Outline the key characteristics of joint ventures as an entry mode strategy. What are some arguments in favor of and against creating joint ventures in the Chinese automobile industry?

        The joint venture as an entry mode strategy allows partners to converge their strategic goals and diverge their competitive goals. The normal mode of automobile industry’s entry, as into many other industries of Chinese, has been mainly through the joint ventures. The government insistence is a reason for this, however, it corresponds with a belief that the automobile market of China is exceptional. In order to gain the Chinese automobile market access, it is essential to look for a local partner as typically believed by a foreign enterprise that understands the local systems and culture. The contacts are provided by this partner that are required to gain permissions and utilize local distribution networks effectively.

Arguments in Favor of Creating Joint Ventures in the Chinese Automobile Industry

        A joint venture in the Chinese automobile industry can be beneficial for both partners if the choice of partner is appropriate. It is critical to choose a partner for a joint venture to succeed. A partner in the joint venture is considered good if it enjoys different core competencies from the main enterprise, competencies making market entry more likely to be successful. The partner in the joint venture from some other country might provide automobile technical or capital know-how to its Chinese partner. The joint venture between Toyota and FAW built a completely new model that was sold under the brand name of Toyota. Toyota invested $1.3 billion in China since 1998 that was mainly serviced by imports and its joint venture.

Arguments against Creating Joint Ventures in the Chinese Automobile Industry

        VW, an automobile company in China, faced some difficulties in its joint venture and had trouble with SAIC (Shanghai Automobile Industry Corporation), its partner, since it discovered that an Anhui-government majority-owned and Anhui-based firm, Chery, in which 20% stake was reserved by SAIC and a rival model is being produced by it, has been using original parts of Volkswagen illegally. This particular problem creating the conflicting interest between partners. A similar type of issue was raised for General Motors. A new car, the QQ model, was produced by SAIC Chery, which has a clear resemblance to the Chevrolet Spark, a GM model, made by one of the Chinese joint ventures of GM. Hence, confidentiality might breach in joint ventures so it is better to avoid it if the main objective is confidentiality protection.