Ford and Mg Companies

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Question 1

Summary of Case Study: The Globalization of Toyota
This case describes the globalization of Toyota. In 1947, Toyota was a little known Japanese car company producing 100,000 vehicles a year. Between 1983 and 2002, the company made foreign direct investments totaling $13.5 billion in North America. Toyota made additional investments in Europe enabling the company to become one of the top automakers in the world. The following questions can be used to generate discussion of the case:

(i) Why was Toyota initially wary of making direct investments into markets where the company already sold cars?

(ii) Drawing upon internalization theory, explain Toyota’s decision to invest in U.S. production facilities, as opposed to exporting cars from Japan to the United States.

Question 2

Summary of Case Study: Ford and General Motors in Russia
This case describes Ford’s and GM’s entry into the Russian auto market. Russia’s auto market has been growing rapidly in recent years, and with a more stable political environment and increasing import duties, Ford felt that it was time to directly invest in the market. GM’s factory is small as compared to the company’s other operations, but Ford believes that production can be increased as the market grows. GM has formed a joint venture with AvtoVAZ, a Russian company. GM plans to use the joint venture to serve not only the local market, but also to export to the Middle East, Asia, and Latin America. Discussion of the case can revolve around the following questions:

(i) Why are Ford and GM entering the Russian car market now? Why did they not invest earlier, and why do they not postpone investment until the market is bigger?

(ii) Why do you think Ford chose to establish a wholly-owned subsidiary in Russia, rather than license its production and product technology to a Russian carmaker like AvtoVAZ?

Question 3
Compare and contrast these explanations of FDI: internalization...
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