Market Expansion Strategies for the Manufacturing Unit
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The manufacturing unit should establish its units in China and Russia, as there is great potential in both markets. The company can adopt the joint venture entry strategy in China and set up a new venture in Russia.
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TABLE OF CONTENTS
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Evaluation of market opportunities through analytical and technical skills................................3
Evaluate and apply appropriate theoretical frameworks to operational and strategic problems
facing international business operations. ....................................................................................6
Evaluation of the main regulatory frameworks, which shape and constrain the conduct of
business within the Triad: European Union, USA and Asia Pacific and develop competitive
strategies for doing business in the Triad....................................................................................9
Analysis of the macroeconomic, political and cultural environment of the Russia and China. 11
Conclusion.....................................................................................................................................16
REFERENCES .............................................................................................................................17
2
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................3
Evaluation of market opportunities through analytical and technical skills................................3
Evaluate and apply appropriate theoretical frameworks to operational and strategic problems
facing international business operations. ....................................................................................6
Evaluation of the main regulatory frameworks, which shape and constrain the conduct of
business within the Triad: European Union, USA and Asia Pacific and develop competitive
strategies for doing business in the Triad....................................................................................9
Analysis of the macroeconomic, political and cultural environment of the Russia and China. 11
Conclusion.....................................................................................................................................16
REFERENCES .............................................................................................................................17
2
INTRODUCTION
Global business can be defined as the international trade conducted by the company
around the globe. In today's scenario, this has become highly important to do international
business in order to expand market share and revenue (Hill, 2005). It is because revenue and
market share cannot be enhanced by operating the business in a single country only. After the
globalization era, every company aims to enlarge its business opportunities in other emerging
markets of the world. The business, however, involves large amount of risk because the external
environment of other country is altogether different from the host country of the company. This
report is focused on the global business of the US and Europe Car Manufacturing Industries.
This industry has set up its plant in the Asia Pacific Region and emerging markets (Walker and
Tobias, 2005).
Further, this report describes the international risk analysis of this industry in the
emerging markets of the China and Russia. Along with that, this report also describes the
analysis of the market opportunities through the analytical and technical skills. Moreover, the
discussion has been made on the regulatory framework of the Triad-European Union, USA and
Asia Pacific. Furthermore, the analysis has been done on the macroeconomics, political and
cultural environment of the Chinese and Russian market.
MAIN BODY
Evaluation of market opportunities through analytical and technical skills
Analytical skills mainly refers to as the ability of a firm to visualize, conceptualize,
communicative and also they possess the skills to solve both complex and easy problems by
making decisions which are sensible and provide information. Further, technical skills refer to as
the knowledge and abilities for accomplishing mathematical, engineering, scientific and
computer coding duties. These skills are highly required by the employees of the car
manufacturing industries so that they can establish their business organization in other countries
of the world. (Jones and Alexander, 2009) Moreover, the industry is setting up its production
plant in the markets of China and Russia because these markets are the emerging markets.
However, there are many international risks available in these markets which are to be analyzed
and converted them into market opportunities. The marketer has to apply their technical and
3
Global business can be defined as the international trade conducted by the company
around the globe. In today's scenario, this has become highly important to do international
business in order to expand market share and revenue (Hill, 2005). It is because revenue and
market share cannot be enhanced by operating the business in a single country only. After the
globalization era, every company aims to enlarge its business opportunities in other emerging
markets of the world. The business, however, involves large amount of risk because the external
environment of other country is altogether different from the host country of the company. This
report is focused on the global business of the US and Europe Car Manufacturing Industries.
This industry has set up its plant in the Asia Pacific Region and emerging markets (Walker and
Tobias, 2005).
Further, this report describes the international risk analysis of this industry in the
emerging markets of the China and Russia. Along with that, this report also describes the
analysis of the market opportunities through the analytical and technical skills. Moreover, the
discussion has been made on the regulatory framework of the Triad-European Union, USA and
Asia Pacific. Furthermore, the analysis has been done on the macroeconomics, political and
cultural environment of the Chinese and Russian market.
MAIN BODY
Evaluation of market opportunities through analytical and technical skills
Analytical skills mainly refers to as the ability of a firm to visualize, conceptualize,
communicative and also they possess the skills to solve both complex and easy problems by
making decisions which are sensible and provide information. Further, technical skills refer to as
the knowledge and abilities for accomplishing mathematical, engineering, scientific and
computer coding duties. These skills are highly required by the employees of the car
manufacturing industries so that they can establish their business organization in other countries
of the world. (Jones and Alexander, 2009) Moreover, the industry is setting up its production
plant in the markets of China and Russia because these markets are the emerging markets.
However, there are many international risks available in these markets which are to be analyzed
and converted them into market opportunities. The marketer has to apply their technical and
3
analytical skills so that they can establish their production plant in both the market. The risk
analysis has been done as follows:
International Risk Analysis
International risk mainly defined as the possibility of the loss which can be caused by
some unfavorable business operations in other country. In shorter manner, it can be defined as
the external environment risk which is outside the impact of a country's government. The rate of
profit and growth is relatively higher in the case of international business and due to this risk rate
is also higher. The main causes of international risk are changes in the environment of
international and huge difference in culture of different risk (Ili, Albers, and Miller, 2010).
Global risk involves the risk of political and cultural environment, market risk, currency
exchange risk, transport risk and so on.
The car manufacturing industries of US and Europe has to do the risk analysis of Russia
and China through using analytical and technical skills by undertaking some of the external
factors and these are described below:
1. Political Risk: In Russia, there is a great political instability. The president is elected for
the third time and people are not excited for his return. Moreover, the relation between
Russia and USA is not good which may create problem for the industry to set up. On the
other hand, China has communist rule and they enhance more of the MNC to get
establish. Thus, the political risk is low in Chinese market.
2. Economic Risk: In Russia, the recession is going to continue till 2016 as well but it will
be less severe. Thus, economic issue may not arise more in Russia. Further, in China the
economic risk is high as there is an expectation of slow down of economy in 2016
(Norcliffe, 2006).
