...Foreign Direct Investments: Volkswagen’s Entry Strategy in China’s Car Market 21/1/2013 Content Page Table of Contents Abstract 1 Introduction 1 Literature review 2 Volkswagen rational for China – Dunning’s Eclectic Paradigm. 4 Conclusion 6 References 7 Abstract China is one of the most attractive destinations for Foreign Direct Investments in the world. It is first destination for Inward FDI among developing countries (WTO, 2012). China has developed second world’s largest car market after U.S.A. and has been the largest car producer in the world since 2008. German company Volkswagen (hereafter VW) is the world’s second largest motor vehicle manufacturer after Toyota Motor (CNN, 2012) and the biggest manufacturer in Europe. VW is one of the earliest investors and the biggest foreign car maker in China with 15% of market shares. This report, by applying relevant theories, such as Dunning’s eclectic paradigm or Hymer’s internationalization theory, will explain why VW Company decided to invest in China through joint venture rather than acquisition or Greenfield investment. Introduction Chinese car industry, as well as many other branches, is very young, although dynamic and fast growing. In 1978 Chinese government introduced policy of open doors which allowed foreign companies to invest and operate in China. Since then car sector has developed rapidly from an infant to a mature industry. Moreover, Chinese government provides various...
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...School of ManagementAssignment Cover Sheetfor submission of individual and group work | Course / Unit Code | Assignment Number | Assignment due date | Group / Session name (if applicable) | BUSM1227 | 1 | 27/02/2012 | Class B | Course / Unit Name | Program Title | International Business | Bachelor of Business (Management) – Full Time | Lecturer / Teacher’s Name | Tutor / Marker’s Name (if applicable) | Wenda Leong | | This statement should be completed and signed by the student(s) participating in preparation of the assignment. Declaration and statement of authorship: 1. I / we hold a copy of this assignment, which can be produced if the original is lost / damaged. 2. This assignment is my / our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgment is made. 3. No part of this assignment has been written for me / us by any other person except where such collaboration has been authorised by the lecturer / teacher concerned and is clearly acknowledged in the assignment. 4. I / we have not previously submitted or currently submitting this work for any other course / unit. 5. This work may be reproduced and / or communicated for the purpose of detecting plagiarism. 6. I/we give permission for a copy of my / our marked work to be retained by the School for review by external examiners. 7. I / we understand that plagiarism is the presentation of the work...
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...2012 International Business Globalization - Volkswagen Akshayita Saxena Anirudh Kunjal Avinash Unni Nair Nilisha Aggarwal Rahul Raghunathan Raj Jatheendran Santosh Gaurav Volkswagen – Das Auto INTRODUCTION : A BRIEF HISTORY Volkswagen, in English, translates to “people’s car”, and the German Labour Front originally founded this company in 1937, with the sole purpose of manufacturing cars for the common man, in a German car market dominated by luxury cars. The People’s car, available at a mere 990 Mark, was positioned around factors such as better fuel efficiency, reliability, ease-of-use and economy of usage. Its first prototype, the kdF-Wagen, had a distinctive round shape to its design (the Beetle continues with this design even today) and had about 336,000 takers. By 1946, the Wolfsburg factory was producing close to 1000 cars a month, a remarkable feat in those times. Post the 2nd World War, Volkswagen served as an icon for the resurrection of West Germany, and showed signs of international expansion by selling its first model in the United States of America in 1949, and its sales services were standardized there by 1955. The Golf Type-I model, was given the title “Beetle” by the quirky, hugely popular advertisement campaigns run in the U.S. then, and was officially adopted by Volkswagen only in 1998. By 1961, VW expanded its production line to include Type-III and Type-IV models, and in 1964, VW bought over the Auto Union and the NSU, successfully creating a merger...
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...poor policies. The aforementioned advantages of the free flow of capital across national borders can be realized through two primary kinds of international investment: (1) Foreign Portfolio Investment (FPI) and (2) Foreign Direct Investment (FDI). While FPI is defined as investment in a portfolio of foreign securities such as stocks and bonds, it does not entail the active management of foreign assets. In other words, FPI is “foreign indirect investment” in that it represents passive holdings of foreign securities not least because the investor does not have control over the securities’ issuer. Exchange rates, interest rates, and tax rates on interest or dividends are factors that directly impact on FPI. In contrast, foreign direct investment, commonly known as FDI, refers to an investment made to acquire lasting or long-term interest in enterprises operating outside of the economy of the investor. The investment is direct because the investor, which could be a foreign person, company or group of entities, is seeking to control, manage, or have significant influence over the foreign enterprise. An example of FDI is when a Japanese company takes a majority stake in a company in America, Iran, or elsewhere. In comparison to FPI, FDI requires exercising management control rights,...
