Ford Wholly Owned Subsidiary Essay

1047 words - 5 pages

Worldwide in 2007, a total of 71.9 million new automobiles were sold. North America and Japan markets were sluggish, while those in parts of Asia and South America grew vigorously. The major markets that saw the most rapid growth were Russia, Brazil, and China. The most active division in the Russian economy is the automotive market. Russia is seen as one of the most promising automotive markets in all of Europe; with a population of approximately 140 million people. The reason is because the Russian market hasn’t reached its point of saturation yet. The Russia car buyers’ desire for premium products, but also a need for low-cost products, offers potential for the auto industry. At a glance ...view middle of the document...

Car sales in Russia totaled 2.78 million in 2013. According to Ernst & Young, since 2011 more than $6 million has been invested in Russia’s car market by foreign corporations.
Ford chose to enter the Russian market as a wholly owned subsidiary. A wholly owned subsidiary is defined as a subsidiary in which the firm owns 100% of the stock. The Ford Company has several advantages being the first foreign car company to enter the Russian market; these advantages are known as first-mover advantages. One important advantage for Ford was having the ability to preempt rivals and capture demand by establishing a strong brand name. A second advantage was the ability to build sales volume in Russia before competition entered the market. This gave Ford a cost advantage over other auto manufacturers that entered the market later. This would give Ford the opportunity, if needed, to cut prices below that of later competitors, and potentially drive them out of the market. Another advantage is the ability to create switching costs that tie customers into their products and services.
However, there are also disadvantages associated with entering a foreign market before other international businesses; first-mover disadvantages. These disadvantages give rise to pioneering costs, costs that an early entrant has to bear that a later entrant can avoid. Pioneering costs arise when the business structure in a foreign country is so drastically different from that in a firm’s home market that the organization has to devote extensive time, expense, and effort to learning the rules of the game. Pioneering costs include the costs of promoting and establishing a product offering, including the costs of educating customers. Early entrants can find themselves at a disadvantage if a change in regulations nullifies prior assumptions about the best business model for operating in that country.
Ford not only took major risks being the first to enter the Russian market, but they took another risk deciding to enter as a wholly owned subsidiary. Establishing a wholly owned subsidiary is the most costly method of entry into a foreign market. Ford, entering Russia as a wholly owned subsidiary,...

Find Another Essay On Ford Wholly Owned Subsidiary

BA History Essay

792 words - 3 pages CitiExpress in 2002 by combining two wholly owned subsidiaries, British Regional Airlines and Brymon Airways. British Airways also merged the operations of two other wholly owned regional subsidiaries, British Airways Regional and Manx Airlines, with British Airways CitiExpress, thereby creating a single wholly owned regional subsidiary airline.In 2003, British Airways Holidays launched its first programs following its re-integration with British

Entering International Markets Essay

604 words - 2 pages Direct Investment for wholly owned subsidiaries. I was then asked to select a mode of expansion. I selected a wholly owned subsidiary. I chose this mainly because the company no longer had limited financial resources and didn't need to be dependent on their licensing partner. Another reason is the profitably of the company and their increased market share against local competition; although the risks were higher, the potential rewards would be high

Marketing in Japan

751 words - 3 pages amongst industrialized nations. With such a high GDP and a deregulating economy, this presents a huge potential, for American businesses.The options for American firms wishing to enter the Japanese market are as follows: 100 percent ownership Establish a new plant of office (wholly owned subsidiary). 100 percent buyout of a Japanese firm (takeover).Partial ownership Establish a joint venture

American Companies: Hitler's Helpers

2594 words - 11 pages Germans to track and identify Jews during the Holocaust. This technology was only made by IBM at this time and Hitler knew that he could use their help with his master plan. Most European countries used this machine to take their censuses (Eisenstadt). The Hollerith machines were manufactured by DEHOMAG or German Hollerith Machine Company. This company was a subsidiary of the American company IBM since 1922 (Eisenstadt). Henry Ford had a part

Whether a Cut in Corp Tax Rate be Beneficial

4338 words - 17 pages services sector and even electronics. Currently, Ford is the largest producer/seller of trucks and the second largest manufacturer/seller of cars. Rated second on the Fortune 500 list of the largest industrial companies, Ford recorded $142.6 billion in sales and revenues and a net income figure of $6.5 billion in 1998. It has also spun off wholly owned subsidiary, Visteon to expand its market for automotive components worldwide. Also a

