International Business Plan Essay

4985 words - 20 pages

An Opportunity for Chinese Car Manufacturer Chery to Enter the Emerging Market for Hybrid Vehicles in North America Chery is a Chinese auto manufacturer that has begun manufacturing and exporting its own proprietary engines and vehicles. Chery is developing a hybrid powertrain with the aim of developing China's first hybrid car. It has plans to enter the U.S. market for subcompact cars in 2010, possibly badged under the Chrysler marque. A plan is proposed where Chery should aim to enter the North American market (excluding Mexico) with a hybrid vehicle to take advantage of the local market conditions. The international business strategy of such a venture is discussed.I. Situation Analysisa. Economic, Political, Cultural and Legal BackgroundBoth the United States and Canada have a representative democracy, unlike China. They are also largely market economies, though some provinces in Canada have some state-owned ventures. Their legal systems are well-established, and based on Common Law inherited from Great Britain. Private property rights are reasonably well protected, but corruption is present in small amounts, especially in the United States. On the Transparency International Corruption Perceptions Index 2007, Canada ranked ninth while the United States was 20th. (Transparency International, 2007). These are still higher than China's 90th place, so Chinese businesses moving into these markets need to be aware of the different business culture regarding the giving of bribes and the enforcement of laws. Intellectual property rights are far more strictly controlled, so that Chery must not violate them as it has done before in China as the courts will enforce the law more strictly (BBC News, 2005). Additionally, safety and environmental regulations at any of its operations in North America will need to be followed. Industrial safety standards for products are also in place which will need to be obeyed. Liability insurance is an added cost that will need to be considered before launching products in the United States (Hill, 2007, p 59).Though the North American countries subscribe to free market economics, there are substantial interest groups that have the power to lobby and influence government in their favour. There are numerous examples of such actions by U. S. or Canadian business groups (for example, Hill, p 208-209). Auto manufacturers in the United States have in the past successfully lobbied to raise tariffs on Japanese auto imports. Chery must be aware of the risk that competitors will influence the government to raise tariffs to imports of Chinese vehicles.The PPP adjusted GNI of the United States in 2006 was 44,260, the world's highest for a major country, while Canada's was 34,610, within the world top twenty (Worldbank, 2007). The GDP growth rate of the U. S, predicting future potential of the market, was 3.2 % per year in 2005 while Canada's was 2.9%. These figures represent great markets for any medium expense large product, like a...

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