Question

Question #1: As we learned in prior classes, the first step of implementing strategic management is environmental scanning. Please conduct some general web search to determine, as of 2007, if the United States auto market would be attractive to Chery. [You can look at the growth of cars sold in the united around that period]

Question #2: If Chery were to go solo (without having a partner) in entering the United States to market its compact passenger vehicles, what would be the biggest selling point? And please evaluate the potential challenges it would face vis-à-vis the following aspects

Production

Marketing

Institutional relation (environmental and regulatory)

The speed of entry into the U.S

Question #3: Based on Case (A), what could Chrysler get out of the intended alliance with Chery? (benefits) Would there be any unintended consequences for Chrysler? (risks)

Question #4: Case (B) mentioned Jaguar Land Rover (JLR) and BMW both entered through forming a joint venture with local partners. Why would they pursue such an entry mode

Question #5: Please suggest an alternative mode of entry to Chery with justifications.

Answer 1

1.

I don't think Chery will be suitable for the US car market. These are compact vehicles, popular in China's major cities. They like these cars because in larger cities in China they can navigate around other vehicles and pedestrians. They have a huge population, and need smaller cars that can fit in spaces. Whereas, we appear to have bigger vehicles in the USA. The form of the body is also quite distinct. I just don't think the look itself from Chery will draw U.S. people to purchase that particular vehicle. And I don't think that selling to the US will be the right idea because they've made a lot of improvements to their vehicles.

2.

· Production- They would face challenges in finding a location that can make a high quality car for a lower price. Other car dealerships would more than likely have all of the good production places to begin with.

· Marketing-They would have to do a lot of market research to target the right consumer which is very costly to do. This would get very expensive for them.

· Institutional relation (environmental and regulatory)- Also a very expensive point that they would have to reach. They need to make sure their cars are able to be “clean” enough to be able to run in American. Also, they would have to make sure their factories are not too harmful to the environment.

· The speed of entry into the U.S- A lot of United States Citizens have trust in brands. They believe and rely on their trusted brands to get them from point A to point B without breaking down. So they would have to build a solid brand recognition in order to get new customers to trust in their cars.

The biggest selling point for Chery would be small cars are less expensive to fill up at the gas pump. It would be an economy car that is relatively cheap and gas wouldn’t cost as much which could lead to developing an eco friendly car.

3.

Pros:

• Promising route to build a competitive small-car lineup for consumers who were pinched at the pump by rising gas prices.
• America needs small cars, they would be the first to break into the market with this partnership
• Chery has expanded into other international markets so they have the skills and knowledge to do so already.
• Chery gained a foothold overseas by building knock-down factories and setting up auto parts

Cons:

• American consumers perceptions of Chery quality
• Bringing Chery’s Chinese-designed-and-built cars in line with tough North American emissions and safety standards.
• United States consumers thought the brand build poorly.
• Chery was not seen as a reliable car.
• Chery had fallen out of the top 10 largest carmakers in China.

4.

Both of the companies have strong and sufficient core technologies that Chinese companies lacked. That is what made those companies so attractive. The local partners know their home country the best. That gives BMW and Jaguar Land Rover the inside scoop of the country and its consumers who would be purchasing the cars from them. They came in with better technologies and the local partners knew their consumers so they both benefitted from this partnership and it was a very good idea to do so.

5.

They could do a licensing where they charge a fee or royalty for the use of its technology, brand, and expertise. They could break into the market that way with someone highly motivated to bring small cars into the united states. Then someone local to the united states market would be able to help them break into the market but with less of their own rick. They would just guide the start up of the licensing company from China.

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