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

MA MANAGEMENT DISSERTATION
XIAOFENG WEN
By manufacturing in the optimal locations firm may be able to realize substantial
location and experience curve economies, but in joint venture, the firm does not have
such tight control to achieve that.
2.35 Greenfield or Acquisition
If a firm is seeking to enter a market where there are well-established incumbent
enterprises and other global competitors are also interested in establishing a presence
in the market, acquisition may be preferred as Greenfield venture is too slow, it gives
the competitors chance to preempt. If the firm is considering to enter a market where
there are no incumbent competitors to be acquired, it may have to choose Greenfield
venture.
Moreover, if the competitive advantage of the firm is based on the transfer of
organizationally embedded competencies, skills, routines and culture, Greenfield
may be the better choice, as it is much easier to build a set of routines and
organization cultures in a new subsidiary than transferring them to acquired firm.
2.36 Key theories and models affecting FDI decision
This dissertation will use PEST mode and Porter’s five forces mode to analyze the
macro and micro environment of China’s car industry, through the investigation, it
seeks to answer the question: what entry modes are appropriate to be used when a
carmaker enter the China’s car market, and why.
1. The Five Forces Model
The Five Forces Model is an important model for analyzing an organization industry
structure in strategic processes, which is introduced by Michael E. Porter in his book
“Competitive Strategy: Techniques for Analyzing Industries and Competitors” in the
year of 1980.
- 27 -