Looking at the SWOT analysis of the situation faced by GM, the best possible strategy available for GM at this point would be to diversify the nature of its operations as well as the country of operations. The company should decrease its present stake in the domestic operations market as well as use the investment for taking the advantage of using China as a base for export market. A further part of the reduced investment could be put in India to take advantage of its existing market. The country’s booming economy, balanced growth and a large market is exactly what GM needs at this point.
A number of its fellow rival companies like Honda and Toyota have already ventured heavily in the country in the automobile segment. Further a shift in technology from the nearby China to India would be easy because of certain culture similarities. Also India would be more recipient and open to GM’s venture because of its open competition with the country in terms of attracting foreign investors. Plan of Action For following the above strategy GM has to make several long terms and short terms decisions. The plan of action has been given in this section Short term
GM’s short term focus is to diversify its investments to neighboring countries. The company could shift come of its joint ventures into countries like Thailand where it already has a significant investment base. This plan would also lead to a much stronger base for GM in the region which is necessary at this point given that most of its present rival companies like Toyota and Honda belong to the Asian region and use similar countries as the production base because of similar advantages like cheap labor. The next step would be to increase the investments in India.
The best way to do this is close down some of the ventures which are faring the lowest and shift them to India. This would send a clear signal to the Chinese government regarding the multiple options available to GM and also other companies about another existing market in the vicinity. As is seen in many similar cases Chinese government is very susceptible to such signals and usually a more lenient policy is introduced by the government. Long Term GM’s long term policies should start by scouting other countries in the Asian and South American regions giving similar advantages as China and India.
There are many new country venturing into attracting foreign companies offering higher cost advantages. Examples of such countries are Vietnam in the Asian region and Brazil in South America. Both the above countries have high population density and availability of cheap labor and also a significantly lower cost of raw materials. The best course would be to strategically reduce the investments in China especially in the new vehicles manufacturing sector for the domestic markets.
The country’ production facilities could be made export oriented which would be a good long term decision giving the inevitability of appreciation of the Chinese currency. The international pressure is mounting to necessitate such a change and it is a fair assumption that it might happen in the near future. In either case it is a good test option for GM to make. Japanese companies who always have acted taking the long term future in view have already ventured out into this area.
The joint ventures which have been the core for success for GM are slowly turning out to be a source of concern and also not so effective any more considering the changing business environment. Hence, GM should seriously re-evaluate each of these partnerships and make a decision regarding continuing such ventures. The risk which should be considered is the infringement of intellectual property especially in the R&D area. As more of these companies become more technologically competent, they seem to be employing their partnerships into unfair use with the backend support of Chinese government.
This should be evaluated against profitability for longer term. As GM earns quite a lot from such partnerships there is no problem for the immediate future because any problems would be balanced by profits in the short term. GM should also consider evaluating the possibility of partnering with fellow automobile rivals for opening up ventures in China. As against the obvious risks of opening up markets for such companies the fact remains that as more companies enter the market it might give a way to a fairer market structure China sometime in future.