Executive SummaryThe chosen company
for this stud...
Evaluation of Dongfeng Motor Corporation's Internationalization Strategy
The chosen company
for this study is Dongfeng Motor Company. It can be witnessed throughout the
paper that the company has already reached its saturation stage in China. As a
result, it is necessary to access the untapped customers of various nations by entering
the two distinct nations such as United States and Brazil. It cannot be denied
that the organization possesses the experience of doing international business.
The HR team of Dongfeng Motor Company is moderate and well performing. However,
many pros and cons of the Brazil and U.S.’s external business landscapes came
to the forefront. Therefore, it has been recommended to the organization to
increase its innovation and technological capacity by investing in R&D.
Secondly, it should focus on customization of pricing and branding strategies
in those two countries for yielding maximum amount of profit and penetrating
the automobile market successfully.
Company is one of the well-known vehicle manufacturing organizations’ in China.
Its head quarter is located in Wuhan. The organization has been formed as a
joint venture, where a 50:50 partnership is shared by Nissan Motors and
Dongfeng Motor Group. Interestingly, there are two distinct genres of
automobiles which the company produces. For instance, the commercial cars are
made under the banner of Dongfeng marque. Alternatively, the passenger cars are
manufactured under the jurisdiction of Nissan marque. The corporation is
actually owned by the state of China. However, the company came into existence
because of the joint venture formed between Nissan and Dongfeng Motor Group.
Many products of the company are some way or the other, connected to Nissan.
The formal operations of the organization started on 1st July of 2003. It customized
several vehicles in order to sell them in the Chinese cities, where interiors
are not smooth enough for journey. Thus, it can be witnessed how the customers
of third and second-tier cities were addressed by the organization largely.
The company is
merely in the initial phase of internationalization. Therefore, in this report,
it will be analyzed how the two distinct overseas locations can be chosen
judiciously so as to roll out its products and increase a significant amount of
the profit margin. On the other hand, the two new host nations of the company
are United States and Brazil. The resources available with the organization are
suitable enough to cater the above-mentioned countries’ automobile customers.
Since the advent of globalization, various organizations’ have started to enter
other nations for expanding their businesses. However, it involves various
processes. For instance, an organization should conduct a thorough market
research before entering another foreign market. Moreover, already existing
market players would try their level best to obstruct an overseas company to
enter their operating zone. Thus, this report will elucidate the environment
audit, external business environment, and entry modes for recommending the internationalization
strategy for Dongfeng Motor Company.
automakers are fighting with one another fiercely. Slowly, the automobile
industry has entered into the mature stage and that is why expanding the
automobile business in other nations, is extremely important. Many automakers
are already present in China, right from domestic to international vehicle
companies. Thus, it can be observed how the Chinese domestic market is already
saturated. Furthermore, the popularity of low carbon emission and energy
efficient cars is increasing at a rocket speed, which ultimately demands
strategy change from the Dongfeng Motor Company’s end.
Company can utilize its strategic partnerships that it shares with several
renowned world-class automobile companies and brands including Nissan, Renault,
and Volvo. It will definitely help in establishing the brand name in the
international business arena. Even the options to choose from a variety of host
countries also increase for the organization. In fact, the strategic alliances
in European and Asian nations are instrumental in shaping the platform for
business expansion in different host countries. The tried and successful
techniques can be completely utilized successively by the company, for entering
the new borders (Cavusgil, Knight and Riesenberger, 2017). The international
process can definitely be refined if the company enhances its technologies for
manufacturing automobiles like other developed nations such as Germany, U.K.,
and U.S. Therefore, even though it is enjoying a robust, skilled and
experienced team of operations yet the same is lacking in terms of various
technologies thereby demanding improving in that genre.
Synopsis of the
SWOT analysis for Dongfeng Motor Company can be witnessed in the below chart of
In this section,
PESTEL analysis of Brazil and United States can be witnessed. On the contrary,
industry lifecycle will be instrumental in dissecting the macro and micro
business environment of Dongfeng Motor Company, which has also been included
PESTEL of United
Political: U.S has
a robust political landscape, where people enjoy a democratic political system.
The election procedures are also quite transparent and fair in nature. Most
importantly, it participates sparingly in the global policymaking pertaining to
almost each and every field. However, its humanitarian activities and
interventionist strategies are often criticized by the other nations as the
same trigger threat of terrorism and provide an upper hand in the international
States enjoys the highest GDP. It is also the largest economy amongst the other
developed countries. The nation’s economic system is quite well-developed,
which gathers its strength from none other than the developed technologies (Frynas
and Mellahi, 2011). Even though it had witnessed extreme economic drawbacks
because of the global financial crisis yet in 2014, U.S. sprung back.