3. Transport Risk: The modes of transport in Russia are highly updated and thus the
produced goods can be transferred in an easier manner to US and Europe. However, these
days Russian economy have a negative impact on the freight rail transportation and this
can create issue for the car manufacturing industry to transport their stocks from Russia
to US or Europe (Rubenstein, 2001). Further, the transportation risk in China is less
because the transport and logistics companies of China accounts for 3.2% market share
this implies that there is less threat about the availability of the transport mode.
4
analysis has been done as follows:
International Risk Analysis
International risk mainly defined as the possibility of the loss which can be caused by
some unfavorable business operations in other country. In shorter manner, it can be defined as
the external environment risk which is outside the impact of a country's government. The rate of
profit and growth is relatively higher in the case of international business and due to this risk rate
is also higher. The main causes of international risk are changes in the environment of
international and huge difference in culture of different risk (Ili, Albers, and Miller, 2010).
Global risk involves the risk of political and cultural environment, market risk, currency
exchange risk, transport risk and so on.
The car manufacturing industries of US and Europe has to do the risk analysis of Russia
and China through using analytical and technical skills by undertaking some of the external
factors and these are described below:
1. Political Risk: In Russia, there is a great political instability. The president is elected for
the third time and people are not excited for his return. Moreover, the relation between
Russia and USA is not good which may create problem for the industry to set up. On the
other hand, China has communist rule and they enhance more of the MNC to get
establish. Thus, the political risk is low in Chinese market.
2. Economic Risk: In Russia, the recession is going to continue till 2016 as well but it will
be less severe. Thus, economic issue may not arise more in Russia. Further, in China the
economic risk is high as there is an expectation of slow down of economy in 2016
(Norcliffe, 2006).
3. Transport Risk: The modes of transport in Russia are highly updated and thus the
produced goods can be transferred in an easier manner to US and Europe. However, these
days Russian economy have a negative impact on the freight rail transportation and this
can create issue for the car manufacturing industry to transport their stocks from Russia
to US or Europe (Rubenstein, 2001). Further, the transportation risk in China is less
because the transport and logistics companies of China accounts for 3.2% market share
this implies that there is less threat about the availability of the transport mode.
4
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4. Cultural Risk: There is a huge cultural difference in the US, Europe, Russia and China.
Thus, the manufacturing units have to adopt the culture of the production countries.
People in China and Russia works together in unity. Further, the management style of US
and UK are different which cannot be applied on Russian and Chinese employees (Smith,
and Crotty, 2008).
Thus, with the help of technical and analytical skills, the international risk assessment has
been done. Now, the marketer can take out the opportunities from the defined risks. Some of the
market opportunities in the markets of Russia and China are as follows:
In Russia, there are abundant natural resources that is oil, gas and metals, thus for the
manufacturing unit the production can be cost effective as they do not have to acquire
these resource from other countries (Turner, 2003).
There are skilled labor forces available, thus company do not require to spent more
time and money on the training and development of people.
The public debt is not much and thus, company may not face more of the issues while
acquiring loan.
Further, the economic risk is not much and due to this company may not face severe
issues while carrying out the business in a smooth manner.
On the other hand, in China, the opportunities lies is that the market is gradually
moving up and this opens the gate for the US and Europe firm to enter in the market.
The service is developed so the company cannot face much issue in rendering its
services to the country (Automotive and components markets of Asia, 2005).
External accounts benefiting from industrial competitiveness and diversification. This
is a main opportunity for the manufacturing units (US automotive backfires into GKN
profits. 2008).
It is being required by the marketer to develop a framework with the help of risk analysis
and market opportunities so that it becomes clear about the management of international
business. The industry can enter into the emerging markets by establishing the potential risk and
opportunities and than by evaluating the opportunities. Thus there are some points which can be
taken into consideration while managing the international business.
5
Thus, the manufacturing units have to adopt the culture of the production countries.
People in China and Russia works together in unity. Further, the management style of US
and UK are different which cannot be applied on Russian and Chinese employees (Smith,
and Crotty, 2008).
Thus, with the help of technical and analytical skills, the international risk assessment has
been done. Now, the marketer can take out the opportunities from the defined risks. Some of the
market opportunities in the markets of Russia and China are as follows:
In Russia, there are abundant natural resources that is oil, gas and metals, thus for the
manufacturing unit the production can be cost effective as they do not have to acquire
these resource from other countries (Turner, 2003).
There are skilled labor forces available, thus company do not require to spent more
time and money on the training and development of people.
The public debt is not much and thus, company may not face more of the issues while
acquiring loan.
Further, the economic risk is not much and due to this company may not face severe
issues while carrying out the business in a smooth manner.
On the other hand, in China, the opportunities lies is that the market is gradually
moving up and this opens the gate for the US and Europe firm to enter in the market.
The service is developed so the company cannot face much issue in rendering its
services to the country (Automotive and components markets of Asia, 2005).
External accounts benefiting from industrial competitiveness and diversification. This
is a main opportunity for the manufacturing units (US automotive backfires into GKN
profits. 2008).
It is being required by the marketer to develop a framework with the help of risk analysis
and market opportunities so that it becomes clear about the management of international
business. The industry can enter into the emerging markets by establishing the potential risk and
opportunities and than by evaluating the opportunities. Thus there are some points which can be
taken into consideration while managing the international business.
5
The car manufacturing industries can enter into market by firstly analyzing the
international risk and then the opportunities to be taken out of them.
Prioritization of the risk has been done that is in Russian market, political risk is more
and also the transportation risk. This risk can be prioritized at top.
After that economic or financial risk is less because the intensity of recession is low and
also the public debt is less. But there is some possibility of risk and thus, this risk can be
prioritized at bottom.
In case of China, cultural risk is highest and thus this can be prioritized at top and rest
other risk can be kept at bottom (Miyoshi and Kii, 2011).
Later the opportunities are evaluated and it has been assessed that these risks can be
overcome if the opportunities are used in an appropriate manner. For instance in Russia,
the risk of recession can be overcome if the loan can be acquired from the Russian banks
and the interest is paid than the recession can be avoided.
This is how international business can be managed if the market opportunities are
assessed in a better manner (Rugman and Brewer, 2001).
Evaluate and apply appropriate theoretical frameworks to operational and strategic problems
facing international business operations.
