Fuelled by integration, trade liberalisation and deregulation the global economy is transforming into an interdependent system. Within this development the internationalisation of companies from developed countries only marked a first stage. The second and current stage sees the rise of emerging market firms investing not only into neighbouring but also into highly developed markets (Baskaran & Chaarlas, 2012; Gaur & Kumar, 2010; Goldstein, 2007a; Karl P Sauvant, Maschek, & McAllister, 2009; Williamson, Ramamurti, Fleury, & Leme Fleury, 2013). This trend challenges established internationalisation theories claiming that emerging market firms initially only invest into economies less developed than their own. Therefore it serves as a present, important and moreover heavily discussed area of research (Mathews, 2006; C. Wang, Boateng, & Hong, 2011; C. Wang, Hong, Kafouros, & Boateng, 2012).
Table of Contents
1. Defining the Problem
1.1 Contemporary Significance of the Subject
1.2 Objectives of the Research
1.3 Organisation of the Research
1.4 Limitations of the Research
2. Theoretical Framework
2.1 Foreign Direct Investment
2.1.1 Demarcation and Definition
2.1.2 Methods and Types
2.2 Internationalisation
2.2.1 Underlying Drivers
2.2.2 Motives
3. China
3.1 China’s Economy
3.2 China’s Outward Foreign Direct Investment
3.3 China’s Automotive Industry
3.4 Case Study China
3.4.1 Geely Company Overview
3.4.2 Motives for Geely’s Acquisition of Volvo
3.5 Evidence for Further Motives in China
4. India
4.1 India’s Economy
4.2 India’s Outward Foreign Direct Investment
4.3 India’s Automotive Industry
4.4 Case Study India
4.4.1 Tata Motors Company Overview
4.4.2 Motives for Tata Motors’ Acquisition of Jaguar Land Rover
4.5 Evidence for Further Motives in India
5. Cross-Case Analysis
6. Conclusion
Research Objectives & Topics
This thesis investigates the motivations driving Chinese and Indian firms to engage in Foreign Direct Investment (FDI) within developed markets in the automotive sector. It seeks to understand why these emerging market firms prioritize acquisitions and which underlying institutional, industry, and firm-level factors trigger these internationalization strategies.
- Analysis of outward FDI trends from emerging economies like China and India.
- Theoretical foundations of FDI and internationalization motives.
- Comparative case studies of automotive giants: Geely (China) and Tata Motors (India).
- Examination of the strategic asset-seeking motive versus market and efficiency-seeking behaviors.
- Evaluation of the impact of institutional support and domestic market constraints on international expansion.
Excerpt from the Book
3.4.2 Motives for Geely’s Acquisition of Volvo
The Volvo Car Group is a small volume producer of premium cars founded in 1927 and was a subsidiary of the Ford Motor Company until its acquisition by Geely. It has to be distinguished from the “Volvo Group”, which is a manufacturer of commercial vehicles and sold its passenger car business, the Volvo Car Group, to Ford in 1999. Volvo has 23,000 employees and is internationally present with a global market share of 2% and sales of 334,808 cars in 2009 (Volvo Car Group, 2014). Its largest markets are the USA, Sweden, the UK, Germany and it was not present in China before the acquisition. Volvo is popular for its brand values, which are safety, quality, sustainability, design, R&D and life style. But as the financial crisis hit, Volvo started to make losses and was offered up for sale by Ford (Fetscherin, 2011).
The acquisition’s financing was largely supported by local governments and the state owned China construction bank, as can be observed in the following overview illustrating the financial structure of Geely’s Acquisition of Volvo.
Furthermore in the follow up of the acquisition, a Volvo factory was established in China to utilise the low Chinese labour costs in improving Volvo’s profitability. On top of that a joint R&D centre was founded. An additional result is dualistic internationalisation. While Geely’s OFDI allowed them to enter Volvo’s main markets, which are located in developed countries, Volvo received the opportunity to start operations in the promising Chinese market (Balcet et al., 2012; Remburuth et al., 2013).
Summary of Chapters
1. Defining the Problem: Introduces the rise of emerging market multinationals and establishes the research focus on FDI within the automotive industry.
2. Theoretical Framework: Provides the definition of FDI and discusses the established motives for internationalization, such as market-seeking and strategic asset-seeking.
3. China: Analyzes the Chinese economic environment and automotive sector, culminating in a detailed case study of Geely's acquisition of Volvo.
4. India: Examines the Indian economic landscape and automotive industry, with a focus on Tata Motors' acquisition of Jaguar Land Rover.
5. Cross-Case Analysis: Compares the findings from China and India to identify shared patterns in acquisition strategies and motives among emerging market firms.
6. Conclusion: Synthesizes the main research findings and discusses the implications of these FDI patterns for the global automotive industry.
Keywords
Foreign Direct Investment, Outward FDI, Emerging Market Multinationals, Automotive Industry, China, India, Geely, Tata Motors, Strategic Asset Seeking, Market Seeking, Efficiency Seeking, Internationalization, Acquisitions, Global Automotive Competition, Emerging Economies
Frequently Asked Questions
What is the primary focus of this research?
The thesis focuses on understanding why and how firms from China and India—specifically in the automotive sector—invest in developed countries through Foreign Direct Investment (FDI).
What are the central themes of the work?
Key themes include the internationalization strategies of emerging market firms, the role of government support in outward FDI, and the search for strategic assets like brand equity and advanced technology.
What is the core research question?
The primary research objective is to identify the motives for Chinese and Indian FDI into developed countries within the automotive industry and to determine the underlying drivers for these decisions.
Which research methods are employed?
The author utilizes an analytical case study approach, examining Geely (China) and Tata Motors (India) as prime examples to illuminate decision-making processes and motives.
What does the main body of the work cover?
The main part of the thesis covers the theoretical framework of FDI, the national economic contexts of China and India, detailed industry analysis, and specific firm-level case studies.
What characterization is given to the firms studied?
These firms are categorized as Emerging Market Multinational Companies (EMNCs), often referred to as "New Kids on the Block," which challenge established industrial orders.
Why did Geely acquire Volvo?
Geely acquired Volvo primarily for strategic asset-seeking, aiming to gain access to technological know-how, safety standards, and global brand equity that it lacked internally.
How does Tata Motors' strategy differ from Geely's?
While both seek strategic assets, Tata Motors' strategy involves diversifying to mitigate risks from volatile Indian market conditions and capitalizing on the prestige of iconic British brands like Jaguar Land Rover.
What role does the government play in these investments?
In China, the government often acts as an active agent providing financial support and policy guidance, whereas in India, firms tend to thrive more independently despite the state.
What is the significance of the "Cross-Case Analysis"?
It identifies common patterns—such as the preference for acquisitions and the focus on European markets—to estimate the long-term impact on the global automotive competitive landscape.
- Quote paper
- Fabian Rendchen (Author), 2014, Motives for Chinese and Indian Foreign Direct Investment into Developed Countries within the Automotive Industry, Munich, GRIN Verlag, https://www.grin.com/document/301891
