This term paper will first of all give an overview of existing foreign market entry modes. Secondly there will be a description of joint ventures in general by analyzing typical motives and risks for using a specific mode of entry to internationalize. At the end of the second part, the situation on the Chinese market is discussed to introduce the reader to the concrete business case of Volkswagen and SAIC Motors, which will be discussed in the third part. Finally, this paper will provide an evaluation of the success of this joint venture on the Chinese market.
Globalization, in recent times, has generated a lot of interest in the business world. More companies are now seeking to escape their comfort zones (home markets) and enter into international markets to expand their businesses. Internationalization has seen several factors as its driving force. More countries have opened their markets to foreign entrants through liberalization and deregulation of previous trade-inhibiting laws. Consumers, in most parts of the world, have also exhibited a homogenous behavior that encourages internationalization. Products that sell well in one part of the world have shown the likelihood to perform the same in other areas, which has motivated more companies to explore international markets.
Other external driving factors are an improvement in technology and logistics. It is now possible for companies to communicate and track the activities of each of its subsidiaries or branches in the world. Technology has offered a business with an appropriate infrastructure that ensures smooth running of their affairs worldwide. Some products also exhibit shorter life cycles; thus, limiting the amount a company can produce. Internationalization offers such company's ability to produce more by expanding their reach beyond local/home markets. Expansion into international markets by a company is motivated by several factors. One of the major factors is to spur growth and increase profitability.
Many companies are seeking to enter into foreign markets to expand their influence and increase their sales and revenue. Internationalization for such companies means an access to a wider customer base, which implies more product sales and more revenues. Expanding the size and scope helps achieve the economies of scale.
Table of Contents
1 Introduction
2 Foreign Markets Entry Mode
2.1 Overview
2.2 Joint Ventures
3 Example: Volkswagen and SAIC Motors
4 Conclusion
Objectives and Topics
The primary objective of this paper is to analyze the strategies employed by companies when entering foreign international markets, with a specific focus on the mechanism of joint ventures. The study explores the motives, risks, and strategic considerations involved in internationalization, utilizing the business partnership between Volkswagen and SAIC Motors as a central case study to evaluate success in the Chinese market.
- Drivers and motivations for corporate internationalization.
- Classification of foreign market entry modes, including strategic alliances and standalone entries.
- Analysis of contractual and operational challenges in joint ventures.
- Evaluation of the Chinese market environment and regulatory frameworks for foreign entrants.
- Case study assessment of the Volkswagen-SAIC Motors long-term partnership.
Excerpt from the Book
2 Foreign Markets Entry Mode
In today's global economy, there are several ways through which a company may seek to enter into a foreign international market. Foreign market entry methods vary in their suitability to a particular international market, including the safety and practicality of the method. Companies take the time to consider all the options available for the entry methods before deciding on which one to adopt. Entry methods can be broadly categorized into two groups: strategic alliances and standalone entries. In typical cases, a company would not choose to share in the profits it expects from a given market, but alliances are sometimes chosen because starting from scratch is an expensive endeavor and riskier in international territories.
Some of the inadequacies that result in a company choosing to form alliances include knowledge and experience about the market, technology, regulations involving companies, and restrictive laws that prohibit foreign investors from starting their venture. Strategic alliances are of a complimentary nature. A foreign company looking for partnership with a local company is usually interested in the resources of the local company that could help establish its presence in that market. The local company too looks out for resources that a foreign investor has that could increase their presence in the local market.
Summary of Chapters
1 Introduction: Discusses the driving forces of globalization and internationalization, highlighting the motivations for companies to expand beyond domestic borders.
2 Foreign Markets Entry Mode: Provides a comprehensive overview of various market entry strategies, ranging from contract manufacturing and licensing to franchising and export, before detailing the mechanics of joint ventures.
3 Example: Volkswagen and SAIC Motors: Examines the practical application of a joint venture strategy through the partnership between Volkswagen and SAIC, focusing on cost reduction and market access in China.
4 Conclusion: Summarizes the effectiveness of joint ventures as a market entry strategy in China, emphasizing the mutual benefits derived from the collaboration between foreign corporations and local partners.
Keywords
Globalization, Internationalization, Market Entry, Joint Ventures, Strategic Alliances, Volkswagen, SAIC Motors, Foreign Direct Investment, China, Automotive Industry, Risk Management, Economies of Scale, Licensing, Franchising, Exporting.
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines how companies navigate the complexities of entering foreign international markets, specifically analyzing the strategic decision-making process behind choosing a market entry mode.
What are the main entry strategies discussed?
The text explores both strategic alliances—including contract manufacturing, licensing, franchising, and joint ventures—and standalone market entries.
What is the core objective regarding the research topic?
The aim is to evaluate why companies choose specific entry modes and to assess the success of these choices through the lens of institutional and market requirements.
What scientific or analytical approach is used?
The work employs a descriptive analysis of market entry theories followed by a specific case study application regarding the automotive sector in China.
What content is covered in the main body of the text?
The main body covers global market drivers, a detailed breakdown of entry methods, the challenges of foreign regulations, and a case study on the Volkswagen-SAIC Motors partnership.
Which keywords best describe this research?
Key terms include internationalization, market entry, joint ventures, strategic alliances, global expansion, and the Chinese automotive market.
Why does China specifically require joint ventures for foreign companies?
China implements these policies to ensure local economic participation and to prevent foreign corporations from gaining complete control over domestic industries.
How does the case of Volkswagen and SAIC illustrate the benefits of a joint venture?
The case demonstrates how the partnership allowed for cost reductions, shared technological expertise, and significant revenue growth for both entities within the Chinese market.
- Citation du texte
- Anonym (Auteur), 2015, Evaluation of Joint Ventures as a Mode of Entry into the Chinese Market, Munich, GRIN Verlag, https://www.grin.com/document/320278
