Does GM's Future Lie in China? - Essay Sample

Introduction

Over the past years, China has emerged as the world's largest and fastest-growing automotive market. General Motors has made a significant investment in the Chinese market, and with the integration of Asian business operations into the global value chain, China is replacing the U.S as the most important market and operation base. In product development capability, GM is a clear leader in China. The company aims to launch local China brands to meet the changing needs of the market. In this regard, it targets first-time buyers living in specific areas within the nation. GM's vision and mission statement address the strategic direction needs of the automotive business (Goolsbee & Alan 20). Its vision statement indicates what the company aims to achieve in the future. On the other hand, its mission determines the actions needed to reach the corporate vision. The company's vision is to become the world's most valued automotive entity. Its mission is to earn customers for life by building brands that inspire loyalty and passion through technologies and at the same time improving the communities in which it serves around the world.

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GM entered the Chinese market at a time when the demand was very limited. Immediately, it established a joint venture with Shanghai Automotive Industry Corporation to build Buick Sedans. It was attracted by the enormous potential in the nation which by then was experiencing rapid economic growth. The company saw its U.S market share slip by a sizeable percentage thus there was the need to remain relevant in the market. The management believed that the market demand would increase due to the projected financial growth of China. During this time, China was an emerging financial power with almost a billion people. The organization saw it necessary to forge joint ventures with local producers because, in China, the local partners have close ties to the Communist Party. The party determines who will be in what business and for how long. GM shifted its low-cost, developing-market focus from Korea to Shanghai. The joint venture between SAIC, Wuling, and GM improved sales (Goolsbee & Alan 21). However, not only did GM lack knowledge and connection in China, but Chinese government regulations made it impossible for the foreign automaker to go it alone in the nation. Prior to a joint adventure, partners usually allocate resources, consign risks and potential rewards, and delegate operational responsibilities to each other while at the same time preserving autonomy (Helper & Rebecca 50). A joint venture is ideal if there is a need to mitigate personal risks.

GM also entered the Chinese market because it was failing in North America. With no established procedures to fall back on, GM was forced to improvise (Sheppard 19). In North America, the director had to deal with powerful functional bosses. However, in China, layers of management were much fewer, and corporate goals were abundantly clear. As the GM integrates its global operations, product development for individual markets will become more fraught.

In China, joint adventures are difficult to establish because they have substantial government involvement (Helper & Rebecca 55). Legal matters lack consistency and can be changed anytime. For the past few years, the Chinese government has tried to upgrade legal protections making the business environment more enticing to GM. Also, understanding the competition and the target audience is a challenge in China. To succeed in the nation, there is the need to understand the market, the trends, competitors, and how to position in terms of marketing and social media. If the competitors are diversifying their activities, then it means the field is already highly competitive.

The success of GM in China is highly linked to joint ventures with local Chinese automobile companies. Initially, the company had a total of 11 partnerships (Lu 3). The joint venture has allowed GM to overcome most of the foreign market entry barriers and accelerated the entity's growth in China. Also, with its sustainability and environmental policies, the company has committed to 100% renewable energy for the next 30 years. It has also signed the Climate Declaration to help solve climate change and to create an environment where sustainability is a priority. Its commitment to the sustainable environment has resulted in lower costs, happier communities, and has attracted lots of positive publicity and to a greater extent strengthens the brand image.

By focusing on a single global vision, GM is in a position to design, build, and sell the world best vehicles. The company has differentiated its products on the basis of cost and quality. With the economies of scale, GM has been able to implement its generic and intensive growth strategies. This has empowered the organization to maintain a competitive advantage based on the extent of market reach and production capacity (Goolsbee & Alan 23). Strong brands are a strength that supports GM's competitiveness in terms of customer loyalty and attractiveness of its automobiles. The company's other strength is based on the fact that it rarely recalls its products. Recalls cannot be avoided due to a complex manufacturing process and sophisticated software used. The company has one of the lowest recall rates in the U.S in comparison to Ford and Volkswagen (Lu 4). Normally, frequent product recalls damage the entity's brand and decreases sales, all of which GM tends to avoid.

There are a number of internal strategic factors that limit GM's growth and development in China. Some of these factors limit employee contributions to the performance of the automotive business. One of the major weakness that GM aims to address is bureaucracy in its culture and structure. Typically, in any successful organization, bureaucracy limits GM's flexibility in responding to issues in the external environment (Lu 7). Limited market presence in other nations is also a challenge. GM is not highly successful at integrating firms with different work cultures. Even though GM has recorded a success at integrating small enterprises, it has its share of failure to merge entities that have different work cultures. Currently, there are gaps in the product range sold by the organization, and there is the need for the management to set business model that does not limit expansion in adjacent product segments and bring out products based on tested features in the market.

There is a great level of consumption of inexpensive small vehicles in China. It is evident that the Chinese market is suited for General Motor's commercial vehicles. The parts of these vehicles are designed with loading capacities for small-scale businesses. The future potential for growth of GM in China is based on the market consumption and demand for vehicles. The company should execute a plan to capitalize on the future of personal mobility using tools such as connectivity, car sharing, and autonomous driving. Recently, the company announced a long-term strategic alliance with Lyft to create an integrated network of on-demand autonomous cars in the United States. With the new energy vehicles under Buick, Cadillac, Baojun brands, the company will be in a position to meet its long-term goals. The management of GM made intelligent, favorable sales plans all across the world to increase sales volume. It focused on a better mix and improved product line. The affordable Baojun brand has shown steady growth due to the success of SUV which sold over 30000 units (Mehrez et al. 7). Currently, GM is shipping vehicles built in China back to be sold in the United States and other nations in Europe. For instance, Buick Envision and Cadillac CT6 Plug were first introduced in China but are currently sold in the United States. There is a need for GM to implement strategic reform for business resilience. An aggressive GM leadership strategy will make it possible to expand the entity's global market presence. The management should continue reforming the organizational culture to address the problem of bureaucracy and to increase the rate of innovation and improve competitiveness.

A great way to more growth is the introduction of new products. GM focuses more on building new, better, and safer cars. By launching 18 new models in China, GM will strongly position itself in the region. Better macroeconomics in China could lead to higher demand for cars thus more future growth for General Motors. GM investment in China has created a win-win situation for both the company and China's auto industry. Its success is evidence of the improvement in China's investment environment and the government's determination to expand economic corporation with other nations including the U.S. The company seems to be doing what it needs to do to remain a major player in the market and generate more profit in China's huge new-car market.

Works Cited

Goolsbee, Austan D., and Alan B. Krueger. "A retrospective look at rescuing and restructuring general motors and Chrysler." Journal of Economic Perspectives 29.2 (2015): 3-24.

Helper, Susan, and Rebecca Henderson. "Management practices, relational contracts, and the decline of General Motors." Journal of Economic Perspectives 28.1 (2014): 49-72.

Lu, Shyi-Min. "A review of high-efficiency motors: Specification, policy, and technology." Renewable and Sustainable Energy Reviews 59 (2016): 1-12.

Mehrez, Loujaine, et al. A multiscale framework for the stochastic assimilation and modeling of uncertainty associated NCF composite materials. No. DOE-GM-Carbon Fiber-ICME. General Motors, 2016.

Sheppard, Barry. "General motors seems too big to jail." Green Left Weekly 1073 (2015): 19.