As per the structured study, it can be said that the business organizations faces number of
issues in context to operational activities while dealing in international market. It impacts the
business opportunities in negative manner and create number of barriers. In this respect, it is
necessary for business organization to focus on various frameworks that can overcome issues in
effective manner and lead business to impressive level of success. In addition to this, it can be
said that while dealing in international market the auto-mobile sector firms mostly faces issues
regarding improper supply chain process. It influences business in negative manner and creates
various barriers to operational activities. In order to overcome the issue regarding supply chain, it
is essential for management to focus on supply chain management framework. It is a combined
framework that provides effective flow of goods and services in order to meet the organizational
goals. With an improved focus on supply chain management, the business organization can have
effective planning of procurement and warehousing activities. In this support it can also be stated
that the supply chain management is combination of various factors such as planning, execution,
6
international risk and then the opportunities to be taken out of them.
Prioritization of the risk has been done that is in Russian market, political risk is more
and also the transportation risk. This risk can be prioritized at top.
After that economic or financial risk is less because the intensity of recession is low and
also the public debt is less. But there is some possibility of risk and thus, this risk can be
prioritized at bottom.
In case of China, cultural risk is highest and thus this can be prioritized at top and rest
other risk can be kept at bottom (Miyoshi and Kii, 2011).
Later the opportunities are evaluated and it has been assessed that these risks can be
overcome if the opportunities are used in an appropriate manner. For instance in Russia,
the risk of recession can be overcome if the loan can be acquired from the Russian banks
and the interest is paid than the recession can be avoided.
This is how international business can be managed if the market opportunities are
assessed in a better manner (Rugman and Brewer, 2001).
Evaluate and apply appropriate theoretical frameworks to operational and strategic problems
facing international business operations.
As per the structured study, it can be said that the business organizations faces number of
issues in context to operational activities while dealing in international market. It impacts the
business opportunities in negative manner and create number of barriers. In this respect, it is
necessary for business organization to focus on various frameworks that can overcome issues in
effective manner and lead business to impressive level of success. In addition to this, it can be
said that while dealing in international market the auto-mobile sector firms mostly faces issues
regarding improper supply chain process. It influences business in negative manner and creates
various barriers to operational activities. In order to overcome the issue regarding supply chain, it
is essential for management to focus on supply chain management framework. It is a combined
framework that provides effective flow of goods and services in order to meet the organizational
goals. With an improved focus on supply chain management, the business organization can have
effective planning of procurement and warehousing activities. In this support it can also be stated
that the supply chain management is combination of various factors such as planning, execution,
6
control and monitoring of various supply chain activities (Mendenhall and Oddou, 2000). It
means, it is necessary for auto-mobile sector organization to ensure that the procurement and
warehousing activities are well designed as per industrial standards so that they can easily
overcome operational and strategic issues.
Moreover, lean principles of management can also be used by auto-mobile organization
in order to ensure about supply chain management. With an assistance of lean principles the
management can easily identify various key issues that impacts business in negative manner.
Standards, for example, ‘six sigma’ can also be implemented within operational activities to
ensure that the business is having effective supply chain process.
Other than this, while dealing in international market the automotive firm can also faces
issues regarding cross cultural aspects. It has been identified that the cultural needs of Russia and
China are different and it creates various issues for business. Mostly company faces problems
regarding needs identification so in order to overcome this issue business firm can focus on
effective application of market research with an assistance of local community. Company can
hire various local professionals who can gather information regarding market and perception of
customers towards business firm. In this respect, the automotive sector firm can also have
strategic alliance with domestic organization as it will also facilitate in overcome various issues.
Risk management tactics can also be adopted in order to identify the key issues that can impact
business in diverse manner.
Furthermore, differences in cultural aspects also create communication issues among
members so it is also necessary for car manufacturing firm to ensure about communication
factor. Differences in language create miss-communication conditions and impacts business in
negative manner. In order to overcome the miss-communication issues the business firm can
focus on effective use of various communication tools such as wireless tools, email, etc. It will
allow employees to ensure about operational activities and reduce miss-communication issues. In
order to overcome language, the management can take assistance from translator that can help in
effective understanding and interpretation of message. In addition to this, company can also hire
manager from domestic region in order to resolve the issue of language (Folsom, Gordon, and
Spanogle, 2009).
7
means, it is necessary for auto-mobile sector organization to ensure that the procurement and
warehousing activities are well designed as per industrial standards so that they can easily
overcome operational and strategic issues.
Moreover, lean principles of management can also be used by auto-mobile organization
in order to ensure about supply chain management. With an assistance of lean principles the
management can easily identify various key issues that impacts business in negative manner.
Standards, for example, ‘six sigma’ can also be implemented within operational activities to
ensure that the business is having effective supply chain process.
Other than this, while dealing in international market the automotive firm can also faces
issues regarding cross cultural aspects. It has been identified that the cultural needs of Russia and
China are different and it creates various issues for business. Mostly company faces problems
regarding needs identification so in order to overcome this issue business firm can focus on
effective application of market research with an assistance of local community. Company can
hire various local professionals who can gather information regarding market and perception of
customers towards business firm. In this respect, the automotive sector firm can also have
strategic alliance with domestic organization as it will also facilitate in overcome various issues.
Risk management tactics can also be adopted in order to identify the key issues that can impact
business in diverse manner.
Furthermore, differences in cultural aspects also create communication issues among
members so it is also necessary for car manufacturing firm to ensure about communication
factor. Differences in language create miss-communication conditions and impacts business in
negative manner. In order to overcome the miss-communication issues the business firm can
focus on effective use of various communication tools such as wireless tools, email, etc. It will
allow employees to ensure about operational activities and reduce miss-communication issues. In
order to overcome language, the management can take assistance from translator that can help in
effective understanding and interpretation of message. In addition to this, company can also hire
manager from domestic region in order to resolve the issue of language (Folsom, Gordon, and
Spanogle, 2009).
7
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Issues regarding management of work activities also occur while dealing in international
market and it impacts business operational activities in diverse manner. In this respect, the
management of car manufacturing firm can focus on various principles of strategic management.
It will allow business firm to have effective formulation of strategies and their implementation in
order to meet the goals. Organizational structure can be redesign as per needs of domestic
employees and citizens so that work can be managed in appropriate manner. Generic competitive
strategies and value chain process can also be adopted by management of auto-mobile firm to
ensure about various key principles (Costa, and Pinheiro, 2014).
