Corporate Ventures - Case Study Example

CORPORATE VENTURES Student’s Name Course Professor’s Name University City (State) Date Corporate Ventures Introduction Holden, officially known as General Motors Holden Limited, is an automaker based in Australasia. Its headquarter is in Port Melbourne in Victoria. The General Motors subsidiary started in 1856 as a manufacturer of saddles in South Australia (The Dog & Lemon Guide 2016). The company ventured into automotive field in 1908 through which is became a subsidiary of the General Motors in 1931 which is a United States' company. The subsidiary saw the company's name adjusted to be called General Motors-Holden's Limited. In 1998, its name was changed to be Holden Limited and in 2005, it adopted its present name GM Holden Limited. As a General Motor's subsidiary, Holden deals with the operation of vehicles in Australasia in which they shared with GM Daewoo in Korea from 2002 to 2009. Holden has brought into the local market a variety of vehicles tailor-made for the population. In addition, it has also supplemented it locally made a vehicle with imported General Motors models to offer a variety for the public. Through shared arrangements, Holden has been able to offer its customers models such as Vauxhall Motors, Toyota, Suzuki, Opel, Nissan, Isuzu, and Chevrolet. The line-up of vehicles models that Holden had as of 2013 included those from GM Thailand, GM Korea, GM in the United States and its self-developed Ute, Caprice, and Commodore. In addition, Holden distributed Opel, the European brand, in Australia as from 2012 up to its demise in Australia in 2013. All the Holden vehicles that are built in Australia are developed at Elizabeth, South Australia. However, the engines for the vehicles are manufactured at the Fishermans Bend, which is located in Port Melbourne. Holden's exportation has been fluctuating since the 1950s with its sales declining constantly. As a result, it has been expanding to reach the international markets with the aim of increasing profitability. On 11 December 2013, the company announced that it will stop producing engine and vehicles come December 2017. However, the company still aims to continue selling of cars upon importation. It also aims to retain its design centre. Current Situation According to the Dog and Lemon Guide (2016), Holden manufactures have only two vehicles in Australia which are the Cruze and Commodore. The rest of the models that the company sells products of oversea businesses that General Motors own. The imported models usually get the Holden badges upon leaving the factories. The company has experienced high losses for most of the last ten days. In 2014, the company experienced a loss of 553.8 million Australian dollars while in 2015 the loss was approximately 255.2 million. The chances of the company surviving the losses are uncertain. However, General Motors, owner of Holder, is currently profitable, more so, in the United States. It has experienced losses in Europe and South America though. The General Motors in China has also been experiencing good profit margins even though vulnerable to the downturn in the economy. As per Holden's plan, it aims to continue its existence in Australasia due to the consumers demand. But after 2017, the products that it will be selling will be internal brands even though they will have Holden badges. The losses have seen the number of staff in the company reducing significantly, and further offload is expected after 2017. The losses have been due to the growth in strength of the Australian dollar that has predicted the fall of the government grants. The top competitors of the General Motors Holden Limited are Ford Motor Company, Honda Motors Company Limited, and Toyota Motor Corporation Australia Limited. First, Ford Motor started manufacturing in the early twentieth century (Hoover's Inc 2016a). The company has had assembly line with mass production making to it grow and become one of the largest automakers in the world. Its brands include Taurus, Fiesta, Lincoln, Focus, F-Series pickup, and Ford Mustang. Ford Motor has a finance unit for credit which is the leading auto financing companies and accounts for approximately 6 percent of Ford sales in the year 2015. Ford also has a stake in Mazda and is running above 65 plants globally. In 2015, the 68 percent of the company’s sale originated from North America. Honda, on the other hand, is the Japan's number two automaker after Toyota and the leading company in motorcycle production (Hoover's Inc 2016b). The car models that belong to the company include Acura line models, Accord, and Civic hybrid versions, Fit, Civic, CR-V, and Accord. Honda's motorcycles models range from super bikes to scooters. The company also have several makes of personal watercraft and all-terrain vehicles. Approximately 70 percent of the Honda's motor sales are from Japan. Lastly, Toyota Motor Corporation Australia Limited is one of the largest companies selling and manufacturing vehicles in Australia (Hoover's Inc 2016c). Its vehicles include Aurion, Camry, Land Cruiser, Prius, and Corolla. Most of the vehicles from the company are exported to about twenty countries. The leading recipient countries are the Middle East, Pacific Islands, and New Zealand. Proposal Opportunities General Motors Holden has several opportunities upon which it can use to start generating profits. First, the company should focus on the retail of the most typical motor vehicle products in the industry (MBASkool 2016). For instance, it should focus on wholesale buying and selling of Chevrolet or Holden Volt that has gained popularity over the recent years. Such a venture will see a rise in the sales thus increase the profit margin (Böhm 2009). Second, General Motor’s Holden Limited should explore the emerging markets instead of concentrating on the over-explored ones. For instance, instead of focusing on Africa and China, the company need to venture in the emerging Asian markets. Due to its popularity in the