Supply Chain

The REAL Reason for GM's China Success

July 22, 2010

A recent article in the New York Times detailed General Motors’ great success in China, contrasting it with the company’s free-fall in the United States. As was pointed out, GM’s ability to become the number-one player in the world’s fastest growing car ...

Andrew R. Thomas Blog

A recent article in the New York Times detailed General Motors’ great success in China, contrasting it with the company’s free-fall in the United States.

As was pointed out, GM’s ability to become the number-one player in the world’s fastest growing car market is due to many reasons: non-union workers, low labor costs, and strong brand equity being among them.

Still, when making comparisons between GM’s China achievements and GM’s US failures, a key component is often missed.

The precipitous decline of GM in the U.S. was driven not only by the obvious reasons we all know about, but something even more ubiquitous.

For decades, General Motors’ cars in the U.S. were sold through an exclusive network of General Motors’ dealers. The dealers only represented General Motors’ brands.

Then, beginning in the 1970’s, General Motors – and the other U.S. manufacturers- began to allow their dealers to represent other car companies.

This marked a seminal shift in the U.S. auto industry. Suddenly, GM’s customers (their dealers) were no longer the loyal, dedicated ones they had been in the past.

Increasingly, if a buyer wanted a new vehicle, they could go to a dealership that might have 5 or 10 or 30 different brands to choose from.

Today, the biggest car dealer in America is AutoNation. Ever been to an AutoNation dealership? If you are a prospective buyer, it is awesome! You have great choice and options.

Over time, GM’s US vehicles, which are incredibly expensive to develop, began to be viewed not as cutting-edge automotive innovations managed through an exclusive dealer network; but, more and more, like dish soap sold at Wal-Mart.

GM’s products in America have become little more than commodities: sold in the same fashion as their competitors through distributors with little or no real stake in those same products.

Conversely, in China, GM cars are sold like they used to be in the U.S.: through an exclusive network of GM-only dealers.

The lesson from GM might very well be that how an innovation is sold is much more important than almost anything else.

About the Author

Andrew R. Thomas Blog | Associate Professor of Marketing and International Business

Andrew R. Thomas, Ph.D., is associate professor of marketing and international business at the University of Akron; and, a member of the core faculty at the International School of Management in Paris, France.

He is a bestselling business author/editor, whose 23 books include, most recently, American Shale Energy and the Global Economy: Business and Geopolitical Implications of the Fracking Revolution, The Customer Trap: How to Avoid the Biggest Mistake in Business, Global Supply Chain Security, The Final Journey of the Saturn V, and Soft Landing: Airline Industry Strategy, Service and Safety.

His book The Distribution Trap was awarded the Berry-American Marketing Association Prize for the Best Marketing Book of 2010. Another work, Direct Marketing in Action, was a finalist for the same award in 2008.

Andrew is founding editor-in-chief of the Journal of Transportation Security and a regularly featured analyst for media outlets around the world.

He has traveled to and conducted business in 120 countries on all seven continents.