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...(1)INTRODUCTION When doing business in an international scale, it is important to understand what international business really means. Therefore according to Rugman & Collinson (2012) international business can be defined as “The study of transactions taking place across national borders for the purpose of satisfying the needs of individuals and organizations. Some of the well known International businesses (MNE’s) are Wal-Mart, Toyota Motors, General Motors and Volkswagen for their performance, moreover annual revenue. Decisions with regard to movement in to global arena should be taken with care as there is certain degree of risk involved. There should be value in moving to different markets (eg- An organization may lack the skills needed to make use of the potential-Integrate R&D activities or incompatible cultures The cost of managing complex infrastructure should not –outweigh the benefits of increased scale Some industries posses’ particular globalization challenges for example companies operating in the manufacturing sector (automobile makers) often faces complexities in integration and particularly vulnerable to economic slowdowns which reduces their ability to expand. (Alexander & Korine, 2008) According to Wall & Rees (2004) the factors to be considered when investing abroad can be classified in to four areas-Supply factors, demand factors, Political factors and others. Under supply factors, production costs, Distribution costs and access to key technologies...
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...orkMultinational Corporations 1. Multinational Corporations http://www2.econ.iastate.edu/classes/econ355/choi/mul.htm Definition of MNC | Multinational firms arise because capital is much more mobile than labor. Since cheap labor and raw material inputs are located in other countries, multinational firms establish subsidiaries there. They are often criticized as being runaway corporations.Economists are not in agreement as to how multinational or transnational corporations should be defined. Multinational corporations have many dimensions and can be viewed from several perspectives (ownership, management, strategy and structural, etc.) The following is an excerpt from Franklin Root, International Trade and Investment | Ownership criterion | Some argue that ownership is a key criterion. A firm becomes multinational only when the headquarter or parent company is effectively owned by nationals of two or more countries. For example, Shell and Unilever, controlled by British and Dutch interests, are good examples. However, by ownership test, very few multinationals are multinational. The ownership of most MNCs are uninational. (e.g., the Smith-Corona versus Brothers case) Depending on the case, each is considered an American multinational company in one case, and each is considered a foreign multinational in another case. Thus, ownership does not really matter. | Nationality mix of headquarter managers | An international company is multinational if the managers of the...
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...China – entry into WTO * Reduction of trade barriers, and limits to import. * Reduction of goverment subsidies and other form of support. * Equal treatment for foreign and domestic firms. * Trade barriers between provinces removed. * Market size up, opportunity to export. * Opportunity to offshoring and outsourcing. Steel – before 2000 * Many low quality steel mills; subsidies * Overemployment * Only 8 mills reached min efficiency to win profits. * World’s biggest production of steel and iron. * Productivity – 10% of other countries productivity. * China demand for high-end steel: undersupplied, but supply off low-end stell: oversupply. After 2000: Reduce subsidies – small steel mills exit * Acquisitions mergers * Ricardian model: China specializes in low-end steel. * Krugman: small firms should exit * large firms grow * medium firms: characterize supply PC: Before 2000 * China produces low-end products * High growth of the market, focus on education * Price wars in the late 90’s * Competitive with HP, Dell etc. * Profit seekers. After 2000: * Market experience * Competitive with western firms Monopolistic competition. AC falls. Offshoring to China: Hardware and low skilled labor – wage difference TV: Before 2000: Oversupply, saturated market. * Unused capacity * Financial support from the government * Foreign tv producers target high-end...
