of Entry:
Automotive sector is highly competitive so it's better to grab the initiative rather than late. The companies must adapt advance technology, must understand the customer's needs according to the market situations.
Nature of market, competition etc...
In Czech in last 10 years maximum investments can be seen in automotive parts sector. The main competitors in automobile industry in Czech are Skoda, Toyota / TPCA, Hyundai and KIA. Market entry modes depend upon the level of competition in automotive parts industry.
Market entry mode
Pay back:The payback period of initial investment in automotive industry is about four years (Czech Invest, 2010). When we compared with jointly owned mode the return of investment would be higher.
Flexibility:
High resource commitments and proficiency knowledge is required in the fields of automotive sector. Choosing CZ will help firm to export to central and eastern European countries as it is strategically located in central Europe.
Investment and market cost:
The investment and market cost will be high in automotive industry. The firms in automotive industry is more and its makes product differentiation challenging and leads to extra market cost
Administrative requirements:
Some of the administrative requirements in CZ are highly skilled labour, advanced technology, infrastructure and affordable property costs.
Firms whose desire is to invest in automobile industry sector can use Eclectic theory because of selection of location. Further more in detailed can be explained by considering the example of Volks Wagon a Germany company took the control over Skoda in CZ in the year 2001(presentation on Skoda). For exporting their products to eastern and central Europe VW used eclectic theory. They gained ownership advantage due to 100% acquisition but also by maintaining good technology, quality, financial and marketing variables. By considering these factors they gained local advantage and positioned subsidiaries in a place which is ready for automobile market such as Central and Eastern Europe.
Principal Market Entry Modes:
Market oriented
Contractual
Shared Owned and Controlled
Wholly Owned and Fully controlled
Direct Exporting
Agents
Distributors
E commerce
E business
Interactive TV
Licensing
Contract Manufacture
Franchising
Alliance
Management service
Contracts
Joint ventures
Partial mergers and acquisitions
Subsidiaries
Representatives
Assembly
Indirect Exporting
Via domestic
Organisation
Trading companies
Export houses
Piggy Backing
Low Level of involvement high
Low Level of Risk and Control high
Source: Lee & Carter, 2009
The firms whose desire to invest in automotive parts sector in CZ will be appropriate in adapting towards wholly owned and fully control of subsidiaries than the representatives of every other entry modes. For any MEMs, during the selection of entry mode, it is necessary to briefly review the preeminent role of control that may best suits to them. It is advised to companies which invest in automotive industry to be operated in full control because in fully control mode the level of involvement of resources will be high and it will go
