Market Entry Strategies for MNCs in the Automobile Industry of China

Multinational Corporations use various market strategies to enter the Chinese automobile industry. The strategies detailed in this study examine market environmental, transaction-specific, competitive strategic factors, and organizational capabilities that influence the choice of market entry. The study researches factors that have influenced the choice of market entry modes for Multinational corporations in China’s automobile industry. Although the most mode of entry research assumes that foreign firms have options to choose any entry mode they wish in a given market, but China proves otherwise. The study explores the impacts of the factors in the internationalization process of firms. The findings show the importance of risk absorption and risk dispersion mechanism in Toyota’s penetration of international markets, China for instance.

Since the WTO recession, Chinese markets have been able to reform and open market policy for other international markets interested in investing. With the policy, its market has been able to deepen its ties with the world economy day by day. Automobile makers around the world were not able to penetrate China’s automobile industry in the last 5 to 6 years. Through this process, it has opened its doors to international markets and also incorporated international rules in it. Since then foreign markets have been able to enter markets that have been protected with all kinds of regulations.

Foreign companies have been able to compete with Chinese local markets that have enabled it to creates new demand for its products. The foreign firms have created jobs, increased income, and expanded the markets for their local consumers. Foreign firms are mainly focusing on marketing and selling their products in the Chinese market than Using China as an off-shore production base (WTO 2003, p.1) (Lu 1999, p.10).

After the WTO recession, China’s auto industry attracted many joint ventures that started technology transfer projects. China Auto Industry General Co. (CAIGC), supervisor automobile agencies, local government, SAW and First Auto Works (FAW) and so many other parties that were making linkages in China’s auto industry technology transfer projects. Since so many parties were opening up contacts in China’s auto industry, duplication became inevitable. The disadvantage of duplication with the joint venture invention was that it limited technology transfer.

With many ventures opening up projects simultaneously, resources get dispersed and limit the scale of projects being implemented and volume output. This impeded the Chinese ability to develop their product in full capacity; they lagged in terms of technology because they kept on using old models of technology. China made efforts to sponsor its local automobile projects at the expense of the numerous developments projects in place. While China still lagged due to duplications, it only produced hundreds of vehicles each year while countries such as Beijing, Tianjin, Liaoning, Shangai, Jiangsu, Shandong, and Sichuan where foreign assembly technology existed produced 50,064, 20,787,12,165, 24,474,15,517 and 16,901 respectively (Xiaohua 1994) (WTO 2003).

China’s partnership with FAW and SAW joint ventures in automobiles enable the country to develop its automobile industry by exposing its employees to production processing in foreign plants. Joint ventures allowed the Chinese allowed to benefit from advanced technology SAW and FAW provided. China’s exposure to foreign suppliers has raised the demand for joint venture assemblers due to the quality of parts and components. Capital starts coming in from newly industrialized countries (NICs) due to the high demand for its vehicles. NIC countries that supply are Hong Kong, Taiwan, South Korea, and Thailand. Transfer of technology did not require equity investment (Xiaohua 1994).

China benefited from the Sino-foreign venture because it had no technology to develop new products. China did not have the capital to finance its subsidiaries in developing and manufacturing products that can compete on world markets. Toyota Motor Corporation and First Automobile Works (FAW) tied hands in the Chinese automobile industry in August 2002.

In October, the same year, other corporations such as Dongfeng Motor Corporation and Nissan Motor Corporation followed suit. In November, a Korea-China joint venture, Beijing Hyundai Motor Co. Ltd established joint ventures. In September 2004, Toyota Motor Corporation established its joint venture as well. Rising automobile demand in China was attributed to a new model launched by Japanese, U.S, and European automakers (Quarterly survey of overseas subsidiaries 2004) (Grossman & Henrik 1988, p. 780) (Xiaohua 1994).

