General Motors' Asian Alliances

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General Motors' Asian Alliances

General Motors, an American-based automotive manufacturer with a large global presence, has long held a large share of the worldwide automotive market. Despite its market position and reputation for quality, the company has recently begun to struggle with new competitors in the Asian Pacific region, which has pushed their needs to develop new manufacturing technologies, as well as to better control costs and quality in its American manufacturing facilities.

Beginning in the 1970s, several nations of the Asian Pacific region, most notably Japan and South Korea, emerged as economic powerhouses. As their manufacturing bases matured, they entered the automotive industry and began to present new challenges as well as new opportunities for General Motors. GM would need to find a successful formula for doing business in this region, as well as develop and adopt innovations that would help it improve its manufacturing operations elsewhere.

In this Case Study, we will examine the facts, the problems, identify the core problems in how General Motors has managed its business alliances in with Asian partner companies, and offer our recommendations how General Motors can best master the challenges of doing business in the East and fully benefit from its joint ventures.

I. THE FACTS

Toyota and NUMMI: In Japan, Toyota was the heavyweight of the automotive industry, controlling over fifty percent of the entire Japanese auto market, and eight percent of the total world market, making it the world’s third largest automotive manufacturer, behind only Ford and General Motors. Toyota presided over a tight confederation of companies, known as a keiretsu where a major manufacturer, such as Toyota, presides over a “pyramid” with the primary manufacturer on top, and several tiers of suppliers below. Unlike General Motors, who held seventy percent vertical integration with its global network of partnerships, alliances, and joint ventures, Toyota only had thirty percent vertical integration in its affiliations, but still managed to have many long-lasting and stable partnerships with its suppliers.

Keiretsus were vast and closely-allied corporate partnerships which evolved from the pre-World War II zaibatsus, giant industrial conglomerates that dominated the nation’s pre-war economy and politics, but were broken up during by the post-war United States-run Occupation authority. These networks were bound by complex and long-lasting arrangements, often minority equity ownership by the company at the top of the keiretsu.
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