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Example research essay topic: Business Analysis Of Ford In China - 1,654 words

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... , 000, 000 in 2010 after China enter WTO. The demand of 1. 2 litres exhausting private car will increase fastest among all the automobiles. 4. 1 Consumers Psychology One of investigations made by China Consumers Association shows that approximately 20 % of Chinese consumers will prefer to buy imported cars, even though the price of them are higher than domestic cars. There will be 80 % of consumers choosing to buy imported cars on the condition that the price of imported cars is almost as same as that of domestic cars. According to this investigation, it seems that band is more important thing to be concerned by consumers besides price. 4. 2 Car Purchasing Power In 2000, Chinas GDP per capita reached over US$ 800. In terms of economic principle when GDP is at this level, or family annual income is the half of the cars price, this kind of family is suitable to buy a car. At present, there have been more than 500, 000 families having US$ 5400 annual income, which is the half of the cars selling price, in Beijing.

Shanghai, Guangzhou, Shenzhen, and economic flourishing district in southern of China also have the same situation. This means China has had the basic conditions of developing cars for family-use, and at least 300, 000, 000 citizens have the capability of purchasing cars according to the income of urban citizen. This situation will climb to the peak during the period from 2005 to 2010. 4. 3 Environmental Factor Influence on Car Consumption Behaviour 4. 3. 1 Car Consuming Environment According to the present situation, demand of cars is constantly growing, as well as the consuming level of Chinese people. There are approximately 20 % Chinese urban families, in other words about 26 million families will want to buy cars, which is equal to the total outputs of automobiles in world. On the other hand, the infrastructure of road in most Chinas cities has been getting better and better, which enhance peoples confidence of buying cars. 4. 3. 2 Political Influence on Car Consumption The planning for the tenth five-years of automobile issued by China Economy and Trade Committee points out that China will focus on developing car which is under 1. 3 liters exhausting private cars and will provide a series of preferential policy to encourage people to buy cars. Under that conditions almost all the automobile producers will manufacture this kind of cars to domination this huge market. 4. 3. 3 Car-buying Tax At the beginning of 2001, Chinese government announced to use the car buying tax instead of the car-buying fee.

This change can reduce the unreasonable charges, such as in Chengdu (one of biggest city in South West China), people who want to buy a car must be charged 10 % - 15 % of car buying fee, which is repealed now. 4. 4 Influence of WTO on Car Consumption Behavior It is no doubt that the selling price of car will decrease gradually after China enters WTO. Consumers who want to buy a car will be delighted to see this situation. On the other hand, the Chinese government has got ready for policy and consumption system to make a suitable environment after entering WTO. It can be seemed that the market of car consumption will be triggered in the future. 5. HUMAN RESOURCES ANALYSIS With the development of high-education and skill training, China has prepared a pool of well educated and trained people that they have sufficient skills to meet our requirement. The labor cost in China is relatively lower than many developed country because of the abundant labor.

Moreover, China also has a mature human resources system for foreign investment. We can believe that China has a good human resource for our companys development. RECOMMENDATIONS AND INVEST PLAN 1. OVERALL ATTRACTIVENESS AND CONCLUSION According to the above analysis, it seems that it should be beneficial for Ford to invest a family car company because of its large market and strong consuming power. We should also look into the costs and risks. Someone may doubt whether the Chinese market will ever really take off and reach the enormous volumes predicted, or the Chinese will get all they need to know about building and selling cars and then somehow evict their Western partners.

These are the concerns many have about doing business in China. China has experienced a stable political system (which is considered totalitarian) with rapid economic growth for more than 10 years, but some political risks still exist. The Chinese government is still insisting on its communist and totalitarian policy, there is no guarantee that China will continue to its open policy and maintain the rapid GNP increase. China also has an unsatisfied human right record; corruption exists in some economical activities in China, all these will be obstacles to foreign investments. On the economical front, China had been adopting centrally planned command economy for many years. Since the 1980 s, the government has been encouraging the establishment of private-owned enterprises.