Furthermore, the number of legal issues can also be faced by management of auto-mobile
sector which can impact the operational activities in negative manner. It has been spotted that the
business organizations needs various legal permissions while entering international market. Any
kind of avoidance can lead business to various legal issues. In order to overcome the issue, it is
necessary for business firm to set up legal team that will ensure about various legal requirements
in proper way (Czinkota, Rivoli, and Ronkainen, 2009). It is necessary for legal team to gather
information regarding diverse legal aspects such as government rules and regulations, Triad
regulations, EU regulations, etc. Various standards can be set out by management in order to
overcome the legal issues and lead business to impressive level of success.
Moreover, issues regarding leadership can also be faced by management while dealing in
international market. For example, the auto-mobile sector firm is more focused towards
autocratic leadership but as per the environment of china the business employees are more
focused towards participative leadership. In this, it is essential for management to redesign its
concept of leadership as per the Chinese cultural needs so that operational activities can be
maintained in proper way (Costa and Pinheiro, 2014). It has also been spotted that in order to
overcome the diverse issues, it is also necessary for management of auto-mobile firm to focus on
training and development program so that issues can be overcome in appropriate manner. For
example, the appointed manager is not well known about Chinese culture due to cultural
differences then management can arrange a training program in which experts will provide
information about various cultural factors of China. In addition to this, organization can also
arrange communication training for the manager so that he or she can learn domestic language in
order to overcome the issue of miss-communication (Deresky, 2011).
8
market and it impacts business operational activities in diverse manner. In this respect, the
management of car manufacturing firm can focus on various principles of strategic management.
It will allow business firm to have effective formulation of strategies and their implementation in
order to meet the goals. Organizational structure can be redesign as per needs of domestic
employees and citizens so that work can be managed in appropriate manner. Generic competitive
strategies and value chain process can also be adopted by management of auto-mobile firm to
ensure about various key principles (Costa, and Pinheiro, 2014).
Furthermore, the number of legal issues can also be faced by management of auto-mobile
sector which can impact the operational activities in negative manner. It has been spotted that the
business organizations needs various legal permissions while entering international market. Any
kind of avoidance can lead business to various legal issues. In order to overcome the issue, it is
necessary for business firm to set up legal team that will ensure about various legal requirements
in proper way (Czinkota, Rivoli, and Ronkainen, 2009). It is necessary for legal team to gather
information regarding diverse legal aspects such as government rules and regulations, Triad
regulations, EU regulations, etc. Various standards can be set out by management in order to
overcome the legal issues and lead business to impressive level of success.
Moreover, issues regarding leadership can also be faced by management while dealing in
international market. For example, the auto-mobile sector firm is more focused towards
autocratic leadership but as per the environment of china the business employees are more
focused towards participative leadership. In this, it is essential for management to redesign its
concept of leadership as per the Chinese cultural needs so that operational activities can be
maintained in proper way (Costa and Pinheiro, 2014). It has also been spotted that in order to
overcome the diverse issues, it is also necessary for management of auto-mobile firm to focus on
training and development program so that issues can be overcome in appropriate manner. For
example, the appointed manager is not well known about Chinese culture due to cultural
differences then management can arrange a training program in which experts will provide
information about various cultural factors of China. In addition to this, organization can also
arrange communication training for the manager so that he or she can learn domestic language in
order to overcome the issue of miss-communication (Deresky, 2011).
8
Evaluation of the main regulatory frameworks, which shape and constrain the conduct of
business within the Triad: European Union, USA and Asia Pacific and develop competitive
strategies for doing business in the Triad
Main regulatory frameworks for operating business in European Union
The automotive industry in European Union majorly denotes to operate business in UK
region. The mentioned industry sector is the most important for Europe’s prosperity. As per the
investigation, this sector provides approx jobs to 12 million people. The industry at the same
time accounts for 4% of overall GDP of European Union. In addition to that, the EU is one
among the leading automotive producers around the world. This sector is denoted as the largest
private investor in R&D services in respect with the motor vehicles.
The European Commission is seen supportive for harmonization of global technological
as well as providing funds for R&D. This is the major indication for the development of auto
manufacturing units within EU. Step of government is taken towards strengthening the
competitiveness of European Union in automotive industry and preserve its global technological
leadership. The entity which is willing to come into the European Union's automotive marketing
is no worried about the funds and it can generate funds from private business (Ahmadian, 2012).
From the view point of industry players, it can be seen that vehicle manufacturing is a strategic
industry in the EU and here in the industry around 17.2 million vehicles are manufactured on
annual basis (Central and Eastern Europe Automotive Market. 2015). In addition to that the
automotive manufacturers are involved in operations of 292 vehicles which are assembled and
produced in around 26 plants in across Europe. The EU's auto industry is seen to the largest
private investor for research and development in 2014, the industry has invested over €41.5
billion. Within the industry, there can be seen 12.1 million people that are around 5.6% of the
EU workforce. Additionally, 7.6% of the EU manufacturing employment includes 2.3 million
experienced jobs in auto manufacturing. As a regulatory framework, motor vehicles are
accounted for over €396 billion in tax contributions within 14 European Union countries.
Main regulatory frameworks for operating business in USA
United States is the leading automotive markets all around the world. There are 13 auto
manufacturers in US who are now operating worldwide. To conduct the business practices in US
9
business within the Triad: European Union, USA and Asia Pacific and develop competitive
strategies for doing business in the Triad
Main regulatory frameworks for operating business in European Union
The automotive industry in European Union majorly denotes to operate business in UK
region. The mentioned industry sector is the most important for Europe’s prosperity. As per the
investigation, this sector provides approx jobs to 12 million people. The industry at the same
time accounts for 4% of overall GDP of European Union. In addition to that, the EU is one
among the leading automotive producers around the world. This sector is denoted as the largest
private investor in R&D services in respect with the motor vehicles.
The European Commission is seen supportive for harmonization of global technological
as well as providing funds for R&D. This is the major indication for the development of auto
manufacturing units within EU. Step of government is taken towards strengthening the
competitiveness of European Union in automotive industry and preserve its global technological
leadership. The entity which is willing to come into the European Union's automotive marketing
is no worried about the funds and it can generate funds from private business (Ahmadian, 2012).
