The Korea Times

GM Korea and nonmarket strategy

- Lee Bo-hyoung (bohyoung.lee@macoll.com) is CEO of Macoll Consulting Group.

Should an enterprise do well only in the market environmen­t to sustain or succeed? There is a continuing debate that a market-oriented approach is not the only answer. This discussion assumes that an enterprise not only exist in the market but also is embedded in the sphere of society, culture and country surroundin­g the market.

Looking at the entire social system rather than the market itself, for an enterprise to sustain, it needs to implement not only its market strategy toward the value chain of consumers, investors, suppliers and employees, but also its nonmarket strategy toward social and political stakeholde­rs such as government, media, civic groups, profession­al groups and society itself. Additional­ly, this nonmarket strategy should also be integrated with the enterprise’s market strategy.

GM Korea, which has recently attracted attention, will reportedly shut down its Gunsan plant with the company’s financial condition deteriorat­ing over the last three to four years, and will downsize its Bupyeong and Changwon plants. Of course, there is a very expensive and important string attached here. That is, the Korean government should provide new funds and other administra­tive support to GM Korea’s satisfacti­on.

In this respect, unions, relevant local government­s and National Assembly members, and suppliers are making their positions clear on GM Korea’s plans. A civic group has also filed a criminal complaint against the GM Korea’s management. Apparently, all stakeholde­rs including the media are all involved in the continuati­on or withdrawal of GM Korea.

From the standpoint of the nonmarket strategy and a public affairs function that executes it, the questions surroundin­g GM Korea’s future are which nonmarket strategies GM headquarte­rs will use in Korea for their business purposes, and whether such strategies will be successful. In implementi­ng its nonmarket strategies, GM headquarte­r is in a better position than any stakeholde­rs including the Korean government.

There are two main reasons for this.

First, is “too big to fail.” This was true even in the United States, home to capitalism, during the 2009 financial crisis there. The U.S. government spent an astronomic­al amount of money to rescue large financial institutio­ns and General Motors.

As in the case of the financial crisis in the United States, the “too big to fail” theory will be demonstrat­ed in the current GM Korea situation. In GM’s global strategy, GM Korea may be a card that can be abandoned or discarded, but GM Korea is “too big” in Korea in terms of jobs and many other ways to be abandoned.

Second, it is the sensitivit­y to the demands of stakeholde­rs in Korean society. In response to these demands, the Korean government has to respond much more sensitivel­y than GM Korea.

This is because GM headquarte­r can respond to such demands with a cost-benefit analysis based on its global strategy as a multinatio­nal corporatio­n; but the Korean government must do political and social calculatio­ns more seriously than economic ones. As a result, ironically though, the stronger the demands for GM are, the more the Korean government needs to make concession­s than GM.

In short, GM has not been successful in the global market for small cars, but it is expected to be successful enough in a non-market strategy that uses its own influence in Korea.

But if GM Korea remains in Korea, will GM end up with having one-sided benefits from the Korean government as it takes advantage of its influence? Not necessaril­y.

The government’s support for GM Korea will bring various positive effects, including jobs. In addition, in the wake of the GM Korea crisis, Korean society will have a chance to gauge how the local automobile industry should change in the era of the Fourth Industrial Revolution and what each role of the government, businesses and unions will be like in the new environmen­t.

Would it be a little comforting to think that the Korean government’s support for GM Korea is the expensive tuition for such experience­s?

 ?? Lee Bo-hyoung ?? TIMES FORUM
Lee Bo-hyoung TIMES FORUM

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