Term Paper on General
Motors Operation Blue Macaw
The case whereby General Motors wishes
to capture the Brazilian market with intentions of producing the
lowest priced car in its newly constructed Plant X in Brazil. If
General Motors had to acquire a competitive advantage in the South
American market, it had to produce for them “the popular cars”. The
Brazilians go for price, and to catch up, the competitors like
Volkswagen having a 44% market share, Fiat Spa with UNO and the Ford
with Ka -“the ultra small car” were already in the fray. The GM’s
product must beat them in order to reap huge profits.
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A revolution was initiated as General Motors changed its role as
manufacturer to a facilitator- the conductor of complex orchestra of
producing economical automobiles. The process involved a consortium
of sub-assemblers and input manufacturers resulting in minimization
of cost by 30 to 35 %. GM code-named it “Blue Macaw”. But that was
not all; “Plant X” was required to produce such cars. And that meant
capital investment of $ 290 million for a two-year construction
phase. This delay is not acceptable, as it would mean a loss of
market to Volkswagen that already holds 44% of Brazilian auto
market.
What Can Be Done About It?
The Brazilian government’s reforms are aimed at massive influx of
the foreign investments. However it was hard talk, when it comes to
rate issues be it inflation or exchange rates. With the influx of
optimism and deep study, GM’s biggest brains came up with the best
guesses on prices estimates, since a baseline analysis has to be the
starting point however sensitivity analysis in later stages was
always welcome. Export to other Mercosur members viz. Argentinean
and Chilean market was also dependent on the same issue.
The Market forecast for Blue Macaw is illustrated as follows: -
Calendar Year 1997 1998 1999 2000 2001 2002
Project Year 0 1 2 3 4 5
Brazil
New Car Market 1,800,000
Growth Rate 20.0% 20.0% 20.0% 10.0% 10.0%
Blue Macaw share 8.0% 12.0% 15.0% 18.0%
Argentina
New Car Market 350,000
Growth Rate 10.0% 12.0% 10.0% 8.0% 8.0%
Blue Macaw share 5.0% 10.0% 12.0% 12.0%
Chile
New Car Market 150,000
Growth Rate 8.0% 10.0% 8.0% 6.0% 6.0%
Blue Macaw share 8.0% 12.0% 15.0% 15.0%
The inventory approach of Just in Time sounded the best as
Volkswagen had already adopted it. That meant to produce not for the
market and on order only resulting in lower inventory, intermediate
inputs, and drastic reduction of unnecessary supply of finished
product. This seems to be the best bet in this case.
There is a significant portion of lapse in the delivery whereby the
competitor Volkswagen is competing on superior grounds and this can
only be defeated through better distribution channels and networks.
As one can see that Brazil’s growth rate has been increasing at
higher rate than others. Though its own trend is declining but still
it is growing and it would be quite plausible for General Motors to
outsource from Argentine and to try to make most of the assembled
components in its Plant X in Brazil taking due advantage of cheap
labor.
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