expansion of a company worldwide

Executive summary

China has been the biggest automobile market in the world. At present, we cannot imagine that the automobile industry of China does not have its own brands and core technologies. China has been the third largest economic entity in the world, and is bound to cultivate international proprietary brands in the automobile industry. Chery Automobile Co. Ltd was founded on Jan. 8, 1997,is a brand of vehicle that is manufactured by a China automobile company, ranging from super-mini to cross over SUVs, accompanied by various body styles as well as different ranges of market price. Though the Audi headquarter is in WuHu, in the AnHui province in China, the brand is marketed and most known worldwide. This paper will focus on why, when, how and 4Ps analysis, also give introduction about Chery at first and conclusion finally.

Table of Contents

Executive Summary 1
Table of Contents 2
Introduction 3
Why ? 4
Where ? 5
When ? 6
How ? 8
4 P’s 9
Conclusion 11
References 12

Introduction Founded on January 8th, 1997, Chery Automobile Co. Ltd is a state-owned corporation that evolved from his first car selling 30,000 times from December 18, 1999, to the wide spread brand with annual output of over 500,000 units today. The main products of Chery are passenger cars, SUVs and minivans, in addition to joint ventures with Jaguar Land Rover and Qoros.

Chery’s headquarters are based in Wuhu in the Anhui province in China. The brand name was derived from the English word cherry, symbolizing cheerfulness and happiness. The corporate concept of Chery is to “serve mankind with independent innovation and world-class quality”, as well as “Customer first, quality foremost and efficiency paramount”.

The core values of the corporation are targeted management and standard procedure and continual improvement, as well as being human oriented, honest, cooperative, diligent and showing integrity. In 2011, Chery topped its export performance as the largest passenger car exporter by exporting about 25percent of its total production. Currently, there are more than 20 models of Chery available on market, and in addition, dozens more will be released successively. Chery has accomplished a sustainable way of development by doing research and preparation while producing autos at the same time, which supports Chery updating its auto-making technology and making its products always follow the trend.

Why?

In 2009, according to the ‘Report of 2009 China Initial Quality Study’ by JD Power Asia Pacific, Chery’s car models had been elected as top car models in the compact and premium car segment. In the report it is also stated that China improved the initial car quality by 14 percent, leading to the fact that the quality gap between the global and Chinese automobile brands is narrowing. The Chinese customer is described as price-conscious, saying that in the past, low-priced cars were the most important segment for car manufacturers in China in the mid-2000s.
Today, quality is perceived more valuable then price when talking about cars, which leads to the point that widening the customer base increases exposure and brand awareness. These facts support the idea of expansion, since Chinese car manufacturers are gaining popularity due to quality increases and the ability to keep costs low when needed. Expansion beyond the Chinese boarders opens up new clientele and gives the brand a chance to evolve from a local brand supplying affordable cars to a brand that targets customers with a different level of income, following the example of Toyota and Lexus. Considering that foreign brands in the car industry are often perceived as exotic and desirable, being a Chinese car manufacturer in China promises to prove difficult, with small or no chance of targeting the higher income group in China preventing domestic market share increase.
Expanding the brand to other countries opens up the opportunity of manufacturing and establishing a sub-brand overseas targeting a group of higher-income customers, so that export of the new established brand from the overseas to China is possible, allowing foreign brand promotion. Manufacturing overseas also lowers logistic as well as transportation costs. Depending on the country, logistics of needed supplies can be lower in costs, as well as the advantage in labor costs when producing in China. Having several locations to sell the product in different countries allows to soften fluctuations in demand, since the opportunities to relocate produced products according to demand, leading to more production and less time from producing to delivery.

Where? I believe Chery 's first targets of expansion should be the developing markets with that have very little or virtually no local car manufacturing plants and very few local brands. One of the BRIC countries, Brazil, Russia and India (not China) would be obvious good candidates because of their huge expanding markets and low labor costs. In terms of outsourcing, labor costs and the geography are important factors to take into account.
The Middle East for instance is both really located for exporting finished products to Eastern Europe, Africa, and the surrounding countries in the Middle East. Egypt and Iran are both great countries in which to build manufacturing plants because of their great geographical reach and low labor costs. This is where Chery should start its expansion. In continuing its expansion, Chery should also strongly consider opening a production facility in Mexico which is known to be a great automobile manufacturing country.
Mexico has a population of over 110 million with an average labor cost in manufacturing of $4.50 per hour. A plant in Mexico would allow cheap shipment costs for exportations throughout all of the Americas. Other countries such as India, Thailand, Malaysia and Indonesia are also good markets to expand to.