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...Thank you for Chrystal. Now I am talking the future plan of Volkswagen. Volkswagen expects to enhance their weakness so they keep going to improve its company. Although VW account for larger proportion market share in China market, the further development is necessary for the company. It can maintain the competitive with others. I found that VW is planning to expand the business in China market. They plan to explore area in South area and West area in China. VW will build the factory in Ningbo. The aim is to increase the influence in China market. VW targets rising the production volume to 300 thousands cars per year. It makes more profits through the mass production. Another future plan is to improve the quality of car. VW spend much money on product development. VW starts developing the new car model in order to enhance the competitive with other car makers and attract new customers. The product should improve as the wants for customers are always changing. Also, they hope to sell the environmental-friendly. They explore the skills for environment. Therefore, VW invest 17.1 billion euro in multi products. That can tackle with customer diversity. Besides, I found that VW is going to explore the renewable fuel, for example wind power and solar power. This plan may solve the problems which increases the fuel price. Last point of the future plan is to rise the sales volume. The goal is to earn 20% of its capital as profit per year. To achieve the goal, VW plans to finance...
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...prosperity of Poland would be the collapse of the eurozone” - Radek Sikorski, Poland's foreign minister. Krzysztof Rybinski, a Polish government critic has said that 2011 was the last good year for the Polish economy and that things will go downhill from the second half of 2012, for want of decent reforms in the face of an economic slowdown, an ageing population and a looming energy crisis. As a party to 89 Double Taxation Treaties throughout the world, Poland is indeed open for international business. Offering a large domestic market coupled with political and economic stability and various government incentives for investors, Poland is placed by the United Nations Conference on Trade and Development (UNCTAD) among the top countries to attract FDI flows in the years 2011-2013 and the 6th most attractive investment location in the world. Poland is highly attractive to international investors wishing to capitalize upon competitive employment costs, increasing industrial output and a highly qualified labor force. Due to its geographic location and EU membership, Poland may easily export goods to all European countries with a potential to...
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...Direct Investment (FDI) is a category of investment that reflects the objective of establishing a lasting interest by a resident enterprise in one economy in an enterprise that is resident in an economy other than that of the direct investor. The lasting interest implies the existence of a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence on the management of the enterprise. The direct or indirect ownership of 10% or more of the voting power of an enterprise resident in one economy by an investor resident in another economy is evidence of such a relationship. FDI is measured on an asset/liability basis or on a directional basis. On an asset/liability basis, FDI statistics are organized according to whether the investment relates to an asset or a liability for the reporting country (FDI IN FIGURES, 2014). In 2008, during the financial and economic crisis which swamped the world economy in 2008 had impacts on foreign direct investment (FDI) that had become the major driver of the globalization process. The Chinese stimulus program to get the country through the global crisis was much criticized by western experts, because it was thought to extend the Chinese development model which is strongly based on exports and investments in infrastructure and favors state-owned enterprises. Yet, during the global financial and economic crisis China succeeded to remain a much favored location for inward FDI compared to other...
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...ASSESSING THE POWER OF PORTER'S DIAMOND MODEL IN THE AUTOMOBILE INDUSTRY IN MEXICO AFTER TEN YEARS OF NAFTA SALVADOR BARRAGAN Master in Business Administration, IPADE Business School, 1996 BSc in Industrial Engineering, Universidad Panamericana, 1994 A Research Project Submitted to the School of Graduate Studies of the University of Lethbridge in Partial Fulfilment of the Requirements for the Degree MASTER OF SCIENCE IN MANAGEMENT Faculty of Management University of Lethbridge LETHBRIDGE, ALBERTA, CANADA © Salvador Barragán, 2005 ii Abstract It has been ten years since the signature of the NAFTA agreement among Canada, U.S., and Mexico. For Mexico, this was a decisive step away from a protectionism model toward a free trade market. One of the main purposes for Mexico in joining NAFTA was to increase the competitiveness of its manufacturing sector, especially the automotive industry. In this paper, Porter’s Diamond Model of national competitiveness and some critiques that attempt to extend the usefulness of the model are analyzed. The Doubled Diamond and the role of MNEs in a host country are both examined through a case study research of the foreign-owned automobile industry in Mexico. The findings of this study show evidence of a broader role of MNEs than in the original framework, as well as the usefulness of the doubled diamond extension to explain alternative sources of competitiveness in early stages of development. iii Acknowledgments...
