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GENERAL MOTORS IN BRAZIL.
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International marketing, risks & rewards, operations, relationship with govt., management.... More...
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Paper Abstract:
International marketing, risks & rewards, operations, relationship with govt., management.
Paper Introduction:
Introduction
General Motors is the world's largest manufacturer of automobiles and trucks; it boasted posted revenues of more than $168 billion in 1995 (Leach 106). With more than 860,000 employees worldwide, the company is one of the largest industrial complexes in the world. In addition to its automotive division, General Motors also participates in finance, aerospace, defense and computer services. Because of its size, General Motors is a significant industrial presence in any country in which it operates; because the company has long recognized the importance of the global market in its industry, it has participated in foreign operations for many years. This carries risks because foreign markets may be unstable in terms of labor supply, currency and even governments, but General Motors has posted a strong record in this area
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GM's commitment to Brazil can be seen in its high level of investment,in terms of time, money and people. Plants in Brazil have "1-5-3 " signs throughout in order tohelp motivate employees. market. Company Activities General Motors works closely with the Brazilian government (as ittries to do in most countries where it operates) in order to build anenvironment which is friendly to the company's operations and goals. Such an environment should prove helpful for the company's plans toexpand GMB's capacity. Background General Motors operates a subsidiary in Brazil, General Motors doBrasil (GMB), which manufactures and distributes products throughout LatinAmerica in addition to handling sales within Brazil. International Marketing According to Belli (5 ), the term "globalization," even when used todistinguish multinational companies from global companies, falls short ofaccurately describing the world market. Until that time, the vehicles were manufactured by a licensedorganization. The results were a combination of just-in-time inventory techniquescombined with advanced purchasing concepts (Turner "In Brazil" 42). In the time since Hogan has been responsible for GMB, he hasworked on building enthusiasm and market share from both inside the companyand outside. With more than 86 , employees worldwide, the company is one ofthe largest industrial complexes in the world. GMB completed a $2 million plant in Uruguay to facilitate production in a country where 1, units of GM products were sold in 1993; the company hopes that its directpresence in the nation will facilitate additional growth (Turner "GMExpands" 2). The sameis true for the company's strategy in Brazil, where cars such as the Corsaare now manufactured with an eye toward the Brazilian market instead ofbeing imported directly from Europe (or based solely on European designs)without regard for the unique characteristics of the Latin American market. The "1" represents the company's goal of beingfirst in customer satisfaction. However, the companyalso participates in other Latin American countries both as a manufacturerand distributor. New York: SalomonBrothers, 7 Feb. "In Brazil, Cars Go for a Case Of Cash." Automotive News 15 Aug.1994: 42.---. Introduction General Motors is the world's largest manufacturer of automobiles andtrucks; it boasted posted revenues of more than $168 billion in 1995 (Leach1 6). During early 1992, more than 2 GMB workers visited theNUMMI facilities in California (some for as long as four weeks) in order toobserve and learn how NUMMI effectively worked within the confines of"lean" manufacturing (lean manufacturing looks for ways of making a productwith less time, labor, investment and plant space while improving quality). "Brazil Eases GM, Autolatina Taxes." Automotive News 4 Apr.1993: 2.---. GM has built a closealliance with the more than 4 dealers who offer its products, and it hasintroduced cars which are unique to the country in order to take advantageof the demand for its products in that area. 1991): 5 -55.Brown, Peter, and Phil Frame. In the United States, GM's break-even is typically 8 percent, offering a much smaller cushion in the eventof economic or political downturns (Turner "Today's Price" 3). "General Motors." Value Line Investment Survey 15 Mar. Because of its size, GeneralMotors is a significant industrial presence in any country in which itoperates; because the company has long recognized the importance of theglobal market in its industry, it has participated in foreign operationsfor many years. The company views its activities in Brazil as acornerstone toward building a strong market presence in Latin America as awhole, a strategy commonly used by multinational companies (Garten 15). Long-term, GM and its GMBsubsidiary should produce strong returns in Latin America in general, andin Brazil in particular. One of the ways that Hogan sought to meet the 1-5-3 goals was to usethe New United Motor Manufacturing Incorporated's (NUMMI) model for "lean"manufacturing. GM has decided that Brazil will form the heart of the company's LatinAmerican operations, with the result that it has a dedicated manager incharge of Brazil who works closely with the government to create afavorable environment for the company's products. With regard to the tax situation, GMB and Autolatina SA (a jointholding company for Ford and Volkswagen AG in Brazil) won tax abatements in1993 which effectively reduced the price of their cars. "GM's Brazil Boss Sees Big Role inGlobalization." Automotive News 15 Aug. Smith. While Ford and Volkswagen saw their taxburden reduced from 8 percent to .2 percent, GMB had been saddled with a25 percent tax; the abatement reduced the price of their cars significantlyand contributed to the strong sales that the company saw in the followingyear. "GM Expands Into Uruguay." Automotive News 24 Jan. GM continues to work closely with the government to improve its marketshare in Brazil, but it is also proactively pursuing this market.Employees are taught how to improve their work methods, sophisticatedmanufacturing and purchasing technique have been introduced into localplants, and the company has committed to investing large amounts of capitalto increase its capacity in the region. "GM Has Secret Weapon in Brazil." Automotive News 15 Aug.1994: 3, 42.Garten, Jeffrey. M. Such features include the size of the market and itsanticipated rate of growth, the stage of development that the market is in,the stage of the product lifecycle that the company would be entering(along with the saturation levels of the market), buyer characteristics,social and cultural factors that influence purchases, and the physicalenvironment (Cavusgil, Tamer, Zou and Naidu 481). In addition to itsautomotive division, General Motors also participates in finance,aerospace, defense and computer services. GMB is the source for the cars and trucks manufactured,assembled and/or distributed throughout Latin America. 