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

MA MANAGEMENT DISSERTATION
XIAOFENG WEN
Marketing advantages: by adopt FDI, the foreign firm may gain from “buy local”
attitudes of host country consumers and improve their customer service. For example,
Taiwan’s Delta products shifted some of its production to a Mexican factory just
across the border from Nogales, Arizona, not only get the local customer, but also
provide better service to US customers.(Wall street , 1996)
Exploitation of competitive advantages: a firm which has big trade mark, brand
name, or technology may not just export its products to foreign countries, normally it
will decide to undertake FDI to exploit competitive.
Customer mobility: if customers or clients are in or will move to the foreign country,
firm will decide to undertake FDI. For example, after Samsung decided to construct
and operate an electronics factory in northeast England, six of its Korean part
suppliers also established factories in the vicinity. (Financial Times, 1996)
3. Political factors
Political factors include avoidance of trade barriers and economic development
incentives. These factors are influence decision when the firm undertakes FDI.
Avoidance of trade barriers: FDI may help firms to avoid trade barriers.
Economic development incentives: Government offer incentive to firms to induce
them locates new factories in the government jurisdictions. Government may offer
lower tax rate in a certain period, reduce the utility rate and so on.
4. Dunning’s eclectic theory
John Dunning in his theory stated that FDI will occur when three conditions are
satisfied:
Ownership advantage: firms must own some specific competitive advantages
compete with foreign firm; these advantages may include brand name, experience,
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