First, companies must have a competitive or internal advantage. Second, companies should understand and understand the policies, laws, and regulations that they intend to enter into their target countries. Third, companies should minimize the risk of “going outâ€. It is best to first attempt to enter overseas markets through exports and contracts, etc. After obtaining sufficient multinational operating experience and capabilities, consider the implementation of the merger and acquisition model.
The ultimate goal of automotive product exports is
Drive the globalization of the industry
The internationalization strategy of Chinese auto companies can be divided into three stages: primary, intermediate and advanced. The internationalization strategy marked by product exports is a primary strategy, also known as a trade strategy. The internationalization strategy marked by non-equity alliances such as technology licensing is an intermediate strategy, also called a contractual strategy. The internationalization strategy marked by the formation of equity alliances such as joint ventures and wholly-owned enterprises is an advanced strategy, also known as an investment strategy. In accordance with the international gradual theory, it is inferred that enterprises' implementation of internationalization strategies will usually proceed from elementary to intermediate to advanced procedures, that is, they will adopt the strategic route from trade to contract to investment. Most of the transnational auto companies entering China for joint ventures and cooperation conform to this rule.
The automotive industry is one of the most globalized industries in the world. Expanding exports will help auto manufacturers to participate in global division of labor and cooperation, and increase the level of auto industry development in international competition. Whether or not a car can be exported on a large scale has become an important indicator of whether a country’s auto industry has international competitiveness. Promoting auto vehicle exports with independent intellectual property rights and independent brands is an inevitable way to improve the overall level and international competitiveness of China's auto industry and achieve sustainable development.
The purpose of expanding the export of automotive products is not merely to globalize products. Its essence lies in the globalization of enterprises through the globalization of products, which in turn drives the globalization of an industry. The export of automobile products is only a primary stage and a manifestation of the globalization of the automobile industry. If a country’s industry wants to play a more important role in the international division of labor system, simply relying on a trade model marked by product exports to enter the international market, there will be no major developments and big undertakings, only the expansion of such trade. Based on the model, we will gradually try to adopt a contract model such as technology licensing, and establish an international business strategy in which investment models such as joint ventures and sole proprietorship enterprises and various models coexist, so as to integrate into the wave of economic globalization at a higher level.
The choice of international mode
Determine the success or failure of international operations
There are many models for companies to enter overseas markets. Apart from exports and mergers and acquisitions, they also include new wholly-owned subsidiaries and strategic alliances. The following table shows the characteristics of several modes.
In general, the selection decision of overseas market entry mode depends to a large extent on the degree of entry and control of the enterprise in the target country (control refers to the degree of influence of the enterprise on the operation system, method, and decision-making in an overseas market. ) Levels, and resource commitments and other aspects. Therefore, the choice of entry mode for overseas markets is considered to be one of the key decisions that determine the success of international business operations.
The trade entry model is to enter the country's market by exporting goods to the target countries. This approach is generally considered to be the least risky investment mode with minimal risk, resource commitments, and financial and management investments. It is also the fastest model for entering other countries. Therefore, many companies believe that this is an ideal first step for companies to go abroad and enter high-risk and uncertain markets. Exports can be divided into direct exports and indirect exports. Indirect exports are products that companies use to sell or distribute products through brokers. Companies do not have direct contact with foreign markets, nor do they involve foreign business activities. They do not need to set up agencies and hire personnel to manage them, thus saving costs and not having to take export risks. However, in a sense, this export model is not a model advocated by China's auto industry, and direct export is the starting point for auto companies to conduct foreign operations. The trade model has the advantages of low capital investment, easy location advantages, economies of scale, access to multinational experience, and flexibility. However, the disadvantage of the trade entry model is that tariffs and non-tariff barriers may cause export products to lose their competitive advantage with local products. The transportation costs are high, and it takes a long time for the products to reach the local market. It is difficult to maintain the monitoring of local market demand.