When?

Chery Automobile Co., Ltd. or as we known as Chery, has emerged as the seventh largest car producer in China by 1997. While other Chinese automotive companies doing joint venture with foreign companies, Chery focuses on developing its own car model and technology by developing its R&D (research and development) department. In 2001, Chery realized that lack of independent research and development facilities could be an opportunity for the company to start developing its own R&D department, Chery started to invited those talented engineers from Dongfeng Motor Corporation to join and as a result, Jia Jing Technology Company (JJTC) is formed as an independent R&D company under Chery authority. In addition, Chery also brought in several foreign auto consultant firms to help in product development and hired few Japanese engineers from companies like Mitsubishi to lead the Six Sigma implementation. Chery’s cars were considered cheap and low quality compared to its competitors, though JD Power Quality reported that QQ (Chery’s top sales car model) had 374 defective points per 100 cars which is 85 points lower than the average scores of other cars in the particular segment. Chery was granted the ISO/TS 16949;2002.

“No stability without domestic market, no strength without overseas market, and promoting its business in both domestic as well as the overseas market.”

Chery believes on the principle above and it comes along with the objectives of striving for world leading technologies, owning independent intellectual property rights, building internationally famous brand, and ranking among top world automakers. Chery could enter the international market or expanding it internationally as the first Chinese auto producer before any other Chinese automobiles companies. There are several advantages for entering the international market such as :
1. Pioneer of Chinese automobiles for particular segment
Being the first Chinese automobile brand who enters the international market encourages people from different country to understand more about the product and set the image or brand in people’s mind. By always developing the technology and improving the standard as well as the service, Chery could win over the international market and compete with top well known automobiles companies.

2. Easier to identify the target market and develop brand
Chery provides affordable cars that are desired by particular target market (niche market). For instance, small family, newlyweds, and low-income family who want to own car that is affordable, safe, comfortable, and doesn’t take a lot of space. Considering the technology, engines, price, and size of the cars that Chery offers, this company could embrace the niche market and developing the brand using proper marketing and approaches.

3. Less competitors from Chinese brand
Where Cherry enters the international market for the first time, there is less competition from other Chinese brands. People will have no comparison to other brands, yet Chery could set the good standard for affordable cars.

Expanding the company internationally as the first start of company’s growth. By doing so, Chery is way ahead than others Chinese automobile companies. It will give Chery opportunities to learn and improve more on international market as well as its products and company. Chery also could learn from its former forerunner like Hyundai or Nissan as references. Those foreign automobile companies had started from low cost product and managed to be well known automobile companies.

How?

To do the international expansion, Chery has several possibilities to enter the international market. But since Chery is targeted on affordable cars with low cost, exporting cars as a built-up car or whole unit will increase the cost (logistic, taxes, etc) especially if the target markets are really price conscious. Manufacturing the cars in China is profitable since the labor wage is quite low and for some countries like US and European countries, Chery will have difficulties to maintain low-cost procedures due to different labor wage, properties, and so on. Hence, several Entry Mode strategies could be approached for different countries considering on the labor wage rate, living standard, taxes, legal rules, and so on.
In order to minimize the cost, Chery could try to set up plant to assemble the car for certain countries to avoid the taxes in countries that have low labor wages. By exporting the complete knock down (CKD) units to those plants and assemble the parts into a whole ready car, Chery could minimize the cost and still provides the affordable cars with the same standards as what it produces in China. Standardization of products, services, and guarantees are also crucial when entering the new foreign markets. It could also be the key tool to develop the brand and transforming it into profitability. Chery could hire local people to work at the assembly lines even to top management for better understanding about the foreign condition and situation, yet the company could employ the few people from its Chinese operations to maintain the standards. Partnering up with local people to establish dealers and local networks to sell and market Chery cars into local market. There could be some challenges for entering the foreign markets, such as weak brand image and people’s perceptions about Chinese products. Chinese products were often perceived as inferior quality products and people are either hesitating to purchase or consume it. Yet, by approaching best pricing strategy, Chery could gain the competitive advantage and embrace the potential niche market internationally.

