Expanding Business Operations Internationally: Joint Venture in Automobile Sector in China.

华 中 科 技 大 学

HUAZHONG UNIVERSITY OF SCIENCE AND TECHNOLOGY

WUHAN

THE PEOPLE’S REPUBLIC OF CHINA

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EXPANDING BUSINESS OPERATIONS INTERNATIONALLY: JOINT VENTURE IN AUTOMOBILE SECTOR IN CHINA.

Term Paper

Submitted by: Malanina Kseniia (李雅)

ID No.  I201421275

                                                             Submitted to:   Prof. 许小平 Xu Xiaoping

Abstract

After the World War II  economies of various number of countries began to experience the rapid growth that humanity has not seen ever before. The globalization brought by organizations like APEC (1989) , EU (1992), WTO (1995) contributed  to the freer trade between nations and lessened boundaries. Nowadays enterprises all over the world are extending their businesses to foreign markets. Notably, MNCs from developed countries tend to explore markets of emerging countries due to their large labor force, cheap costs of production and opportunities to sell their product in a market consisting of  tremendous purchasing power from the population that counts for around 60% of the whole globe's population. Thus the developing nations exhibit an enormous growth due to participation in international trade and opening their borders to inflow of large amount of investments.

Key words: emerging countries, Foreign Direct Investment (FDI), Joint ventures (JVs), auto industry, China.

Table of Contents

Background Introduction        

Literature Review        

Discussion        

Conclusions        

References        

Background Introduction

With an opening to international trade many companies aim to develop their business far beyond the home country borders. According to the business  practices and scholars' researches, a primary reason for entering a foreign market is to take advantage of perceived market opportunities or to reduce the costs of operation and production (Gutterman, 2002). Emerging countries possess a large pool of low-wage workers; governments, in order to attract foreign investments, establish a free trade zones that can be effective in developing new markets and lead incomes to increase from existing foreign trade and manufacturing operations (Tiefenbrun, Jefferson 2012). China is the fastest growing economy  attracting foreign investors all over the world (World Bank, GDP growth over 7% in 2014). Moreover, due to the economic boom the population becomes more wealthier, in fact, the emerging "middle class" in China carries special meaning for multinationals that are counting on the huge Chinese market to boost their growth. The current tendency - the growing demand for luxurious goods, especially for  the luxury cars, made Chinese market attractive to the foreign automakers.