International Business Strategy Research Paper

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Geely Car Entry into AU Market

Entry Strategy to Australia's Automobile Market

Demographic/Product Market

Australia's automobile market is among the most developed in the world and would make an ideal market for Geely to target given the relative proximity from the company's headquarters in Hangzhou and Australia. The company moved its headquarters there in 2003 to strategically position for international exports (Jiacai, 2002). However, there are many regulations that exist in Australia that are not present in the Chinese market that Geely will have to adapt to. Australian Design Rules (ADRs) are national standards for vehicle safety, anti-theft and emissions (Department of Infrastructure and Transport, 2012). It's recommended that they pursue a low cost entrant strategy in the urban markets.

Regulations and Incentives

Australia is one of the few countries that are yet to offer incentives for efficiency in vehicles. However, they are many regulations for safety. For example, the Australian government recently passed a new law stating that electronic stability control (ESC) will have to be equipped on most models of cars that are sold in the market. Electronic Stability Control (ESC) helps drivers to avoid crashes by reducing the danger of skidding, or losing control as a result of over-steering (How Safe is Your Car, N.d.). Preliminary research has indicated that Geely would not meet these standards with their current production model however they were allowed to export cars to Western Australia in a temporary arrangement (Hammerton, 2011). Therefore, both Geely could even potential enter the market, it might need to retool its manufacturing facilities as well as redesign some of its models so that it is compliant with Australian standards as the company has had previous trouble with meeting the ADR certification (Hammerton, 2012).

Positioning and Supporting Industries

However, once this obstacle is overcome, Geely will have a multitude of possibilities of positioning itself in the Australian market. The company could attempt to institute a big bang approach in which it tries to enter the entire market at once a position itself as a major player quickly or it could pick a single geographic market and enter the market slowly; as well as any combination in between.

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However, given the fact that the company will likely have to redesign some of its manufacturing capabilities to be compliant in the Australian market, it is reasonable to suspect that it would be more cost effective to try to reach some level of quantities of scale in their Australian offering.

Therefore it is recommended that Geely try to build the brand very quickly in the entire Australian markets or at least in some of the major automotive markets in Australia such as in the urban areas. Also given the fact that the company will have to redesign the cars for this market, it is reasonable to assume bring in one model at a time would be the most reasonable approach. For example if Geely MK enters the market at the twelve thousand dollar range and has to be specially designed for this market in a low cost leader strategy, it probably would not make economic sense to create customized manufacturing lineups in the initial phases of the entrant strategy. Furthermore, this would likely also allow the company to build the brand image in the market allowing for further expansion later on.

Market Development

Production

It was determined that the most advantageous way for Geely to enter the Australian market was to manufacture one model in the low cost market segment. However this segment is the target of other Chinese automotive producers as well such as Chery (Spinks, 2011). An $11,990 drive-away price is confirmed for Australia's first Chinese passenger car produced by Geely in Australia (Dowling, 2011). The twelve thousand dollar market seems to be the benchmark to the low cost segment. It should initially distribute this model as widely as possible in the initial….....

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