John K. Binay (UID: 2009961582)
Build Your Dreams
Timing of market entry (Nancy)
BYD’s propose to enter the United State market by the end of 2010. BYD believes that under
the current financial and industrial conditions, there’s no better time to introduce BYD’s
brand and quickly capture a share of the US’ automobile pie. Moreover, with the growing
prominent of hybrid cars, the quicker BYD enters the market, the greater the extent it can
exploit the first-mover advantage and really establish a presence in the US’ hybrid car
industry. The recent negative publicity with Toyota Prius is also beneficial to BYD.
A company which wants to enter a new country can choose from several strategies, among
them are exporting, international licensing, international franchising, contract manufacturing,
management contract, turnkey project, wholly owned subsidiary and joint-venture. We
decided to analyze the advantages and disadvantages for BYD of three of these strategies
(exporting, wholly owned subsidiary and joint-venture), as they are the most commonly used
in the automobile industry.
If BYD was to choose exporting as their entry strategy, they would select one or several
distributors in America. These distributors, which are not part of BYD, would import the cars
built by BYD in China. BYD would have no presence in America except maybe for an
eventual office in charge of dealing with the importers.
There are several advantages for exporting such as the relatively low financial exposure.
Indeed, there is no necessary investment and BYD would ship their cars only on an order
basis. Furthermore, BYD could acquire knowledge about the American market and see
whether its products are well welcomed by American consumers. Finally, exporting permit a
gradual market entry.
However, there are major disadvantages as well. First of all, BYD cars would be vulnerable to
the 2.5% tariffs the American government taxed on imported cars
. Then, it is logistically
difficult and expensive to export cars on an order basis. To keep the cost of transport low,