1. CASE 7
PG-31 Prerna Rai
PG-32 Pritam Patil
PG-33 Raul Pinto
PG-35- Rohan Kapuria

2. Description of Case Study
GM and Daewoo motors enter into a Joint-Venture in 1984.
Each invest $100 million.
Day to day management under Daewoo.

3. Manufacture of a subcompact car, the Pontiac LeMans,
which was based on Opel-Kadett, GM's successful German-
designed car.
Managerial and Technical advice was to be provided by GM
executives.

4. GM’s Objectives
Enter into the lucrative Korean market.
Ability to increase its market share above 10% in the Asian
Market.
Easy entry into Asian markets with local partner.
Cheap labor in South Korea would decrease overall cost.

5. Daewoo’s Objectives
Technical and Managerial expertise by GM executives.
Access new technology and engineering skills developed by
GM through technology transfer.
Export to world markets mainly US and Europe on the back
of strong GM brand name.
Compete with Toyota Motors.

6. Problems Faced by GM
In 1987 Korea became a democracy and frequent labor
strikes reduced productivity
Daewoo ended up doubling salaries to workmen, costing
edge lost due to higher wages
Quality issue-poor workmanship affected sales and attracted
negative publicity
US sales dropped 86% within 3yrs

7. Problems faced by Daewoo
GM did not allow Daewoo to expand in the US or Europe
Fearing exploitation of technology, GM did not share the
same with Daewoo
GM refused to invest another $100 million to double
manufacturing capacities
Daewoo accused GM of not properly market the product

8. Final Result
GM and Daewoo dissolved partnership
Daewoo bought out 50% stake of GM for $170 million,
payable over 3yrs
About a decade later GM, along with Suzuki and SAIC
bought 66.7% stake in Daewoo
Investment made was $400 million
Daewoo brand having suffered, GM branded Daewoo
vehicles as Chevrolets

9. Analysis
Daewoo did not receive the technology backup from GM
GM’s superior quality standards could not be met by Daewoo,
due to operational differences
Discord was caused due to inability of both parties to achieve
their main objective of entering the Joint-Venture

10. Analysis (contd.)
GM: To enter Asian markets successfully and produce
compact cars at cheaper costs
Daewoo: To gain superior technology and enter US and
European markets
Since Daewoo brand was diminishing, GM made a smart
move by marketing the cars under the brand Chevrolet

11. Alternative Solution
Considering that eventually GM bought Daewoo at a higher
cost, organizational restructure would have been better than
outright selling the last time round
GM executives should have made an effort to understand
Korean business culture
Cultural Differences could have been sorted out as trust
issues kept cropping up