Write about Volkswagen Group?
Entry Modes for Volkswagen in Brazil
Volkswagen Group is a multinational Company that manufactures automotives and it;s based in
Wolfsburg, Germany. Volkswagen has over hundred production plants across twenty seven
countries globally. Volkswagen designs, manufactures and also distributes large commercial
vehicles as well personal private small cars. Volkswagen is one of the largest producers of motor
vehicles just behind Toyota. Volkswagen nowadays manufactures such brands as Audi, Bentley,
Skoda, Bugatti and Porsche (Volkswagen group, 2009).
The following are entry the strategies which Volkswagen has also attempted some of them to
gain entry into foreign emerging markets.
Direct or Indirect Exports or Imports
The oldest form of business trading involves the business of exporting and importing from
foreign countries. There are high risks involved in the business especially if the business relies
on a small number of traders to make profits. Brazil is one of major markets for Volkswagen
products in South America (Export Partners of Brazil, 2012).
Foreign direct investments
Foreign direct investments refers to the business organizations that may be wholly owned as a
subsidiary and which is always referred to as a Greenfield investment, Joint ventures with
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foreigners where the company is jointly owned with other foreigner partners or takeovers
(Volkswagen group, 2009). The main importers for goods from Brazil are China, Argentina,
Germany and the US. (Van Loon, 2005).
The entry strategy to the Brazilian market by the Volkswagen Company utilized the green field’s
investment strategy to penetrate the Brazilian market which is one of the most stable nations
(Caves, 2007). Brazil’s economy is the best or the largest in Latin America while its GDP grows
much faster than its neighboring countries. It has a labor force of 107.1 million while the
unemployment rate is 4.3% (Brazil, n.d). Its major industries are in the textile industries,
chemicals, steel, aircrafts, motor vehicles and other spare parts (Brazil, 2012).
The other mode of entry in global markets is through licensing and franchising where the
franchiser allows the franchisee to rent or hire its own intellectual property for an agreed amount
of fee as initial payments for the use of its brands (Daniels, Radebaugh and Sullivan, 2008).
Strategic alliances and collaborative strategies that involve management contracts, agency
agreements, subcontracting among others have been recognized as critical entry strategies and
are mostly treated differently (Bracken, Bremmer and Gordon, 2008).
Most firms relocating abroad gain competitive advantage by exploiting their resources and
financial capabilities. The choice of entry mode is largely determined by the resources that a
company has at its disposal.
Volkswagen mode of entry strategies to most countries including Brazil is base on takeovers,
joint ventures and mergers. For example, in 2009, Volkswagen bought almost 50% of Porsche
AG. In 2010, Volkswagen bought the almost 20% of Suzuki to test the Japanese market.
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Joint ventures are basically agreements where two or more countries with joint equity share
ownership and control of a company. Joint strategy refers to a situation where full ownership of a
company is risky and it’s advisable to enter into joint ventures in order to spread the risks
involved (Rugman and Collinson, 2008).
China,26%
Germany,9%
Europe,29%
Asia,29%
South
America,7%
Volkswagen Global market
(Export Partners of Brazil, 2012)
The Volkswagen group has over twelve major vehicle manufacturers. So far, Volkswagen group
has acquired Automobile Lamborghini, Audi, Bentley and Roll Royce. These acquisitions are
strategies and mode of entries to specific countries (Volkswagen Group, 2015).
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References
Bracken, P., Bremmer, I., and Gordon, D. (2008), Managing Strategic Surprise, Cambridge
University Press
Brazil (n.d)World Development Indicators
Brazil (2012) International Monetary Fund, Retrieved 2012-10-14.
Caves, R. E. (2007), Multinational Enterprise and Economic Analysis, New York: Cambridge
University Press
Daniels, J., Radebaugh and Sullivan, D. (2008), International Business: Environments and
Operations, Pearson Education
“Export Partners of Brazil (2012) CIA World Factbook , Retrieved 2013-07-25.
Rugman, A. M. and Collinson, S. (2008), International Business, Financial Times Prentice Hal
Van Loon, J. (2005). “Wolfsburg, `Special’ City, Reels as Volkswagen Flounders” . Bloomberg .
Retrieved 12 Feb 2015.
Volkswagen Group (2015) Business lines and markets” . Volkswagen AG. Retrieved 12
February 2015.
Volkswagen group (2009) Volkswagen and Suzuki agreed to establish a comprehensive
partnership” VolkswagenAG.com. Volkswagen AG. 9 December 2009.