The contract entry model is for companies to enter the target country through entering into long-term, non-investment intangible assets transfer contracts with legal entities in target countries. Enterprises choose to enter the contract model, mainly in the domestic production of products sold to the international market, the export mode is limited, such as transport costs are too high, tariffs, quotas and other trade restrictions are too strict. In this case, some companies will produce locally and sell on the spot in the target market. If the target country’s market is large, labor costs are low, and the government encourages foreign capital investment, it will be more conducive to companies investing in factories and manufacturing on the spot. The difference between the contract entry mode and the export trade mode is that companies output technology, skills, and processes rather than products. The advantage of the contract entry model is that it can bypass import restrictions and investment environment barriers, avoid high transportation costs and reduce investment risks. Countries that have foreign direct investment restrictions can benefit from process technology and save project operating time. The disadvantage of the contract entry model is that it is effective only when the company has advanced technology or a prominent brand, lacks control over the technology, faces the risk of new competitors, and results in poor flexibility due to contract terms and projects have low profits. The characteristics of returns.
The investment entry model is through direct investment into the target country, ie, the company will transfer the capital and its management technology, sales, finance and other skills to the target country, and establish a branch or subsidiary controlled by the company. The new model refers to setting up factories or establishing companies in the target countries. M&A entry mode, also known as merger entry mode and acquisition entry mode, is the acquisition of equity through the merger of existing companies in the target country and acquisition of business control rights. Compared with the new model, the main advantages of M&A are: to develop overseas target markets faster, to achieve market diversification, product diversification, and new services or to quickly acquire resources and technologies that are difficult to grasp with the new model. The main disadvantage is that it is very difficult to find and evaluate M&A objects. The advantages of the M&A model are that the parent company has greater control power, can more closely approach the local market, can reduce transportation costs, customs tariffs, etc., reduce product costs, can effectively improve the product's adaptability to local market preferences, and can pass knowledge. The transfer enhances the opportunity to tap the company's competitive advantage. The disadvantage of the M&A model is that it has greater commitment to resources such as finance and management. As a result, it causes greater risks. It may lead to excessive initial costs due to long investment returns, and to the company’s strategy due to high input costs. Adjustments lack flexibility.
The Internationalization Strategy of China's Auto Enterprises
Extending in depth
At this stage, the internationalized strategic model implemented by Chinese auto companies has the following features:
First, the trade model (mainly exports) is the main model for the current internationalization strategy of China's auto companies.
At present, the export of China's auto companies has the following characteristics:
Judging from the nature of export enterprises, the vehicle exports are mainly based on self-owned brands or products with independent intellectual property rights (Great Wall Motors, Chery Automobile, Jiangling Motors, Hafei Automobile, Jianghuai Automobile, Geely, etc. are becoming the main force of exports); joint venture cars The share of exports is relatively low, and joint ventures are still dominated by competition in the domestic market.
From the perspective of export target markets, 70% of China's entire vehicle export market is in developing countries, and the EU and the United States account for only 30%. The major markets are the Middle East, Africa, and Southeast Asia. The export market for auto parts is in stark contrast to the entire vehicle, with nearly 70% of the auto parts export market being exported to developed countries.
From the perspective of export product structure, China's vehicle exports, especially car exports, are mainly based on the needs of low-end markets in developing countries, and there will be no positive competition with major multinational auto companies in the short term. It can also be said that currently the competitors faced by China's vehicle export (especially the car export) market are mainly domestic companies themselves.
Second, the contract and investment (strategic alliances, investment and construction, etc.) model is an auxiliary model for the internationalization strategy of China's auto companies.
A survey conducted by the China Academy of International Economics, Trade and Economic Cooperation on Chinese companies’ overseas investment shows that 48.4% of the surveyed companies stated that they will invest overseas in two years, and 70% of them will do well to expand their overseas business within four years. In preparation, 20% of companies expect their total overseas investment to exceed US$10 million.
