General Motors (GM) in China Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Problem Statement

The problem that GM in China faced is that the business environment of China was changing dramatically. The potential of business opportunities in China created increased competition from the domestic firms and new competitors from abroad because of this GM faced new challenges from these rivals so they were finding the way to overcome these challenges.

PEST Analysis of GM in China

Political environment

The regulation of government had consistently played a major role in directing the growth of this sector. They are as follows:

ü The government restriction of automobile financing.

ü The government restriction on loans made to finance the purchase of motor vehicle.

ü Increase in the interest rate and taxes to restrain the aggregate demand.

ü The local firms in China own 50% each joint venture by the government regulation.

ü To support technological development in domestic firms new rules are imposed by government.

Economic environment

The economic factor includes:

ü Increase in the aggregate demand due to an increase in the consumer incomes, exports and substantial foreign investment.

ü The rapid increase in the inflation in China is due to an increase in the prices of natural resources and oil.

ü Increase in the unemployment is due to the expensive employees layoffs that is done in order to increase the efficiency.

Socio-Cultural Environment:

The socio-cultural factor includes:

ü Customer shifted towards purchasing less expensive automobiles that resulted with a decline in sales.

ü The rapid increase in the population growth in China.

ü The decrease in the prices of vehicles.

Technological Environment

The technological factor includes:

ü The modern technologies and managerial skills are brought by the foreign investors in China.

ü The domestic firms in China pursued traditional practices that lacked in innovation and product development, which resulted in poor quality components.

ü China has no proper highway system.

SWOT Analysis of GM in China

Strengths

General Motors (GM) was the largest vehicle manufacture. The strength of GM in China includes:

Rapid increase in the growth rate of motors vehicles.
Increase in investment by the foreign firms in the fast growing motor vehicle industry brought modern technologies and expertise in China.
General Motors became the first foreigner automaker that issue car loans to its purchasers in China.
General Motors in China had operated six joint ventures and two wholly owned foreign enterprises.

Weaknesses

The weakness of GM in China includes:

In 2004 there was a decline in the sales and production of the motor vehicles in China. The annual sales growth of 2004 ended at 50 percent of the previous year sales.
Air pollution had become the major concern that limits the motor vehicle industry’s growth in China.
GM in China faced the strategic issues regarding the purchase of domestic partner interest in the joint ventures with GM in China, As GM is a foreign partner in a joint venture, hence; it raised many difficult challenges for the company.
General Motors in China had to face important challenges to protect its intellectual property. This is because domestic firms in China could copy designs and technologies of the foreign firms.

Opportunities

The opportunities for GM in China include:

Chinese market is a long-term potential market as the population of China is increasing continuously that provides more working opportunities to foreign firms. The rapid economic growth of China provided evidence that more number of Chinese will able to purchase more cars in future. So there will be an opportunity for GM to expand their business in China.
There is a substantial increase in the demand of automobile due to an increase in the purchasing power of the people in China.
The world trade organization will provide the foreign companies with the valuable opportunities.
General Motors in China can introduce new vehicles with new styles and models to target different customer segments based on their preferences in accordance with the increasing motor vehicles market in China.

Threats

The threats for GM in China include:

The regulations that the Chinese government imposed on the General Motors posed significant threats to implement their expansion plans.
The intellectual property rights posed a significant threat to the businesses of General Motors in China. General Motors in China may be threatened by the fact that domestic firm may copy their design and technological expertise. GM faced important challenges in protection of their intellectual property.
The over capacity is another major threat that General Motors including many foreign firms faced which led to lower prices and profit margin. The average car prices in China declined in the year 2014.

GM in China faced new challenges .................................

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