles exclusively for the Chinese market are the two most advantageous contributors to the company’s success after the bankruptcy. The company had invested extensively in the joint venture, and this decision was justified, considering the size of the market in China and car per 1,000 people ratio. Thus, in America, there were more than 760 cars per 1,000 people, while China had about 40 cars per 1,000 people. The volume of the market is still tremendously large, so GM’s focus on it is a very wise strategic decision. It should be noted that in 2010, the company sold more cars in China than in the United States (2.35 million vehicles versus 2.22 million vehicles respectively), which only supports the correctness of the company’s course of development.

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