The Chinese market is of tremendous strategic importance to multinationals. Before China joined WTO, its auto industry was dominated by Sino-foreign joint ventures. In 2000, there were around 13 carmakers which 8 of them were from Sino-foreign joint ventures and 5 domestic makers. Together, they produced 12 brands, 10 of them were foreign-funded and 2 domestic. Sino-foreign joint ventures dominated the market by 85 percent. Tariff and non-tariff protection measures that were put in place, investment by multinational corporations were favored that meant that to avoid high importation barriers, the corporation would engage in production and operational activities in local markets. The products involved here were technical and production equipment that was less advanced and the models had remained unchanged for decades But with the exposure to modern technology by joint ventures, Chin was able to learn from it (China Association of Auto Manufacturers 2003, p.8) (Kroeber 2006, p.3).

Due to the joint venture auto investment, China has experienced the porousness of the economic boundaries that was accelerated due to the extensive linkages with foreign companies that have enabled it to build its global economy. The global linkages have accessed China to developing auto industry turning the country to industrial revolution thereby creating more employment opportunities and national income. China offers international markets two advantages in entering its market; 1). Before 1971, china pursued a socialist economic policy of self-reliance and this was closed to foreign business. In 1979, it reopened its market to foreign investment. From this time China has become the largest recipient of foreign direct investment among developing countries. China has also been characterized as particularly distinct in terms of its institutions and form of capitalism (Vibha, Pan & Ungson 2002) (Xiaohua 1994).

Automobile manufacturing worldwide competition subjected some of the producers towards strategic alliances. These alliances jeopardized the relation that existed between manufacture and supplier. What happened was just old and substandard products were pushed to developing economies such as Triad. In the 1970s, China started taking the old auto parts from these countries to develop and process them to learn the skills and technology out of auto-manufacturing since at the start of the period joint ventures were limited in scale for China automobile industry. The Chinese government did not also want to attract join ventures at the time because it did not want to give up control over its local suppliers and also the administrative authority of managing its automobile business. With these policies put in place, joint ventures assemblers had hard time building connections with China’s domestic suppliers (Xiaohua 1994).

Problems associated with joint ventures were that they wanted to select their suppliers according to marker in terms of product quality instead of a government assignment. SAW-Citroen and FAW relied on technical partnerships instead of equity investment to increase the domestic content of car assembly either than engaging capital investment and research facilities that would develop the economy fast (Xiaohua 1994).

Joint ventures are only concerned with the manufacturing process of products but not getting involved in research and development. Foreign partners provide a production system and take responsibility for troubleshooting. This limits the Chinese partners in involving and learning the whole process of product development and technological innovation as compared to a wholly-owned subsidiary. China was also exposed to interactive learning and industrial growth.

Toyota’s entry into Chinese market growth is closely linked to the relative competition in local enterprises since multinationals are the determining factors of industrial growth and patterns of developing countries, this way the country can not gain an advantage by educating its employees in the automobile sector as compared to the wholly-owned subsidiary. Establishment of the interactive learning relationships is a process in which local enterprises under the protection of local government can absorb advanced technology from foreign investors. The management is also able to know how things are done and also products will be developed and it will be able to make innovations to suit the local’s specific needs according to the market and resource environment (Yu Chai 1999, p.11) (Hawit 1995, p. 39).

Toyota Entry into Chinese markets

Toyota should wholly own venture either than joint ventures investment because the Chinese government decentralized power to the periphery, divided up policy control that would have slowed production. Slow response from some material industries would also cause a problem to Toyota automakers. These shortages and abusive behavior from local authorities would castrate Toyota’s survival chances in China. Toyota Motor Corporation signed an agreement with China’s largest automaker to begin large-scale production of a variety of Toyota models is coming one of the latest multinationals to enter into the Chinese car market.

