Business

This conglomerate merger, was entered by the two auto makers with a view of sharing various strategic advantages that each of them possessed. Each of the automaker contributed 50 towards the project, which means that both went in to the deal with equal financial muscle. The objective of the deal therefore was to share marketing and distribution channels as well as production techniques and advantages. The bargaining power for each of the companies was dictated by a combination of these strategic considerations.

The Daewoo group came to deliver the affordable labor needed for small vehicle manufacture. GM was previously unable to engage in the production of small vehicles because of the expensive US labor market. The objective was to have Daewoo capitalize on its existing production network to produce small cars, which the GM would use to penetrate the US market for small cars. That advantage was however lost with the democratization of South Korea and the subsequent increase in average wage of the countrys workers. This rise in average wage was not matched with an increase in productivity for the Korean worker, something that made the country unable to compete with equivalent labor markets such as Germany, which had high productivity. With that therefore, the strategic importance of Daewoo was lost.

On the other hand, Daewoo was hoping to capitalize on GMs technological sophistication to earn a good reputation and thus penetrate the US car market. For that to happen, the partnership needed to produce a high quality model that would inspire the US consumers in to trusting the Daewoo brand. Contrary to that, the opposite happened, as the partnership produced a car that even ended up scaring away Daewoos potential market. Moreover, the models bad reputation even ended up destabilizing Daewoo hitherto stable Korean market. Clearly, Daewoo never benefited from GMs technology, nor did the partnership grant the automaker an access to the huge US market.

In conclusion, both companies failed to live up to their expectations, and this rendered the partnership impotent. The disagreements between the two resulted from unmet objectives, as both tried to explore new ways of making the partnership beneficial to them. A dissolution was inevitable because the attraction that each had for one another was tied to the bargaining power, and that having failed, the partnership too had to fail.