InternationalBusiness: General Motors
General Motors is one of the leading car manufacturers in UnitedStates. The company designs, creates and put up for sale vehicles,trucks and different accessory parts of the automobile. In addition,General Motors offers automobile financing services. Some of themost-iconic brands manufactured by General Motors include Cadillac,Pontiac, Chevrolet and hummer. The company` headquarters are locatedin the United States, though General Motors has subsidiaries inEurope (Germany), South America (Brazil) and Asia-Pacific. GM being a Global corporation is supposed to follow not only the domestic lawsand customs governing business operations in United States, but alsoobey laws in the host state (General Motors, 2014).
In the United states and in European markets the company does notface significant legal bottlenecks since the markets are open andbased on competitive ability of a company`s product. In foreignmarkets primarily Asia pacific, and in particular China that is oneof the largest economies in the world and that provides a significantmarket for General Motors automobiles and other related accessories,the legal framework is quite different, and the rule are ratherarbitrary. This affects the prices of the company`s cars in China,the cost of requisite inputs and manpower, technology and thelocation of the firm (Helper & Henderson, 2014). For instance,while General Motors has used internet to market and provide crucialinformation to customers and prospective buyers, the same facesbottlenecks in China since the government imposes stringent rulesrelating to use of internet by business and citizens of China.
Typesof Legal Systems
At home, the US government has put in place strict emission controlrequirement on automobiles that are sold within the country`sborders. These regulations affect the design and material used forthe manufacture of automobile that raises costs of production forGeneral Motors. Every car model manufacturer must acquirecertification from the Federal Authority and other relevant statauthorities (Rowling, 2006). This ensures that all models meet thestandard emission requirement. In US, and other foreign countrieswhere General Motors` has a subsidiary vehicle manufactured must meetthe safety requirement as states in the host nations laws (GeneralMotors, 2014). For example in Brazil the company is supposed toreport to the appropriate authority filed reports, warranty claimsand customer complaints. In China, the company is also required toreport on safety recalls. In this year, the company has encountered arigorous court battle from families of deceased individuals due to adefective ignition switch in some of the vehicles produced by GeneralMotors. The company has paid colossal sums of money to victims andtheir families and has been coerced to recall all vehicles with thatfault. This has significantly affected operations at the company,lowered sales and increased costs.
Thecompany should monitor economic growth, political stability, andavailability of requisite labor, inputs and government policies.These factors will shape the business procedures and should bethoroughly contemplated before investing in foreign lands. In theUnited States General Motors has engaged in many social programs. Themost conspicuous is the financial aid and support to MichiganTechnological University. From mid 20th century, the company hasgiven financial support in the excess of $12.2 million to theuniversity. A huge part of this support goes into research programs,capital projects and youth programs. GM code of conduct is winningwith integrity. In the competitive automobile industry, every aspectthat gives the company a competitive edge is paramount, and none hasdone it better that GM`s code of conduct of winning with integrity((General Motors, 2014) This has earned the company a good reputationamong customers all over the world, and created a culture ofreliability and candor in all the company`s operations. It isimportant that GM continues to follow the code in foreign statesbecause customers want to deal with a partner they can trust.
Some of the possible sources of political risks include changes ingovernment rules and policies, civil turmoil, conflict and terrorism.In the US that forms the largest market for General Motorsautomobiles, the stability of political institutions has ensured thatthe political risks are significantly reduced. Nonetheless, this isnot the case in second world nations and developing nations wheresuch systems are not stable (Moran, & International Bank forReconstruction and Development, 2001). For example, a change inadministration in Middle East and Africa affects rules that governbusiness operations. In 2013 General Motors has been forced to pay$358,000 fine to the government for violating emission standards.Political crisis in Kenya in 2008, the Arab spring that led to thedeposition of dictators in Egypt, Libya and Tunisia, and theturbulent political climate in Middle East has affected operations ofmajor subsidiaries and joint ventures ((Rowling, 2006).
As a political consultant, I would suggest that the companycategories the nature of political risk to be able to identify themost-apt remedy. Political risk can be company specific, country–specific or international. Company risks have major effects at thecorporate stage. In some cases there may be inconsistency between thehost nations and the company in matters relating to foreign exchange.Management must find ways to arrive at the right balance through useof available platform of negotiation. Country –specific politicalrisks emanate from the country level and invariably affect theoperations of the company. They may include cultural risks andinstitutions risks (Rowling, 2006). In some developing nations, theregulations governing multinational companies state that a givenproportion of employee must originate from the local labor market.
Ownership structures also vary depending on the rules of the state inquestion and it is the duty of management to strike a conducivebalance with local government to avoid unnecessary confrontation. Itis paramount that such requirements are met. Global political riskssuch as terrorism can also affect the operation of multinationalcompanies. As a political consultant, I would suggest that subsidiaryfirms in foreign nations are located in areas that are not volatileand where there are no security threats. In addition, it is paramountthat the company engages local dwellers so that they feel like partof the organization. Where possible the company should buy inputs forproduction from the local market to maximize value added benefits andpromote domestic employment. Engaging in social projects like aidingconstruction of learning institutions, and hospitals can also go along way in creating a good rapport between the local community andthe company.
Harrison,A.(2011). InternationalEntry and Country Analysis.Teesside University, United Kingdom. Retrieved from:http://www.ekf.tuke.sk/files/TUKE%20Lectures%202011-12.pdf
Rowling,J. K. (2006). Legal,Technological and Political Forces.Sage Publication London.
Helper,S.and Henderson, R.(2014).Management Practices, Relational Contracts and the Decline of GeneralMotors.Havard Business School.
GeneralMotors .(2014).Winningwith Integrity: Our Values and Guidelines for Employee Conduct.Retrievedfromhttp://www.gm.com/content/dam/gmcom/COMPANY/Investors/Corporate_Governance/PDFs/WWI.pdf
Moran,T. H., & International Bank for Reconstruction and Development.(2001). Exploringnew frontiers.Washington, DC.