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MA MANAGEMENT DISSERTATION

XIAOFENG WEN

The Investigation of Volkswagen’s Entry Strategy in China’s Car Market

By

XiaoFeng Wen

2007

MA MANAGEMENT

17,957 words

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MA MANAGEMENT DISSERTATION

XIAOFENG WEN

Keywords

Volkswagen (VW); Market Entry Strategy; Foreign Direct investment (FDI); China’s car industry; Shanghai Volkswagen; Joint Venture.

Abstract

China is one of the most attractive investment destinations for the world investors, now almost all the world car-manufacturing giants have launched their factories in this country, making huge efforts to explore their market share. And it has one of the world’s largest car markets, in the past few years sales have grown forty to sixty percent annually. The favorable macro-environment and policy environment has enabled China’s car industry grew fast and steadily.

Volkswagen (hereafter VW) is one of the earliest investors and the biggest foreign car maker in China, its entry and development strategy is very successful, now it controls over 30% of the China’s car market. This piece of study analyses the international strategy of VW, and focuses on its investment strategy in China, particular attention was paid on its selection of entry modes when it entered Chinese market, the objective was to find out which particular modes did VW use to enter Chinese market and what are the rationales behind such choice.

It was found that it is the macro environment (political, economic, social and technological) and micro environment (threat from five forces) of China lends itself to a particular entry mode: joint venture. It also presented the challenges and directions of the company in its future development in China

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MA MANAGEMENT DISSERTATION

XIAOFENG WEN

Acknowledgements
In the course of writing this dissertation, I am indebted to my supervisor Richards John. He led me and continuously pushed me to finish my dissertation, immolate his time, and gave advice cannily through out the dissertation writing progress.

I am also very grateful to my friend, David Wu, who provided me much useful information, and my girl friend Yang Gao, who heartened me with her love.

XiaoFeng Wen Business school University of Nottingham September 2007

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MA MANAGEMENT DISSERTATION

XIAOFENG WEN

TABLE OF CONTENTS

1.0 INTRODUCTION
1.1 Introduction 1.2 Introduction of Topic 1.3 Research Objective and Research Questions 1.4 Available Research Method 1.5 Limitation of Research 1.6 The Structure of Dissertation 1.7 Summary

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8 8 9 10 10 11 12

2.0 LITERATURE REVIEW
2.1 Introduction 2.2 Key Entry Modes and Influential Factors 2.3 The Review of Foreign Direct Investment 2.31 Definition of Foreign Direct Investment 2.32 Knowledge about FDI and Key Factors Affecting the FDI Decision 2.33 Types of FDI and Their Advantages & Disadvantages 2.34 Wholly Owned Subsidiary or Joint Venture? 2.35 Greenfield or Acquisition? 2.36 Key Theories and Models Affecting FDI Decision

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13 13 16 16 17 22 26 27 27 36
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2.4 Summary

MA MANAGEMENT DISSERTATION

XIAOFENG WEN

3.0 RESEARCH METHODLOGY
3.1 Introduction 3.2 Research Purpose 3.3 Philosophical Perspectives 3.4 Research Strategy 3.5 Data Type, Source and Collection 3.6 Summary

37 37 37 38 40 40 42

4.0 VW International Strategy and Its Enter China Strategy
4.1 Introduction 4.2 VW’s International Strategy
4.21 The Overview of VW 4.22 VW’s International Strategy 4.23 VW’s Competitive Advantage 4.24 VW’S International Enter Strategy

44 44 44 44 46 49 51 54 54 54 55

4.3 VW’s Strategy in China
4.31 VW in China 4.32 The Two Joint Ventures in China

4.4 Summary

5.0 The Investment Environment of China’s Car Industry
5.1 Introduction

57 57

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MA MANAGEMENT DISSERTATION

XIAOFENG WEN

5.2 The Macro Environment of China’s Car Industry 5.21 Political Environment 5.22 Economic Environment 5.23 Social – Cultural Environment 5.24 Technological Environment...
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