The ventures would produce about 100,000 mini cars a year and 10,000 to 20,000 sports cars. The partners would also build an assembly plant exporting 50,000 midsize sedans a year in 2005. Another joint venture was set up by Toyota to begin manufacturing 30,000 cars in October of the same year. F.A.W has already a venture with Volkswagen to build compacts cars. With all these ventures, automakers sold nearly 750,000 cars and 750,000 trucks in China last year making each market equivalent to the 10^th size of the American can and truck markets. China’s entry into the trade group forced it to lower imports on cars, therefore, bringing prices down sharply. Toyota auto industry is the major large-scale foreign automakers investments in china, this situation resulted in overcapacity and disappearing profit margins that affected the auto industry in many industrialized countries. Multinational Corporations are Volkswagen, Honda, and General Motors. Other small ventures that are close to Toyota are Ford, DaimlerChrysler (Bradsher 2002)(Xiaohua 1994).

China has a comparative advantage in a labor-intensive industry that it would supply Toyota auto market with. Also, it’s not competitive in technology-intensive industries like other automobile industries. Toyota Motor Corporation and First Automobile Works tied hands in the Chinese automobile industry in August 2002. In October, the same year, other corporations such as Dongfeng Motor Corporation and Nissan Motor Corporation followed suit. In November, a Korea-China joint venture, Beijing Hyundai Motor Co. Ltd established joint ventures. In September 2004, Toyota Motor Corporation established its joint venture as well. Rising automobile demand in China was attributed to a new model launched by Japanese, U.S, and European automakers (Quarterly survey of overseas subsidiaries 2004) (Grossman & Henrik 1988, p. 780).

Toyota introduces VIOS production pattern in China in joint venture investment to raise production capacity. In 2004, Japan successfully issued the new car in the logo “Toyota made in China” that had invested $300 million in it. Toyota is working on had to bridge production in which it only manufactures 30,000 compared to other ventures such as Volkswagen and GM that manufacture over 100,000. Toyota is proposing a plan to produce a capacity of 150,000 to 200,000 vehicles per year. It has been able to choose joint venture partnerships instead of wholly-owned subsidiaries because other national supply cheap labor and at the same time it wants to maintain brand name (China Association of AutManufacturerses 2003).

Toyota’s ability to expand manufacturing plants into the middle successful company of local markets has not yielded fruits yet. in the early 1990s, the automobile company found it very difficult to get its hands into a market share in Central and Western Europe due to its high cost of production. Since Europe is the main importer of Toyota cars, this company could not solely cater to its demands. Toyota provided guideline principles to address concerns that international businesses must react to changing nature of global automobile companies. Included in the seven principles are;

1. the Multinational Corporation should honor the language and spirit of every nation and it should sign up to take open and fair corporate activities so that it can be fair to the whole world.
2. The corporations should dedicate their work to provide clean and cafe products.
3. It should respect the culture and customs of every nation and they should put efforts to engage in activities that develop economic and social developments
4. They should work together to advance technologies and provide excellent products and services that satisfy customers worldwide
5. they should develop a corporate culture that enhances individual creativity and teamwork value and respect mutual trust between labor and management.
6. They should all pursue growth in harmony with all communities involved through innovative management
7. All corporations should work with each other in research to achieve stable, long-term growth and mutual benefits and at the same time keeping their country open for the new partnership.

With all the stated principles, Toyota Motors is acting responsibly in its penetration of foreign markets. The products will experience greater success if it enters the market and embraces the culture of people instead of trying to change people’s customs. Success application of the principles helped Toyota to be ranked among the world’s largest automakers (CIA World Factbook 2005, online).

Marketing analysis

Toyota has 51 manufacturing companies in 26 countries and markets to over 140 countries. To market its product, China reduced its labor costs by producing in foreign markets. In the United States, for instance, Toyota shares increased by 20 percent in 2004 that made the prices of its competitors fall. It gained in the stock market because it was allowed to manufacture automobiles cheaper in its foreign plants. Since it entered the d US market, its market shares have been rising yearly. For example, in 2004 it was ranked 4^th and 3^rd in 2005. Toyota is taking advantage of foreign trade zones (FTZs) where customs and taxes are lower compared to its country. This enables it to reduce distribution costs. With other multinational corporations such as GM and Ford, it’s often difficult to penetrate foreign markets where the entire market is flooded with domestic producers (Ridder 2005, p.2).