From the view point of industry players, it can be seen that vehicle manufacturing is a strategic
industry in the EU and here in the industry around 17.2 million vehicles are manufactured on
annual basis (Central and Eastern Europe Automotive Market. 2015). In addition to that the
automotive manufacturers are involved in operations of 292 vehicles which are assembled and
produced in around 26 plants in across Europe. The EU's auto industry is seen to the largest
private investor for research and development in 2014, the industry has invested over €41.5
billion. Within the industry, there can be seen 12.1 million people that are around 5.6% of the
EU workforce. Additionally, 7.6% of the EU manufacturing employment includes 2.3 million
experienced jobs in auto manufacturing. As a regulatory framework, motor vehicles are
accounted for over €396 billion in tax contributions within 14 European Union countries.
Main regulatory frameworks for operating business in USA
United States is the leading automotive markets all around the world. There are 13 auto
manufacturers in US who are now operating worldwide. To conduct the business practices in US
9
is one of the most challenging tasks for any business entity especially to the automotive
manufactures. As per the industry overview, auto manufacturers have produced around 8 million
passenger vehicles between 2008- 2012 in United States (The Automotive Industry in the United
States. 2016). In 1982 when Honda introduced the first US plant in 1982, that was biggest boom
to the auto manufacturing industry. From that point of time, European, Japanese, and Korean
automaker are seen with producing their vehicles in the region vehicles in United states (Acuña,
2004).
In addition to that there are three auto maker companies who are conducting their
manufacturing activities in U.S. Including General Motors, Ford and Chrysler. In addition to
that Mitsubishi, and Subaru Toyota, Mazda, Nissan, Hyundai-Kia, BMW, Mercedes-Benz is
enjoying manufacturing facilities in US. In the year 2011, Volkswagen has introduced a new
U.S. Plant that increased the manufactures count to 13. To operate business in US as an auto
manufacturing company, the entity has to compete with the leading auto manufacturers. As per
the investigation, it was found that existing manufacturers have engine and transmission plants
so the new auto manufacturer must have such facilities to compete with the rest. In respect with
the current status, dealerships accounts about 3.5 percent of U.S. GDP. An entity willing to start
up a manufacturing unit has to conduct practices such as research and development, design, and
testing. Within the industry, Motor vehicles as well as the parts manufacturers directly employed
more than 8 million people in US.
In addition to that, the US automotive industry is seen with extensive network of auto
parts suppliers. Instead of the challenges remains with the US automotive sector, the industry has
leaded world market in terms of forefront of innovation. The maker focused areas of new entity
should be toward making initiatives for new research and development initiatives are
transforming the industry. There are major opportunities in US automotive marker in the 21st
century but simultaneously, it is seen very competitive (Barlow and Chatterton, 2002).
Main regulatory frameworks for operating business in Asia Pacific
The automotive industry within Asian region denotes China the largest in terms of
automobile unit producers in the world. Since 2009, the yearly production of automobiles is
witnessed exceeding European Union as well as United States. As per the recent statistic there
are approx 4.1 million passenger vehicles are manufactured in China. From a long run, China is
10
manufactures. As per the industry overview, auto manufacturers have produced around 8 million
passenger vehicles between 2008- 2012 in United States (The Automotive Industry in the United
States. 2016). In 1982 when Honda introduced the first US plant in 1982, that was biggest boom
to the auto manufacturing industry. From that point of time, European, Japanese, and Korean
automaker are seen with producing their vehicles in the region vehicles in United states (Acuña,
2004).
In addition to that there are three auto maker companies who are conducting their
manufacturing activities in U.S. Including General Motors, Ford and Chrysler. In addition to
that Mitsubishi, and Subaru Toyota, Mazda, Nissan, Hyundai-Kia, BMW, Mercedes-Benz is
enjoying manufacturing facilities in US. In the year 2011, Volkswagen has introduced a new
U.S. Plant that increased the manufactures count to 13. To operate business in US as an auto
manufacturing company, the entity has to compete with the leading auto manufacturers. As per
the investigation, it was found that existing manufacturers have engine and transmission plants
so the new auto manufacturer must have such facilities to compete with the rest. In respect with
the current status, dealerships accounts about 3.5 percent of U.S. GDP. An entity willing to start
up a manufacturing unit has to conduct practices such as research and development, design, and
testing. Within the industry, Motor vehicles as well as the parts manufacturers directly employed
more than 8 million people in US.
In addition to that, the US automotive industry is seen with extensive network of auto
parts suppliers. Instead of the challenges remains with the US automotive sector, the industry has
leaded world market in terms of forefront of innovation. The maker focused areas of new entity
should be toward making initiatives for new research and development initiatives are
transforming the industry. There are major opportunities in US automotive marker in the 21st
century but simultaneously, it is seen very competitive (Barlow and Chatterton, 2002).
Main regulatory frameworks for operating business in Asia Pacific
The automotive industry within Asian region denotes China the largest in terms of
automobile unit producers in the world. Since 2009, the yearly production of automobiles is
witnessed exceeding European Union as well as United States. As per the recent statistic there
are approx 4.1 million passenger vehicles are manufactured in China. From a long run, China is
10
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witnessed for increasing local production at the same time boosting for the existing joint-venture
passenger car production agreements (Automotive and components markets of Asia, 2005). This
strategy remains the single strategy. Due to increase of such joint ventures, China did not borrow
much foreign technology as with the help of knock-down kit the country has completed majority
of manufacturing activities. Beside this, there are thousands of entrepreneurs in Asian
automotive industry who are involved developing, assembling, and marketing at lower scales,
and these all can provide a tough competition to new entity.
Analysis of the macroeconomic, political and cultural environment of the Russia and China
In order to assess the macroeconomic environment of emerging markets that is Russia
and China, PESTLE analysis can be done. Through this model car manufacturing industries can
assess the macroeconomic environment and through this decision for entering the market can be
made. This model will help the industry to either establish their plant in the Russia and China or
not. Also, how the establishment can be done in a most appropriate manner. The application of
the model is as follows:
PESTLE of Russia
Factors Impacts
Political Political environment of Russia is unstable.
