Introduction
The emerging economies of the BRICS nations have experienced phenomenal growth in recent years, transforming the global economy. According to Li and Liu (2021), China is the world’s second-largest economy after the United States, with numerous opportunities for domestic and foreign investors. China has a favorable business environment owing to political stability, a rapidly growing economy, business policies, foreign exchange rates, advanced technology, and a skilled workforce (Li & Liu, 2021). Although there are numerous market entry strategies that SOLA could employ to enter the Chinese market, exporting, foreign direct investment (FDI), and other collaborative arrangements such as licensing and joint ventures are the most appropriate.
Exporting
Exporting as a market entry strategy entails distributing and selling products to foreign countries. According to Aversa et al. (2021), exporting is the most straightforward way for a company to enter or expand its operations. If SOLA chooses to export as its market entry strategy in China, it will sell entirely or semi-manufactured self-driven solar vehicles to Chinese merchants and automotive dealers. The benefits of SOLA company adopting exporting would be a quick distribution of SOLA cars in China without establishing its operation in the said markets. SOLA will realize significantly higher sales and profits than if the company had to develop its function in the market. Furthermore, exporting SOLA self-driving solar cars to China would assist the company in reducing vulnerability, which often occurs when a company relies solely on sales in local markets. Finally, exporting vehicles to China would boost SOLA’s competitiveness by positioning the company’s products in both domestic and international markets.
However, in addition to the numerous advantages of exporting goods to a foreign country, the market entry strategy impedes market entry or expansion. According to Aversa et al. (2021), companies that use it to conquer foreign markets face severe disadvantages. The first issue is the additional cost of transportation and tariffs. SOLA will also face financial risks due to economic and government restrictions, and exchange rates may disrupt SOLA operations in China. Finally, the company will face payment delays because it frequently involves complicated processes such as consignment, which takes time.
Foreign Direct Investment
SOLA company could also benefit from FDI to enter the Chinese market. According to LĂĽtkemeyer et al. (2022), FDI allows foreign companies or investors to buy or establish new businesses in targeted countries. Most FDI companies have chosen China as a destination in recent years. Because SOLA has no business in China, it could either buy a current company or establish a new one to sell its solar cars in the market. The primary benefit of FDI to a company is the reduction of import and export costs, which hurt international businesses. According to LĂĽtkemeyer et al. (2022), FDI allows new companies to produce local resources with minimal disruption from the country’s governments. It is also worth noting that SOLA under FDI will benefit from low labor costs.
However, FDI as a market entry for SOLA company has some negative consequences that could significantly impact its operation in the Chinese market. According to LĂĽtkemeyer et al. (2022), establishing a subsidiary or company in a foreign country is costly, and SOLA will need significant money to develop its premises. Recent studies have also identified political risk as a factor SOLA must consider when purchasing or establishing a company in China (LĂĽtkemeyer et al., 2022). Finally, because SOLA is an American organization, China’s exchange rates and economic regulations may not favor SOLA since the Chinese yuan lags behind the US dollar, resulting in a low-profit margin.
Joint Ventures
A joint venture is another strategy SOLA company could employ to enter the Chinese market. According to Jin and Wang (2021), a joint venture is a business partnership formed by two or more companies or business associates who share familiar customers. More often than not, companies that agree to do business together pursue a common goal and project, resulting in increased business growth and popularity (Jin & Wang, 2021). When international companies join forces, they bring new expertise and workforce experiences to the table, allowing the partnership to thrive (Jin & Wang, 2021). Furthermore, risk and cost-sharing may assist SOLA in carrying the economic burden that SOLA would have had to bear if it could handle its operations in China. It is also worth noting that SOLA will have an increased reach of resources and equipment as opposed to when it decides to launch business operations on its own in the market. However, misunderstanding and disagreement among partners often lead to business failure. Moreover, SOLA will experience different operating and work methods with a high probability of impacting operations and collaborations.
Recommendation
According to the above analysis of market entry strategies, FDI is the best option for the company because labor costs in China are lower than in the United States since the Chinese yuan is weaker than the US dollar. As a result, SOLA will save a significant amount of money in the long run. The low production costs will make SOLA vehicles more affordable, increasing sales. Furthermore, China has a stable political and economic profile, so SOLA will face no business risks. As a result, if the company chooses FDI as its market entry strategy over the other methods discussed, it will be easier to establish roots in China.
