Toyota Motors Corporation in the Different Aspects of the Chinese Market: Regulations and Competition - Research Paper Example

 The Chinese automobile industry has been an attractive market for players around the world. The government of China started taking new directives in policy framing to attract foreign capital. In the passenger car industry, the existing policy in 1970 - 80 was directed to substitute import, enhance the knowledge base of the indigenous players and finally in independent development of products. Interestingly, the global linkages enjoyed by China cannot be compared to that of Japan or USA. The country, till 1970s, was a tightly closed economy. Of now, it is planning simultaneously to attract investment, technology and foreign trade. Most importantly, the Japanese and US automobile industry actually has strength whereas the Chinese economy presents itself as a country with opportunities only. Foreign companies were expected to transfer technical knowhow initially through semi knock down and then through complete knockdown process. This was the general view of the industry almost throughout the 1980s. (Yang X., 1995) The declaration of the first Automobile Industry Policy in 1994 marked a change in the outlook of the Chinese government towards inflow of foreign capital. According to clause 28 of this policy, a Chinese automobile manufacturer can choose to use foreign funds through a joint venture with a foreign company if it possesses its own patent and trademark rights, international sales network and financing capability. Furthermore, the joint venture so formed must have an in house research and development center. It should also be instrumental in promoting products in order to achieve favorable foreign exchange balance. Clause 31 requires that Chinese shareholding should not be less than 50% in the JV producing finished cars. All these create a tough competition for European, American and Japanese companies each trying to get a share of the Chinese market. Essentially, in a different approach from most of the developing countries, China has taken strategic actions to ensure stability in its own automobile industry rather than become the workshop of the whole world. Formation of an alliance is extremely critical to enter a foreign market. The entry mode will decide the fate of the alliance in future. The manifold increase in the number of alliances has made economists name this period as “the age of alliance capitalism”. Different entry routes provide different degree of managerial control and flexibilities to the parent company. There are primarily three modes of entry in China. The first one is by making alliances with a firm from the same country. Japanese firms, on account of their interdependent business models and shareholding patterns often take this route. Another route of entry is through alliance with an international firm. This mode is suitable when the two firms compliments each other in different fields like technology, cost reduction, gaining competitive advantage, etc. the third mode of entry is for non-Asian firm like an American or European firm, to form an alliance with an Asian firm so as to bridge the cultural gap. (Tse D.K., Pan Y. and Au K. Y., 1997) In China, for example, the joint venture route is quite popular. This is mainly due to government regulations that demand not less than fifty percent of the shareholding of the Chinese company. Toyota Motors Corporation has its presence in both joint ventures and wholly owned subsidiaries. In the vehicle manufacturing units, it has entered into joint venture withlike in Tianjin FAW Toyota Motor Co., Ltd. (TFTM) where Vios, Corolla, Corolla, EX, Crown, Reiz are manufactured, Sichuan FAW Toyota Motor Co., Ltd. (SFTM). It also has wholly owned subsidiaries with Tianjin Toyota Forging Co., Ltd. (TTFC), where it manufactures forged parts. 2. Aims and Objectives The aims and objective of this paper is to precisely analyze the different modes of entry of foreign multinational companies in china. A study of different theoretical frameworks has been undertaken to investigate the economic differences amongst the modes of entry. The interview of different MNCs operating in china as well as discussion with officials of the Toyota Motors China division, made it easy to understand the different aspects of the Chinese market, regulations and competition. Further, an investigation has been made to understand the ‘Chinese’ contribution towards the performance of Toyota, the largest auto manufacturer today. The analysis of financial data is used to support the findings. Finally, based on the findings, we come to a conclusion regarding the suitable entry mode that companies should follow. 