GM Gives China Respect, Apple Should Take Note
Global auto giant General Motors’ (GM) (NYSE: GM) announcement of a major adjustment to its international corporate structure last week demonstrated its commitment to China, grabbing headlines and winning goodwill from Chinese consumers and Beijing. The move reflects a broader savvy policy of big investments and other corporate actions designed to highlight the importance of the market for GM, a strategy that others like Apple (Nasdaq: AAPL) should follow to boost their prospects in China.
Under its latest announcement, GM said it would split off China from its international unit to become its own independent division, underscoring the importance of a market that has become one of the largest and most profitable for GM. (English article) In an additional vote of confidence, GM also said the former international chief will take over as chairman of the new independent China unit.
The move strongly acknowledges China’s huge economic accomplishments over the last 20 years, and will boost GM’s image among Chinese consumers and government officials. More broadly the move also reflects GM’s development strategy that emphasizes big investments and other shows of commitment to the market – a smart two-pronged approach that has helped it become China’s biggest automaker.
GM broke new ground when it formed a joint venture with local giant auto SAIC in 1997 to manufacture some of its latest models in China. Before that, foreign automakers imported most of their latest cars to the country, and locally-based manufacturing was mostly for older models that were out of date in the West.
Since that groundbreaking deal, GM has invested billions of dollars in China by building a series of plants, and recently announced new plans to spend another $11 billion by 2016. GM was also one of the first foreign automakers to develop models specifically for China, and became one of the first to develop a special brand just for China with its launch of the Baojun nameplate in 2011.
GM’s strategy contrasts sharply with that of tech giant Apple, which has struggled lately with image and other problems in China due to a series of negative media reports and a sharp drop in local sales. Apple counts China as its second largest market, earning $5 billion there in its latest quarter.
But the company still largely treats China as a sales center. It has invested relatively little money in China to date, though it makes many of its products there at factories run by third-party manufacturers like Foxconn. Apple also uses a policy of secrecy in China similar to that in the US, usually refusing to comment on any of its latest launch or other strategic plans before official announcements.
This kind of stealth and lack of major investment have worked against Apple, which has come under growing attack by Chinese media and is losing its luster among local consumers. Apple and other major firms that see China mostly as a sales center would do well to look more closely at GM’s success and try to imitate its strategies. Otherwise they could find their growth potential limited, as they are either ignored or even come under attack for policies that seem to reflect an indifference to China’s welfare and economic accomplishments.
Bottom line: GM’s latest creation of a separate China unit highlights its savvy strategy of strong respect, investment for the market.
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