Expansion Strategies

Included in Toyota’s agenda expansion strategies include producing reliable and durable cars at affordable prices. An example of this is India’s project that was developed in the 1990s and turned out to be very successful. Toyota market in India was able to penetrate India’s market by providing the low-cost vehicle to the countries population thereby boosting Toyota’s total sales. Toyota has also introduced its plants to other countries in San Antonio in America that is anticipated to boost Toyota’s truck sales internationally. Expansion plant into Turkey helped it solve the high production cost problem and also provide low tariff percentages to European Union. Turkey provides an export-oriented manufacturing division of Toyota that ships finished products into the European market at a lower production cost ready to compete with the already existing domestic vehicle manufacturers (Fetscheirin 2005, p. 8).

Financial analysis

Toyota manufactures more economic cars that are helping cope with today’s oil crisis. Despite all the negative effects of recent gas shortages and prices fluctuations having on the global automobile industry, Toyota is less affected by it because of its economical cars and its sales and revenues are expanding tremendously. When all automakers released their month-end reports in September 2005, GM and Ford Motors reported a drastic decrease in sales with 24 percent and 20 percent respectively, on the other hand, Toyota sales rose to 22 percent an increase of 10% compared that year. There was also an increase of 90% in sales of Toyota hybrid, Prius. The sales figures give an insight into Toyota’s growth trends in its domestic and foreign markets. Withy the vehicle sales reports we examine that its total sales rose 10.3% from 2004 to 2005 and export sales increasing faster than that of domestic markets. and also the vehicle production rose 5.4%, 14.1% overseas, and 2.3 percent at home. These figures show increased revenues in exporting abroad. Transportation costs are reducing in producing vehicles in the U.S either than having to ship them all the way (Fetscheirin 2005, p.8).

Corporate Responsibility

The effects of globalization have affected both production and market for corporations, therefore these companies are called upon to act ethically and be responsible to limit pollution. Toyota is leading by example in taking social responsibility in its ‘guiding principles’ we have seen earlier to target this particular issue. We see that Toyota has taken measures to reduce pollution by producing hybrid vehicles that have lower emission quantities (General Motors Corporation 2008, p.11) (Hashim 2005)

National Business Environment Analysis

Toyota increased its market share in the United States to 15.1% and finally broke into the top three rankings that were usually occupied by the Big Three. Its net sales were more than Daimler-Chrysler at the beginning of 2005 and are quickly taking over Ford Motors and General Motors. The U.S market has the largest and richest automobile market in the world but the sales have been dormant for quite some time. Domestic auto sales fell by 14% in October to 1.15 million vehicles that left General Motors and Ford weak in terms of growth figures. Both companies suffered a 26% sales drop but Toyota was less affected by this (Fetscheirin 2005, p.18) (Kae 2005) (Shirouzu 2005) (Daimler-Chrysler Motor Corporation 2005, online) (Environmental Defence Fund 2007, online).

Growth sales

Toyota sales in the US have been increasing since 2004 by 10.4% a total of 2.06 million cars and trucks. In October of the same year, sales increased by 1.3%. The increase in sales of Toyota cars is greatly influenced by cutting costs in production that were attributed to marketing techniques and huge demand for Toyota models. Big Three agreed to add pension and health-care packages that were reflected in increasing every vehicle by 1 to 2 USD but Toyota vehicles are selling anyway. Though Toyota is still working hard to penetrate the markets, one of its main tools is to ensure that there is a consistent return on investment. Since they operate in different markets and deal with different currencies, they can work as a natural hedge as they have the potential to shift production to ant designated regions. For instance, in their region in Japan, when the value of Yen drops against the U.S dollar, Toyota can either choose to increase production at home and reduce production in the U.S or Japan in order to reduce their cost of production. This is the benefit of multinationals (Fetscheirin 2005, p.19).

