Gm case study

Good afternoon everybody, we're Federico, Monica and Monica and this is our vision of the gm case studyThe first question asked to characterize the strategy pursued by GM in the developing world and in Europe before 1997.so first of all I would like you to notice that in this very question we have two important information for our discussion:First information: there are 2 main market areas for gm’s international operations: Europe and the developing world which is made up of Latin America, Asia and eastern Europe and we’ll see that the strategy pursued in these two markets are totally different.Second information is that there’s a key date in gm’s history which is 1997. this date is an important turnaround for gm and as you’ll see our whole discussion will be based on these first two assumptions.

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So let’s start from the strategy pursued in the developing markets before 1997.As you can see from this slide there was a very low commitment from the top management towards the developing markets.that means that the product offer was very low quality, made of old products that would have not been sellable in a competitive, developed market like the US or western Europe.From the case we also noticed that all the strategic, planning and marketing decisions were centralized in the Detroit headquarter.In our opinion this means that the top management didn’t consider important to have a direct contact with those markets, didn’t want “trust” local subsidiaries to manage on their own, they thought they could manage the developing market from their desks in Detroit.So now the question is why did they act this way?Was it lack of initiative? Or just plain Yankee arrogance? No, or at least, these weren’t the main reasons.We think the gm’s management acted accordingly to the market context.In fact to understand their strategy we must keep in mind the geopolitical situation before the ninetiesIn south America we had instability Both in Politics and economy, poverty, crime and sometimes civil wars.In eastern Europe and Asia: communism. also known as not favorable to American capitalists.the choice of a low profile strategy was the only chance at these conditions.Low risk, low investment, low commitment but also low return.The market share of gm’s vehicle in these markets was very little but, considering the amount of resources invested, it’s not bad at all.After all, this low-cost strategy allowed gm to extend the life of obsolete products without risking to lose valuable resources in risky states.And most important, generating some cash to be invested in more appealing markets like Europe.

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And here we go with the second part of the question: strategy in Europe before 1997.

Here everything is different. We have an appealing market, high profit opportunities, demanding customers and strong competitors.

In Europe you can’t even imagine to sell the same cars you sell in America.

First of all because there’s not enough space: streets are smaller. Plain and simple.

Second, because people have very different preferences compared to US

And third because if you don’t tailor the cars to the specific market needs, local competitors will blow you off in a minute. And you’ll be out of the game.

So here’s how gm managed the European operations:

They gave local subsidiaries freedom to design, produce and sell new models

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To summarize

Pressure for cost reduction was high in developing countries not because of competitors but mainly because of poverty.

In Europe, compared to developing countries, customers have a high expenditure capability so if a pressure for cost reduction exist it’s due to competition but still it’s not comparable to that in the developing world. That’s why we’ve put it in the lower end of the axis.

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Other car manufacturers are leveraging low cost of labor????

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