Internet Exercises


1			It seems that GM’s gamble in South Korea may just be starting to pay off. The auto giant invested $251 million for a 42% share of bankrupt Daewoo Motors Company. The rest of the company, known as GM Daewoo Auto & Technology, is held by Suzuki, Shanghai Automotives, and various Korean creditors. For GM the venture represents an opportunity to counter the challenge in the U.S. market from South Korean carmakers Hyundai Motor Company and Kia Motors Corporation. In addition, GM views the venture as a means of cutting development costs. Daewoo’s engineers can bring a car to market for some 10% to 15% less than GM’s other operations. Finally, a by-product of its investment in Daewoo has been the discovery that Korean prices on parts are about 10% less than GM was paying elsewhere. Consequently, GM has stationed four buyers in Korea to procure parts for GM’s global operations. Go to GM’s web site (www.gm.com) and explore the company’s international operations. Discuss the pros and cons of GM’s Asian strategy. What can you conclude from GM’s investment with Daewoo and the company’s other alliances with Asian partners about GM’s perspective on control and risk? What advantages were accrued to GM by investing in Daewoo as compared to establishing a wholly owned subsidiary? GM Daewoo Auto & Technology is planning a major export drive not only into the U.S. where three models will be exported, but also into Europe and the rest of Asia. Discuss whether, and if so how, the success of this effort could be hampered as a result of the operation being a joint venture rather than a wholly owned subsidiary. Source: Hopeful Signs for GM’s Korean Venture," The Wall Street Journal, 2/11/03, p. A14.




2			One might think that India is a cola maker’s paradise. With a population of a billion plus, and cola consumption levels at just seven 8-ounce servings per year, the market should be nirvana for Coca Cola. Yet, India has been a challenge for Coca Cola. After being forced out of the market by India’s government 15 years ago, in 1993 Coca Cola reentered the market with ambitious plans to snatch market share from Pepsi and other local beverage companies. However, much to its chagrin, thus far, Coca Cola has been less than successful, suffering losses for several years. Now though, the company hopes that it finally has the right formula for success. The company is supporting local brand Thumbs Up that was acquired when Coca Cola returned to India in 1993. In addition, Coca Cola has dropped prices and introduced new bottle sizes in an effort to attract more buyers. Coca Cola is also cutting bottling costs by closing inefficient plants that were acquired as part of the Thumbs Up deal, and saving on import duties by buying more local raw materials. The decision of which foreign markets to enter, when to enter them, and on what scale are basic to any firm contemplating foreign expansion. How have these issues played out for Coca-Cola (www.cocacola.com) with regards to India? Discuss the concept of first-mover advantages and the effects of those advantages on Coca-Cola’s ability to challenge Pepsi in the Indian market place. Explore Coca-Cola’s history in the Indian market in more depth (see for example, http://www.rediff.com/money/2002/jul/20paran.htm). Why has the company had such a difficult time with India? In your opinion, should the company continue to pour resources into India in an effort to conquer the market? Why or why not? What can Coca-Cola and other companies learn from Coke’s Indian experience? Source: "Finally, Coke Gets It Right," Businessweek, 2/10/03, p. 47.

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