In the last years the globalisation has increased the competition amongst the companies and forced them to enter foreign markets. The development of a market entry strategy is very complex and has long-term concerns for a company. Therefore choosing an adequate market entry strategy is of great significance. This term paper is concerned with the evaluation of joint venture as a mode of entry for the German car manufacturer Volkswagen entering the Chinese market.
Therefore I will give a theoretical introduc-tion into international market entry strategies and clarify advantages and disadvantages in chapter two. In the next chapter the emergence of possible market entry strategy for the Chinese market is checked. Therefore, the importance of the Chinese market will be shown at the beginning. Then the when and where will be explained. The fourth chapter shows Volkswagen´s way for entering the Chinese market.
Table of Contents
1 Introduction
2 Basics of international market entry strategies
2.1 Market entry strategies in general
2.2 Motives for companies to go international
3 Strategies to enter the Chinese market
3.1 Significance of the Chinese market for car manufactures
3.2 Timing of market entry: When to enter?
3.3 Location of market entry: Which market to enter?
3.4 How to enter: Chinese Joint Venture
4 Volkswagen Case
4.1 Volkswagen in detail
4.2 Volkswagen´s Chinese market entry
5 Conclusion
Objectives and Topics
This paper examines the efficacy of Joint Ventures as a primary market entry strategy for multinational corporations, using the German automobile manufacturer Volkswagen's expansion into China as a central case study. The research investigates the strategic motivations behind internationalization, evaluates the timing and location determinants for market entry, and analyzes the operational success of the Shanghai Volkswagen (SVW) partnership.
- Theoretical foundations of international market entry strategies
- Core motives for global business expansion (e.g., Economies of Scale)
- Strategic analysis of the Chinese automotive market
- Comparison of Sprinkler vs. Waterfall market entry models
- Evaluation of Joint Venture structures in complex regulatory environments
Excerpt from the Book
3.4 HOW TO ENTER: CHINESE JOINT VENTURE
Joint Ventures (JV) in China are a popular market entry form for foreign companies. A JV can be defined as “the sharing of assets, risks and profits, and participation in the ownership […] of a particular enterprise or investment project by more than one firm or economic group. The latter may include private corporations, public corporations or even states.” To put it in other words, a JV is a business agreement for a corporation between at least two parties which is based on equity participation. They develop for a finite time a new, legally independent company. To minimize as much risks as possible by entering the Chinese market through a JV, foreign companies corporate with domestic established companies because the Chinese partner has a well-founded knowledge about the market environment and a distribution network on-site. JV as a market entry is a common strategy in China especially of the complex regulations and restriction the market offers. For example the equity ownership in the automotive industry is limited to a maximum of 50 percent for the foreign company. Thus, an automotive company that wants to enter the Chinese market is more or less forced to establish a JV. However, JVs provide significant advantages over other market entry forms.
Chapter Summaries
1 Introduction: This chapter outlines the global increase in market competition and introduces the research focus on Volkswagen's utilization of Joint Ventures to penetrate the Chinese market.
2 Basics of international market entry strategies: This section defines the fundamental concepts of market entry and explores the primary economic motives—such as Economies of Scale and Scope—that drive firms to globalize.
3 Strategies to enter the Chinese market: This chapter analyzes the specific appeal of the Chinese economy, compares the Sprinkler and Waterfall entry models, and evaluates the necessity of Joint Ventures due to local regulatory constraints.
4 Volkswagen Case: This chapter provides a detailed overview of the Volkswagen Group and evaluates the historical success and strategic rationale behind the formation of the Shanghai Volkswagen (SVW) Joint Venture.
5 Conclusion: The concluding chapter synthesizes the findings, confirming that Volkswagen's success in China is fundamentally linked to its strategic adaptation to the local environment through the Joint Venture model.
Keywords
Joint Venture, Volkswagen, China, Market Entry Strategy, Globalization, Automotive Industry, Economies of Scale, Economies of Scope, Foreign Investment, Strategic Management, Market Opportunities, Sprinkler Strategy, Waterfall Strategy, Business Expansion, SVW.
Frequently Asked Questions
What is the primary focus of this paper?
The paper evaluates the Joint Venture (JV) as a strategic mode of entry into foreign markets, specifically focusing on how Volkswagen successfully utilized this model to establish a significant presence in China.
Which theoretical entry strategies are discussed?
The author discusses two primary timing strategies: the 'Sprinkler strategy', which involves entering multiple markets simultaneously, and the 'Waterfall strategy', which focuses on sequential market entry.
What is the central research question?
The research seeks to understand why and how large corporations like Volkswagen utilize Joint Ventures to navigate complex regulatory landscapes and maximize market opportunities in emerging economies like China.
What research methodology is applied?
The work utilizes a theoretical literature review on internationalization strategies combined with a specific qualitative case study analysis of Volkswagen's operational history in the Chinese market.
What are the main topics covered in the main body?
The main body covers the definitions of international entry modes, the motives for internationalization (Economies of Scale/Scope), the significance of the Chinese automotive market, and the specific mechanics of the German-Chinese Joint Venture.
How would you characterize this work using keywords?
The work is best characterized by terms such as Joint Venture, Market Entry Strategy, Volkswagen, China, and International Business Management.
Why did Volkswagen choose to form a Joint Venture with SAIC?
Volkswagen chose a Joint Venture because of Chinese regulations limiting foreign ownership to 50 percent and to leverage SAIC's local networking, political connections, and distribution expertise.
What are the identified disadvantages of the Joint Venture model in China?
Key disadvantages include the high cost and complexity of establishment, potential conflicts of interest between partners, challenges in merging different management cultures, and the risks associated with technology transfer.
- Arbeit zitieren
- Lars Steilmann (Autor:in), 2014, An evaluation of joint venture as a mode of entry. The example of "Volkswagen", München, GRIN Verlag, https://www.grin.com/document/378169