3. Literature Review Broadly speaking, there are four alternatives of market entry that are available to firms. They are exporting, license, joint venture and wholly owned subsidiary. (Jain S. C., 2001) Exporting should not be counted in the same bracket as the others, simply because it is a tool used to bridge the demand supply gap in a foreign country. As a firm moves from licensing to joint venture to wholly owned subsidiary the power of managerial control as well as the risk-return trade off increases. Here, we will study important theories that guide a firm to choose the most suitable entry mode. The first one is the Transaction Cost Approach (TCA) according to which firms will invest in another country to benefit from the competitive advantage in any stage of the value chain. This approach seeks to describe “the choice of institutional involvement” of multi national corporations. (Barclay L. A., 2000) Williamson defines the multinational corporation (MNC) as “the product of a series of organizational innovations that have the purpose and effect of economizing on transaction costs” (Barclay L. A., 2000) A firm will go international if it incurs a higher operating cost at home than abroad. The transaction costs as defined by Williamson refer to costs associated with the transfer of technology, search of a suitable buyer, negotiation of contracts, etc. In this direction the best suitable involvement on the part of multinational corporations will be the wholly owned subsidiary route. This allows flexible control over the subsidiary unit and also the comfort of necessary disclosures. The interrelation ship among firms in the transaction cost approach is seen as market imperfections. (Dubois A, 1998) Although on economic grounds, the TCA suggests that a firm will generally look towards a low control entry mode, this sense of market imperfection can tempt it to take the high control mode. Teece advances this theory by extending the concept of knowledge beyond technology to include managerial, administrative and marketing skills. At this point, a few words need to be said about the types of integration between multinational firms. MNCs are said to be horizontally integrated when it produces similar commodities across its production units worldwide. The MNCs that produce different components of a product in different parts of the globe are said to be vertically integrated. Teece argues that the emergence of horizontal MNC is due to increasing transaction cost associated with movement of owned assets of the firm. Similarly, vertically integrated MNCs are borne in an effort to avoid switching costs. The TCA identifies seven key factors that determine a firm’s choice of entry mode. These are uncertain demand in the host country, cultural gap between the home and foreign country, market attractiveness of foreign country, technological frontier of production, perceived fair pricing for technology transfer, transaction frequency with other subsidiaries of the firm and the size of the MNC. (Jain S. C., 2001) Table: Factors affecting the choice of entry route – Transition Cost Approach Source: (Jain S. C., 2001) Another theory that demonstrates similar lines of thought as the TCA is the internalization theory. Both of them are based on market imperfections. However, the internalization is based on the fact that firms will internalize the process of production when the market for the intermediate products fails. (Barclay L. A., 2000) The internalization theory underlines the reasons that make firms go for production rather than selling its competitiveness. This will be done when it is more efficient on the part of the firm to create a market of its own, rather than supply to the already existing one. Such a phenomenon happens if the firm is apprehensive of the future of the market and might even fear a market failure. Government intervention plays a significant role in this framework. Firms tend to move to locations where the tax liability is less and from where they can repatriate a considerable part of their profits. Ultimately, the firm will bring under its purview all those activities which were earlier being undertaken by the market. This process will turn firms into Multinational Enterprises when it happens on a global scale. On establishment of the MNE, the firm will restrict the erosion of firm specific benefits through its internal control measures. The industry specific factors result in internalization of markets for intermediary products; this gives rise to vertical integration. Similarly, the internalization of markets for knowledge will give rise to horizontal integration. Though it has been theoretically proved that MNEs will avoid the market for intermediate products and knowledge ranging from managerial knowhow to technological prowess and take the FDI route for the same, this model lacks empirical support. In spite of this, the