Toyota International presence

New Toyota plants are set up to open soon in continents such as Asia, United States, Latin America, and Europe. Toyota has the advantage of open up its market in Europe because it has a reputation of being affordable compared to other models and also its environment-conscious of its consumers. It also can construct manufacturing facilities at a lower cost in all countries in Europe such as the Czech Republic. 60% percent of Toyota automobile is sold in Europe. Europe is looking for ways to cooperate with Toyota like sharing production lines the same way PSA Peugeot Citroen shares with Toyota in the Czech Republic. For Europe to accept the deal, Toyota must reach its stated goal of 15% global market share (Fetscheirin 2005, p.20).

South Africa

In 2004, the automobile industry contributed to 7.2 percent of the total GDP overtaking the mining industry. Toyota achieved net sales the same year of 127,868 units. Toyota has been dominating South Africa’s market for years since it developed its construction plant in 1961. Currently, there are 249 Toyota dealerships in 13 colonies of South Africa that are managed by Toyota S.A. To successfully survive in the South African country, South Africa; has developed programs to influence the surrounding culture known as the Toyota Academy of Learning. This program trains and develops citizens into employees to boost the manpower demanded by the ever-increasing automobile industry (Fetscheirin 2005, p.21).

Middle East

Toyota is currently running its manufacturing companies in India, Turkey, and Pakistan. Toyota started exporting Camry from Australia to the Middle East in April 2004. It later built its Camry in the Middle East to save on shipping costs. Dubai Transport Company also imported Camry from Australia. Australian manufacturing company has been the major import source for the Middle East over the years. While in Asia, Toyota Motor Corporation was established in 1937 and developed a strong foothold in the Asia automobile market with other Asian countries getting involved such as Thailand, Indonesia, and Eastern Russia. Political and economical policies have been the major obstacles in establishing the Toyota plant in China. The main reason why Toyota is penetrating multinational markets is that it wants to strengthen Chinese currency and deliver models faster to dealers around the world. For example in Europe, the company plans to add 300,000 units to its current 775,000 units thereby building other plants in Valenciennes, France. On its plans also is opening up a plant in Russia that will add 550,000 units to European production to overtake other models (Fetscheirin 2005, p.22) (Howard & Nelson 1999, p. 400) (Toyota Recalls 160,000 Prius Hybrid 2005) (Thun 2005).

Toyota began the International Multi-purpose Vehicle (IVM) project to expand its global manufacturing and supply system for multi-purpose vehicles to meet the growing demand in more than 140 countries. Its also attempting the Business Process Offshore Outsourcing strategies to allow faster shipping and to enable it to operate at a lower cost at the same time delivering Toyota quality products (Fetscheirin 2005, p.23) (Toyota Motor Corporation 2005, online).

Competitive strategies

China’s automobile is dominated by foreign companies. As a result of this, there has been intense competition among foreign automakers in the process to succeed in the rapidly growing large market. Competitive strategies that are adopted by foreign investors include vertical and horizontal differentiation and responses to local demand. General Motors has been the most successful in the competitive market due to its quick response to local needs. The success of Volkswagen’s entry to China market in the early years was due to its strong vertical differentiation and its risk-taking strategy. Among the two Toyota possess the least pioneering industry to enter the automobile industry (Chen & Shujie 2006, p.8).

Toyota is less affected by negative economic trends in its automobile industry, it continues to grow whereas its competitors are falling out of the Market. To identify the internal weakness of Toyota we will examine SWAT analysis. This will enable us to explore the opportunities and threats the automobile industry faces. 1). Diversifies Products and Innovative Technology; Toyota can identify the tastes and preferences of its clients globally; this reflects its ability to sell its products effectively and increase its market share. Toyota specifically manufactures its products to cater to customer’s different needs, unlike other companies who care most about making huge profits. It also produces products that suit customer’s financial positions. The vehicles range from tiny two-door couples to large cargo trucks, also from luxury sedans to small fuel-efficient hatchbacks (Fetscheirin 2005, p.24) (Lu 1999, p.7).