Marketing
SOLA self-driving solar vehicles are expected to be ideal for Chinese citizens. Rosário and Raimundo (2021) discovered that China ranks second in the auto market, and its middle-class population has a high demand for vehicles. Furthermore, the country has recently witnessed many road accidents, so self-driving vehicles would significantly improve road safety. SOLA self-drive cars may be adopted by many Chinese to ensure road safety. Based on the size of SOLA’s vehicles, it will be beneficial in narrow roads and congested areas. Furthermore, SOLA sells its cars for only $10000, which is reasonable given that the vehicles are self-driving, solar-powered, and have high safety standards compared to the $12000 standard Chinese car (Shen et al., 2021). I think it will be difficult for SOLA company to sell its version in the Chinese market. China has already embraced technology and is selling cars at this price. Moreover, the SOLA cars only accommodate only two. Thus a change in design would be necessary, at least to have multiple in a car considering big family sizes.
Managing International Operations
Managing operations is critical for any organization because it allows for the planning, controlling, and supervising of all of its activities, including personnel. According to Daniels et al. (2018), for a SOLA company to succeed in China, it must effectively manage its resources and control its operations to ensure quality, productivity, customer satisfaction, and lower operating costs. SOLA could use ethnocentric, polycentric, or geocentric staff frameworks to establish roots in China.
Ethnocentric
SOLA could manage its operations in China with ethnocentric staffing. According to Daniels et al. (2018), this staffing framework prioritizes home country nationals for top positions. For example, SOLA must have American executives to ensure top management has sufficient experience with SOLA vehicles. This staffing framework has been shown to promote organizational unity. However, it prevents the company from appreciating local talents who could be beneficial in terms of innovation.
Polycentric
SOLA could also use this staffing framework to manage its operations in China. According to Daniels et al. (2018), this approach assigns top positions in an organization to both home nationals and local workers. The main advantage of this approach is that it facilitates organizational learning because local workers understand the market better than nationals. Polycentric, as opposed to ethnocentric, gives limited promotions to locals, except for top corporate positions. The most difficult challenge in implementing this staffing framework is the emergence of a performance gap between local and home country managers.
Geocentric
Under the geocentric framework, SOLA will hire anyone randomly, regardless of race, culture, Background, or country of origin. According to Daniels et al. (2018), the primary concern of geocentric is job qualification, and anyone with excellent skills will be hired. The geocentric framework can improve the company’s cultural learning and knowledge of available markets and countries. However, the framework strains human resources because they must deal with immigration and relocation issues.
As an international consultant, I advise SOLA to manage its operations in China in a polycentric manner. The strategy will allow SOLA to maintain its US management style and operations while learning more about the Chinese market. Employing experienced Chinese workers in SOLA administration is beneficial because they understand customers’ needs and can be very useful to SOLA operations. Furthermore, local employees will strive to give their all in the hopes of being promoted, propelling SOLA to the forefront of the market. Again, local managers understand ground customer needs better than national home managers, so that a polycentric framework would be best for SOLA. When selecting the right candidate to lead operations, SOLA company should consider a person who lives in China capable of adapting to new cultural norms, and having good communication skills. Moreover, the candidate must understand customers’ needs and SOLA’s financial performance.
Conclusion
In conclusion, SOLA should consider expanding its self-driving solar vehicles to China rather than any other BRICS country. Recent studies say China has the world’s second-largest economy and a massive population with high purchasing power. Furthermore, China’s political environment is stable, and SOLA operations will be unaffected by political unrest. Although cultural beliefs differ between China and the United States, SOLA must consider cultural issues to operate successfully in China. This implies that SOLA expatriates should learn Chinese to communicate with Chinese customers effectively. Regarding trade relations between China and the United States, it was discovered that both have solid relationships and FDI. As a result, SOLA’s recommended market entry into the Chinese market was through FDI. China’s financial environment will allow SOLA to operate at a lower cost compared to when SOLA operates in the US, a matter influenced by the exchange rates between the countries. Finally, because the ground manager must be fluent in Chinese culture, language, and leadership skills, a polycentric approach to managing international operations would be ideal for SOLA.
References
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Daniels, J., Radebaugh, L., & Sullivan, D. (2018). International Business, Global Edition (17th ed.). Pearson.
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