There is still an involvement between the main
government and the region or local government.
The political environment provides opportunities for the
trade to be conducted in the country.
The government plays major role while running the
business of the whole country.
The country is rated highest point in the corruption. The
nation has high Corruption Perception Index.
Economical GDP of the country is ranked 10th in the world.
The nation is highly depended on the price of the crude
oil.
11
passenger car production agreements (Automotive and components markets of Asia, 2005). This
strategy remains the single strategy. Due to increase of such joint ventures, China did not borrow
much foreign technology as with the help of knock-down kit the country has completed majority
of manufacturing activities. Beside this, there are thousands of entrepreneurs in Asian
automotive industry who are involved developing, assembling, and marketing at lower scales,
and these all can provide a tough competition to new entity.
Analysis of the macroeconomic, political and cultural environment of the Russia and China
In order to assess the macroeconomic environment of emerging markets that is Russia
and China, PESTLE analysis can be done. Through this model car manufacturing industries can
assess the macroeconomic environment and through this decision for entering the market can be
made. This model will help the industry to either establish their plant in the Russia and China or
not. Also, how the establishment can be done in a most appropriate manner. The application of
the model is as follows:
PESTLE of Russia
Factors Impacts
Political Political environment of Russia is unstable.
There is still an involvement between the main
government and the region or local government.
The political environment provides opportunities for the
trade to be conducted in the country.
The government plays major role while running the
business of the whole country.
The country is rated highest point in the corruption. The
nation has high Corruption Perception Index.
Economical GDP of the country is ranked 10th in the world.
The nation is highly depended on the price of the crude
oil.
11
The economy of the country cannot be compared with
other countries.
Recession has been shrinked in the year 2016.
Insurance market of the Russia is growing at an apex rate
from last five years.
Socio-Culture The culture of the Russia is of collectivism and they do
not work in an individualism manner.
There is a vast difference in the cultural aspect in Russia
and Western countries.
There is an income inequality in the Russia. Thus, Car
manufacturing unit has to manufacture the car for both
types of income group people.
Lifestyle of people is changing as per the new trends and
this provides great opportunities to the new business to
set up.
Technological This nation is historically known for the excellence in
space technology so the production plant cannot face
much issue in the case of technology.
The IT market of the country is growing at a fast pace.
Thus, there lies huge potential for the IT spending by the
Russian industries.
Legal Due to the re-election of same president in the country,
there is not much legal changes in the country.
In order to bring improvement in the production system,
a long list of legal reforms has been set by the
government.
For attracting foreign investor, government has
introduced new law which is in favor of investors.
12
other countries.
Recession has been shrinked in the year 2016.
Insurance market of the Russia is growing at an apex rate
from last five years.
Socio-Culture The culture of the Russia is of collectivism and they do
not work in an individualism manner.
There is a vast difference in the cultural aspect in Russia
and Western countries.
There is an income inequality in the Russia. Thus, Car
manufacturing unit has to manufacture the car for both
types of income group people.
Lifestyle of people is changing as per the new trends and
this provides great opportunities to the new business to
set up.
Technological This nation is historically known for the excellence in
space technology so the production plant cannot face
much issue in the case of technology.
The IT market of the country is growing at a fast pace.
Thus, there lies huge potential for the IT spending by the
Russian industries.
Legal Due to the re-election of same president in the country,
there is not much legal changes in the country.
In order to bring improvement in the production system,
a long list of legal reforms has been set by the
government.
For attracting foreign investor, government has
introduced new law which is in favor of investors.
12
Environmental The government of Russia has planned to set up an
effective security system to prevent the pollution and
man-made environmental disaster.
The pollution caused by car manufacturing company is
the highest and thus this can become the major issue for
them.
PESTLE of China
Factors Impacts
Political The political environment of China is unstable and the
most unsettled force is the political force. This lead to the
imposition of rigid rules and those rules are always
fluctuating.
There is a Communist party in China so manufacturing
company might not face difficulty while taking
permissions (Ahmadian, 2012)
Tariffs barrier are high thus, import of raw material
cannot be done in an easier manner.
Economical GDP growth of China is 9.5% which is an advantageous
factor for the company to establish there.
Populations of the China who are below the poverty line
are 10%, so the customers of the cars can be more.
Tax rate for foreign investment is very high and this
discourages the new investment.
Labour cost is low and due to this reason foreign
investment can be encouraged.
Socio-Culture The young generation is highest in number and this
created a demand for more sports cars.
13
effective security system to prevent the pollution and
man-made environmental disaster.
The pollution caused by car manufacturing company is
the highest and thus this can become the major issue for
them.
PESTLE of China
Factors Impacts
Political The political environment of China is unstable and the
most unsettled force is the political force. This lead to the
imposition of rigid rules and those rules are always
fluctuating.
There is a Communist party in China so manufacturing
company might not face difficulty while taking
permissions (Ahmadian, 2012)
Tariffs barrier are high thus, import of raw material
cannot be done in an easier manner.
Economical GDP growth of China is 9.5% which is an advantageous
factor for the company to establish there.
Populations of the China who are below the poverty line
are 10%, so the customers of the cars can be more.
Tax rate for foreign investment is very high and this
discourages the new investment.
Labour cost is low and due to this reason foreign
investment can be encouraged.
Socio-Culture The young generation is highest in number and this
created a demand for more sports cars.
13
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Literacy rate is 92% this means that people are highly
educated and thus they could not be cheated upon any
factor as they are aware about every feature (Barlow, and
Chatterton, 2002).
There are few kinds of religion so company has to take
care about the beliefs and values of all kind of religion.
Potential customers of the luxury car lie in West China.
Technological Technological aspect is highly appropriate in China.
It provides high-end equipments which can aid in
building and producing high-tech products (Dernburg, T.
and Dernburg, 2009)
The cost of technology is becoming cheaper, thus cost
effective in technological aspect can be achieved.
Legal There are several laws in china which are in the favor of
allowing foreign company to get establish there so that
Chinese people get exposure of the western management
style and technology.
Other laws related to employment, safety and security at
workplace are highly obeyed there.
There are also high tariffs on import so company cannot
import the good and have to purchase raw material form
local suppliers (Cobham, 2007)
Environmental The environment is not protected in China.