market, upon increasing its revenues, the General Motors subsidiary needs to ensure that it continues to produce dependent of its parent company. Corporate Venturing General Motors Holden Limited should ease its appetite for production and consider venturing into retail of several other vehicle models (Williams 2013). Since the company brand has a legacy, it should buy a vehicle of sound quality from other companies such as Chevrolet and Holden Volt. Through its legacy and already established investment structures in Australia and New Zealand, the country will be able to increase the sales. Some of the vehicles that Holden limited need to trade include Buick, Chevrolet, GMC, and General Motors Cadillac, which are the mother company's best selling products. General Motors Holden Limited should venture into the Asian emerging market (Tsai, MacMillan & Low1991). Some of the particular countries that Holden should venture in include South Korea, Malaysia, India, and the Philippines. In addition, the subsidiary should venture into the emerging markets of Thailand, China, and Indonesia. General Motors Holden Limited should continue developing its models upon a satisfactory increase in profit. However, the models should be supported by the help of General Motors Company Limited (Hill & Birkinshaw 2014). Through such a partnership with General Motors, Holden Limited will be able to offload some of its expenses. As a result, Holden Limited will be free from the government since it will not look for bail from it. Expected Impact on the Overall Organization The increase in sales on the part of General Motors Holden Limited will not only increase the profit margins of the subsidiary but the overall organization. The popularity of the subsidiary in Australia and New Zealand will increase and as a result, General Motors will not lose its ground as one of the leading automobile companies (Jurevicius 2013). Furthermore, through the subsidiary Holden, General Motors can increase its market. In explanation, the increase will automatically happen with Holden Limited trying to venture into the emerging markets such as Asia. As a result, the popularity of General Motors will increase as well as its market margin and value as a company. The stakes of the company will, therefore, increase as it gains a competitive advantage over its competitors. Helping Holden Limited in the production process of automobiles will give General Motors an opportunity to go green (Caradvice 2016). Consumers are an air of adverse impacts of air pollution generated by diesel and petrol (Gregory 2007). Through the collaboration, General Motors will have an opportunity to claim the praise that comes from the production of the sustainable hybrid vehicles associated with Holden Limited. With the wake of climate change, consumers are primarily concerned about greenhouse gas emission, and that is what Holden Limited brings to the table. By going green, General Motors will have increased its popularity. Further integration between Holden Limited and General Motors will reduce brand dilution which has been a weakness associated with the company (Loffler 2010). In explanation, General Motors Company has more than eighteen automobile brands that are sold on the distinct market and quality (Lantz, Sahut, & Teulon 2011). The several brands on the sale, it is hard to identify the brands that belong to the General Motors family. In explanation, only one brand out of eighteen carry the General Motors symbols hence lower awareness. With Holden Limited in the picture, General Motors will have the opportunity to add its awareness on another brand so as to reduce its dilution rate. General Motors will also have an opportunity to grow further through acquisition. Holden Limited being a fairly known company, it will enable the mother company access additional market (Napp & Minshall 2011). For example, it will allow General Motors to have access to the New Zealand market and its environs. Such ventures will enable General Motors to access more new markets, assets, and skills. Potential Problems The corporate venture might lead to intense competitive disadvantage on General Motors Holden Limited. In explanation, the brand of Holden Limited might be diluted in the process of the venture thus making its competitors take advantage of the situation (Wadhwa, Phelps & Kotha 2016). Holden Limited will risk losing the Australian market authority in favour of General Motors. As a result, Holden Limited risk losing its bargaining power in the venture. Other companies that are more associated with Australia might also take advantage of the situation and offer competitive disadvantage to the company. The venture into the additional market might have additional risks due to the exchange rates issues. A venture in the emerging markets in Asia translated to dealing with more currencies. As a result, fluctuation in the exchange rates will be detrimental on the venture more so when it concerns the unstable economies (Kwak & Anbari 2009). In explanation, the fluctuations will threaten the profits in case the dollar appreciates against the other currencies in the market. Implementation Timeline The corporate venture can be planned and started in a period of five years (Yang & Fu 2014). However, the process needs further consultation among the stakeholders to ensure sustainability. The process also should be conducted in a systematic manner with both parties agreeing on the suitable way. Furthermore, it should ensure that all the parties are winners at long last. Refer to Appendix 1. Resources Required The resources required for the venture are majorly corporation, human resource, and financial resources. Corporation translates to synergy through which Holders Limited and its mother-company General Motor’s company agree among themselves and with their shareholders on how to implement the venture. On the other hand, the human resources for the planning processes, production of automobiles and integration calls. Human resources