Study Case: Volkswagen Entry in

China’s Car Market

1937

Herlambang Mahardika
Muhammad Bima Surya Kesuma
Triando Ersandi
Case: Volkswagen
 Company Profile

1937
Volkswagen Brands
Volkswagen Production Plants
Foreign Direct Investment in China

Source : European Union for 2012

 China
Investment
Landscape
Strong Point FDI in China Weak Point FDI in China
● The largest internal market in the world, with 1.3 billion potential customers ● An ever-changing legal environment
● Importance of foreign currency reserves and public debt owned by Chinese government ● Bureaucratic and administrative complexities
and individuals ● A lack of transparency, corruption and weak intellectual property rights protection
● A well-developed production sector (manufacturing sector and heavy industry) ● Ageing population
● A favourable geographic location (close to emerging Asian markets, to Japan, maritime ● High level of corporate indebtedness
frontage) ● Production overcapacity in several sectors
● Top economy in terms of purchasing power parity (PPP) thanks to rapid growth of the ● A strongly degraded environmental situation in several big cities
economy ● Cultural differences in business practises that may be difficult for foreigners to
● Labour costs remain comparatively low, although the situation is changing in certain learn and apply in new business situations
areas ● Underdeveloped middle management and low rate of qualified workers
● New opportunities with the development of the western provinces (particularly Sichuan
province)
● Development of a new export network (Silk Road network)
Source : Worldbank 2019
 Conclusion

❖ Based on our analysis we concluded that Volkswagen:

Why?
● Ownership-specific advantage.
● Location-specific advantages.
● Internalization advantages.
Where?
❖ However, the government and VW gained mutual
advantage from joint venture:
How?
● VW helped Chinese government to reach the position of
second the biggest car market in the world and improve
car production technology due to entrance of strong
German’s R&D team.

● On the other hand Chinese market has become second

the biggest market for VW cars in terms of sales after
Germany.
Thanks Bruuuh...