AN INVESTIGATION AND COMPARATIVE STUDY OF THE MARKET ENTRY STRATEGIES ADOPTED BY FORD IN THE UNITED KINGDOM AND CHINA
Introduction
A cardinal displacement has occurred in the universe economic system where antecedently contained and protected national economic systems that were isolated from one another by barriers to traverse boundary line trade, and national differences in linguistic communication and civilization, are unifying into an interdependent planetary economic system. This has led to the outgrowth of multi-national giants such as the Ford Motor Corporation ( Ford ) that proactively respond to planetary chances and menaces non merely in footings of selling, but besides in footings of production, to take advantage of national differences in the cost and quality of factors such as labor, energy, land, and capital. ( Jeannet and Hennessey, 1998 )
Global companies must find the type of presence to keep in every market where they compete. The universe contains more than 200 single states or markets that may be grouped regionally to cut down cost. Major determinations include the designation of the market followed by the method of come ining the selected market. In some of the more hard markets such as China, doing the right market entry determination can go a cardinal competitory advantage and can unlock markets otherwise unaccessible to a foreign corporation. ( Czinkota, 1995 )
This research proposal seeks to better understand the construct of market entry scheme into a foreign market and the footing of determination devising for that entry. The range of the research has been limited to a instance survey analysis of Ford Motor Corporations entry scheme in the United Kingdom ( UK ) and China.
Ford is considered one of the most successful motor fabrication companies in the universe. As the 2nd largest vehicle shaper after General Motors, and the universe ‘s largest manufacturer of trucks, this multibillion dollar corporation ( 2004, USD 172 billion in grosss ) presently manufactures autos and trucks under the Ford, Lincoln, Mercury, Aston Martin and Jaguar nameplates. With its companies and subordinates, Ford employs more than 371,000 people worldwide and maintains offices and installations in 34 states for its fabrication, assembly and gross revenues operations. ( Ford, 2005 )
In recent old ages the company has had to confront the worlds of globalization, the challenges posed by competitory makers, the effects of thin production in supply concatenation direction and the outgrowth of new sections as the markets for autos becomes progressively fragmented. ( Donnelly and Morris, 2003 ) Although it’s 2004 after revenue enhancement net incomes were USD3.9 billion, which was an betterment on the 2003 consequence of USD1.2 billion, its bond evaluations have been downgraded in May 2005 to below investing class debris bonds. ( Reuters, 2005 )
Ford’s response is to cut down its trust on a limited part of their merchandise scope for net incomes and to better marketability of its full scope of merchandises across all of the markets it serves. ( Ford, 2005 ) The success of this scheme is likely to be a effect of the market entry mode that Ford chose in set uping its regional or state presence. The probe of the UK and Chinese markets will foreground the importance of the determination and organize the footing for an informed position.
LITERATURE SURVEY
A literature reappraisal serves to concentrate research jobs, understand current academic thought and theoretical theoretical accounts around the research subject. It is both a description every bit good as a critical reappraisal of the literature. ( Saunders, Lewis and Thornhill, 2000 ) A high-ranking literature study was conducted as a footing for a research design and methodological analysis and as verification of the preliminary purpose of the research aims.
Ford United Kingdom
The first Ford mill outside of North America was established near Manchester in 1911 and the Ford Motor Company ( England ) , as it was so known, came into being. In contrast to the parent company public presentation and accrued losingss of USD 2.6 billion over the period 1992 – 2000 at a Ford Europe degree, Ford Britain as a division, employing14,200staff at 10locations, has entrenched the Ford trade name as the UK market leader for 28 back-to-back old ages in an progressively competitory new auto market. In 2004, three Ford theoretical accounts were in the top 10 best Sellerss and the Ford Focusmodel was Britain ‘s has been a top marketer for the 6th consecutive twelvemonth. ( Ford, 2005 )
Ford China
China became a member of the World Trade Organisation ( WTO ) in December 2001. Prior to that inordinate import duties on autos had provided protection for China ‘s developing domestic automotive industry. Ford ‘s first successful entry into China ‘s car industry was an investing of USD40 million in Jiangling, a publically traded truck maker. ( Dai, 2005 and Kane, 2004 )
By buying 20 % of the company ‘s stock, which was reserved, for foreign investors, Ford was able to come in the market without blessing from the Chinese authorities. Ford staggered subsequent investings of $ 300 million to set up six joint ventures in China in vehicle constituent manufacturers. During 2001, in a USD98 million trade, Ford received blessing from the Chinese authorities to come in into a joint venture ( 50-50 ) with the Chongqing Chan’an Automobile Group. The new joint venture built compact household autos for the Chinese market and for export. ( Dai, 2005 and Kane, 2004 )
Market Choice
A figure of theoretical accounts were identified as a footing to place attractive markets such as the portfolio attack ( Harrell and Kiefer, 1993 ) , the Heckscher Ohlin attack to differences in factor gifts, Vernon’s merchandise life rhythm, and Porter’s Diamond theoretical account of national competitory advantage. ( Jeannet and Hennessey, 1998 ) The implicit in scheme is that a house will scatter its production installations to those states where they can be performed most expeditiously, non merely for that market specifically but for other foreign markets within which it operates.
