ge19 - – The strategy appeared to be one of harvesting...

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Case Study 3 Competing in the Chinese Automobile Industry GEB 3373, Spring 2011 1
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GEB 3373, Spring 2011 2 Why Choose FDI? FDI usually has greater control over the operation and quality control of the production processes. It had to be a joint venture, so selection of an appropriate partner is a critical decision. Honda started with exporting before it decided to use FDI and this allowed it to assess the market and build up a market share. This strategy lowered the risk somewhat, but put Honda behind the others in terms of supplying the local market.
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GEB 3373, Spring 2011 3 Why did Volkswagen Succeed while Peugeot Failed? While both came in early, VW obviously considered it to be a significant thrust into an important market. Popular, modern design. Put the resources (managerial and financial) in to make it succeed, and reinvested earnings. Peugeot entered with older, outdated models and did not reinvest earnings to improve the products.
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Unformatted text preview: – The strategy appeared to be one of harvesting all of the cash flow possible and not really preparing for the long run. GEB 3373, Spring 2011 4 Why did Many Automakers Wait to Enter China? ▲ Risk aversion—was the market really there and could a joint venture succeed? ▲ Would the technology transfer requirements put the foreign partner at a disadvantage? ▲ Once the uncertainties were largely resolved, the hesitant automakers decided to jump in, but finding a partner was a challenge. GEB 3373, Spring 2011 5 Would you vote for a $2 billion FDI Automobile Project in China? ▲ Risk of overcapacity and bloodletting. ▲ Probably good returns for those companies who succeeded in the early years. ▲ Can you design a strategy to weather any adversities in the short run in order to enjoy the long run? ▲ The bottom line is: How much risk are you willing to take?...
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This note was uploaded on 01/28/2011 for the course GEB 3373 taught by Professor Crum during the Spring '10 term at University of Florida.

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ge19 - – The strategy appeared to be one of harvesting...

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