Entering China as an Automaker of Ford Motor Company - Case Study Example

TABLE OF CONTENTS INTRODUCTION COUNTRY ANALYSIS Geography/Climate Political System Legal System Demographics Educational System Living Conditions Healthcare Infrastructure Trade Restrictions Government Treaties Business Customs/Practices Currency and Payment Trade and Industry ECONOMIC ANALYSIS Structure, Statistics, and Activity Major Industries Governing Bodies Work Force Composition Technology MARKET AUDIT AND COMPETITIVE ANALYSIS Market Trends Product Uses Distribution Freight Forwarders/Ports of Entry Warehousing/Inventory/Shipment Competition Branding Product Regulations Promotion Pricing Taxes Barriers to Entry Import/Export Documentation Contract Provisions/Negotiation Practices INTRODUCTION Our analysis and research has produced the following findings in regard to the matter of Ford Motor Company’s continued expansion in the existing market of the automotive industry in China. It is recommended that a joint venture be established due to the opportunities available for sharing control of human resources, technology, capital, and rewards and risks with the parent company. We have explored all avenues (current and projected) including economics, demographics, government, marketing, international policies and legalities, expected sales, and other related factors. According to the Inter Press Service News Agency, China is now the second largest auto market, selling seven million cars each year, with the United States being the leader selling sixteen million vehicles annually. (Bezlova, October, 2006) COUNTRY ANALYSIS Geography/Climate: The People’s Republic of China, located on the Pacific Ocean’s western shore in East Asia, is the third largest country in the world with a population of 1 ¼ billion, 23 provinces, and 4 municipalities. The distance covering north to south measures about 5,500 km. The summer monsoon season results in high temperatures and vast amounts of rainfall. (from AsianInfo at http://www.asianinfo.org) Political System: A variety of political parties abound in China. The Communist Party is in power; however, the eight non-communist parties have cooperated in decisions pertaining to the efforts of the state’s political aspect. (AsianInfo) Legal System: Adopted in 1982, the Constitution of the People’s Republic of China is the ultimate law source in China and regarded as the basis for the populace to reside in a socialist state. The Constitution stresses the rights of the people to be equal in education, to practice freedom of speech and assembly, the duty to be a taxpayer, and the right to vote, to name a few. International law is incorporated into the Constitution. Demographics: Even with its large population, there is a small youth populace. The one-child policy adopted in 1979 has helped to stabilize the staggering growth population. There are diverse Chinese ethnic groups, and the primary language spoken is Mandarin, with seven Chinese dialects. About 59% of the population is non-religious, with some practicing the beliefs of Taoism and Confucianism. A third of the populace have adopted a mixture of beliefs, and approximately 6% are Buddhists. (Wikipedia, the free encyclopedia) Educational System: The Chinese educational system has three divisions consisting of basic, higher, and adult teaching. The law demands nine years of formal education for each child. Children begin school as early as three years old with preschool, then go on to elementary classes at six years old. Opportunities for higher education abound vocational, technical, and managerial skills. However, a staggering 114 million of the populace in China remains illiterate. The Ministry of Education directs this problem to the lack of funding, and there are claims made by the government of China that plans are in place to rid all illiteracy among 15-24-year-olds by the year 2010. (People’s Daily, September 2006) Living Conditions: In 1978, approximately 48% of the population had no housing, or only about floor space of seven square meters floor space per capita. Experts say that China has made huge improvements in their living conditions by expanding floor space to about 25 square meters today. At one time, the system of China was to have workers move into employee housing paying very low rents, as a working benefit. The burden placed on the state to maintain this policy resulted in halting construction leaving many workers without housing. This was resolved by both employers and employees carrying the cost of housing. Government funding and home loans offered to families has bettered the past living conditions. (china.org) Not commonly observed, birthdays are celebrated today with a cake, instead of the old tradition of noodles, a symbol of longevity. The legal age for males to marry is 22, and for females, age 20, with wedding ceremonies not the norm. Funeral rites are simple; cremation for the city dwellers and burial for the country areas, and white being the mourning color. (AsianInfo.org) Healthcare: Change and modernization seem to be the trend of today’s China. This is being mirrored in industry, business, and healthcare. Prior to today’s world, the communist government dictated the necessities and paid the tab. Hospitals were funded by the government medical attention was given without charge, or very minimal, to patients. Now patients are required to pay for some of their care, and medical institutions are made to finance their own expenditures. With no private health insurance, some companies are eager to initiate these benefits. With no primary care, independent doctors, or clinics, the people have to go to a hospital for every medical need. Appointment systems are absent, causing confusion and crowding to exist. Large hospitals in the city have access to medical specialists, technology, and equipment. In the poverty-stricken areas where medical attention is most needed, none of this exists, not even adequate plumbing. The affluent Chinese, however, can afford to pay for superior care and private rooms. Medical professionals are poorly paid, and there is no governing body to ascertain competency. (Moreton, MedHunters.com) Infrastructure: The Chinese government has heavily invested in certain economic zones to draw foreign investment. However, infrastructure is extremely lacking outside of the targeted zones. Only five provinces (Guangdong, Shanghai, Hunchun, Fujian, and Hainan) are especially developed for this purpose. These zones are established to lure businesses and offer significant tax breaks. Caution is advised upon investigating operating in these zones, because capital investment may also be significantly higher. China’s goal is to spend $1 trillion (USD) on infrastructure over a 3-year time frame. This is a tremendously huge investment for the Chinese government. The country includes more than 200 airports, a vast number of ports serving a thriving export trade used by most international shipping companies, and approximately 62,500 km of widely used track. There are well-traveled waterways sporting all types of boating; however, most roads are unpaved and in need of a major overhaul. Subways are a means of transportation in large cities, but inadequate to support the current and future amounts of people using them. The Special Economic Zones have readily available communication systems for internet, satellite, and internet usage, and some availability is in place in surrounding areas of industrialization. (China Unique) Read More