contribution of the model that the global firm that internalizes the market will always prefer the wholly owned subsidiary route of entry in to a foreign market is of immense contribution in this area of literature. (Barclay L. A., 2000) In a somewhat deviation, Kogut and Singh outlines that the transaction cost approach is not sufficient enough to gauge the motives of an MNC in deciding its entry routes. (Barclay L. A., 2000) According to their work, cultural differences between the home and foreign country will be a significant force towards influencing managerial decisions. Importantly, these differences will play a pivotal role in choosing the entry route of the firm. Firms at a greater geographical distance will have greater cultural difference than firms that firms that are nearer. Hofstede further identified the aspects of cultural difference between countries as tendency to avoid uncertainty, individualistic attitude, gender bias and tolerance of power. Empirical testing showed that further an investing firm is from the US; greater is its tendency to choose a joint venture over acquisition. The attitude towards avoiding uncertainty makes a firm chose a joint venture and Greenfield investment over an acquisition. The Bargaining Power Theory (BP), as the name suggests, refers to the bargaining power of the host and the foreign country that determines the choice of the mode of entry. This theory has a political shade to it which allows the powerful nation among the two to draw the negotiations in its favor. According to this theory, a firm will naturally incline towards high control modes of entry so that it can gain an upper hand in the long run as far competition is considered. But, its bargaining power as against its counterpart might force it to take up low control modes if the later is powerful than the former. An important determinant of the BP theory is the stake of the parties in a project. Stake is the degree of dependency of the parties on the outcome of the negotiation. Naturally, stake and bargaining power is inversely related. Logically, the number of alternatives available to each member of the negotiation is important in the sense that one who enjoys greater number available alternatives will have a greater bargaining power. Like the TCA, the BP theory also has seven factors that affect the decision making of a firm regarding the entry route. These are host country’s interest in the investment, Interest of the MNC in the investment, attractiveness of the host country that generates competition among investors, legal restrictions, and local support for the MNC, resource commitment and risk associated with the MNC The following table gives a synopsis of the different factors according to the BP Theory and its effect in determination of control level of the entry route. Table: Factors affecting the choice of entry route – Bargaining Power Theory (Source: Jain S. C., 2001) The Eclectic theory propagated by John H Dunning is another important piece of work in defining the determinants of Foreign Investment. Dunning says that there must be three factors available for a firm to invest abroad. These are Ownership specific advantages (O), location specific advantages (L) and internalization advantages (I). The first one relates to specific advantages that the firm has over its competitors in the market where it plays, the second one refers to advantages that a particular location should have for the firm to invest there. Internalization advantages refer to those which define why the firm should invest rather than meet the same needs through trade. Taken together, these form the OLI framework. Operating in a foreign environment crops up certain problem for the firm like the alien culture and improper knowledge of the operation of the market against as against the firms based out there itself. The cost of operating from a distance coupled with communication costs will also add up the disadvantages. The return from the investment must be higher than the cumulative disadvantages for it to invest abroad. Ownership specific advantages are those factors which the foreign firms posses over the domestic firms. These advantages would enhance the profit margin of the foreign firms and keep them in competition against domestic firms. The ownership advantages can be subdivided into tangible and intangible assets where the former is referred to as endowment advantages or access to superior capital or manpower. The intangible assets refer to developed organizational skills, managerial ability etc. The location specific advantage defines where a firm can invest so as to reap the maximum gain from its ownership specific advantages. This can be subdivided into economic, social and political advantages. Economic advantages cover the aspects of