Harrell and Kiefer’s ( 1993 ) portfolio attack was first developed in 1981. It represents a theoretical account used by Ford during the 1980’s to measure the attraction of assorted abroad markets. Countries were rated on attraction ( market size, growing rates, economic indexs etc ) and competitory strength ( market portion, merchandise tantrum, distribution webs etc ) . The ensuing matrix was declarative of Ford’s attempts to rank markets utilizing multiple factor indices but lack those factors measured in other theoretical accounts such as Porter’s Diamond.
The Heckscher Ohlin theoretical account predicts that the form of international trade is determined by factor gifts instead than differences in productive. Therefore China would stand out in the production of labour intensive fabrication industries that indicate its copiousness of low cost labor. The theoretical account does non nevertheless see local market demand conditions for merchandises. ( Jeannet and Hennessey, 1998 )
Vernon’s merchandise life rhythm theoretical account is based on the observation that for most of the 20th century, a big proportion of the world’s new merchandises had been developed by USA houses and sold foremost in the USA before other markets. As competition develops, and merchandises mature, fabricating moves offshore whilst the primary market remains the USA. This changes over clip as demand for the merchandise develops in other markets. ( Jeannet and Hennessey, 1998 ) This is arguably the instance for the constitution of the Ford Motor Company in the UK and the initial set up of a fabrication works in Britain. As the rhythm progressed, Ford closed its fabrication workss at Dagenham in 2002, and moved it fabricating capableness to lower cost states such as Spain. ( Ford, 2005 )
Porter’s Diamond theoretical account suggests that bing theories of trade do non turn to a nation’s success ( or possible success ) for a specific industry. Porter theorised that four wide properties shape the environment within which local houses compete and these properties promote or impede the creative activity of competitory advantage. These properties include factor gifts, local demand conditions, related and back uping industries, and house scheme, construction and competition. These attributes represent a “diamond” which is reciprocally reenforcing in that each property is contingent on the other. Porter besides suggests two farther factors, viz. opportunity and authorities policy that influence national fight. ( Porter, 1998 ) Criticism of Porter’s Diamond includes the disregard the influence of civilization, history, and political relations and that its factor driven attack is based merely on an analysis of first universe economies instead than developing states such as China. This would stand for an of import factor to see in the concluding study. ( Czinkota, 1995 )
Market Entry
Kwon and Konopa ( 1993 ) suggest that a firm’s market entry manner is influenced by “internationalisation” or a gradual low hazard engagement due to increasing export strength or a high hazard high resource committedness based on strategic pick dependent on host state and foreign market features. Risks include cultural differences, political and economic factors, and domestic conditions. A market choice theoretical account is hence utile in quantifying and pull offing this hazard every bit good as make up one’s minding on the market manner.
This is particularly true of a determination in regard of China where authorities ordinance plays a important function. Cultural factors impact significantly on determination devising where the manner of behavioral norms is based on basically different rules, linguistic communication, and social differences. Market entry manner choice is affected non merely by international market considerations, but besides by the firm’s capacity to be successful in that state. ( Moon and Kim, 2003 )
Until the 1990’s market entry was typically through exportation, licensing, foreign fabrication, or joint venturing. The 21stcentury has led to the development of complex mixes of acquisition, venture capital funding and complex authorities partnerships. It is progressively common pattern to come in into multiple joint venture understandings with foreign spouses that link to complex issue schemes in market entry processes. Ford’s progressive entry into China demonstrates this displacement in attack every bit good as the demand for changeless re-evaluation for continued market efficiency. ( Moon and Kim, 2003 )
Decision
The literature reappraisal of market choice and entry in the context of Ford’s established concerns in China and the UK suggests that an appropriate theoretical account such as Porter’s Diamond be used as a footing for comparing the comparative successes of the two administrations in their defined markets. The consequences of the literature reappraisal have been incorporated into a research procedure to reply the preliminary research aims.
RESEARCH Focus: AIMS AND OBJECTIVES
The on the job rubric for the research proposal is: “An probe and comparative survey of the market entry schemes adopted by Ford in the United land and China.
The preliminary purposes of the research proposal to back up the working rubric are:
- To measure the current place of Ford in the planetary car market,
- To place the selling schemes that supported its success,
- To place and compare the market entry schemes followed in the UK and Chinese markets.
The pick of research methodological analysis was influenced chiefly by the research inquiry, and as advocated by Besag ( 1986, p13 ) who states “we should be unfastened to all types of cognition and methodological analysiss, including chance, penetration, common sense, and anything else that may assist us reply the inquiry. The inquiry should find the methodology.”
The first loop of the research inquiry to back up the working rubric was to place whether the pick of market entry schemes have contributed to Ford’s planetary fiscal success based on an probe of the company’s UK and Chinese markets.
To reply the inquiry, the following aims have been identified.
- Research Objective One:Confirm the choice of Ford UK and Ford China for research intents as successful runing divisions by comparing their comparative success to their nearest rivals in footings of market portion, volume of units sold and profitableness.
- Research Objective Two:Contextualise the consequences of an in deepness literature study to the automotive industries in the UK and China.