Ultimately, the consumers got back their purchasing power largely.
Social: The people
of U.S. enjoy quite a comfortable lifestyle with an increased standard of
living. However, the nation’s biggest problem in the social front is its ageing
population. On one hand, people over there possess a liberal mindset; on the
other hand, they are also quite intolerant towards other races. Its medical,
healthcare and education systems are incomparable to the other developed
Innovation and advanced technologies are the two important strengths of U.S.
Since the time U.S. started to rule over the other nations, it applied and
adapted to various technologies robustly. As of now, its technological
supremacy has not been superseded by any other country. However, different
developing nations are giving U.S. a tough competition in the field of technology.
The main technologies that can be witnessed in U.S. are environmental
technology, nanotechnology, and biotechnology. It actually opens the business
opportunities for various companies. The technological advantages can be tapped
by both the start-ups and new entrants. As a result, it can be understood that
the company can utilize technological innovations to the fullest in U.S.
EPA of U.S. is quite strict about the environmental laws and regulations. It is
truer in the case of automobile companies. Even the U.S. citizens are inclined
towards the environment friendly products and services. Thus, tapping the U.S.
automobile market needs technologically developed engines which can support
fuels made from renewable sources of energy as well.
pertaining to the businesses are quite stringent in United States. Therefore,
one should remember that legal issues may crop up if proper precautions are
taken by Dongfeng Motor Company. Furthermore, going through a length legal
procedure can actually prove to be detrimental for the financial resources of
PESTEL of Brazil
Political: The Brazilian government is quite proactive
in nature. However, as of now, Brazil’s political landscape is also stable. The
biggest problem in Brazil is mainly its corruption. Moreover, political
volatility is a matter of election. Thus, the problems may actually rise from
Social: There is an
economic inequality amongst the Brazilian population. Almost 19 percent of the
total citizens dwell under the poverty line. The population of Brazil is
reaching the heights, day-by-day. In Brazil, class distribution is also a big
issue. Brazilian people are fashionable and up-to-date.
laws and regulations pertaining to the environment are not adequate like United
States. Alternatively, things are developing in this genre at a slower rate.
Legal: Brazil is
quite open to foreign investors and implies several regulations for the
start-ups. However, the labor unions are strong enough. Taxations agreements
are made for double taxation impositions. Lastly, the corruption rate in Brazil
is rising every day.
Brazil’s inflation rate is not unstable, for the time being. However, the
nation has been flooded with many unskilled laborers. On the other hand, market
deregulation is quite high. The exporters are always in an advantageous
position because of the undervalued goods.
nation is not dependent upon the technologies and innovations. As a result, it
can be said that Brazil is a labor-intensive nation. It is largely evident in
the case of many unskilled laborers’ presence in Brazil.
Industry life cycle
of U.S. is actually in the growth phase (Appendix 1) because number of
immigrants is increasing at a rapid rate. On the other hand, demand for
vehicles is actually because of inflation and decreasing unemployment rate.
Many Japanese and German automakers are trying to capture the market. However,
several cases related to excessive carbon emission can be witnessed in the
United States. Therefore, Dongfeng Motor Company can actually judiciously utilize
the high demand landscape that can be witnessed for the United States.
Furthermore, a high living standards urges the population to buy one or two
cars, however shortage of money he or she is facing, during the economic
downturns (Johnson, Scholes and Whittington, 2011). Lastly, the suppliers and
automakers are compelled to manage their factory usage and supply chains
cautiously in this country because of EPA’s stringent environmental policies.
Therefore, the newly engineered green cars are actually going to prove
profitable for the company as their sell will definitely remain high enough.
Slowly and steadily, it is entering the industry shakeout phase because of
higher car loan rates.
automobile industry is actually in the embryonic stage (Appendix 1). The population of Brazil is invariably high.
As a result, the multinational automakers are taking risks for expanding their
businesses. However, a conservative approach will actually help them to stay on
top of things. For instance, a steady management is required in terms of
factory capacity and cost effectiveness. Thus, pricing strategies must be
robust enough in an emerging nation like Brazil.
Competitive Advantage evaluation
There are mainly
four components of the Porter’s diamond model; they are demand factor,
production factor, competitions, and industrial factor (Appendix 2).