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...History and Economy of the Czech Republic This paper is on the Czech Republic economy. I will first introduce the country with detailed information on the Czech history from past to present. Then, I will talk about their economy during communism and post-communism. This will show how the country and its economy has changed dramatically during and after communism. Transitioning from that, later on in this paper will exemplifies the Czech Republic economy in exquisite details from the past 25 years to now; post-communism. The term "Czech" refers to the cultural characteristics of the Czech-speaking inhabitants of the Czech Republic, which includes Bohemia; the larger western part. The republic is bounded by Poland on the north, Germany on the northwest and southwest, Austria on the south, and the Slovak Republic on the east. The crowning of the first Bohemian king took place in 1085. And the first university in central Europe was founded in Prague in 1348. The development of Czech national culture came to a temporary halt in 1620, when the Czech's social classes possessing political rights were defeated in the Battle of White Mountain. The Bohemian kingdom lost its independence, and its provinces were declared the hereditary property of the Hapsburgs. A period referred to as "the darkness" lasted until the end of the eighteenth century, when the Czech national revival the formation of the modern Czech nation began. The area of today’s Czech Republic used to be an industrial...
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...Multinational corporations Table of contents Preface 4 1. Introduction; General meaning of MNC 4 2. Ranking multinationals 5 3. Entry of Multinational corporation into new markets, 6 4. Three Stages of Evolution 7 5. Motives for Foreign Direct Investment (FDI) 9 6. The comparison of MNC and TNC 11 7. What are the benefits and problems that MNCs face? 11 8. What are the Russian companies that achieve the multinational status? 13 Conclusion 14 Bibliography 14 Appendix 15 Preface We would like to consider the most interesting topic concerning the multinational corporations. If we called it like that, it means that company made a great success in the market, it operate in several foreign countries. In this mini-course work we will investigate more detailed the structure and strategies of MNCs. In the first part we will look through the history of MNCs. The history, in general, is to be considered as an essential part of every project in order everyone may compare the development of the particular sphere. Next part will show us the statistical data of MNCs, where we will recognize all the most reputable companies from the different industries, such as BMW, Nike, Lego, etc. We cannot leave a side the point of entry into the new market. There it will be explained the strategies of MNCs, such as mergering, joint venture and sequential market entries. Also we will consider investing into the particular companies, weather it is risky or not and the motives...
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...includes the sourcing of key production inputs (such as raw materials or products for assembly) as well as the international outsourcing of services. Example; India has nurtured a strong IT capacity, and has attracted global companies outsourcing IT and related services. India’s economic development has most often been compared with that of China, where export-oriented manufacturing industries have flourished, mostly in mass-produced goods, from textiles to standardized consumer electrical goods. Both countries offer location-specific advantages: China offers abundant cheap labour, and India, skilled labour for knowledge-intensive industries. However, each is looking to diversify, as India is broadening its policies to attract manufacturing FDI, and China is seeking to move up the value chain, to more high-tech activities. As the world’s two most populous countries, each with populations of over a billion, they are also, potentially, the world’s largest markets. Not surprisingly, therefore, many companies eye the market potential they offer, in addition to their location- specific advantages in production. Globalisation of Market Globalization of markets refers to convergence in buyer preferences in markets around the world. This trend is occurring in many product categories, including consumer goods, industrial products, and business services. Clothing retailer L.L. Bean (www.llbean.com), shoe producer Nike (www.nike.com), and electronics maker Sony (www.sony.com) are just a...
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...was commissioned to do an analysis of Germany and make a recommendation as to whether or not to a large Canadian company should expand its foreign operations in Germany. The country was analyzed based on its Macro Environment – country description, Political situation and stability, Legislation, Economic conditions and Cultural issues, as well as on its Factor Endowments. The findings show that Germany has an overall stable and healthy economy with excellent advanced factors of production – especially in regards to productivity and innovation. With new ties to Canada, through CETA, legislation will be easier to deal with. The country also has a similar culture and stable politics. The risks of falling GDP and low FDI do not outweigh the benefits and FDI should soon increase with Germany’s new agreements with Canada and is soon to do a similar deal with the US. It is recommended that foreign operations be expanded into Germany. Operations should proceed cautiously with wages that are stagnant in Germany and try to provide a fair wage to encourage further training and enhance the economy. COUNTRY’S MACRO ENVIRONMENT Country Description: Germany is a highly developed and wealthy OECD country [33] and is the fifth largest economy in the world in terms of PPP [17]. Its GDP/capita in terms of PPP has been on an upward growth trend since 1985 and was just below Canada’s in 2012 (Appendix 1). However, neglect has led to infrastructure that is crumbling (including highways...
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