Name: Hubert Tam
Shanghai General Motors – Individual Case Memo
This case illustrates how Shanghai General Motors (GM) entered as a late comer but still through a joint venture with Shanghai Auto Industry Corp (SAIC) successfully build a strong market presents in China.
Why GM entered into China in 1997
GM had a long term vision in China and saw the opportunity for mid to high end auto market. As China’s economy grows, the people’s wealth will grow and demand high quality of life. GM entered into China in 1997 during the Asian Financial Crisis, they took the opportunity when the Chinese government needed foreign investment the most during the economy down turn.
GM build their unique value proposition using their Buick model which had a prestige reputation in China, this provided them with a distinct competitive advantage. Volkswagen (VW) is GM’s strongest competitor in the China, they had 25% market share in 2004 where SGM only had 10%. VW’s target market was very different from GM’s. VW’s best selling sedan was the Santana which was targeted at the lower market, about half the price of GM’s Buick. VW’s competitive strategy was based on price, hence most taxi in China are VW Santana.
What is GM and SAIC’s agenda in this JV
GM’s agenda to enter the China market mainly has to do with the US domestic car market. The US auto market is very saturated with US citizen owned 25% of the world’s car with only 5% of the population. The US domestic market was also attacked heavily by Japanese car makers like Honda and Toyota. GM had to expand outside of the US market to stay competitive verse the Japanese car maker. On the other hand SAIC’s main agenda was to obtain better auto technology from foreign firms and to strengthen their auto industry.
Conflict arise from this JV
One of key factor that contributed to GM’s success in China was their willing to cooperate and share technology with SAIC. GM trust in