Ford and General Motors in Russia A Case Analysis

1
Ford and General Motors in RussiaA Case Analysis

• September 28, 2005
• Stephanie Barrett
• Steve Meyer
• Doug Niedzwiecki

2
Opportunities and Threats of Foreign Auto-Makers

• Opportunities
• High Growth Potential as the Economy Improves
• Cheap Labor
• Poor Quality Competition
• New Capitalistic Political System
• First-Mover Advantage
• American Symbolism

• Threats
• Entry of New Competition
• The Inherent Risk of a Joint Venture (GM)
• Political Stability
• Pricing Difference
• Inadequately Skilled Labor

3
Timeline Foreign Auto-Makers in Russia

• Ford
• 1907 - Ford Motors Co. dealership in Russia was
  opened
• 1924 - Henry Fords books My Life and Work and
  Today and Tomorrow were published in Russia
• mid-1920s - Fordson tractors accounted for about
  four-fifths of all tractors being used in the
  USSR (20,000 out of 24,000).
• 1929 - Ford Motor Co. signed a contract with the
  Soviet trade corporation Amtorg on the
  production of the Ford-A cars in Russia and
  submitted a proposal to build new automobile
  plants in Moscow and Nizhny Novgorod
• 1935 - In view of the Soviet sides failure to
  fulfill its obligations, Ford broke off its
  contract on cooperation.
• 1990 - The second advent of Ford in Russia
• 1996 - Ford opened an office in Moscow for
  broadening its dealer network.
• 1999 - Ford signed an investment agreement with
  the Ministry for Economic Development and Trade
  of the Russian Federation and started to build an
  automobile plant in the town of Vsevolozhsk
• 2002 - 6,669 cars were sold
• 2003 - Planned to sell 18,000 and production
  capacity was planned to reach 25,000

4
Barriers to Entry

• Steve here

5
Mode of Entry - Ford

• Previous Issues
• Amtorg incident in 1935
• Belarus failure in 2000
• Opportunities
• Having complete management control
• Choice of production location
• Flexible product mix and pricing
• Technology transfer
• Brand equity

6
Mode of Entry - GM

• Opportunities
• Joint venture (41.5 ownership) with the largest
  and most successful domestic auto-maker, AvtoVAZ
• GM gained access to domestic production
  facilities, supply chain, sales distribution
  network
• GM gained an established domestic relationship
  with Russian government
• Export opportunities
• Threats
• Inherent risk of (international) joint venture
• AvtoVAZ bad business practices
• Policy and political instability

7
References

• http//www.findarticles.com/p/articles/mi_m0UDO/is
  _2000_June_2/ai_63676737
• http//www.rh.edu/stodder/BE/FordGMRuss2.htm
• http//www.newtimes.ru/eng/detail.asp?art_id896
• The Motor Industry in Russia Prospects Beyond
  2000. The Economist Intelligence Unit, Motor
  Business International, Q1 1998.

8
Questions?

• Comments?
• Thank You