There is a water shortage which can create difficulty in
meeting out the expectations for the industry.
The land of china is vulnerable to natural disaster which
is a harmful factor for the company to get establish there.
Porter's Analysis of China
14
educated and thus they could not be cheated upon any
factor as they are aware about every feature (Barlow, and
Chatterton, 2002).
There are few kinds of religion so company has to take
care about the beliefs and values of all kind of religion.
Potential customers of the luxury car lie in West China.
Technological Technological aspect is highly appropriate in China.
It provides high-end equipments which can aid in
building and producing high-tech products (Dernburg, T.
and Dernburg, 2009)
The cost of technology is becoming cheaper, thus cost
effective in technological aspect can be achieved.
Legal There are several laws in china which are in the favor of
allowing foreign company to get establish there so that
Chinese people get exposure of the western management
style and technology.
Other laws related to employment, safety and security at
workplace are highly obeyed there.
There are also high tariffs on import so company cannot
import the good and have to purchase raw material form
local suppliers (Cobham, 2007)
Environmental The environment is not protected in China.
There is a water shortage which can create difficulty in
meeting out the expectations for the industry.
The land of china is vulnerable to natural disaster which
is a harmful factor for the company to get establish there.
Porter's Analysis of China
14
5 Forces Impact Degree of Impact
Buyer's Bargaining
Power
Large number of buyer's as the Chinese
people have high purchasing power.
Switching cost is low.
Price sensitivity is less (Turner, 2003).
High
Supplier's Bargaining
Power
Certain percentage of suppliers are of
China thus they imposes a threat if their
demands does not get fulfilled.
Number of supplier's are more.
Switching cost is low.
High
Substitute's Threat Two wheeler vehicle can be the substitute
for the car and in China there are large
number of two wheeler users (Calabrese,
2012).
Public transports also acts as a substitute.
Cost of change is very less.
High
New Entry Threat China is expanding in Globalization
context.
New entry can be done using joint
ventures.
There are less number of government
formalities for new entries (Hill, 2005).
Economies of scale mainly lies with big
companies.
Moderate
Industry Rivalry There are many competitors under this
industry.
There is a cut-throat competition in the
emerging markets of China
High
15
Buyer's Bargaining
Power
Large number of buyer's as the Chinese
people have high purchasing power.
Switching cost is low.
Price sensitivity is less (Turner, 2003).
High
Supplier's Bargaining
Power
Certain percentage of suppliers are of
China thus they imposes a threat if their
demands does not get fulfilled.
Number of supplier's are more.
Switching cost is low.
High
Substitute's Threat Two wheeler vehicle can be the substitute
for the car and in China there are large
number of two wheeler users (Calabrese,
2012).
Public transports also acts as a substitute.
Cost of change is very less.
High
New Entry Threat China is expanding in Globalization
context.
New entry can be done using joint
ventures.
There are less number of government
formalities for new entries (Hill, 2005).
Economies of scale mainly lies with big
companies.
Moderate
Industry Rivalry There are many competitors under this
industry.
There is a cut-throat competition in the
emerging markets of China
High
15
Porter's Analysis of Russia
5 Forces Impact Degree of Impact
Buyer's Bargaining
Power
The markets of Russia is emerging so
there is an emergent of large number of
buyers (Miyoshi and Kii, 2011).
Due to the entrance of new companies,
buyers have many choices.
Switching cost is low for them.
High
Supplier's Bargaining
Power
Supplier's are less in number.
Switching cost is low.
Material provided is not unique in nature.
Low
Substitute's Threat Substitute threat is less in Russian market
(Deresky, 2011).
People prefer car over the two wheeler.
Cost of change is equivalent.
Moderate
New Entry Threat Due to emerging markets, many MNC's
are going to enter the industry.
The entry cost is less.
Barriers to entry is also low (Automotive
and components markets of Asia, 2005).
The country is technologically advanced
so there are more chances of entry.
High
Industry Rivalry There are large number of new entries
which mans that large number of
competitors in the industry.
Due to cost leadership competition level
is high (Jones and Alexander, 2009).
High
16
5 Forces Impact Degree of Impact
Buyer's Bargaining
Power
The markets of Russia is emerging so
there is an emergent of large number of
buyers (Miyoshi and Kii, 2011).
Due to the entrance of new companies,
buyers have many choices.
Switching cost is low for them.
High
Supplier's Bargaining
Power
Supplier's are less in number.
Switching cost is low.
Material provided is not unique in nature.
Low
Substitute's Threat Substitute threat is less in Russian market
(Deresky, 2011).
People prefer car over the two wheeler.
Cost of change is equivalent.
Moderate
New Entry Threat Due to emerging markets, many MNC's
are going to enter the industry.
The entry cost is less.
Barriers to entry is also low (Automotive
and components markets of Asia, 2005).
The country is technologically advanced
so there are more chances of entry.
High
Industry Rivalry There are large number of new entries
which mans that large number of
competitors in the industry.
Due to cost leadership competition level
is high (Jones and Alexander, 2009).
High
16
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The forces for change in this external environment is technological aspect because the
technology is changing in the world and this become difficult for the US and Europe car
manufacturing unit. The US and Europe have the high-tech technologies and as compared to
these nations China and Russia do not possess such technologies so this may create the issue if
the changes occur in this aspect. Further, the political changes may also create problems as they
are fluctuating and new government may pass new laws which may or may not be in favor of the
foreign company (Cobham, 2007). Thus, in order to enter the new emerging market of Russia
and China, company has to adopt these strategies so that they can move ahead in a smooth
manner. Thus, the strategic recommendations are as follows:
The manufacturing company can enter into Chinese market by adopting the Joint venture
strategy. It is because; the cost savings could be done as the extra expenditure on setting
new plant can be saved.
The firm can enter into Russian market by establishing its new venture because the
resources are abundant and at least cost that can be acquired.
In China, differentiation strategy can be adopted because the Chinese people’s lifestyle
has changed and they now require the products which are unique and provide innovative
services (Calabrese, 2012).
However, in Russia the cost leadership can be done in order to penetrate the market of
Russia.
The firm can also bring technological changes in the country in order to develop the
economy of the nation. This will be favored by the government of the Russia and China.
There are chances of high growth and can earn highest profits in the emerging markets.
