Corporate and Global Strategies - Assignment Example

Corporate and Global Strategies Section A 1. Critically analyse and evaluate the internationalisation path taken by General Motors in their entry and development of key overseas markets. Identify and evaluate internal and external internationalisation triggers and methods used by GM at different stages. (30marks) Just a year away from celebrating its centenary, General Motors is the world’s number #1 maker of automobiles. The impressive line up of vehicles that bear the GM seal include the Chevrolet, Cadillac, Buick, Vauxhall, Holden, Opel, Astra, Pontiac, and the GMC. Gm also owns heavy duty Allison Transmissions, and has stakes in Fiat, Fuji heavy industries, Suzuki Motors and GM-Daewoo. As the world’s largest automotive company (founded in 1908 in Flint, Michigan) General Motors employs nearly 340,000 people across the globe. Headquartered at Renaissance center, Detroit, USA, GM manufactures automobiles and accessories from 33 countries. (Source: Wikipedia, the free encyclopedia, viewed, may 16th 2007, The market value standing at 16.587 billion dollars, the company has devised various strategies to promote and sustain its global reach. (Source: “General Motors (NYSE:GM) at a Glance”, Forbes.com, Free Trial Issue, viewed, 16th May, 2007 The internal and external internationalisation practices facilitating it can be encapsulated as Post 1996 saw more efforts put into defining strategic global platforms for GM, a deviation from the earlier practice of exporting residual American models of GM automobiles. In 1996, began the export of the Opel Omega from Europe to the USA. Internal Internationalisation “General Motors relies on a preexisting internal division of labour, that has allocated GM Europe responsibility for international affairs, meaning for the whole world outside of North America.” (Bordenave Gerard and Lung Yannick, “The Twin Internationalisation strategies of US carmakers GM and Ford”, Equipe Industries Innovation Institutions, University Bordeaux IV, France, Working Papers of E3i Series, 2002, viewed 16th 2007, http://ideas.repec.org/p/iii/wpeiii/2002-1.html) General Motors that were remarkable for its global reach, because it targeted the three main global platforms that were involved in medium and small cars finalized a master plan in 1996. The plan also visualized reducing the existing 14 global platforms to seven. The three platforms were called Gamma, Epsilon and Delta and were further classified into A, B, C, denoting the market’s geographical reference. A-emerging markets, B- North America C- Europe – The manufacture of small and large cars and the utility vehicles were distributed as responsibilities of these platforms that were also believed to join hands for general product development. Highlights In 1998 the Delta platform launched Astra (sold in Asia and Latin America. After 2001 when Chevrolet Prism, Pontiac Sunfire and Cavalier were commercially inept, the Delta platform was to take over the models to be redesigned. One of the reasons for the delay of the same was the commercially viable light utility vehicle attracting more resources. “Wait and watch” strategy to review innovations of other carmakers too, was a good enough reason to delay manufacture, (for example the Chrysler PT Cruiser and the Ford focus were in the pipeline However a better and more globally apt model was adopted in 1998. External Internationalisation 1998 - GM increased its stakes in Isuzu to 49% and to 10% in Suzuki 1999 - GM acquired 20% stake in Fuji heavy Industrie 2000 - the Suzuki stakes for GM increased to 20% 2000 - A 20% stake acquisition in Fiat Auto GM in China, Russia and India China, Russia and India, given their large population and changing economies are strategic centers for any global enterprise, GM included. “A strong foothold in India is a key to GM’s growth globally”, according to General Motors Chairman and CEO Rick Wagoner, during the launch of GM-Daewoo’s Chwevrolet Spark, in India.. (Source: “India , Spark to light up the GM unit”,in Journal, Just Auto -Authoritative and Timely Global Business Information, 17th April, 2007.) With an effective strategy of adapting to local framwork of market performance and tapping the vast resource of various economic groups’ demand for veautommobiles has helped GM strenghten its foothold in the three countries. GM acquired a 41.5% partnership with Avotzaz (41%).and Europeon bank for Reconstruction (17%) for a locally designed vehicle, sold under the Chevrolet name. (Bordenave Gerard and Lung Yannick, “The Twin Internationalisation strategies of US carmakers GM and Ford”, Equipe Industries Innovation Institutions, University Bordeaux IV, France, Working Papers of E3i Series, 2002, viewed 16th 2007, http://ideas.repec.org/p/iii/wpeiii/2002-1.html) As the first American Automobile entrant GM manufactured the small “Shangai” for China, with a 50% stake with the Shangai Automotive Industrial Corp. In India acquired a 50% stake in Hindustan Motors, in 1994, to assemble, in the coming years, a hatchback version of the Opel Astra. The attempt to internally manage the global strategies was one of the main reasons for the slow growth of the company in the international market. The European division was expected to cater to the ever-expanding international markets. This placed more responsibility on the Opel development center in Dudenhofen, Germany. This was the reason for reorganization and restructuring for GM in 1998. The various strategies remodeled and adapted over time brought in varying degrees of success in GM ventures. What were the main benefits of Internationalisation to GM at each stage of their international development? Every step towards effective globalisation involves an analysis of existing geographic and socio-economic factors. Internal and External Internationalisation moves have brought about the following In 1996 GM became the first major manufacturing company in the world to transform into