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PG-31 Prerna RaiPG-32 Pritam PatilPG-33 Raul Pinto
PG-35- Rohan Kapuria
CASE 7
Description of Case StudyGM and Daewoo motors enter into a Joint-
Venture in 1984.
Each invest $100 million.
Day to day management under Daewoo.
Manufacture of a subcompact car, the Pontiac LeMans, which was based on Opel-Kadett, GM's successful German-designed car.
Managerial and Technical advice was to be provided by GM executives.
GM’s ObjectivesEnter into the lucrative Korean market.
Ability to increase its market share above 10% in the Asian Market.
Easy entry into Asian markets with local partner.
Cheap labor in South Korea would decrease overall cost.
Daewoo’s ObjectivesTechnical and Managerial expertise by GM
executives.
Access new technology and engineering skills developed by GM through technology transfer.
Export to world markets mainly US and Europe on the back of strong GM brand name.
Compete with Toyota Motors.
Problems Faced by GMIn 1987 Korea became a democracy and
frequent labor strikes reduced productivity
Daewoo ended up doubling salaries to workmen, costing edge lost due to higher wages
Quality issue-poor workmanship affected sales and attracted negative publicity
US sales dropped 86% within 3yrs
Problems faced by DaewooGM did not allow Daewoo to expand in the
US or Europe
Fearing exploitation of technology, GM did not share the same with Daewoo
GM refused to invest another $100 million to double manufacturing capacities
Daewoo accused GM of not properly market the product
Final ResultGM and Daewoo dissolved partnershipDaewoo bought out 50% stake of GM for
$170 million, payable over 3yrsAbout a decade later GM, along with Suzuki
and SAIC bought 66.7% stake in DaewooInvestment made was $400 millionDaewoo brand having suffered, GM
branded Daewoo vehicles as Chevrolets
Analysis
Daewoo did not receive the technology backup from GM
GM’s superior quality standards could not be met by Daewoo, due to operational differences
Discord was caused due to inability of both parties to achieve their main objective of entering the Joint-Venture
Analysis (contd.) GM: To enter Asian markets successfully
and produce compact cars at cheaper costs
Daewoo: To gain superior technology and enter US and European markets
Since Daewoo brand was diminishing, GM made a smart move by marketing the cars under the brand Chevrolet
Alternative SolutionConsidering that eventually GM bought
Daewoo at a higher cost, organizational restructure would have been better than outright selling the last time round
GM executives should have made an effort to understand Korean business culture
Cultural Differences could have been sorted out as trust issues kept cropping up