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Market Entry into China - Assignment Example

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In the paper “Market Entry into China,” the author considers the Chinese market to be lucrative. China is the world’s fastest-growing economy. The country is experiencing a 9.5% growth every year. Ever since China joined the World Trade Organization (WTO) and the economy became open to foreign competition…
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Market Entry into China
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Download file to see previous pages The living standards of the Chinese consumers are increasing. The country has a large proportion of the middle-class population. China has millions of potential car buyers that make foreign automobile companies enter the Chinese market. China ranks third among all car manufacturing countries. The prices of automobiles, automobile parts, and import tariffs got reduced after China entered the WTO. The cost of labor is cheap in China and the automobile industry in China is extremely competitive. This is the reason that automobile manufacturers in other countries are exploring opportunities in the Chinese market (Jun & Zhiqiang, 2008).
Mitsuoka was founded in the year 1968 by Susumu Mitsuoka. Mitsuoka is a luxury car maker in Japan. They are planning to enter the Chinese market by introducing a model called ‘Orochi’ (Mitsuoka Motor, 2010)
The automobile industry was declared as a ‘pillar’ industry by the Chinese government in 1985. The automobile tariffs in 2006 were reduced by 50%. The major limitation that automobile manufacturers faced while entering China was the mode of entry. They had to enter into a joint venture with a local company and had shareholding only up to 50%. The industry is extremely competitive in China. Three local big companies, First Automobile Works (FAW), Shanghai Automobile Industry Corporate (SAIC) and Dongfeng Automobile were selected to enter into joint ventures with foreign companies. It was believed that these joint ventures would raise the technology level and ensure the survival of the domestic players (Min, 2005).
The ‘Open Door Policy’ of China is the major reason for the capital inflow into the country through FDI. The inflow of foreign capital added to China’s economic growth and the advancement of technology. The foreign enterprises can enter through EJVs (Equity Joint Ventures), cooperative joint ventures, WFOEs (Wholly owned foreign subsidiary) and joint ventures (Deng, 2000). ...Download file to see next pagesRead More
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