Toyota’s success has been attributed to its ability to develop new models that are consistent with its new technological innovation. It has always been on the move to establish new high-technology products such as Hybrid. It has also established itself as a dealer in developing new hybrid models to deal with rising oil prices and increase the desire for people to purchase fuel-efficient automobiles. It experiences competition from other companies such as General Motors and Ford motors but what favors it to survive in the market is that it has established itself in manufacturing economical and affordable vehicles, drawing many consumers to purchase its reliable products. Its ability to target international markets has saved its shipping costs a great deal. Toyota’s ability to market its products in different countries reflects its success in analyzing consumers’ tastes. By it be able to identify models that satisfy the preferences of a particular population, this has enabled it to successfully set up manufacturing plants in many regions to reduce its transportation costs (Fetscheirin 2005, p.25) (Toyota Recalls 160,000 Prius Hybrid 2005).

Total Quality Management employed by Toyota in its manufacturing philosophy has enabled it to combine all organizational functions i.e. marketing, finance, design, production, and engineering to customer service that focuses on meeting customer needs and organizational objectives. The strategy can cater to employee needs as well as managers and executives and at the same time reflect a purpose-driven focus. TQM has been able to establish the quality system and quality culture. Toyota’s entry into foreign markets has enabled it to protect currency fluctuations. The dangers of currency flu actions could result in price hikes to cater to increased production costs. The flu actions could also result in higher real price commodities which would result in overstocking of inventory. Toyota’s ability to shift production to different plants in various continents has allowed it to produce cheaply and also take advantage of weak currency in the countries where it has its plants and also reduce production in countries that have stronger currencies (Fetscheirin 2005, p.25). (Toyota Motor Corporation 2005, online) (Bruce 2003).

FAW was the major joint venture company in China that was manufacturing Toyota cars in 2004. China’s First Automobile works Group Corporation (FAW) was undertaken for economic reasons being that there was a historic tension that made purchasing Japanese products not common in China. Toyota’s role is to provide FAW with financial and technical assistance in production activities. FAW gross sales were over 100 thousand units in 2002. Toyota uses joint ventures in China to produce their parts and materials so that they can be exported back to Japan and the Philippines. Toyota constructed its plants in China to reduce costs of production, take advantage of low labor supply in China and low land costs. Plans are underway to release Toyota models in conjunction with FAW (Fetscheirin 2005, p.28).

Currently, the government of China has established joint venture requirements on foreign entrants to protect its domestic producers. But on the other hand, it hopes to reduce costs for consumers, it will only be achieved if it opens its borders completely and allow competition. It’s putting efforts to drop barriers that would attract other corporations. If its partnership with FAW succeeds, then it can compete with other low-priced Chinese automakers. Other companies dominating the market are Volkswagen and General Motors. To successfully break into the Chinese market, the Chinese will need to be more tolerant of Japanese brands. On an incident that happened in 2005 in the Shangai show where Japanese model cars were damaged during the demonstration, it would be difficult to penetrate the market without a change of attitude (Fetscheirin 2005, p.29).

Multinationals with being able to penetrate China’s market by taking market share from old ones. They will achieve this by introducing new products and lowering prices. For instance, in 2000 Germany Volkswagen took 53.57% of the Chinese market. Three years later, the market share dropped to 35.20 percent. Later 2002 more models were introduced in the market of 40 brands that accounted for 60 percent market share. These new products are just introduced in the market to study its consumption capacity and Toyota will use these statistics to prepare it in entering the market. Other national’s strategy is to invest and expand market share in China by constantly launching new products and lowering prices (Yu Chai 1999, p.6).

