Volkswagen Case Study

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Executive Summary
An assignment was given in choosing a MNC or SME from any industry of a country origin and its core business was examined. Issues regarding with foreign direct investment, international diversification impact on the cost of capital for the company need to be discuss as well.
So, the company that chosen is Volkswagen and the host country is China. Volkswagen Company is a well known for its line of automobiles and the most famous brand associated with the company is Audi.
Introduction
With an average growth of 2% annually, car industry has been one of the fastest growing industries in the world. The industry has been keeps on changing and it had been become one of the most competitive markets and it has been globalize radically due to its growth. But now there are only a few major players that dominate the global market as mergers and union has been occurring regularly between them. Previously, the car industry has been dominated by the Europe and American car industry but it has been facing heavy competition from the emerging Latin America and East Asia car manufacturers in the global market recently.
China is one of the major car manufacturing countries nowadays and it only has a history for 50 years since 1953. After the country changed its foreign direct investment policy in 1981, a huge number of local firms started to emerge and even the foreign car manufacturers are attempting to do business in China. With this significant growth, it has become one of the biggest car markets in the world and it has been grow to a more mature industry in a very short time.
China government has developed quite a number of new policies on giving the significant boost to the local car companies and to attract more foreign ...

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...ttractive market to venture since it has changed its policy to encourage more MNCs to enter its market. With the right international strategy executed by Volkswagen and the goal of achieving the status of becoming the leader of car market, China could prove beneficial and acts as a boost for Volkswagen in gaining those statuses. With the appropriate research of the China political and economical factors and also getting the right partner to joint venture with, Volkswagen could achieve huge success not only in China market but also success in gaining competitive advantage as well.
Although acquisition has always proved successful for Volkswagen, but making joint venture is proved as a better way in considering the new market and the political regulation set by the China government. Besides that, it is the easiest and fastest way to enter the market.

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