4Ps analysis

Product
Chery’s Headquarters is located in AnHui, China. Chery is one of the most successful multi brand premium automobile manufacturers in China.
Chery manufacturers, distributes and sells cars. Their range includes sedans, coupes and convertibles.
Chery operates under three segments, vehicles, motorcycles and financing 1. Chery Vehicles 2. Chery Financing 3. Chery Motorcycles’
The company’s slogan in English is the ultimate driving experience - “Safer, More Energy Saving and More Environmental-Friendly”
Chery is pursuing world-leading technologies, creating independent intellectual properties, forging a world-renowned brand and exploiting the global automobile market
Chery has 7 different models: A, B, C, D Segment car, SUV &MPV, VANS and EV (such as QQ, Cowin, Easter, Tiggo, A1, A3 and A5)

Price
Chery pricing strategy is a competitive orientated strategy. Depending on the different models

Place
In domestic market, Chery innovates the marketing mode characterized with network marketing. In this way, it not only strengths the control capacity of the market, but avoid unfair competition and internal friction in resource, moreover, it greatly enhance the ability in marketing services, enlarges Chery’s marketing network, so that Chery 's marketing network can cover both the developed towns and undeveloped counties, by building Chery brand, while standardize the core information for product, deliver product positioning and its selling points to customers, it also benefits the customer in clearly finding out suitable products according to their own needs among complex automobile market.

Promotion
Chery has been use advertising to give public to external. The Agency uses television for branding campaigns and new car launches, outdoor campaigns.
Competition also is an eternal melody of the market economy- harmony only belongs to the strong in the end. With the continual development and expansion of Chery, the entire world is keeping a watchful eye on Chery at present. The newborn Chinese automobile brands including Chery will be confronted with a worsening market environment, which is realistic pressure. However, employees of Chery never lack the spirit of drawing sword at critical moments and the courage of fighting. They do not hesitate nor stop due to the changes of the external environment- Even if it needs efforts for generations, we will also realize our final objective.

Conclusion

According to this paper, although Chery has experienced all sorts of difficulties, its future development road will not be smooth, we shall tenaciously pursue and realize the dream without hesitation guided by our own direction and objective, as have understood such mission and firmed such confidence. Today Chery has compared with the one more than ten years ago, accumulated considerable technologies and experience and established its own base, and has also indomitably taken rooted in the international market and has been striding toward our objective.
Today’s Chery is grasping the opportunity of the new adjustment in the global automobile industry to continue exploring and advancing on the road of technical innovation, management innovation, and institutional innovation, and striding toward the direction of building Chery into a modern international enterprise with top-ranking human capitals and sci-tech strength, and the cooperate culture of entrepreneurial spirit, as well as a strong sense of social responsibility.

References

Harish A., 2010.International Center for Management Research, Retrieved from http://www.icfaiuniversity.in/Cases/Cherry%20Auto%20Success%20Story.pdf

Georgina Robinson, 2011. China 's cheap car: is the Chery a lemon? Perhaps, but not for long. Retrieved from http://smh.drive.com.au/chinas-cheap-car-is-the-chery-a-lemon-perhaps-but-not-for-long-20110318-1bzq7.html

Gregory E Osland; Charles R Taylor; Shaoming Zou, Marketing Intelligence & Planning; 2001; 19, 3; ABI/INFORM Global. Selecting international modes of entry and expansion, pg. 153

McGraw-Hill/Irwin, 2007.International Business, 6/e (distributed by teacher)

References: Harish A., 2010.International Center for Management Research, Retrieved from http://www.icfaiuniversity.in/Cases/Cherry%20Auto%20Success%20Story.pdf Georgina Robinson, 2011. China 's cheap car: is the Chery a lemon? Perhaps, but not for long. Retrieved from http://smh.drive.com.au/chinas-cheap-car-is-the-chery-a-lemon-perhaps-but-not-for-long-20110318-1bzq7.html Gregory E Osland; Charles R Taylor; Shaoming Zou, Marketing Intelligence & Planning; 2001; 19, 3; ABI/INFORM Global. Selecting international modes of entry and expansion, pg. 153 McGraw-Hill/Irwin, 2007.International Business, 6/e (distributed by teacher)