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.
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.
