PG-31 Prerna RaiPG-32 Pritam PatilPG-33 Raul Pinto

PG-35- Rohan Kapuria

CASE 7

Description of Case StudyGM and Daewoo motors enter into a Joint-

Venture in 1984.

Each invest $100 million.

Day to day management under Daewoo.

Manufacture of a subcompact car, the Pontiac LeMans, which was based on Opel-Kadett, GM's successful German-designed car.

Managerial and Technical advice was to be provided by GM executives.

GM’s ObjectivesEnter into the lucrative Korean market.

Ability to increase its market share above 10% in the Asian Market.

Easy entry into Asian markets with local partner.

Cheap labor in South Korea would decrease overall cost.

Daewoo’s ObjectivesTechnical and Managerial expertise by GM

executives.

Access new technology and engineering skills developed by GM through technology transfer.

Export to world markets mainly US and Europe on the back of strong GM brand name.

Compete with Toyota Motors.

Problems Faced by GMIn 1987 Korea became a democracy and

frequent labor strikes reduced productivity

Daewoo ended up doubling salaries to workmen, costing edge lost due to higher wages

Quality issue-poor workmanship affected sales and attracted negative publicity

US sales dropped 86% within 3yrs

Problems faced by DaewooGM did not allow Daewoo to expand in the

US or Europe

Fearing exploitation of technology, GM did not share the same with Daewoo

GM refused to invest another $100 million to double manufacturing capacities

Daewoo accused GM of not properly market the product

Final ResultGM and Daewoo dissolved partnershipDaewoo bought out 50% stake of GM for

$170 million, payable over 3yrsAbout a decade later GM, along with Suzuki

and SAIC bought 66.7% stake in DaewooInvestment made was $400 millionDaewoo brand having suffered, GM

branded Daewoo vehicles as Chevrolets

Analysis

Daewoo did not receive the technology backup from GM

GM’s superior quality standards could not be met by Daewoo, due to operational differences

Discord was caused due to inability of both parties to achieve their main objective of entering the Joint-Venture

Analysis (contd.) GM: To enter Asian markets successfully

and produce compact cars at cheaper costs

Daewoo: To gain superior technology and enter US and European markets

Since Daewoo brand was diminishing, GM made a smart move by marketing the cars under the brand Chevrolet

Alternative SolutionConsidering that eventually GM bought

Daewoo at a higher cost, organizational restructure would have been better than outright selling the last time round

GM executives should have made an effort to understand Korean business culture

Cultural Differences could have been sorted out as trust issues kept cropping up