strategic management in the ailing automobile industry.pdf

It can be traced back to more reasons firstly the

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exposed to the downturn than that of Europe, North-America or Japan. It can be traced back to more reasons. Firstly, the levels of personal debt are far lower and a smaller proportion of cars are bought on credit. Secondly, a potential customer in an emerging market who has been saving for years to buy his first car will not postpone it because of some turmoil on the world market. And last but not least the BRIC economies have been expanding so fast that even in a meltdown they will grow. Figure 2 This chart indicates the car ownership per 1000 people of driving age in different countries in 2007. We can set out that the car ownership in emerging countries is far behind that of the US (more than 900 cars), Western Europe and Japan (both around 600 cars). As in Russia it is below 200, in Brazil about 130, in China around 30 and in India less than ten. (Matthew Symonds, 2008) 2.3.1 China China is already the world’s second-biggest market with its yearly sales of 9.35 million vehicles (6.76 million passenger cars) in 2008, but according to predictions it will soon overtake America who accounts for sales of 16-17 million in an average year. It is even more admirable if we know the fact that 30 years ago only 5 000 vehicles were sold in China annually. The industry got its first major boost in 1978 when former Chinese leader Deng Xiaoping within the framework of his open-door policy allowed the establishment of joint ventures 2 in the automotive industry. 2 Legally and economically independent partners establish a new firm that is jointly owned. It can be for only a specific project or a continuing business relationship.
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18 At the beginning, Volkswagen , Europe’s biggest carmaker was the only one who agreed to set up joint ventures in China. The negotiations took more than 6 years due to China’s lacking experience in modern business management along with legal and patent protection. The nation’s first car venture, Shanghai Volkswagen Automobile Co., was finally established in 1985. The first car rolling off the company’s assembly line was the VW Santana sedan, which dominated China’s auto market for 10 years , holding nearly 85 percent market share. (Jin Jing, 2008) In 1990 Volkswagen founded its second Chinese joint venture with First Automotive Works (FAW). And in 2001 it established a third joint venture for the production of gearboxes. Volkswagen joint ventures employ 21 500 people and operate more than 1000 subsidiaries in China. China is the most important foreign market of the giant. But VW has rested too long on its laurels as first mover and reacted too late and wrongly to changes in the marketplace so it lost its market leader position to General Motors in 2005. The government of People’s Republic of China has given a high priority to developing a competitive indigenous auto industry in the country. Earlier they restricted the import of cars, and limited vehicle joint ventures to a maximum of 50 percent foreign ownership. Through these ‘local content’ regulations they could achieve the fast transfer of both product and manufacturing technology and the training of Chinese engineers. And although after China’s joining to WTO in 2001 foreign car makers are
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  • Spring '14
  • Holtsclaw,ChariceL.

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