product, technology, infrastructure etc. The social and cultural advantages include the attitude towards foreigners, cultural gap, and government outlook towards free market economy. The political subheading encompasses all those factors which politically affect the flow of investment into the country. Generally, a peaceful country with political stability is obvious to attract investment easily than a country which is labeled as risky by investors. In addition to this, a country with low tax rates, quality resources will be an attractive investment destination. The internalization advantages sheds light on why companies with the required ownership advantage choose to set up a firm of its own in a foreign land rather than do the same through trade. Dunning attributes this to the costs incurred through contract maintenance, quality maintenance, or costs associated with other trade barriers. Barriers like tariff and quota makes it al the more expensive for an foreign firm. If a firm chooses to invest, it can bypass these costs and perhaps, do business with a better margin. In case these costs are absent, then foreign companies will chose to take the export or franchisee route. Till these costs exist, and they do exist in most of the cases, investment through JV or Subsidiary is comparatively less costly. The OLI framework provides with an in-depth analysis of the reasons behind a country becoming a favorable destination for foreign capital in relation to its peers. In the Hierarchical Model of Market Entry Modes, Yigang Pan and David K. Tse classifies entry modes as equity based and non equity based modes. The equity based entry mode constitutes of joint venture and wholly owned subsidiary, whereas contractual agreements and export cpomes under the heading of non equity based. Examining about 10000 entry modes in China from 1979 to 1998, it has been concluded that effect of certain macro factors is prominent in choice between the first level of hierarchy, ie the equity and non equity mode, but seems insignificant in choice between the second levels of hierarchy. Another important focus of this model is to verify country specific variables from both the host and foreign country that affect entry decisions. (Pan Y, Tse D. K., 2000) The review of theoretical articles remains incomplete without considering the Chinese case. The above studies have had USA or Japan mostly as the underlying country. The story of entry of foreign firms in China is interesting for two ways. Firstly, China has been undergoing a transition phase of socio political change from 1979 which makes investing firms constantly re design their strategies. Secondly, by 1995, China had already become the second attractive destination in the world. According to Shenkar, there are a number of foreign firms who have marketed their products manufactured in the production units within China. This leads to the fact that with an increase in intensity of foreign investment, multinational corporations will prefer to take the equity based entry route. (Tse D. K., Pan Y., Au K. Y., 1997) 4. Research Methodology 4.1. Primary Research and results A survey conducted on about 150 representatives from the MNC automobile manufacturers of (through e-mailed questionnaire, Please refer to the appendix for the same) China has revealed interesting results. About sixty four percent felt that the current ongoing crisis will force them for a change in their plans. On being asked about their strategy to capture the mass market in china, the most of the representatives (almost 85%) felt that pricing holds the key to get an upper hand over the competitors. The survey revealed that most of the MNCs had come to china to start operations keeping in view the untapped market of China; almost equal numbers felt that cost of production and access to suppliers was the reason for their coming to china. On asking how they could bridge the cultural gap with local people, almost three forth said they had imbibed a balance between employees from both home and foreign country. A deeper analysis revealed that the senior level of management consisted of members from the home country; local representatives were roped in to ensure day to day operations run smoothly. Moving on to a different perspective, about seventy five percent of the respondents feel that the Chinese government will not change its stance regarding the upper bound of ownership by foreign countries. This means to come to china, MNCVs will have to form alliance with Chinese firms who should have 50% ownership in the deal. Only 37% seemed optimistic that post-crisis, the government might change its outlook. Since the electric cars have attracted considerable attention as automobile manufacturers’ plan to reduce dependence on petroleum and go green, the survey included this aspect as well. However, quite surprisingly, it met with a cold response. 