Hong Kong & Shanghai Banking Corporation (HSBC)

1677 words - 7 pages Chinese or other foreign borrowers. - No major financial costs. Disadvantages: - Deposits were restricted to foreign depositors. - US banking laws forbid agencies from taking local deposits. - It would limit HSBC’s business primarily to dealing with foreign clients. - Edge Act Corporations (International banking Act of 1978) 2. A wholly owned subsidiary incorporated as a normal US bank. Advantages: - The subsidiary could undertake any

Harley Davidson case analysis -- with IFE, EFE, CPM, and TOWS matrix

1587 words - 6 pages Financial services segment consists of Harley's wholly owned subsidiary, Eaglemark Financial Services INCMarketing Distribution:·Harley-Davidson has approximately 615 independently owned full-service dealerships in the United States. The Marketing efforts are divided among dealer promotions, customer events, magazine and direct mail advertising, and public relations. Harley also sponsors racing activities and special promotional events and

Global Communications Benchmarking

6940 words - 28 pages its core business; starting the information service was simply a matter of offering existing hardware to about 1,200 nighttime users in its first year. The following year, CompuServe became a wholly owned subsidiary of HandR Block, Inc., which provided the financial support to foster CompuServe's rapid growth through expansion as well as research and development.In April 1996 HandR Block sold 20% of CompuServe in an initial public offering (IPO

WIPRO & NEC FUTURE WATCH

459 words - 2 pages Electron Devices. NEC Corporation, with its in-house companies, employs more than 150,000 people worldwide and saw consolidated net sales of 5,409 billion Yen (approx. US$43 billion) in the fiscal year ended March 31, 2001About NEC System TechnologiesNEC System Technologies, Ltd., a wholly owned subsidiary of NEC Corporation, is one of the biggest systems integration and platform development arms in NEC group. NEC System Technologies provides van

Acquisition Robeco by ORIX

655 words - 3 pages , because they generate a lot of revenue on a constant level. With this acquisition, Orix is now able to use Robeco’s distribution network and integrate other subsidiaries of the group. In the case Robeco/Orix case, it would not have been better if Orix started a wholly owned subsidiary. It would simply take too much time to build a good track record in order to receive the amount of trust a well known asset manager has accumulated. Moreover

lahman

1382 words - 6 pages disillusioned with its licensing strategy, question 2 asks how joint ventures overcome the failures of pure licensing. Here, the student correctly notes that joint ventures give Starbucks greater control (compared to licensing) while at the same time permitting the company to retain access to knowledge of the local market through its joint venture partner(s). Note that joint ventures minimize financial risks relative to wholly-owned subsidiaries, but not

Similar Essays

Henry Ford Essay

1116 words - 4 pages earnings per share (EPS) for 1997 were $5.62, up 54% from 1996's EPS of $3.64.Ford financial services was formed October, 1987, to provide stable source of earnings to counter balance the Company's automotive business. Ford Credit is a leader in customer satisfaction, having earned more customer and dealer satisfaction awards from J.D. Power and Associates, than any other auto finance provider.A wholly owned subsidiary of Ford Motor Company, Ford

Holding Company Essay

584 words - 2 pages subsidiary company.Section 5A defined that a company can be an ultimate holding company of another company if another company is subsidiary of the holding company but the holding company is not a subsidiary of any company.Under Section 5B, if none of the members is person other than its holding company, nominee of holding company, another wholly owned subsidiary of holding company or nominee of such wholly owned subsidiary, we can said that this

Ford And Gm Case Study

2220 words - 9 pages Ford chose to establish a wholly owned subsidiary in Russia, rather than license its production and product technology to a Russian carmaker like AvtoVAZ?There are some constraints for the company for not giving the license to the subsidiary company in foreign market. We can understand this in term of the know- how. Know-how is the company's competitive advantage over the competitor that company knows, how to make better technological product

Special Purpose Vehicles In Modern Accounting

1186 words - 5 pages is said to create a closed circuit of risk1. Contrary to this view, where an SPV is a wholly-owned subsidiary of a sponsor, there nonetheless may be direct liability attaching to the sponsor as the SPV parent company, in the event of insolvency of the SPV. In layman's terms, a sponsor who utilises a wholly-owned SPV may not be able to simply walk away from the project debts and liabilities in the event of insolvency.There are various methods that