Going Global & Managing Global Businesses Case Study

General Motors’ Joint Ventures in Russia and China: The Secret Behind Success & Failure

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Abstract:
"In order to expand its operation in the Russian and Chinese automobile markets, General Motors (GM) had entered into joint ventures (JVs) with the domestic firms of the respective economies. While GM's Chinese JVs with Shanghai Automotive Industry Corporation (SAIC) and Wuliang were among the most successful JVs in the history of the automobile industry worldwide, it's Russian JV with AvtoVAZ was on the verge of collapse. The reason behind this was that the JV brands such as Viva and Niva were not performing as per the expectations of both strategic partners. Apart from this, both the companies were reluctant to carry on with the JV as they shifted their interest elsewhere. Consequently, auto analysts were doubtful whether GM's Russian JV would sustain. In addition to this, rather than pouring more money into the partnership, both AvtoVAZ and GM were putting their resources into other projects. While GM was setting up its new plant, AvtoVAZ was in talks with Renault of France. On the other hand, JVs in China had operated well, mainly due to the fact that the partnerships had been allowed to flourish and develop a life of their own, rather than either partner gaining the upper hand. While the timing and leadership were responsible to a certain extent, the cultural adaptability and lack of foresight could not be ruled out for having such a bipolar result.

Pedagogical Objectives:

• To discuss the dynamics of the Chinese automobile market
• To discuss the dynamics of the Russian automobile market
• To analyse the reasons that led to a successful JV in China and a failure in Russia
• To discuss the future strategies in sustaining such an alliance.

Keywords : Shanghai Automobile Industry Corporation (SAIC); General Motors Corporation; World Trade Organisation (WTO); Lower tariff; Power train; European bank for reconstruction and development (EBRD); Automobile industry; AvtoVAZ; Communist China; Association of European Business; State council development; North America