4.2. Secondary Research The paper has inputs from different books and journals, accessed online, to discuss various issues. The company website of Toyota Motor Corporation, FAW etc was consulted to research on financial data. Apart from this, annual reports form an important part of analysis. 5. Analysis of Financial Performance of Toyota Motors In a recent achievement, Toyota overtook General Motors to become the largest automobile manufacturer in the world. Today, it is the leader in operating profit margin with a sale of 8.9 billion vehicles worldwide. The sale of the major brands of Toyota as in Toyota, Lexus and Scion almost tripled profits between 2000 and 2008. However, the present scenario is not perhaps the right time to comment on its performance. The credit crunch has played a major role in downgrading of Toyota Motor Corporation by Moody’s Investors Service from AAA to AA1. Major attributes to the slump in Toyota’s quarterly reports have been the appreciation of the Japanese Yen against dollar, high prices of raw materials, coupled with global decrease in demand. Even then, analysts are of the view that its flexibility and cash liquidity should se it safely through this turmoil. Toyota has remarkably used its presence in different countries of the world. In China, it has strategic alliance with ten automobile companies. In some of the association, it produces vehicles while in others it manufactures ancillary parts. In China, Toyota has ten manufacturing units located. Following are their details: Name Of Unit Start of Operations Main Products 1. Tianjin Jinfeng Auto Parts Co., Ltd. (TJAC) October 1997 Steering assembly, propeller shafts 2. Tianjin Fengjin Auto Parts Co., Ltd. (TFAP) May 1998 Constant velocity joints, axles, differentials 3. Tianjin FAW Toyota Engine Co., Ltd. (TFTE) July 1998 Engines 4. Tianjin Toyota Forging Co., Ltd. (TTFC) January 1999 Forged parts 5. Tianjin FAW Toyota Motor Co., Ltd. (TFTM) October 2002 Vios, Corolla, Corolla, EX, Crown, Reiz 6. FAW Toyota (Changchun) Engine Co., Ltd. (FTCE) December 2004 Engines 7. Toyota FAW (Tianjin) Dies Co., Ltd. (TFTD) December 2004 Stamping dies for vehicles 8. Guangqi Toyota Engine Co., Ltd. (GTE) January 2005 Engines, engine parts (camshafts, crankshafts) 9. Sichuan FAW Toyota Motor Co., Ltd. (SFTM) December 2000 Coaster, Land Cruiser, Land Cruiser Prado, Prius 10. Guangzhou Toyota Motor Co., Ltd. (GTMC) May 2006 Camry Source: (Toyota Company Profile, 2009) At the end of March 2008, the total numbers of vehicles produced by Toyota in China stood at 4,46,000. Of this, 2,71,000 were produced at Tainjin FAW Toyota Motor Co. Limited, 5000 by Sichuan FAW Toyota Motor Co., Ltd and 1,70,000 by Guangzhou Toyota Motor Co., Ltd.(Overseas Production Companies: Production, Sales and Exports, 2008) Among the above mentioned companies, Tianjin Toyota Forging Co., Ltd. (TTFC) is a wholly owned subsidiary of Toyota Motors with 100% equity stake. It also has 50% joint ventures with Tianjin FAW Toyota Engine Co., Ltd. (TFTE), Tianjin FAW Toyota Motor Co. Ltd(TFTM), FAW Toyota (Changchun) Engine Co., Ltd. (FTCE) and Sichuan FAW Toyota Motor Co., Ltd. (SFTM)( In STFM, Toyota Motors has 45% equity and 5% stake is held by Toyota Tsusho Corporation) and Guangzhou Toyota Motor Co., Ltd. (GTMC). In addition to this, Toyota also holds a 30% stake with Tianjin Jinfeng Auto Parts Co., Ltd. (TJAC) and a 90% majority holding with Tianjin Fengjin Auto Parts Co., Ltd. (TFAP)and Toyota FAW (Tianjin) Dies Co. Ltd The 30 year JV with Guangzhou Automobile is for a period of 30 years at an initial investment of 50.8 billion yen. (Guangzhou Automobile and Toyota Motor Corporation Establish Joint Vehicle Production and Sales Company in Guangzhou, China, September 2004) The JV with Sichuan FAW Toyota Motor Co. Ltd was done at an initial investment of US$ 67 million. The Asian market, with particular reference to china has been a determining factor in Toyota’s growth. The demand for IMV series and Yaris in Thailand and Indonesia contributed significantly to the sales figure of 956 thousand vehicles. The consolidated production jumped by an impressive 27.3% to 961 thousand vehicles. Sales in the china market totaled to 499 thousand vehicles and with a production figure of 446 thousand only, vehicles had to be imported from Japan.