Strengths and Limitations of Global Partnerships

Global Partnerships

Strengths and Limitations of Global Partnerships

Global partnerships: Strengths and limits

The once-beleaguered U.S. automotive firm GM is currently in a highly lucrative partnership with the Chinese firm SAIC Motors. "SAIC-GM-Wuling (SGMW) sold its 1 millionth vehicle this year in China for the fourth consecutive year. It is the earliest the General Motors China joint venture has reached the milestone. In 2011, SGMW sold its 1 millionth vehicle in October. Through the first eight months of 2012, SGMW sold an average of 3,500 vehicles every day, up 15.2% from the same period in 2011" (GM China's SAIC-GM-Wuling JV Sells 1 Millionth Vehicle, 2012, GM News). GM is one of the most popular car manufacturers in China, despite only recently surviving bankruptcy proceedings and a temporary takeover by the federal government.

GM has benefited from the joint venture with SAIC by gaining an audience for its cars that is rapidly expanding, in contrast to the relatively stagnant American market. More and more Chinese people own cars, and China's emerging middle class ensures that GM's consumer base is growing. Moreover, many of these consumers desire to buy SUVs and other large vehicles, which are status symbols amongst the Chinese middle class. In the U.S., large vehicles have gained a great deal of negative press as 'gas guzzlers.' "In 2011, Chinese consumers purchased 2.1 million SUVs, a figure that marks an impressive increase of 25.3% compared to 2010" (Gloan 2012). "Foreign brand vehicles enjoy a reputation for higher quality and brand value compared with most local competitors. Automakers are also beginning to sell China-made vehicles elsewhere, taking advantage of lower costs and proximity to other developing markets" (Hays 2012).

GM has produced smaller vehicles as part of the joint venture, given that not all Chinese consumers can afford luxury vehicles like SUVs. SAIC-GM-Wuling Automobile recently began a new factory which is designed to "produce vehicles from the Baojun family. The Baojun brand of small, inexpensive cars was created in 2010 to address growing demand for affordable passenger vehicles in China and is aimed at competing with local auto brands, including those sold by Zhejiang Geely Holding Group Co. And BYD Co" (GM's Micro-Van Joint Venture Opens New Plant in China, 2012, NASDAQ).

Partnering with a Chinese firm has been financially advantageous for GM because Chinese government regulations can often be complex and difficult to understand from an outsider's perspective. Joint partnerships are often the preferred entity selection, particularly for corporations entering unfamiliar markets given they "provide access to needed information and resources; build credibility with a particular target market" and extend access to "new markets that would be inaccessible without the partner" (Ward 2012).