In the 1990 s, China established its own stock exchange and started to sell state-owned business to private investors. But the policy is still not clear and produced a lot of turbulence in the stock market. The delay of political reform may also effect the development of economy. It is still doubtful whether or not China will keep on its economical renovation toward a market economy. Although the legal system of China is adequate to protect foreign investment, the violation of laws by some local authorities will be a potential risk to our investment.

The overall attractive of China as a investment site depends on balancing the benefits, costs and risks associated with doing business in China. Despite all the above risks, we still consider China as a suitable country for our investment. 2. INVESTMENT STRATEGY We shall establish our business gradually, in a steady way. The first step is to establish a joint venture with a local Chinese car manufacturer for producing our Ka family sedan car and spare parts. The plant should be put into production within 2 years at a capacity of 50, 000 /year.

If its guaranteed by the government policy after China joins WTO, we shall introduce our car-rental (Hertz) and financial service (auto loan) in the future. 2. 1 Entry Time Although the car industry is declining in the US and Europe, it is still a suitable time for Ford Motor Company to invest in China. As the 2 nd largest car manufacturer in the world, Ford had been waiting patiently to enter the Chinese Market for more than 20 year. Some other world-famous car manufacturers (such as Volkswagen, General Motor, Toyota, etc. ) had already started their business years ago, but we do not consider that it is too late to enter the Chinese family car market. Because we are quite confident with the potential of the Chinese market and also the Ford company, we should not care too much about where we enter this market early or late, we should improve ourselves progressively toward the purpose of surpass our competitors.

We have the ability to achieve that. Actually there are also some advantages of enter the market late, such as we can learn the lesson from some other unsuccessful car manufacturers like Peugeot, which closed its plant in Guangzhou. We can also be beneficial from the intelligent and skilled workers who have a lot of experience in the car-making field. 2. 2 Entry Procedure Ford has been producing its Transit van in China for many years. The productivity and sales are not as good as expected because of the high cost (price) and limited production. We suggest choose Ka family sedan as our major product for this project. The car will be sold at a price around RMB 100, 000 (USD 12, 000).

According to the current Chinese policy on motor industry, Ford will establish a joint venture with 50 % share with Chang An Automobile Company in Sichuan Province. Chang An Automobile Company is the 3 rd largest car manufacturer in China, which has the experience of car-making for more than 20 years. The place that Ford will build its plant is located in the west part of China, which will benefit from the favorite policy of Developing West (of China). In the future, if permitted by the Chinese policy, we can increase of share percentage and wholly own this company. Ford will introduce it car-rental service (Hertz) after China opens its car-rental market. We will also set up our financial service in China in the future.

Ford should invest China slowly but steadily and should always consider there would be political or economic problems down the road. China demands a cautious approach. We have to be careful in deciding when and how much to invest in China. We should take a lot of patient to do business in China. SUMMARY To sum up, we believe that Chinese business environment is suitable for Ford to establish a family car factory.

With a caution and steady investment strategy, Ford will gain satisfactory benefit in the future. REFERENCES Hill, C. W. L. (2001) International Business, Irwin/McGraw-Hill, New York. Needle, D. (2000) Business in Context, Business Press, London. P ettinger, R. (2000) Investment Appraisal: A Managerial Approach, St.

Martins Press, New York. Fahey, L. and Narayanan, V. K. (1994) Global Environmental Analysis, in Segal-Horn S. (ed. ), The Challenge of International Business, Kogan Page Limited, London. Deng, P. (2001) WFOES: The Most Popular Entry Mode into China (wholly foreign-owned enterprises), Business Horizons, July Min, Z. (2000) Family Cars Predicted to rev up Auto Sales, China Daily, 01 March. Nie, Y. (2001) The Investment Tendency of Multinational Auto Companies in China, web Ford Motor Company: web China Consumers Association: web National Bureau of Statistics of China: web China Automobile Information Centre: web World Bank: web Shanghai Automobile Post: web


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