(Annual Report 2008, p 43) the following table provides the production and sales figure in China on y-o-y basis. The production figure in 2007 had gone up by 62.8%; sales increased by 62% corresponding to 2006 figures. An in depth analysis is conducted on the financial performance of the FAW group, which has important joint ventures with Toyota Motor Corporation. In 2007, FAW group tallied a sale of 1435982 units of vehicles, which included 1113048 units of passenger cars. This is almost 23% increase over its previous year figures. Sales income was calculated at 187.6 billion Yuan which is in excess of 26.4% over the 2006 amount. The total profit rocketed to an increase of 235% at 11.7 billion Yuan. The above mentioned growth is quite impressive and can be mainly attributed to the new assembly plants of FAW-Volkswagen and FAW-Toyota. In 2007, The Tianjin FAW Toyota group sold a total of 257289 units of vehicles consisting of Toyota’s own brand names like Corolla, Crown, Reiz which was over 28.2% higher than the previous year. The success of the Toyota Corolla played an important role in achieving this growth. In order to remark about the suitability of the entry mode and its effect on the business of the company, the abovementioned absolute figures will not suffice. To facilitate the analysis, we contrast the achievement of Toyota Motor’s operation in china with that in Thailand. Toyota Motor Thailand Company Limited is the largest auto manufacturer in Thailand. It manufactures land cruiser, Camry, Corolla Altis, and Soluna Vios. It uses fully Thailand manufactured components in the vehicles. In 2007, the company had a sales volume of more than 4,00,000 vehicles, an increase of about 0.1% over its previous year. It also earned revenue of 300 million baht, which was 0.7% less than its previous year figure. The company sold 92566 passenger cars and 196542 commercial vehicles in 2006. The decrease can be attributed to the appreciation of Thai Baht. In spite of this, Toyota Motor Thailand remained at the top in terms of market share of 42.4%. It also remained at the top spot in term of export figures. It exported 196000 completely built units that earned 86 million baht and a little over 22000 spare parts consignments that brought in around 33million baht. (Sustainability Report, 2007) 6. Limitations A research on China that requires official data is limited to a certain extent by the non-availability of the same. Moreover, accuracy of the available data is always questionable. In preparing the research report on suitability of entry modes of automobile MNCs on China, inter firm comparison was hindered due to non availability of sufficient data. An alternative was tried out by comparing the strategy of Toyota in Thailand, where it has almost near to 90% controlling power in its manufacturing unit Toyota Motor Thailand Company Limited. However, problems of exchange rate fluctuation prevented a full fledged comparison being done. The interview of the representatives of automobile MNCs was somehow not according to expectation, with most officials declining to answer certain critical aspects of their operations. Even managers of the Chinese affiliate of Toyota were eager to cut short the telephonic interview and mentioned their busy schedule to be the cause behind their half hearted participation. 7. Conclusion The Chinese law requires a foreign company to form joint ventures of not more than 50% shareholding if it wants to engage in production activities in China. Toyota Motors have no option other than entering into a JV. However, it can and as well, has gone for 100% ownership in manufacturing auto ancillaries. China has contributed significantly to Toyota’s global growth. One difference that can be clearly identified is the export potential; while Toyota Motor Thailand Company Limited has a huge earning from exports of completed vehicle unit and ancillary parts, The Chinese division lags in production. In fact to cater to the high demand, cars had to be imported from Japan. We can thus comfortably draw a conclusion that the Joint Venture mode is a reliable one when it comes to performance. As regarding the export, Toyota is planning to open up new plants in China that is expected to be operational from 2010. The subsidiary mode is best suited when it comes to manufacturing of components. This is of particular advantage, since it will facilitate the implementation of the famous Lean practices of Toyota and also ensure that quality is maintained that is, till today, the hallmark of what Toyota is. 8. Appendix 8.1. Email Questionnaire 1. Has the ongoing crisis made you change your plans for this year? a. Yes b. No c. It depends, cannot be said earlier than June 2. How do you see your company adapting to changing Chinese market? a. Pricing is going to be critical b. Improvement in technology 3. How do you expect the SUV segment to perform under the rising fuel costs? a. SUVs are expected to remain revenue earners for us b. currently, there are plans to research on fuel efficient SUVs 4. Do you feel that the ceiling on 50% foreign ownership should be abolished for better interests? a. Yes b. No 5. What has been the main determinant for your mode of entry in China? a. Market b. Access to