Strategic Alliances in the Chinese Automobile Industry

Strategic alliances in the Chinese automobile industry

Italo Andres Sanhueza

Student ID: 2007950305

5/23/2008

International Business (BUSS313) Professor Mannsoo Shin

Contents

Structure of the paper 3

Introduction 3

Strategic Alliance -THEORY 4

Description of the global automobile market 5

Description of the Chinese automobile market 6

Reasons for Strategic alliances in Chinese automotive market 7

Conclusion 8

Appendix 9

References 10

Structure of the paper

This paper will intent to identify and find strategic alliances in the Chinese automobile market in the 21st and see if the major international automobile companies in the world have joined cooperation with a Chinese partner, focusing mostly on the OME leaders. This paper will also intent to find general reasons behind the alliances as well find some brief information about their current situation in the Chinese market

A brief introduction of the Global and Chinese automobile market will also be covered in this paper and furthermore this paper will give some brief theory about Strategic alliances and discuss the advantages and disadvantages of forming alliances

Introduction

Strategic alliances are nowadays a very commonly observed phenomenon in the international business world in all kinds of industries affecting businesses on a daily bases. The strategic alliances are nowadays not only observed and used as an entry mode of MNC’s but it also more commonly observed among smaller companies as well. A good example of well known and big alliance is the alliance in the airline industry called Star Alliance which at that time became big news all around the world since it joined together many big Airline companies under the same roof to cope with the problems in the Airline industry, such as oil prices and a decrease of passengers.

When it comes to the automobile industry there has been many dramatic changes and alliances during the last century putting many of worlds well known car brands in the same “family” (please see figure 1, page 9). For example just between 1980 and 1990 Japanese firms joined alliance with American companies in more than 500 times. One of the famous alliances was the one in the 1980s between General Motors and Toyota where reason for entering in alliance was that Toyota was interested in entering the US market and General Motors wanted to get to know this fast growing Japanese company. A very interesting alliance considering that nowadays these two companies are competing head to head on the global automobile market.

Strategic Alliance -THEORY

Strategic alliance is not easily to define considering that different literature has different explanations but to keep It simple a Strategic Alliance can be seen as a relationship or a business arrangement where two or more enterprises forms a collaborative arrangement for the mutual benefit and success of the enterprises which entered the arrangement.

The alliances can be divided into following categories or types of “sub-alliances”

• Sales Alliance: Two companies agree to sell complementary products or services on a market where the focus lies on creating sales

• Solution Specific Alliance: Two or more companies create a business relationship in which the agree to collaborate and together develop a specific market place solution

• Geographic Specific Alliance: This alliance is developed when the companies joining the business relationship agree to jointly market or co-brand the companies services and products in a specific region of the world

• Investment Alliance: According to the literature this alliance is formed when one of the companies invest in the other company and also agree on jointly marketing their services and products

• Joint Venture Alliance: If we follow the literature this basically means that two enterprises make an agreement to form a third company for a specific market with development