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Unit 14: Strategic Evaluation and Control

co-operated or acquired another company outside its home market. This strategy was Notes
quite different from that of Ford.
Importantly, Toyota always had some doubts about a simple global strategy. It used basic
model designs for its volume car ranges but essentially produced cars that were designed
for major regions of the world. For example, the Yaris small car was designed purely for
the requirements of the European market in 2002 and there were no plans to develop the
model as a global car.

GM’s Strategy
General Motors has often followed a strategy of building alliances, minority shareholdings
and joint ventures outside its traditional North American and European markets. Over
recent years, it has also followed a policy of reducing its prices in order to hold its market
share, especially in its home country.

GM’s Alliance Strategy
GM’s home country is the US where it has some of the strongest established brand names
like Buick, Cadillac, Chevrolet and Pontiac. Its North American operations include around
100 manufacturing, assembly and warehousing facilities.
It has also been involved for many years in Europe, where its brands include Opel
(Germany), Vauxhall (UK) and Saab. It has 10 production and assembly facilities in seven
European countries.
In addition to investment activity in its existing plants, GM has taken minority
shareholdings in a number of world vehicle companies – for example, it owns 20 percent
of the shares of Fuji Heavy Industries, the owner of the Japanese brand Subaru; it has 10
percent of the shares of Fiat, Italy. The only company bought outright by GM was the
Swedish company Saab. GM spent around US$4.7 billions to build such minority stakes
over the period 2001-2004.
Essentially, GM has built a series of alliances and minority shareholdings and then co-
operated with such companies in order to gain purchasing savings from extra scale. Thus,
it has obtained benefits in diesel engines from its links with Isuzu and Fiat; it has sold
Chevrolets in Japan through its co-operation with Suzuki; it has sold a Suzuki-designed
car as one of its own brands in European markets. Essentially, such a strategy derives from
serious doubts about the benefits of mergers and acquisitions in the car industry – both
Ford below and DaimlerChrysler are examples of companies that have struggled with
outright acquisitions.
One drawback of such GM-type links is that the biggest benefits often go to their smaller
partners, who benefit from access to GM’s size and negotiating power without making
much difference to the overall GM purchasing power base. For example, Suzuki has put
only 5 percent of its purchasing bill through GM’s worldwide purchasing network, which
is insignificant for GM. Suzuki has then been able to benchmark the GM prices and see if
its own supply network – mainly in Japan, where GM is weak – can offer a better deal.

In addition, some links are not easy to manage. An investment banker commented: The
good part is that GM has not spent much, and it doesn’t have the Daimler Chrysler problem
of integration (of the Daimler and Chrysler companies) Managing all these alliances is
exceedingly complex, and the synergies it can extract, while significant, are limited.

Contd...

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