China’s economy is growing year by year. The persistent growth has affected the auto-mobile sector in particular. Increasing income and the passenger vehicle as an exclusive status-symbol has risen the private demand. In 2009, the PRC overtook the USA as the biggest automotive market in the world in production as well as in sales. This trend will certainly continue: With economic problems like stagnating real income, rising raw material prices and credit-driven consumerism in the industrial countries the importance of the Chinese market for car companies will even grow. Saturated passenger car markets in the USA and Western Europe and low rates of motorisation in new auto-motive markets like China focus the attention of the market participants on these new, growing markets. But the upward trend has already shown a downside. Increasing de-pendency on the strong politically influenced market and claims about know-how transfer are exemplary threats.
As German enterprises in this industrial sector are popular worldwide and the car-industry is the key industry in our country, the internationalisation strategies of German automotive companies in China will be analysed in the following. The trend of the Chinese automobi-le market can be summarised in a quote of Dieter Zetsche, CEO of Daimler: “Wir fahren noch nicht im höchsten Gang, wir können noch mehr”. The quote relates to the expected turnover and profit records of Daimler in 2011, which were mainly based on the success in the PRC: The Swabian vehicle manufacturer sold 198,500 automobiles in China. In spite of these difficulties, the automotive market in the PRC is very attractive, especially for the well-known German firms. However, the companies should know how to manage the problems in China. Therefore, the choice of a suitable strategy of internationalisation is crucial.
By definition internationalisation strategy is the orientation of corporate development by growth in different foreign markets. In contrast to an international market entry strategy, an internationalisation strategy is not only about starting business in a foreign market, but also developing a strategy in a market which has already been entered.
The focus of this bachelor thesis is put on the passenger vehicle market and lines out why the Chinese market is profitable and attractive for German and international manu-facturers in general. [...]
Table of Contents
1 THE BIGGEST AUTOMOBILE MARKET OF THE WORLD
2 MARKET ANALYSIS OF THE CHINESE AUTOMOTIVE MARKET
2.1 Political-legal Factors
2.1.1 Political Circumstances for the Development of the Car Industry
2.1.2 China's Entry to the WTO
2.1.3 Involvement in the 12th Five-Year Plan
2.1.4 Legal Uncertainty
2.1.5 Management of Intellectual Property
2.2 Economic Factors
2.2.1 Economic Development
2.2.2 Automotive Market Situation
2.2.3 Automobile Suppliers
2.2.4 Automotive Financing Sector
2.3 Socio-cultural Factors
2.3.1 Distribution of Income and Disparities
2.3.2 Demographic Development
2.3.3 The Chinese Car Consumer
2.3.4 Marketing-Mix in the Chinese Automotive Sector
2.4 Technological Factors
2.4.1 Technological Trends - The Chinese E-Mobility Programme
2.4.2 Research & Development Landscape
2.4.3 Infrastructure and Traffic Management
3 INTERNATIONALISATION STRATEGIES
3.1 Timing Strategy
3.2 Establishing and Developing Business
3.2.1 Export
3.2.2 Representative Office
3.2.3 Franchising
3.2.4 Joint Venture
3.2.5 Wholly Foreign Owned Enterprises
3.3 Choice of Location and Partners
3.3.1 Locating Strategy
3.3.2 Finding a Business Partner
3.3.3 Chinese Automotive Companies
4 INTERNATIONALISATION STRATEGIES OF GERMAN CAR COMPANIES IN THE PEOPLE'S REPUBLIC OF CHINA
4.1 Volkswagen Group
4.1.1 Chronological Development of the China Strategy
4.1.2 Country-specific Market Development
4.2 Bavarian Motor Works Group
4.2.1 Chronological Development of the China Strategy
4.2.2 Country-specific Market Development
5 CONCLUSION
Objectives & Core Topics
This thesis examines the internationalisation strategies of German automotive companies operating in the Chinese market. The primary research focus is to analyze why the Chinese market is attractive to international manufacturers, how firms manage significant environmental and institutional challenges, and how they optimize their market entry and development strategies to maintain long-term competitiveness.
- Analysis of the PEST framework regarding the Chinese automotive industry (Political, Economic, Socio-cultural, Technological factors).
- Evaluation of market entry and expansion strategies, including Joint Ventures and Wholly Foreign Owned Enterprises.
- Comparative analysis of specific internationalisation approaches taken by Volkswagen Group and BMW Group.
- Investigation of the impact of government industrial policies, such as the 12th Five-Year Plan and E-Mobility mandates.
- Assessment of operational challenges, including intellectual property protection, legal uncertainty, and regional infrastructure needs.
