Entry Strategy
From: Charles Hill, International Business, 2013, 9th Ed., McGraw Hill
Chapter 15. Entry Strategy and Strategic Alliances
General Motors in China
The late 2000s were not kind to General Motors. Hurt by a deep recession in the United States and plunging vehicle sales, GM capped off a decade where it had progressively lost market share to foreign rivals such as
Toyota by entering Chapter 11 bankruptcy. Between 1980, when it dominated the U.S. market, and 2009, when it entered bankruptcy protection, GM saw its U.S. market share slip from 44 percent to just 19 percent. The troubled company emerged from bankruptcy a few months later a smaller enterprise with fewer brands, and yet going forward some believe that the new GM could be a much more profitable enterprise. One major reason for this optimism was the success of its joint ventures in China.
GM entered China in 1997 with a $1.6 billion investment to establish a joint venture with the state-owned
Shanghai Automotive Industry Corporation (SAIC) to build Buick sedans. At the time the Chinese market was tiny (fewer than 400,000 cars were sold in 1996), but GM was attracted by the enormous potential in a country of more than 1 billion people that was experiencing rapid economic growth. GM forecast that by the late 2000s some 3 million cars a year might be sold in China. While it explicitly recognized that it had much to learn about the Chinese market, and would probably lose money for years to come, GM executives believed it was crucial to establish a beachhead and to team up with SAIC (one of the early leaders in China's emerging automobile industry) before its global rivals did. The decision to enter a joint venture was not a hard one. Not only did GM lack knowledge and connections in China, but Chinese government regulations made it all but impossible for a foreign automaker to go it alone in the country.
While GM was not alone in investing in China—many of the world's major automobile companies
Chapter 15. Entry Strategy and Strategic Alliances
General Motors in China
The late 2000s were not kind to General Motors. Hurt by a deep recession in the United States and plunging vehicle sales, GM capped off a decade where it had progressively lost market share to foreign rivals such as
Toyota by entering Chapter 11 bankruptcy. Between 1980, when it dominated the U.S. market, and 2009, when it entered bankruptcy protection, GM saw its U.S. market share slip from 44 percent to just 19 percent. The troubled company emerged from bankruptcy a few months later a smaller enterprise with fewer brands, and yet going forward some believe that the new GM could be a much more profitable enterprise. One major reason for this optimism was the success of its joint ventures in China.
GM entered China in 1997 with a $1.6 billion investment to establish a joint venture with the state-owned
Shanghai Automotive Industry Corporation (SAIC) to build Buick sedans. At the time the Chinese market was tiny (fewer than 400,000 cars were sold in 1996), but GM was attracted by the enormous potential in a country of more than 1 billion people that was experiencing rapid economic growth. GM forecast that by the late 2000s some 3 million cars a year might be sold in China. While it explicitly recognized that it had much to learn about the Chinese market, and would probably lose money for years to come, GM executives believed it was crucial to establish a beachhead and to team up with SAIC (one of the early leaders in China's emerging automobile industry) before its global rivals did. The decision to enter a joint venture was not a hard one. Not only did GM lack knowledge and connections in China, but Chinese government regulations made it all but impossible for a foreign automaker to go it alone in the country.
While GM was not alone in investing in China—many of the world's major automobile companies