Strategic Alternatives
GM in China faces a drastic change the business environment as compared to the previous years of its existence the country. The changes can be seen in all the possible areas starting with the reason of investment in China. All this have made it critical for GM to come up with a makeover strategy which would redefine its presence in the Chinese automobile industry which has been very strong till now. There are certain alternatives available to GM which would be given in this section. One of the key alternative present with GM is to set up China as an export base for manufacturing cars to be sold in other countries chiefly Europe.
This is not a new idea and has been already tested by GM’s long-time rival, Honda, which has set up the export based manufacturing plant in the Guangzhou region of China. The strategy holds many appeals to it. One of them is the fact that China itself is an export oriented country and would not be averse to any export based venture at any point in future. Another obvious advantage would be that the direct and stiff competition from the local companies can be minimized. This is because any vehicle in the foreign market would have to adhere to strict quality laws which the government would not like to tamper.
Still another advantage is the fact that, while the energy and raw material cost in China is rising, the country still is the site for the largest number of cheap labor available which is not expected to change anytime soon. By diversifying its present units which come under the direct ownership of GM, the company can reduce its presence in the domestic car market and focus on the exports. Another alternative present to GM is to diversify its operations in the neighboring countries especially India. The former country has the advantage of an almost equal population base.
Economically too the country is on a high rise which translates into a large and lucrative market in the country. The government laws too as not as controlling or stringent as in China which in itself is an advantage. As an additional bonus, India too has a large low-wage labor market which is also considered by many outsourcing countries to be skilled Also the country does not see as many issues related to intellectual property violation as in China. Still another option is to set up joint venture in Thailand where Gm already has significant investments.
This would diversify the risks for GM, and could send a clear signal to Chinese government which has been taking too many stringent measures to the discomfort of the foreign companies setting up ventures in the automobiles sector. The cost of labor and other energy related cost are almost at par with China, and the country also is liberal to opening up strategic ventures with foreign companies. GM has another option to reevaluate the business environment in China and change the mode of operations in the country.
The company could set up production bases there for the cars that have been in the market. The strategy would ensure that only those cars come into the market that have certain brand value thereby reducing the chances of a low-cost remake for which China is very infamous. Additionally the technology transfer would be for cars would not be the latest but for the lower rung options. While this strategy is susceptible to many risk factors chiefly a possibility of yet another policy change by the Chinese government to protect local automobile manufacturers, it is nevertheless an option.