1996:1 6.Turner, Rik. 1994: 2.---. Forexample, the company worked closely with the government to get taxesreduced on company products and to help the company boost its sales. Mark Hogan is head of GMB and reportsto Nerod. "Today's Price." Automotive News 1 Jan. Indeed, in recentyears, the company's foreign subsidiaries have often outperformed thecompany's domestic operations (Kirnan 3). 1994: 42.Cavusgil, S. As a result of these measures, GMB Finance Director Joseph Florezexpects inflation to decrease to 1 percent or 2 percent monthly in the nearfuture, although inflation for 1994 still posted an annual rate in excessof 8 percent, in part because the currency change did not occur until themiddle of the year (Knapp and Smith 75). Risks and Rewards The major risk facing GM in Brazil is the economic situation andpolitical turmoil. A company must undertake international marketing with the same careand consideration that it uses when introducing a product domestically.This means that the company needs to understand the key features of thetarget market. "Product and PromotionAdaptation in Export Ventures." Journal of International Business Studies(Fall 1993): 479-5 6.Frame, Phil. Conclusion General Motors has demonstrated that it is able to operate successfuland profitable operations not only in the United States but also throughoutthe rest of the world, taking advantage of the expertise it has gained inthe American car market to succeed in other locales. "Is there a World Cup for GM doBrasil?" Ward's Auto World Sept. This carries risks because foreign markets may be unstablein terms of labor supply, currency and even governments, but General Motorshas posted a strong record in this area (Harari 978). For example, instead of merelyintroducing Opel cars into the United States without modification, thecompany is committed to designing new products which may bear the Opel name(or not) but which are designed especially for the U.S. "Big Emerging Markets." World Traders Dec. Thecompany is also intricately involved with the Brazilian economy, and itsmere presence in the country serves as a stabilizing influence on thevolatile Brazilian economic situation. The efforts that GMB has put into its operations are impressive: thecompany operates at a break-even point of 5 percent in Brazil and 25percent elsewhere in Latin America (meaning that the company is profitableeven if plants operate at only 5 percent of capacity in Brazil or as lowas 25 percent of capacity elsewhere). The "3 " indicates the goalof establishing and maintaining at least a 3 percent market share of theBrazilian car market (Frame "GM Has Secret" 3). The "5" indicates the goal of reducingcosts at the facilities by 5 percent per year. Works CitedBelli, P. 1994: 3. General Motors Company Report. From this standpoint, the companyintends to use Brazil as a core market from which it can build market sharethroughout the region. 1996.Knapp, Gwendolyn, and David C. Managerial Strategies General Motors is committed to continuing its expansion in LatinAmerica; in 1994, GM announced that it would expand its operations inUruguay to participate directly in the assembly of the Mona and Chevettesubcompacts. liter version of the Corsa which was originally introduced in Europe.In addition to the benefits of having newer cars in Brazil, the countryalso benefits from GM's investment of more than $25 million in plant,equipment and labor (Turner "Brazil Eases" 2). liter GM Chevette to .2 percent. Inflation historically has been so rampant (reaching ashigh as 2, percent annually) that automakers were forced to raise pricesdaily. "Globalizing the Rest of the World." Harvard Business Review(July-Aug. M. Since 1989, the Brazilian government has liberalized its trade andinvestment policies and, in July 1993, followed Argentina's lead byscrapping the old cruzeiro and adopting a new currency called the URV, orunit real value (commonly shortened to real), which also is indexed to thedollar. When the license expired, GM expanded its operations to takeadvantage of the Mercosul Common Market (which includes Brazil, Argentina,Uruguay and Paraguay), which became official in 1995. 1994: 73-76.Leach, M. In 1994, GMB produced 28 , cars and trucks, butcompany officials were confident they could sell and/or export more if theyhad more capacity. The company is alsoa manufacturer and exporter, has its own technical center, design team andproving ground, and is rapidly becoming a major source for dies and toolingused in its own and in other GM operations and even competitors'facilities. Also as part of the deal, GM agreed to replace the Chevette with a1. Under the taxabatement, the Brazilian government decreased the excise tax on the 1. The globalization of the 198 s andearly 199 s omitted Africa and Latin America, which actually lost marketshare during that time. The reward then, is the strong market potential in Latin America as awhole, and in Brazil in particular. Tamer, Shaoming Zou, and G. This is the country's eighth currency in 5 years, an indicationof the nation's unstable economy and the difficulties that companies suchas GM face as they try to compete (Knapp and Smith 75). This researchexplores the operation of the company in Latin America, with a particularemphasis on Brazil. 1994: 14-18.Harari, J. Hogan's commitment to a global strategy (and the company's commitmentto that strategy) is evidenced by the company's commitment no longer tosimply introduce cars developed for one market into a different marketwithout modification (Brown and Frame 42). As applied to multinational and global companies,"globalization" meant the interrelationship of Europe, North America andAsia. "General Motors." Standard & Poor's Stock Reports 13 Feb.1996: 978.Kirnan, J. Naidu. V., et al.
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