Excerpt from the Book
2.1.5 Management of Intellectual Property
The judicial area with the largest conflict potential is the intellectual property. According to Wallentowitz et al., it is the most feared risk of producing in China (Figure 5). Complaints against product piracy of foreign enterprises are a common occurrence. According to Reisach et al., the whole governance system including all companies would collapse without pirated software, especially in the strongholds of counterfeiting and piracy. 69% of forgeries confiscated by the American customs were made in China and as reported by the German Machine and Plant Engineering Association 70% of pirate copies were produced in the PRC, a lost turnover of €30bn. Chinese companies did not only copy the organisational structure of Siemens but even the brand name, business records, distribution structure and corporate processes of NEC, a Japanese provider of information technology. In consequence, they could pretend to be this corporation.
Chinese people do not have a guilty conscience when imitating and copy things. They are culturally influenced by Confucius who said: “By three methods we may learn wisdom: First by reflection, which is noblest; second, by imitation, which is easiest; and third by experience, which is the bitterest”. In consonance, this saying shows that Chinese believe that it is an honour to copy. They have not had conflicts with this attitude so far, because they have not been part of technical innovations for decades. They simply follow the footsteps of the Japanese, who on the one hand imitated especially the products of electronic enterprises and manufactured them cost-effectively. This trend is on the hand, intensified by the education with the focus on listening, imitating and reproducing and on the other strengthened by the feeling that the PRC was disadvantaged in the past and quickly has to reach a competitive level.
Chapter Summaries
1 THE BIGGEST AUTOMOBILE MARKET OF THE WORLD: Introduces the rapid growth of the Chinese automotive market and defines the scope of the thesis regarding internationalisation strategies for German car manufacturers.
2 MARKET ANALYSIS OF THE CHINESE AUTOMOTIVE MARKET: Provides a comprehensive PEST-Analysis examining the political, legal, economic, socio-cultural, and technological factors that define the current Chinese business environment.
3 INTERNATIONALISATION STRATEGIES: Discusses theoretical approaches to international market entry, including timing strategies, legal entities like Joint Ventures, and the importance of location and partner selection.
4 INTERNATIONALISATION STRATEGIES OF GERMAN CAR COMPANIES IN THE PEOPLE'S REPUBLIC OF CHINA: Analyzes the practical application of these strategies by comparing the market development paths of Volkswagen Group and BMW Group.
5 CONCLUSION: Summarizes the key findings, highlights the potential and threats of the Chinese market, and suggests strategic recommendations for German automotive firms.
Keywords
China, Automotive Industry, Internationalisation Strategy, Volkswagen, BMW, Joint Venture, PEST-Analysis, E-Mobility, Intellectual Property, Market Entry, Market Development, Foreign Direct Investment, Brand Loyalty, Sustainable Growth, Supply Chain.
Frequently Asked Questions
What is the core focus of this research?
This work fundamentally analyzes how German car manufacturers, specifically Volkswagen and BMW, approach internationalization in the People's Republic of China, balancing market opportunities against institutional and competitive threats.
What are the primary thematic areas covered?
The study covers the macro-environmental landscape (PEST analysis), different legal forms of market entry (Joint Ventures vs. WFOE), and specific corporate responses to Chinese government industrial policies and cultural nuances.
What is the main research objective?
The objective is to identify how global car companies can successfully adapt their business models to the Chinese market, effectively manage technology and intellectual property risks, and leverage local government initiatives to maintain market leadership.
Which scientific methods are employed?
The author uses a structured market analysis based on the PEST framework and conducts a comparative case study approach, evaluating the strategic actions taken by VW and BMW throughout their tenure in China.
What content does the main body provide?
The main body investigates the political, economic, and sociocultural environment, details various internationalization theories as applied to the automotive sector, and evaluates the specific strategic successes and failures of major German players.
What keywords best characterize the work?
The core keywords include: China, Automotive Industry, Internationalization Strategy, Joint Venture, PEST-Analysis, Intellectual Property, E-Mobility, and Market Development.
How do cultural factors like "Guanxi" influence business for German firms?
Guanxi is highlighted as an essential networking tool in China, which influences decision-making processes and can serve as a buffer against legal uncertainties and bureaucratic challenges.
How do German companies currently handle intellectual property risks?
Companies focus on non-compete clauses, trademark registration, joining protection organizations like the QBPC and APM, and increasingly shifting R&D activities to stay ahead of domestic imitators.
What is the significance of the "Go West" strategy for the automotive industry?
The "Go West" strategy represents a push by the Chinese government to develop underdeveloped provinces, offering German firms opportunities for further growth and lower operational costs outside the saturated coastal regions.
- Quote paper
- Patrick Schrott (Author), 2012, Analysis of the Internationalisation Strategies of German Car Companies in China, Munich, GRIN Verlag, https://www.grin.com/document/206596