- Research Objective Three:Confirm Porter’s theoretical account of national competitory advantage as a footing for comparing the automotive industry potency of the two markets within a determined period.
- Research Objective Four:Compare and contrast the market entry manners as a footing for back uping Ford’s success in the two markets based on the steps identified in the first research aim.
ResearchMethodology
The research inquiry and associated aims presented a practical job in choosing an appropriate research design. Budgetary restraints, limited clip and no entree to Ford’s executive direction squad in China and the UK implies that the more usual attack of a qualitative survey integrating a study design utilizing interviews and questionnaires as field beginnings would be impractical. A instance survey research design based on a nomothetic attack was hence selected. A signifier of qualitative descriptive research, this method is chiefly used where a research inquiry focuses on a set of issues within a individual administration such as Ford. The research will non concentrate on the find of a universal, generalisable truth, or look for cause-effect relationships but instead focal point on geographic expedition and description. Research decisions hence can non be applied outside of the context of Ford internationally. ( Saunders, Lewis and Thornhill, 2000 )
The pick between an ideographic or nomothetic attack to research is the rule of how a research inquiry is dealt with. The ideographic attack seeks understanding or account through an analysis of a individual instance or event and aims at a complete apprehension of a peculiar phenomenon, utilizing all relevant factors. The nomothetic attack seeks to detect those considerations that are most of import in explicating general categories of actions of events. ( Trochim, 2005 ) The research of the UK and Chinese markets with regard to the automotive industry and Ford in peculiar that is tested through the vehicle of an established theoretical theoretical account represents a nomothetic attack.
Yin ( 1994 ) points out that it is of import to retrieve that the intent of information assemblage in a instance survey is non to simply try the administrations, but to retroflex subjects. This means that the research worker compares different administrations ( in this instance, divisions ) in a systematic manner to prove the pertinence of a peculiar theory in the research. The instance survey attack provides the option is to get down with a peculiar theory such as Porter’s Diamond, and so roll up informations which may back up or dispute it, and hence extend the bing theory. A instance survey attack hence suits the research aims. ( Hartley, 1995 )
It is of import to observe that in instance surveies, the research may happen new cardinal factors beyond the research objectives that emerge during the research procedure. Although non straight relevant to the research aims, they may go the footing for new inquiries asked at the terminal of the study, therefore associating to the possibility of farther research. ( Yin, 1994 )
An advantage of a instance survey attack is that it produces much more elaborate information than what is available through a statistical analysis. Supporters of the attack argue that while statistical methods might be able to cover with state of affairss where behavior is homogenous and everyday, instance surveies are needed to cover with creativeness, invention, and context. ( Yin, 1994 )
Furthermore, the instance survey attack is a flexible method of research. Research workers are free to detect and turn to issues as they arise in their experiments. The accent on deepness in a specific context bridges the spread between abstract research and concrete pattern by leting a comparing between firsthand research with the quantitative consequences obtained through other methods of research. ( Yin, 1994 )
A disadvantage of the instance survey attack is that it is inherently subjective. The attack relies on personal reading of informations and illations. Consequences are hard to prove for cogency, and disparagers are that the method seldom offers a problem-solving prescription whilst running the hazard of deducing excessively much from what might be circumstance. ( Yin, 1994 )
Reliability is concerned with the truth of the existent measurement instrument or process, whilst cogency is concerned with the survey ‘s success at mensurating what the research workers set out to step. ( Saunders, Lewis and Thornhill, 2000 )
Methods to command dependability and cogency will include:
- An drawn-out literature reappraisal to assist see the truth of the findings by supplying the research worker with more concrete information upon which to explicate readings.
- Use the rule of triangulation by utilizing a assortment of informations beginnings to corroborate information as opposed to trusting on limited beginnings. This implies an active documentation on the reading of informations.
- Peer audience will be employed by active audience with capable experts and co-workers prior to composing the concluding bill of exchange of the study in order to set up cogency through pooled judgement.
Important to observe is that ethical issues and struggles of involvements can impede the credibleness of the survey. Personal unity, sensitiveness, and possible biass and prejudices of the demand to be taken into consideration in outlining the study. Personal prejudices can crawl into how the research is conducted and the research methods used. ( Saunders, Lewis and Thornhill, 2000 )
A common ailment in instance survey research is that research workers change way during the class of the survey unaware that their original research design was unequal for the revised probe. Unknown spreads and prejudices in the survey can originate. To avoid this, preliminary findings will be reported on an interim footing to co-workers and a supervisor to cut down prejudice of this nature. ( Saunders, Lewis and Thornhill, 2000 )
The research methodological analysis hence follows recognized pattern in design. The consequences will be translated into a in writing representation of Porters Diamond for easiness of comparing and coverage.
Decision
Firms compete globally because of strong market potency, low cost production chances, and entree to similar market sections in different states. The planetary selling construct views the universe as one market with single states intervention as submarkets. The multi-dimensionality and complexness of many foreign markets implies that a considered attack to market choice and entry manner is required. This research proposal will seek to identity cardinal elements of a successful attack utilizing Ford’s attack to the UK and China for comparative intents.
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