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Abstract:
Volkswagen was the first western car maker to enter the Chinese market in 1985. Since then, the Chinese government has deregulated the market in leaps and bounds to attract more foreign direct investments (FDI) through its 'market socialism' doctrine. It was a success story for the Chinese government as most of the main automotive multinational companies (MNCs) entered too, for a piece of the market share. MNCs follow the economic, political and cost imperatives with a favourable factor, demand and supply condition that the Chinese market provides. The low cost production site also acts as a hub to export automobiles in the region. With the first entrant strategy, Volkswagen with its initial 'taxi strategy' had long remained the leader. However, in 2005, General Motors replaced Volkswagen as the leader in the automobile market in China. The Asian competitors were not far behind. The case discusses and highlights on one hand the internationalisation process of the German car maker Volkswagen, its internationalisation phases vis-a-vis distribution and production internationalisation, the group's strategy worldwide that synergised its strategy in China since 1985. It raises issues on localisation in the Chinese market and focuses on how MNCs can sustain their growth and a profitable growth in the hypercompetitive Chinese market.
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