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

MA MANAGEMENT DISSERTATION
XIAOFENG WEN
Chinese government has a series of new policies on national car companies, on one
hand reforming the national car companies, on the other hand attracting more foreign
investors invest into Chinese car market, which brings the Chinese car industry a
dramatic development. Owing to the widespread public policy issues surrounding
the car industry, from labor to environment concerns, car industry has become more
and more attractive to foreign investors.
VW was one of the earliest foreign carmakers in China, which made direct
investment and succeed in entering Chinese market with its preliminary strategy.
VW set up joint ventures with the only two passenger carmakers in China - Shanghai
Auto Works and First Auto Works. In 1978, it firstly negotiated with Shanghai Auto
Works in China. And the reformation & open door policy that launched in the next
year in China increase the speed of negotiation process. In 1984, Shanghai-VW was
set up and started local production of the Santana in the next year. In 1988, FAW
started its licensed production of Audi and set up FAW-VW brand. Two years later,
it introduced a new model named Jetta to the market. Today, VW has been the most
successful foreign car maker, which controls almost 50% car market in China.
(Datamonitor, 2007)
Through the introduction background, both China’s car industry and VW’s entry
strategy in China are very significant to be studied in. Hence, this piece of project
will analyze the market entry and expansion strategies adopted by VW. In other
words, the focus of the study is reviewing the main entry strategies adopted by VW
when entered the Chinese market and why these strategies were appropriate during
that period.
1.3 Research objective and research questions
The objective of this project can be summarized as the following three aspects:
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