a digital enterprise and its CIO, Ralph Szygenda was named IndustryWeek’s 2001Technology Leader of the Year. (Source: “Technology Leader of the year:- Transforming GM” http://www.industryweek.com/ReadArticle.aspx?ArticleID=995&SectionID=38) Chevrolet Prism, Pontiac Sunfire and Cavalier were commercially inept. The Delta platform was designated its development. However, the work did not start immediately as GM preferred to wait and watch trends that dictated the manufacture and sales of other automotive company products. In 2000 the Delta platform re-started making models “Saturn”, “Astra” and “Zafira”. Besides, the Chevrolet cavalier and the Pontiac Sunfire were to be made here. The Prism was to be later redesigned in collaboration with Toyota. And all models met with considerable success. The Saturn L-series, a larger car was assigned the Epsilon platform and the design had a global acceptability. Opel/Vauxhall Vectra would be designed by Epsilon after 2000. “The Saturn Aura which shares its vehicle architecture and design language with the Opel/Vauxhall Vectra, was named “North American Car of the Year” at the Detroit Auto show, ahead of Toyota Camry and Honda Fit (Jazz in Europe)” , (Source: GM Studio Social Media Newsroom, January 8, 2007) viewed on May 16, 2007, available at ) The Fiat-GM collaboration then announced joint projects like Sharing of platforms (The new big car of Fiat to share the Epsilon platform, to replace Vectra) Sharing of technology, engines and transmissions Development of common platform for manufacture (for the GM Corsa, Fiat Punto and 178 – to be ready in 2005-2007 Consequent to these strategic moves the gamma and Delta platforms tend to become more regional with the Corsa and Astra respectively, while the Epsilon was redefined for a global reach. As Fiat has a significant portion of its resources in Europe and South America, The two companies have the best options for collaboration in these regions. The collaboration with Japanese firms was especially advantageous in the manufacture of light utility vehicles (Isuzu) and small vehicles. One such example was the quick suspension of project in Russia in 1998 in the rouble crisis, and a future plan to manufacture Daewoo and Avotzaz in the Ukraine. Change in Company profile The presence on the global scene of the automotive giant has considerably changed Global economic considerations play a major role in planning future strategies The business structure has been changed to suit the company’s international reach. Structural change: The regional presidents of Asia, Latin America, Europe and North America were responsible for all operations in their respective region. Global process leaders (13) were newly appointed, responsible for manufacture, sales, product development and purchase. Together they formed the “Automotive Strategy Board” They reported to the GM President and Head of Operations These changes triggered a change in investment patterns of the company and redefined its financial profile. These in brief are the main benefits of the Company’s Internationalisation strategies. Which of Bartlett and Ghoshal’s four typologies best describes the strategic position adopted by GM? Has this changed over time? Of the four of Bartlett and Ghoshal Typologies, International Company status for General Motors is most suited. This company is described to be as one, which exploits parent company knowledge and capability through worldwide diffusion and adaptation. “It is a coordinated federation, suiting companies with a reputation for professional management. This implies a willingness to delegate responsibility, while retaining overall control, via sophisticated management systems and specialist corporate staff”(“Managing across borders: An empirical test of the Bartlett and Ghoshal (1989) Organisational Typology” Web article viewed may 16, 2007, at ) Though strategies and approaches of the Company, have changed to suit a global perspective, the typology of the company has remained essentially the same. GM’s growth has been based on its technical enterprise and has improvised for geographical considerations with suitable partners, in order to create a successful product, within a specific socio-economic framework. Even in the event of sweeping changes for global expansion, the company structure of retaining overall control, while delegating responsibility by sophisticated management practices and employing specialist corporate staff has been its basic profile through the decades. Section B Choose THREE of the following themes and apply theory applied on the module to your experience in the Czech Republic. Reflect upon what you have learnt from the experience: (each question is worth equal marks) 1. MNE and FDI activity in the Czech Republic 2. Internationalisation paths: triggers, methods and strategies of Czech MNEs 3. The Global versus Local debate 4. Cultural Aspects of doing business in the Czech republic 5. National Competitive Advantage of the Czech Republic MNE and FDI Activity in the Czech republic The dynamics of economic change in Eastern European countries have resulted in the influx of various MNEs and FDIs into these countries. The multinational enterprises have come here to stay and are instrumental, to an extent, in redefining the socio economic profile of the regions. Though public acceptance of the new enterprises have been positive, there are still pockets of country where the trade unions have yet to grasp the impact of the presence of these companies. Some of the specific features of the MNE and FDI activity in the Czech republic are The people are exposed to new business culture and newer and beneficial trends in industrial relations FDI in the EEC was about 7 billion USD in 1995, of which two thirds was to Hungary, Poland and the Czech Republic. (Source:: The ILO SRO-Budapest Bulletin, Newsletter2-1995) The MNEs in the Czech offer better pay than local companies and hence attract the most qualified workers of the region. Some