Supplier c. Cost of Production 6. How have you bridged the cultural gap between your company’s home country and China? a. By an ideal mix of employees from both and abroad b. Training of Employees 7. Do you expect the effect of reduction in import tariffs post china’s entry in WTO will actually have increase the competition from imported sedans? a. Yes, but we have strategies for that b. No, things will remain as they are 8. How stringent is the framework of Industrial policy? Do you see any relaxation being done in them in future? a. China’s foreign policy perhaps will not allow that b. Might be, post crisis 9. How do you tackle the fall in growth rate from 20% to the present about 6%? a. We have definite plans b. the Chinese market will recover faster than US/UK 10. Finally, how tough a competition are you expecting from electric cars? a. They will change the dimensions of this industry b. Is the world ready to accept them? 8.2. Telephonic Interview with Managers In Toyota’s China Branch Yours plan regarding China…. China is perhaps the greatest market of the world…..although regulations are strict… we expect the credit crunch to disappear with its effect from china sooner than it does from other parts of the world…to be very specific, we plan here to stay…and do good business How will that be done.. The mass market of china is unique in itself, but at the same time pretty interesting as well…we are focusing on strengthening our relationship with local players… some changes in the organizational structures have also been planned to ensure that we stay longer….we also plan of expanding our facilities within China to have an uniform presence…importantly, we intend to learn the about the market and implement those…. There are reports that your operating profits might dip up to 40% this year….. To some extent, we might not actually get the projected sales, obviously due to the credit crunch and the fall in global demand. However, we are pretty much optimistic about the new research and developments What are your plans for the future… Toyota has a strategy to increase its sales in emerging countries. In relation to the Chinese market, production utilities will be strengthened and a fuller line up of models will be provided. The manufacture of Camri at the Guangzhou plant was impressive. In china, we are planning a target of 640 thousand vehicles in the financial year of 2009.that would be about an increase of 170 thousand vehicles. The 2008 profit figures are well balanced with equitable contribution from locations across the globe. (Annual report 2008) 9. References Annual report, 2008, Toyota Motor Corporation, [Online], Available: http://data.toyota.nl/home/data/toyotaV8/pdf/TMCsustrep2008.pdf, [31 March 2009] Barclay L. A., 2000, Foreign Direct Investment in Emerging Economies: Corporate Strategy and Investment Behaviour in the Caribbean, Routledge, London, ISBN 0203463110, 9780203463116. Beebe A., No Date, NoWinning in China’s Mass Market, IBM Institute for Business Value, [Online], Available: http://www-03.ibm.com/industries/global/files/china_mass_markets.pdf [31 March 2009] Dubois A, Organising Industrial Activities Across Firm Boundaries, Published by Routledge, 1998, ISBN 0415147077, 9780415147071. FAW Annual report, 2007, China FAW Group Corporation, [Online], Available: http://www.faw.com/webcontent/2007EN/2007en.pdf, [31 March 2009] Guangzhou Automobile and Toyota Motor Corporation Establish Joint Vehicle Production and Sales Company in Guangzhou, China, (September 2004), JNC Newswire - Japan’s Corporate News, retrieved on 31 March 2009 from Jain S. C., 2001, Handbook of Research in International Marketing, Edward Elgar Publishing, ISBN 1840649461, 9781840649468. Overseas Production Companies: Production, Sales and Exports, Toyota in the World, 2008, [Online], Available: http://www.toyota.co.jp/en/about_toyota/in_the_world/pdf2008/26overseas.pdf, [31st March 2009] Pan Y. and Tse D. K., 2000, The Hierarchical Model of Market Entry Modes, Journal of International Business Studies, Vol. 31. Toyota Company Profile, 2009, Toyota Japan, [Online], Available: http://www.toyota.co.jp/en/about_toyota/manufacturing/worldwide.html, [31st March 2009] Toyota Sustainability Report, 2007, Performance and Highlights 2006/07, [Online], Available: http://toyota.republicast.com/sr2007/republicast.asp?page=7&layout=1&control=yes&zoom=100, [31 March 2009] Tse D.K., Pan Y, Au K. Y., 1997, How MNCs Choose Entry Modes and Form Alliances: The China Experience, Journal of International Business Studies, Vol. 28, Issue: 4. Yang X., 1995, Globalization of the automobile industry: the United States, Japan, and the People's Republic of China, Published by Greenwood Publishing Group, ISBN 0275948374, 9780275948375. 10. 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