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Case Title:

VW's and GM's Loss in China: First Mover's Disadvantage?

Publication Year : 2005

Authors: Susmita, Sumit Kumar Chaudhuri

Industry: Automobiles

Region:China

Case Code: CCA0017

Teaching Note:  Not Available

Structured Assignment:  Not Available

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Abstract:
During the 1960s and the 1970s, China lacked the technical expertise to facilitate mass production of automobiles. The Government of China made a policy of encouraging foreign car makers through 50-50 joint ventures with the indigenous producers. Among the first to enter into the Chinese market through this mode were Volkswagen (VW), in 1984, and General Motors (GM), in 1995. Though VW and GM made huge profits and large market shares in China in their early years, they lost out eventually to new entrants like Hyundai and a Chinese company named Chery. Despite their position as the incumbents, they failed to customise their cars according to the shift in their customer segment, from the government-owned institutions to individuals. It was opined that GM and VW have procrastinated cost-cutting and other measures for too long.

Pedagogical Objectives:

  • To discuss how complacency can tumble the fortunes of a company and dampen the first mover's advantage
  • To discuss whether it proves beneficial to be a forerunner or a follower in the new markets

Keywords :  Volkswagen; General Motors; First mover's advantage; Customisation; Competitive pricing strategy; Corporate Strategies Case Study; New market entrants; Chery; Global automobile industry; Joint venture; Shanghai Automotive Corporation First Auto Works (FAW); Flexible tooling and lean manufacturing; Operational flexibility; Price war; Market share

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