In terms of technology, China will not be able to develop car models based on its local market. For multinationals to succeed in the market they need to follow their unique technological developments lines that are compatible with that of the home country. For example, European enterprise has produced the most individualized and high-class cars by manufacturing the models in line with the European market characteristics. The US also produces cars that ordinary citizens can afford by producing volumes of them. Japan produces cars that are energy-efficiency small models that will be able to cater for oil shortages in its country. Whereas China produces cars in the market that is similar to that of the US in terms of size, and that of Japan that corresponds with population density. Chinese enterprises rely mostly upon impetrating or purchasing technology because they do not have technical innovation in their country as this makes them follow their counterparts from developed countries (Yu Chai 1999, p.10) (China Association of Auto Manufacturers 2003) (Evens 1995).

The biggest risk in product development is that investment cannot be recalled. If China opens its markets, then its demand for cars will be satisfied with local production by joint ventures and also increase imports. The risk of developing new products by trying to get into the market share for multinational corporations is higher. The cost of developing one new model is approximately 100 million US dollars and this amounts to high risks if the products are not acceptable in the market this means that Chinese enterprises will go into bankruptcy.

The advantage of a multinational is that it will be able to bear the cost by itself and also be able to produce more new models. Therefore conceding that a Chinese enterprise will be able to survive and grow up in a very competitive environment, its chances are limited. China’s major joint ventures have not been able to engage in independent product development like the other small corporation that has gained access in the market because property rights allocation is controlled by Sino-foreign joint ventures. This joint venture controls technology, brand, collect royalties, control pricing rights and develop network procurement while the Chinese have to pay higher technology fees for using this service even though the model is not designed for its market (Yu Chai 1999, p.11).

The Chinese government should establish an institutional arrangement of interactive learning relationships between multinationals and their local enterprises. To achieve this, the Chinese government has to be lenient with domestic sides in joint ventures, relax on its policies and law that would be able to accommodate foreign technologies to better its economy. At the moment Chinese government has not raised any requirement or even set targets to encourage its local enterprises in terms of technology, products, and market, and bale to supervise the enterprises. Joint ventures mainly depend on the brand and technology advantages of foreign companies to be able to profit from the market. On the other hand, domestic enterprises introduce technologies and make innovations to improve production disablement and later results to the for them to compete intensively so that they can establish joint ventures with foreign companies (Yu Chai 1999, p.11).

Since China’s WTO accession, there have been strategic adjustments of multinationals and domestic enterprise that have changed its relative competitive edges that has also fostered learning and adopting of new circumstances. Local enterprises are relying on multinationals to development of their industrial economy. China’s car industry is gradually leaning towards a multinational-led dependency growth pattern. Based on this research, establishing joint ventures, importing new car models, and relying on multinational corporations are among the strategies that China has developed to boost its domestic enterprise. Since its WTO recession, china attracted foreign investment that’s where Multinational corporations came in. Due to this, the markets have been subjected to harsh competition that has made Chinese marker overly on them. When multinational came into the Chinese market, strategies adjustments were realized, the competition experienced in the market between multinationals and Chinese enterprises, enabled the market to transform towards a dependable development model. Strong policy strategies need to be implemented for it to be able to survive the market so that what happened to the Latin American car industry is not passed on to them (Yu Chai 1999, p.12) ( Jenkins 1987) (Jenkins 1984).

In conclusion, Toyota Motor Corporation has set high standards for its company’s future. It has been able to plan its strategies well that has enabled it to penetrate international markets. Toyota is striving to develop other global automakers through the increased need to be efficient and reduced costs. With all its developments, it has not overlooked the values of global responsibility. The company has been able to balance between technology and people welfare, these projects resulted in short-term profit reduction but the long-term results are overwhelming, it has been able to reduce pollution a great deal. Recent environment concern has forwarded a proposal to automakers to make fuel-efficient vehicle developments with the increase of oil prices but Toyota was not strained on this at all, it is using this as opportunities ahead. Demand for Toyota cars is still increasing for its ability to design fuel-efficient vehicles. Toyota has been able to successfully thrive in the market because it has been able to cater to specific peoples’ needs.

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