Subscribe to DeepL Pro to edit this document.

Visit www.DeepL.com/pro for more information.

NISSAN CASE
Natalia Jaraba T00061252

1. Summarize the main problems of Japanese automakers in the late 1980s in relation to the development of the European market.
Describe the political and economic environment they had to deal with.

Japanese automakers faced two significant challenges. First, the substantial appreciation of the yen made exports difficult from an
economic perspective. Second, from a political standpoint, they encountered opposition to increased imports, which resulted in the
implementation of export control agreements, thus limiting the amount of stock that Japanese automakers could take in Europe. In the late
1980s, France imposed restrictions on imports, limiting them to 3% of the total market, while Spain set a quota of 3200 units, including those
imported through other European Community countries, and Italy restricted imports to only 3300 units.

2. Describe what major factors led to Nissan's decision to implement a local production plant and, especially, what
circumstances led to the choice of Sunderland, UK.

Due to restrictions imposed by several European Community countries on imports from Japanese automakers, many Japanese companies were forced to
establish production facilities within the EC, either through acquisitions, mergers or joint ventures. Nissan chose the UK because of favorable government
policies, subsidies for fixed capital investment, and the availability of a suitable workforce. In particular, they chose Sunderland for the following reasons:

First, Nissan Motor Co., Ltd. needed a site that had sufficient space for possible future expansion, and the local council and development corporation offered
them a 930-acre site, which had previously been Sunderland Airport. Second, during negotiations, the council offered the land as a single production facility.
Finally, the choice of this region was based on its similarity to the Ohio-Tennessee region in the United States. These similarities included a high
unemployment rate, an ethnically homogeneous population, as well as the logistical requirements and availability of necessary government subsidies.

3. In general, Japanese automakers had different options with respect to their market entry and operating strategy. Discuss why
Nissan Motor Co., Ltd. decided on FDI and what other possibilities it had. What are the main advantages and disadvantages of
other modes of market entry? Compile the factors that influence a company's choice of entry mode.

When considering operational and market entry strategies, it is important to note that there are alternatives to Foreign Direct Investment
(FDI). These alternatives include direct exporting, licensing, franchising, joint ventures and strategic acquisitions.

 Direct Export:

 Advantages: This strategy minimizes both risk and capital requirements, being a conservative way to explore international markets.
Manufacturers can restrict their presence in foreign markets by hiring wholesalers with importing expertise to handle distribution and
marketing in those countries. In addition, this strategy can contribute to the experience curve and gain economies of scale by
manufacturing the product in a central location and exporting it to other domestic markets.

 Disadvantages: It is not always appropriate to export from the company's headquarters, especially if there are lower cost overseas
locations for manufacturing. High transportation costs, especially for bulk products, may make exporting not economically viable. In
addition, tariff barriers can make exporting difficult.

 License Concessions:

 Advantages: This strategy avoids the risks associated with investing in foreign markets that are unfamiliar, highly uncertain
or politically volatile. It is often used when a company wishes to enter a foreign market but encounters barriers to investment.
It is also useful when a company owns intangible properties with commercial applications, but prefers not to develop those
applications itself.
  Disadvantages: There is a risk of providing valuable technological know-how to foreign companies and thus losing some
degree of control over its use. Technological know-how is the basis of competitive advantage for many multinational
companies.

 Franchises:

 Advantages: The franchise model allows the franchisee to assume most of the costs and risks of establishing overseas
locations, while the franchisor focuses on recruiting, training and supporting the franchisees, similar to licensing.

 Disadvantages: Maintaining quality control can be a challenge, as foreign franchises do not always guarantee consistency
and standardization.

 Joint Ventures:

 Advantages: This strategy benefits from a partner's local knowledge of competitive conditions, culture, language, and
political and business systems in the host country. When the costs and risks of establishing a business abroad are high,
sharing them with a local partner can be beneficial. In addition, in some cases, political considerations make joint ventures
the only viable option.

 Disadvantages: Similar to licensing, there is a risk of ceding control of the technology to a partner. In addition, it does not
provide complete control over subsidiaries, which may be necessary to achieve economies of scale and location. Shared
ownership can lead to conflicts over control between the investing companies.

After evaluating all these market entry strategies, it can be concluded that Foreign Direct Investment (FDI) was the preferred
choice for Japanese automakers in Europe due to the market conditions and political factors present in many of the countries in
the region.

4. Define different types of market barriers and show their effect on the mode of entry. Explain the different
strategies a company can use to deal with entry barriers in the context of internationalizing its business. Give some
examples

 Protective or ins titutional barriers can be divided mainly into tariff and non-tariff barriers. In the context of exports,
these barriers may manifest themselves through customs duties. In addition, the host country may implement
stringent local content regulations in order to protect its own domestic industry.

 Economic barriers may arise from the economies of scale of companies already established in a given market.
Also, product differentiation by established firms may generate stronger customer loyalty, which is a significant
barrier.

 Behavioral barriers are derived from the specific preferences, knowledge or habits of customers and other
stakeholders.

In addition to these general categories, there are industry-specific barriers, such as the FDA approval requirement in the
U.S. pharmaceutical industry. For example, in sectors such as electronics, oil and gas, and financial services, there are
specific regulations and laws that operate as barriers to entry.