At present, in order to reduce export risks, strategic alliances among domestic auto companies, as well as companies and insurance credit agencies, are beginning to emerge. In 2005, Yutong signed a strategic agreement with China Export Credit Insurance Corporation and became the first company in the automotive industry to form a strategic alliance with export credit insurance companies. The concluding of the alliance can provide Yutong's exports with market risk analysis, buyer credit evaluation, export credit guarantee and other services. In 2006, the Ministry of Commerce and the National Development and Reform Commission identified 44 companies such as Chery Automobile Co., Ltd. and 116 companies, such as Wanxiang Group, as state-owned automobile export base companies and national auto parts export base companies. In order to effectively solve the two major problems of the credit and ocean shipping capacity encountered in the export of enterprises, the government departments also helped build a long-term strategic partnership between some of the intended export automobile companies and the China Credit Insurance Corporation and China Ocean Shipping Company. The purpose is to avoid export risks, reduce transportation costs, and ensure the success of corporate exports. In 2006, nine light truck companies (Beiqi Foton, Anhui Jianghuai, Dongfeng Motor, Nanjing Yuejin, FAW Hongta, FAW Harbin, Jinbei shares, Shandong Kaima, Jiangxi Jiangling) voluntarily formed a strategic alliance and reached an important consensus: "Combine to go out and shoulder to shoulder to open up the international market." Other forms of alliance in automotive companies (eg, production outsourcing, technology licensing) still exist. Hafei Group and the Malaysian NZA Group have reached a technology transfer agreement. FAW Group cooperated with Russian factories to adopt technology licensing methods to produce SUVs and pickup trucks. The model will use the FAW brand, with all components imported from China, FAW authorized to assemble in Russia, and training Russian partners for technology and personnel. In October 2006, Yangzhou Yapu Auto Plastics Co., Ltd. transferred fuel tank technology to India, which not only enabled India to achieve a “zero breakthrough†in the local plastic fuel tank manufacturing industry, but also made itself the first exporting fuel tank technology to China. Independent brand enterprise.
Since 2003, many domestic auto companies have begun to build factories overseas. In 2003, Chery established a joint venture plant in Iran and in 2004 it authorized Malaysian ALADO to manufacture, assemble, distribute and import Chery cars. In 2006, Chery Motors entered into a strategic alliance with National Automotive Industry Corporation, a subsidiary of Malaysia's largest automaker, Proton. The two companies announced that they will build cars for each other and enter each other's markets. This transaction enabled Proton and Chery to assemble vehicles of each other's brands in China and Malaysia and sell them to the Chinese, Malaysian and ASEAN markets. In addition, Changan Group established a production line in Pakistan in early 2005; the same year, Geely Automobile Holdings Co., Ltd. and IGC Group signed a cooperation agreement to manufacture, assemble and import Geely Automobile in Malaysia; Brilliance also teamed up with Egyptian BAG Group to assemble Chinese cars in Egypt. In July 2006, Dongfeng Motor Co., Ltd. ("Dongfeng Motor") signed a contract with Ukrainian DAN Industrial Investment Holding Group Co., Ltd. in Wuhan to jointly construct a CKD (parts assembly) plant in Ukraine to produce "Dongfeng" light commercial vehicle series. .
In 2003, Changan established an overseas R&D center in Turin. This is the first large automotive group in China to establish R&D branches overseas. In May 2005, the Chang'an European Design Center also began to operate independently. Later, domestic companies such as JAC, China, Yuchai, Haima, Chery, and Dongfeng also began to seek to set up research and development centers overseas. JAC also opened an overseas research and development branch in Turin. The establishment of these R&D centers indicates that the internationalization strategy of China's auto companies has expanded into the depth field.
At present, in the implementation of the "going out" internationalization strategy, China's auto companies are faced with the problems of low brand awareness, tariff and non-tariff barriers, and chaotic management of the industry, in addition to the lack of credit cooperation and limited transportation of goods. Coalition and other means to solve these problems is a good method, and it is worth learning from the government and the automobile companies in China.
To implement the "go global" internationalization strategy, Chinese auto companies must comprehensively judge according to their own conditions, market conditions, competitive characteristics, and other factors, in order to determine the overseas entry mode that is most suitable for the specific circumstances of the time and local conditions to expand the international market. In general, before implementing the "go global" strategy, the company must first possess a competitive advantage or an internal advantage: on the one hand, it should be strengthened and expanded through strategic alliances to rapidly enhance its international competitiveness; on the other hand, Internalization can minimize market risks and uncertainties. Second, the understanding and understanding of the policies, laws, and regulations of the target countries to be entered by the enterprises is also a problem that needs to be solved before considering the overseas markets entering the strategy. Understanding the regional advantages is also an indispensable step. Third, companies should minimize the risk of “going outâ€. It is best to first attempt to enter overseas markets through exports and contracts, etc. After obtaining sufficient multinational operating experience and capabilities, consider the implementation of the merger and acquisition model.
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