Thus, the manufacturing industries of US and Europe should make the investment in
these nations by adopting the laws and regulations of the country (Byrd and Megginson,
2013).
CONCLUSION
After doing the study on the global business of US and Europe car manufacturing
industries in the market of Russia and China, it has been concluded that the emerging market of
these two nations will bring highest growth and revenue to the companies. Further, the risk
17
technology is changing in the world and this become difficult for the US and Europe car
manufacturing unit. The US and Europe have the high-tech technologies and as compared to
these nations China and Russia do not possess such technologies so this may create the issue if
the changes occur in this aspect. Further, the political changes may also create problems as they
are fluctuating and new government may pass new laws which may or may not be in favor of the
foreign company (Cobham, 2007). Thus, in order to enter the new emerging market of Russia
and China, company has to adopt these strategies so that they can move ahead in a smooth
manner. Thus, the strategic recommendations are as follows:
The manufacturing company can enter into Chinese market by adopting the Joint venture
strategy. It is because; the cost savings could be done as the extra expenditure on setting
new plant can be saved.
The firm can enter into Russian market by establishing its new venture because the
resources are abundant and at least cost that can be acquired.
In China, differentiation strategy can be adopted because the Chinese people’s lifestyle
has changed and they now require the products which are unique and provide innovative
services (Calabrese, 2012).
However, in Russia the cost leadership can be done in order to penetrate the market of
Russia.
The firm can also bring technological changes in the country in order to develop the
economy of the nation. This will be favored by the government of the Russia and China.
There are chances of high growth and can earn highest profits in the emerging markets.
Thus, the manufacturing industries of US and Europe should make the investment in
these nations by adopting the laws and regulations of the country (Byrd and Megginson,
2013).
CONCLUSION
After doing the study on the global business of US and Europe car manufacturing
industries in the market of Russia and China, it has been concluded that the emerging market of
these two nations will bring highest growth and revenue to the companies. Further, the risk
17
assessment has revealed that there is a high amount of political risk and transportation risk in
Russia, whereas, in China economic risk is highest. Moreover, the PESTLE analysis of both the
nation provides signal that company can adopt the joint venture entry strategy in China and
setting up new venture in case of Russia. There is a great potential in both the markets so
manufacturing unit should establish its units in these two emerging countries.
18
Russia, whereas, in China economic risk is highest. Moreover, the PESTLE analysis of both the
nation provides signal that company can adopt the joint venture entry strategy in China and
setting up new venture in case of Russia. There is a great potential in both the markets so
manufacturing unit should establish its units in these two emerging countries.
18
REFERENCES
Books and Journals
Acuña, R., 2004. Occupied America. New York: Pearson Longman.
Ahmadian, M., 2012. An Exciting Future Awaits us in Automotive Engineering
Technologies.Advances in Automobile Engineering. 01(01).
Barlow, N. and Chatterton, P., 2002. Improving the competitiveness of companies in the UK
automotive sector. Industry and Higher Education. 16(5). pp.315-319.
Burnham, K., 2013. Developments in Control within the Automotive Industry - Part 2: An
Introduction. Measurement and Control. 46(10). pp.302-302.
Byrd, M. and Megginson, L., 2013. Small business management. New York, NY: McGraw-Hill.
Calabrese, G., 2012. The greening of the automotive industry. Basingstoke, Hampshire: Palgrave
Macmillan.
Cobham, D., 2007. Macroeconomic analysis. London: Longman.
Costa, S. and Pinheiro de Lima, E., 2014. Green supply chain management. Journal of
Manufacturing Technology Management. 25(8). pp.1105-1134.
Czinkota, M., Rivoli, P. and Ronkainen, I., 2009. International business. Chicago: Dryden Press.
Deresky, H., 2011. International management. Upper Saddle River, N.J.: Prentice Hall.
Dernburg, T. and Dernburg, J., 2009. Macroeconomic analysis. Reading, Mass.: Addison-
Wesley Pub. Co.
Folsom, R., Gordon, M. and Spanogle, J., 2009. International business transactions in a nutshell.
St. Paul, MN: West.
Hill, C., 2005 . International business. Boston: McGraw-Hill/Irwin.
Ili, S., Albers, A. and Miller, S., 2010. Open innovation in the automotive industry. R&D
Management. 40(3). pp.246-255.
Jones, L. and Alexander, R., 2009. International business English. Cambridge: Cambridge
University Press.
19
Books and Journals
Acuña, R., 2004. Occupied America. New York: Pearson Longman.
Ahmadian, M., 2012. An Exciting Future Awaits us in Automotive Engineering
Technologies.Advances in Automobile Engineering. 01(01).
Barlow, N. and Chatterton, P., 2002. Improving the competitiveness of companies in the UK
automotive sector. Industry and Higher Education. 16(5). pp.315-319.
Burnham, K., 2013. Developments in Control within the Automotive Industry - Part 2: An
Introduction. Measurement and Control. 46(10). pp.302-302.
Byrd, M. and Megginson, L., 2013. Small business management. New York, NY: McGraw-Hill.
Calabrese, G., 2012. The greening of the automotive industry. Basingstoke, Hampshire: Palgrave
Macmillan.
Cobham, D., 2007. Macroeconomic analysis. London: Longman.
Costa, S. and Pinheiro de Lima, E., 2014. Green supply chain management. Journal of
Manufacturing Technology Management. 25(8). pp.1105-1134.
Czinkota, M., Rivoli, P. and Ronkainen, I., 2009. International business. Chicago: Dryden Press.
Deresky, H., 2011. International management. Upper Saddle River, N.J.: Prentice Hall.
Dernburg, T. and Dernburg, J., 2009. Macroeconomic analysis. Reading, Mass.: Addison-
Wesley Pub. Co.
Folsom, R., Gordon, M. and Spanogle, J., 2009. International business transactions in a nutshell.
St. Paul, MN: West.
Hill, C., 2005 . International business. Boston: McGraw-Hill/Irwin.
Ili, S., Albers, A. and Miller, S., 2010. Open innovation in the automotive industry. R&D
Management. 40(3). pp.246-255.
Jones, L. and Alexander, R., 2009. International business English. Cambridge: Cambridge
University Press.
19
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