(Session: 2009-2011)

Assignment

On

“Entry Strategy in the International Market

Iperian International Ltd.”

Submitted To: Submitted By:

Prof. Ravindra Desai Aniket Bushal

Iperian International Ltd.
It is an automobile y fully established in Indian automobile industry wants to expand in the
international market. Since it is an automobile industry so need a huge capital and a strategic
decision for the mode of entry. The mode of entry based on the country in which we are moving
into with our product is:

MEXICO:

Market Overview :  In 2008, the automotive industry experienced a significant and rapid
decrease in profitability due to declining sales, increased competition, and the higher price of
raw materials such as steel and oil. The slowdown of the U.S. and Mexican economies has
resulted in dramatic changes in the industry and has forced automakers in Mexico to reduce
their production. Market realities have led to new trends in car manufacturing, including smaller
car sizes and increased fuel efficiency. As a result, opportunities exist for U.S. exporters of
spare parts, equipment and new technologies oriented to reduce costs.  There are
approximately one thousand auto parts manufacturers in Mexico and about 70% of these are
subsidiaries of foreign corporations, mainly from the United States. Fifty eight percent of the
automobiles sold in Mexico are imported, of which 75% come from the U.S.  Total production of
vehicles in Mexico in 2008 was 2,102,801.

Mexico: Importing Used Vehicles : The Mexican government announced a change in the
used car imports procedure to Mexico starting in February 2008.The new decree states that
used cars may not be over 10 years old.  This is because a tremendous amount of older than 10
years units were imported in 2005-2006, causing an important increase in pollution and traffic
problems in major cities. From August 2005 to January 2008, 1,776,284 autos between 11 and
15 years old, and 1,073,654 ten-year-

Population: Current population for Mexico is of 111,211,789 (July 2009 est.) and Mexican
population is expected to reach the 112 million-mark at the end of 2010.

GDP: The Gross Domestic Product (GDP) in Mexico expanded at an annual rate of 2.03
percent in the last quarter. Mexico Gross Domestic Product is worth 1086 billion dollars or
1.75% of the world economy, according to the World Bank

Natural Resources in Mexico: petroleum, silver, copper, gold, lead, zinc, natural gas,
timber.

Exports: Alcoholic Beverages, Automobiles, Coffee, Textile and Product Mills, Electric-
Electronics.

Imports: ICT (Especially 3G Mobile, Digital TV & Software), IT, Food &
Drinks, Power.
Mode of Entry: Joint Venture with Toyota will be the strategy to enter in Mexico market.

Car Segment: we will be launching the C segment cars in the Mexico market as from
the last 4-5 years data it has been seen that this segment of cars are successful in this
market.

Analysis: In order to grow, U.S. automakers are looking for places to invest where productivity
is high and that can generate better returns. Industry analysts believe that Mexico can fit this
profile due to its lower production costs and proximity to the U.S., which make the country a
natural place for automakers to assemble the next generation of smaller, cheaper cars. Above
all, Mexico is attractive because its trained labor is much cheaper. Although not on the level of
American worker, productivity is also rising as a pool of experienced labor and training facilities
expand. Equally important, the automobile industry in Mexico—now the country’s most
important manufacturing sector—has the advantage of possessing a critical mass of auto
parts suppliers. Many of these are American brands that have migrated here and now
produce $24 billion annually, which creates a well-integrated auto parts supply chain and a
just-in-time production capacity, both of which allow costs to be trimmed. This sector has
been growing quickly, with 13,500 new positions in last year and a 6 percent growth rate,
signaling a bright future. Furthermore, under the North American Free Trade Agreement,
Mexican-made cars enter the U.S. market without duties, essentially erasing the border for
the auto industry. Free trade agreements with other countries, including the European
Union, most of Latin America and Japan, mean that a plant in Mexico can ship cars to much
of the world with low or nonexistent tariffs, making it an attractive export platform that
manufacturers are increasingly exploiting. Mexico is also politically stable, has a
comparatively strong intellectual property rights regime and a decent utility infrastructure, all
of which contribute to it being a low-risk country to invest in.