The human capital
of U.S. is quite innovative and advanced than the other nations. Therefore, it
provides a fortified infrastructure in U.S. for the company. Furthermore, the
higher standard of living and hi-fi lifestyle definitely increase the demand
for cars, especially the environmental friendly ones. Thus, hiring the
immigrant African Americans at a low cost will definitely help Dongfeng Motor
Company in saving an adequate amount of manufacturing cost (Coulter, 2009). The
rising population rate is proving to be fruitful, in the case of demand-supply
dynamics. The supply chain of automobile in U.S. is quite robustly shaped. U.S.
possesses several assembling centers and manufacturing units. The energy
friendly cars are already manufactured by the company. However, their sale in
China is relatively less. Therefore, it will be easier to sell the same in the
U.S. Lastly, the strong innovative platform will actually help Dongfeng Motor
Company to improve its manufacturing process (usage of lean technology) and
introduced automobile industry’s policy in Brazil has helped the car makers
immensely. Its emergence year is 2012. However, integrated industry policy is
still lacking which can actually support the growth of R&D genre. Thus,
becoming the center of production is not easy. For instance, producing the
vehicle with a less local content as well as design along with higher prices is
difficult, especially when competition is extremely high (David, 2008). The
production factor in Brazil which can help the company is low-cost labors,
unlike the other nations. Even other Latin American countries are also quite
attractive for various automobile organizations’. Moreover, a high rate of
Brazilian population can assist the company for hiring the candidates for various
positions. Thus, the manufacturing costs will largely decrease due to the
reason mentioned above. Foreign automakers are welcomed in Brazil quite
gracefully. Lastly, the increased population rate and immigrants definitely
keep up the demands for automobiles quite high. However, as the automobile
industry of Brazil is only in the embryonic stage, supply chain is not well
formed. Even though numbers of manufacturers are surging yet suppliers are
still lacking over there. The competition in Brazil is sky-rising. However,
most of the international players are fighting in Brazil. It shows the Brazil’s
weaker domestic automobile market.
The company must
opt to establish subsidiaries in the United States. Alternatively, the organization
should go for joint ventures and strategic alliances in Brazil.
In Brazil, if the
company will enter via strategic alliances and joint ventures, it will help to
establish the brand name much easily. For instance, Hyundai is still struggling
to sell its cars in the Brazilian market. However, it possesses a better
technological advantage over Dongfeng Motor Company. As a result, it will be
easier for the company to utilize Hyundai’s technologies. There are various
benefits which the organization may enjoy if it becomes ready to enter the
Brazilian market in joint venture with Hyundai. For instance, it can access
distribution networks and market much easily. It is mostly because Hyundai is
already familiar with the Brazilian auto industry. Furthermore, it will be able to save a lot of
expenses and risks by partnering with Hyundai (Spulber, 2007). Lastly,
Hyundai’s specialized staffs, resources, finances, and technologies will be
accessible for Dongfeng Motor Company, in this way.
Company can establish a foreign owned subsidiary in U.S. It will help to
separate taxation issues of the subsidiary and the parent company. Moreover,
logistical infrastructure is favorable for the company in U.S. Furthermore, the
parent company will be able to continuously support its subsidiary in the U.S.
Most importantly, the U.S. people are experimental in nature which may compel
them to purchase Dongfeng Motor Company’s products lucidly. Energy efficient
cars are not new for the company as it manufactures them in the home country
but Chinese people do not buy them. On the contrary, the U.S. people tend to
purchase the eco-friendly vehicles. As a result, the firm can make various
improved energy efficient models in the U.S. by judicious utilization of the
technological and infrastructural resources (Amrosini, Johnson and Scholes,
From the above
analysis, it can be inferred that Dongfeng Motor Company should actually opt
for business expansion in various foreign countries. The two chosen countries
for hosting, by the company are Brazil and U.S. On the other hand, the main
modes of entry selected for introducing various new products in Brazil include
strategic alliances and joint ventures. Alternatively, the U.S.’s infrastructures
are best for opening a foreign owned subsidiary, by the organization.
Company’s must keep its car prices less for the Brazilian market because it is
still emerging. The rising income is still not enough to increase their
standard of living. The government is providing subsidies also and that is why
establishing production units over there can be expected to remain smoother. On
the contrary, making energy efficient cars for both the U.S. and Brazilian
markets will prove to be immensely fruitful and lucrative for the company.
Increasing the compensation amount of the low-cost labors can further help in
retaining them. Pricing strategy of the company should be at par with the
social settings and lifestyles with the countries. For example, brand
positioning in U.S. should be in the form of high-end energy efficient cars.
Alternatively, in Brazil, it should position as a middle-range fuel saving
cars. Lastly, it is crucial to improve the R&D teams of Dongfeng Motor Company
so as to roll out various clean and green cars.