11 Pages Posted: 21 Oct 2008
This case is an analysis of GM-Europe's decision process in establishing a production operation in Hungary. The issues addressed include market analysis, foreign-currency requests, government negotiations, and joint-venture partner selection. The case has applications in the teaching of global management, strategic decision making, and market/economy analysis.
In February 1989, General Motors Corporation (GM) signed a protocol with the Hungarian government to initiate a feasibility study of a new engine manufacturing facility and an automobile assembly plant in Hungary. During the year, GM executive teams in Europe and the United States examined the opportunities available in Hungary for the manufacture and sale of automobiles. The project had a high profile within GM, because it was the company's first serious examination of an East European market. GM engaged several outside consultants, academics, and East European authorities to assist in its analysis. By December 1989, Robert Jones, a senior executive at GM Europe (GME) had to make a recommendation to GM senior management in the United States about the Hungarian project.
GM in Europe
In 1989, GM sold 7.9 million automobiles, which made it the largest automotive company in the world. GME, with its Opel and Vauxhall lines, sold over 1.5 million automobiles in 1989, up from 1.3 million in 1987. GME sales were $ 19.7 billion in 1989, up 11% over 1988. GME was the fastest growing of the “Big Six” European car makers; Opel or Vauxhall held first, second, or third position in 12 of the 16 West European country markets. To meet increased demand, the company operated assembly and manufacturing operations in 15 countries and had made a public commitment to increase production capacity by 12.5% by 1994.
One of the first priorities for GME under this expansion program was to increase capacity for its “Family I” engines, used in the Corsa and Astra models. Because no space was available for expansion at any existing European facilities in 1988, GM management in Zurich, Switzerland, decided to explore potential greenfield sites for an engine plant.
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Keywords: foreign investment, international business, international strategy, investment analysis, emerging markets, manufacturing strategy, international case, diversity case, strategic planning, international
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