Is it possible for EU Multinational investment in China to benefit Essay

Is it possible for EU Multinational investment in China to benefit both the EU and China - Essay Example This, Oehler-Sincai (2011:74) notes can be attributed to the high growth rate in these economies and the high level of transformation from efficiency driven economies towards innovation driven economies. China in particular, has experienced the strongest growth among the emergent countries over the past three decades. This has been characterised with a high level of investment projects from various developed countries, the European Union (EU) the world’s leading source and host of foreign direct investment, being among them (Vanino, 2012:70). Both China and the EU are among the largest host and source of foreign direct investment in the world and the two countries have over the past years developed an integrated industrial and commercial relationship (Bustillo and Maiza, 2012: 355). Despite the continuously increasing trading relationship between the EU and China, increase investment flows between the two countries have remained limited in comparison. While the European invest ors agree and concur to the suitability of China as a desirable investment location that has high unexploited potential, there are still high concerns concerning a ‘lack of level playing field’ in the region as well as uncertainty and persistent barriers in the Chinese business environment (European Commission, 2012). In recent years, EU investment in China has reached about 20% of all foreign direct investment (FDI) in China. At the same time, China is also growing to be an active investor globally with a growing share invested in the EU market (Vanino, 2012:70). The high optimism on the growth potential within the Chinese market however does not translate immediately to EU confidence in China market as a predictable and sustainable investment environment. This is mainly because of the persistent barriers in China. Furthermore, the EU feels that China has obtained more benefits from their trading and investment relationship, as EU investment environment is more open to China, than China is to EU investors (Vanino, 2012:70; Bustillo and Maiza, 2012: 355). Taking into account the rising importance of China as an investment destination for EU investors, it is important to examine whether it is possible for EU investments in China to benefit both EU and China. Hence, this paper seeks to accomplish this purpose. Background to EU Multinational investment in China Over the past three decades since the Chinese reforms which liberalised the economy to adopt a more market based economy, China has rapidly experienced high growth rates, which has elevated economic development in the country (European Commission, 2011). Over this period, China has experienced a 9% annual average growth rates with its GDP rising exponentially to 5% of the global GDP. This growth resulted to the highest drop in poverty within a country in world history as the people living under a dollar a day reduced by 170 million between 1990 and 2000, and as the country experienced a sudden surge in middle class with a large purchasing power (Commission of the European Communities, 2006). The increased integration of China into the World’s trading system, mainly spurred by the country’s inclusion in the World Trade Organisation (WTO) in 2001, provided China with export markets that were open, hence elevating the country into a trading power. Furthermore, China became a major recipient of FDI with more than

The VW Resende Modular Consortium Essay Example | Topics and Well Written Essays - 3000 words

The VW Resende Modular Consortium - Essay Example The idea of a modular consortium consists of separating the product into sub-assemblies (modules) which are delegated to and entirely provided by a specific module supplier. Therefore, the module supplier is responsible for assembling its module directly on the automaker’s assembly line (Pires 1998, 225). By establishing strong partnership with 7 key suppliers and outsourcing 100% of its manufacturing, VW was striving to: optimize the operating costs, minimize the coordination costs, to improve cooperation between the partners (suppliers), to improve quality and productivity, to increase the market share, and to utilize space more efficiently.Referring to the Porter’s strategic framework, VW’s strategy of manufacturing trucks in Brazil could be defined as a Focus Strategy. Under a focus strategy the firm concentrates on one or a limited range of segment of the market (Thompson and Martin 2005, p.287). Thus did VW, by focusing its manufacturing process on trucks. Working in the automotive industry throughout the world, VW has made a decision to focus mainly on one segment of the automobile industry in Brazil. It was a truck production sector. While this strategy was different from the overall company strategy, VW had to act in a way that best fitted the organization’s competitive environment in Brazil. The company benefited from its specialization on truck segment by gaining strong competency in the production of trucks and some of their modules. According to the information.... g costs, minimize the coordination costs, to improve cooperation between the partners (suppliers), to improve quality and productivity, to increase the market share, and to utilize space more efficiently. Referring to the Porter’s strategic framework, VW’s strategy of manufacturing trucks in Brazil could be defined as a Focus Strategy. Under a focus strategy the firm concentrates on one or a limited range of segment of the market (Thompson and Martin 2005, p.287). Thus did VW, by focusing its manufacturing process on trucks. Working in the automotive industry throughout the world, VW has made a decision to focus mainly on one segment of the automobile industry in Brazil. It was a truck production sector. While this strategy was different from the overall company strategy, VW had to act in a way that best fitted the organization’s competitive environment in Brazil. The company benefited from its specialization on truck segment by gaining strong competency in the p roduction of trucks and some of their modules. According to the information, received from the interview with Jose Ignacio Lopez, the VW Resende Modular Consortium could enable the company to gain significant competitive advantage among the rivals. These included: modern and productive manufacturing process, relatively low cost, quality of the trucks, simultaneous engineering process with the suppliers, speed in the development and launching of new products, common corporate goals and objectives (trend to work more toward mutual success) (Correa and Park, n.d., pp.1, 7, 10). With Focus strategy approach the company can seek either lower costs or differentiation (Thompson and Martin 2005, p.287). Therefore, by going deeper to the Porter’s focus strategy, it is possible to assume that the VW’s Resende