Question 1: What attracted General Motors to China in 1997? What were the benefits of making a significant investment in the country? Answer: General Motors entered China just after Volkswagen and Citroen were granted licenses. Initial General Motors could did not live up to the expectations of the buyers. In a turn of events which went General Motor’s way Daewoo was bought by GM which led to increased sales . The benefits frequently associated with entering a market early are commonly known as first-mover advantages. One first-mover advantage is the ability to preempt rivals and capture demand by establishing a strong brand name. A second advantage is the ability to build sales volume in that country and ride down the experience curve ahead of rivals, giving the early entrant a cost advantage over later entrants. A third advantage is the ability of early entrants to create switching costs that tie customers into their products or services. Such switching costs make it difficult for later entrants to win business. This can be seen in General Motor’s case, GM reported a 26% increase in sales in China. The unit in Shanghai alone pulled the figure to 24.3% increase in the sales . Question 2: Which entry mode did General Motors used to enter China? What advantages did this entry mode have over other ways to expand into the market?
Answer: China used joint ventures mode which entails establishing a firm that is jointly owned by two or more otherwise independent firms. A joint venture entails establishing a firm that is jointly owned by two or more otherwise independent firms . Joint ventures have a number of advantages. First, a firm benefits from a local partner’s knowledge of the host country’s competitive conditions, culture, language, political systems and business systems, Second, a firm might gain by sharing costs and risks with a local partner. Third, political considerations in many countries make joint ventures highly appealing. There are however,...
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