are also needed for the management purpose of the new corporate venture. All the processes depend on the existence of financial resources (Mitchell 2009). The resources can be informed of loans, in-kind, and grants among others. Conclusion General Motors Holden Limited is an automaker based in Australasia with its headquarter in Port Melbourne in Victoria. Despite the company having great brand name and influence in Australia, it has been having difficulties. On 11 December 2013, the company announced that it will stop producing engine and vehicles come December 2017. However, the company still aims to continue selling of cars upon importation. It also aims to retain its design centre. In Australia, General Motors Holden Limited have two vehicles: Cruze and Commodore. The rest of the models that the company sells products of over-sea companies that General Motors own. The imported models usually get the Holden badges upon leaving the factories. The company has experienced great losses in most of the last ten days. In 2014, the company experienced a loss of 553.8 million Australian dollars while in 2015 the loss was approximately 255.2 million. Despite all, the General Motors subsidiary has several opportunities. First, the company should focus on the retail of the most common motor vehicle products in the industry. Second, General Motor’s Holden Limited should explore the emerging markets instead of concentrating on the over-explored ones. Third, it can produce with the help of General Motors Company. Therefore, General Motors Holden Limited should ease its appetite for production and consider venturing into retail of several other vehicle models. It should also venture into the Asian emerging market. Furthermore, General Motors Holden Limited should continue developing its models upon a satisfactory increase in profit. All the will have a positive impact on its mother company. However, there will be slight challenges on the part of Holden Limited if caution is not taken. The corporate venture that will see the company saved should be implemented in five years. Recommendation The corporate venture should be done with caution. General Motors Holden Limited should not be at the losing end through brand dilution. The suitable solution for the problem would, therefore, be allowing the label of the products to have both brands. Concerning the fluctuation in the exchange rates, the venture should ensure that the vehicles are sold at a currency that is most stable in the region. For instance, in Asia, China's currency ought to be used due to its stability. Reference List Böhm, A 2009, The SWOT Analysis, GRIN Verlag, München. Caradvice 2016, The holden volt is dead. Available from: < http://www.caradvice.com.au/350518/the-holden-volt-is-dead/ > [5 July 2009]. Gregory, HL 2007, ‘Extending innovation boundaries: corporate venture capital gives large firms a strategic option’, Journal of Business Strategy, vol. 28, no. 5, pp.36-43. Hill, SA & Birkinshaw, J 2014, ‘Ambidexterity and survival in corporate venture units’, Journal of management, vol. 40, no. 7, pp.1899-1931. Hoover’s Inc 2016a, Ford Motor Company Company Profile. Available from: < http://www.hoovers.com/company-information/cs/company- profile.ford_motor_company.7e957f44fa904756.html > [5 July 2009]. Hoover’s Inc 2016b, Honda Motor Co., Ltd. Available from: < http://www.hoovers.com/company-information/cs/company- profile.honda_motor_co_ltd.580e600d1335eb1c.html > [5 July 2009]. Hoover’s Inc 2016c, Australia Limited Company Profile. Available from: < http://www.hoovers.com/company-information/cs/company- profile.toyota_motor_corporation_australia_limited.ac5aea30d746ca87.html > [5 July 2009]. Jurevicius, O 2013, SWOT analysis of General Motors. Available from: < https://www.strategicmanagementinsight.com/swot-analyses/general-motors-swot- analysis.html > [5 July 2009]. Kwak, YH & Anbari, FT 2009, ‘Analyzing project management research: Perspectives from top management journals’, International Journal of Project Management, vol. 27, no. 5, pp.435-446. Lantz, JS, Sahut, JM & Teulon, F 2011, ‘What is the real role of corporate venture capital?’, International Journal of Business, vol. 16, no. 4, pp.367- 382. Loffler, D 2010, The FJ holden: a favourite Australian car, Wakefield Press, Kent Town. MBASkool 2016, Holden Cars SWOT Analysis, USP & Competitors. Available from: < http://www.mbaskool.com/brandguide/automobiles/5234-holden-cars.html > [5 July 2009]. Mitchell, P 2009, ‘Corporate venture funds chase early-stage deals’, Nature biotechnology, vol. 27, no. 5, pp.403-404. Napp, JJ & Minshall, T 2011, ‘Corporate venture capital investments for enhancing innovation: challenges and solutions’, Research-Technology Management, vol. 54, no. 2, pp.27-36. The Dog & Lemon Guide 2016, Holden. Available from: < file:///C:/Users/Hp/Desktop/Writing%20Styles/HAVARD%20Real.htm > [5 July 2009]. Tsai, WMH, MacMillan, IC & Low, MB 1991, ‘Effects of strategy and environment on corporate venture success in industrial markets’, Journal of business venturing, vol. 6, no. 1, pp.9-28. Van den Bosch, J & Duysters, G 2014, Corporate venturing organizing for innovation, Edward Elgar, Cheltenham. Wadhwa, A, Phelps, C & Kotha, S 2016, ‘Corporate venture capital portfolios and firm innovation’, Journal of Business Venturing, vol. 31, no. 1, pp.95-112. Williams, C 2013, Management. South-Western Cengage Learning, Mason. Yang, S & Fu, L 2014, ‘Critical chain and evidence reasoning applied to multi-project resource schedule in automobile R&D process’, International Journal of Project Management, vol. 32, no. 1, pp.166-177. Appendix 1: Implementation Timeline Activity 2016 2017 2018 2019 2020 Further analysis of the corporate venture Consultation among stakeholders Participatory Planning on the Implementation Process Accumulation of Resources for the Venture Starting the Integrated Retail of Automobiles Starting to Venture into the Emerging Asian Market Starting the Production of Automobiles on Joint Platform Read More