Question

This was a discussion post by a student. Please create a response to the below post:

From my reading of the Closing Case “General Motors in China” on page 471 (Hill, 2015), GM entered the Chinese market through a joint venture with SAIC because of benefits such as being able to understand the Chinese legal issues through the eyes of a Chinese company and also understand Chinese criteria for the automobile allowing it to design specific vehicles for the Chinese people. While the potential risks were minimal loss of investment since a known Chinese company was also at the helm of design making. The joint venture has been so successful to date due to a correctly optimistic evaluation of the potential growth in the demand for the vehicles.

Answer 1

Chinese culture and legal system is very different and for a business to thrive in a country like China, it is very important for the organisation to understand the Chinese cultural, legal and economic system. Chains like Starbucks succeeded in China because of their partnership with local players and customization of its products according to Chinese culture so that a coffee retail chain does not like a threat to the Chinese tea-drinking culture. General Motors also did the same. It entered China through a joint venture with SAIC. This helped General Motors understand the complex and homogeneous market structure of China. SAIC also helped General Motors through the legal issues, product placement and positioning in Chinese market, political environment, Chinese mindset and demographics which are different even between the regions.