companies conduct successful pilot studies and research within the region to devise a code of strategies that suits and adapts itself to the local cultural milieu. Trade Union activities being strong in these regions, a hands on approach for both the MNEs and the Unions need to Evolve awareness strategies and better communication avenues about local legal systems and international business practices Help strengthen the local infrastructure facilities Level of involvement of MNEs in local business enterprise – being productive to the economy without affecting local environment in an adverse manner Adherence to International labour organisation standards. In the face of changes affecting every corner of the world, the Czech republic has geared itself up commendably to join hands with the international trends in business investment and economic progress. Cultural Aspects of Doing Business in the Czech Republic The first time visitor to the Czech republic is struck by the rich culture exhibited in the political and social structure of everyday life. Family is a strong word in the Czech republic. A strong attachment to roots and regard for the family characterizes every Czech home. This also is the reason for strong principled, and generally polite nature of the local people. It is known that in local business practices, one would prefer to say, “it may not be possible” or “it is difficult” rather than refuse an offer with a direct “no” (Source: “Czech Social and Business Culutre, Doing Business in the Czech Republic”, Communicaid, Web article viewed May 16, 2007, at http://www.communicaid.com/czech-business-culture.asp) The Czechs prefer to avoid ambiguity in situations,. This augurs well for business enterprise as uncertainty is eliminated in business agreements and functioning Economic Situation: The disintegration of the Soviet Union and the following Velvet revolution in the country, helped greatly to reduce the political and economic turmoil, it had faced earlier. This helped make Czech republic one of the most economically stable countries of the region. Its strategic geographic position and inclusion in the European Union recently makes the country an ideal environment for business enterprise These are the factors that are crucial while conducting business with Czechs Deals should be completed before Friday afternoon as the Czechs have an extended weekend Punctuality is well appreciated and expected in colleagues and associates August is a month of holiday The work culture reveals that Czechs prefer to start and finish work early Qualities considered commendable in business Business and private life is generally kept separate Knowledge power and authority is regarded more important than age Friendship is made with caution and formality, rather than informality is welcomed in conversation These are the basic aspects to conduct business with a Czech counterpart. National Competitive Advantage of the Czech Republic The Czech republic, a small country with an open economy, has a more competitive edge to its economy, because of its geographic positioning and work culture. A culturally individualistic country, the business house The Czechs have a formidable culture of high quality products ranging from shoes to beer to weapons. Empowerment and contemporarily fine tuned human resource management are essential factors that give a competitive edge to the country’s work and business culture. Labour, productivity, capital investment and saving of the Czech republic defines it as a superior economic player of the region. This economic growth has only gained momentum with the influx of foreign investment and the advent of the MNEs. Certain specific indicators of competitive advantage are Reasonable pricing of products, due to various factors including innovation and quality consciousness Ability and willingness of the work force to learn both from latest technology and knowledge based in indigenous technology and experience Ability to network for economic advantage Information and communication dissemination with the help of the latest techniques Computer literacy on a marked upward trend Precise, sincere and polite nature of the people in general is generally conducive to business enterprise, both local and international Importance accorded to culture and family values propagates high ideals in business dealings In a nutshell, the Czech Republic offers an ideal environment for economic growth with its open economy and the required attitudinal integrity that will help increase mutual regard with its business partners. Source: VSEM, Competitive Yearbook- The Czech Republic 2005 * * * * * References 1. Web article “General Motors” from Wikipedia the free encyclopaedia” viewed May 16th 2007 2. “General Motors (NYSE:GM) at a Glance”, Forbes.com, Free Trial Issue, viewed, 16th May, 2007 http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=GM 3. Bordenave Gerard and Lung Yannick, “The Twin Internationalisation strategies of US carmakers GM and Ford”, Equipe Industries Innovation Institutions, University Bordeaux IV, France, Working Papers of E3i Series, 2002, viewed 16th 2007, http://ideas.repec.org/p/iii/wpeiii/2002-1.html 4 Web article: “Technology Leader of the year: - Transforming GM” :http://www.industryweek.com/ReadArticle.aspx?ArticleID=995&SectionID=38 5 GM Studio Social Media Newsroom, January 8, 2007) viewed on May 16, 2007, available at ) 6 “Managing across borders: An empirical test of the Bartlett and Ghoshal (1989) Organisational Typology” Web article viewed may 16, 2007, at ) 7.. “Czech Social and Business Culutre, Doing Business in the Czech Republic”, Communicaid, Web article viewed May 16, 2007, at http://www.communicaid.com/czech-business-culture.asp) Articles 1.The ILO SRO-Budapest Bulletin, Newsletter2-1995) 2. “India , Spark to light up the GM unit”,in Journal, Just Auto -Authoritative and Timely Global Business Information, 17th April, 2007. 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