You are a senior manager in a U.S.

automobile company considering whether to invest in

production facilities in China, Russia, or Germany. These facilities will serve local market
demand. Evaluate the benefits, costs, and risks associated with doing business in each nation.
Which country seems the most attractive target for foreign direct investment? Why?

Which country is best

choice of U.S automobile company investment?

INTRODUCTION
Three major countries are China, Russia, and Germany. If the vehicle firm picks any of
the three countries, it will benefit, but it will also face obstacles. In Germany, the automobile
sector is well-known for its power. If the corporation decides to invest in Germany, it will be up
against a lot of competition. Germany is known around the world for its great automobile sector
and engineering prowess. From Asia to the Americas, German automobiles represent highly
prized traits such as innovation, dependability, safety, and design. Germany is Europe's largest
production and sales market by a large margin. While in Russia, Automobile businesses will be
unable to enter the country due to trade barriers. Historically, the automobile sector has played a
significant role in the Russian economy. In terms of car sales, Russia is one of the top 12
markets in the world. Currently, the industry is defined by the expansion of local manufacturing
capacity, as well as the provision of government subsidies and guarantees to market
participants, all with the goal of preserving customer demand and lowering production costs.
And in China, The economy is indeed weaker than Russia's and Germany's. Automobiles are
considered a luxury item by many people. Despite this, China remains the world's largest
automotive market in terms of annual sales as well as manufacturing output. China continues to
see tremendous economic expansion, as well as substantial increases in vehicle ownership.

CHINA GERMANY RUSSIA

● according to ● If investment in ● Russians have a

Chinese Germany is greater average
Automotive effective, potential income than
Industry Yearbook gains will occur Chinese people.
(1999) when US
automotive MNEs Because of
BENEFITS During the reform absorb advanced Russia's high
years, it grew technology and income and
quickly, managerial sluggish pace of
accounting for a approaches life, many
significant through learning Russians are
percentage of effects. interested in
industrial purchasing a
 production, output, ● Because private
and employment. Germany's automobile.
consumption and
If a US automaker revenue levels are The population's
wants to expand higher than those of per capita
its business in China and Russia, income
China, it will need Germans can afford increased
to hire a big to pay for their cars. significantly as a
number of If the corporation result of both pay
competent creates fixed increases and
workers. customer groups in the expansion of
the new market, consumer credit,
China's average total potential which increased
wage is revenue in the number of
significantly lower Germany will be consumers who
than the global optimistic. were able to
average. As a secure sufficient
result of the low ● This 'two-pillar financing to fund
labor costs, the approach,' which their car
company will reap combines strong purchases.
significant benefits exports from
if it decides to German The automobile
expand into car-building sites sector has a
China. with expansion of dominant
● large and foreign production position, its
potentially in growth markets, technology is
lucrative a market has made Germany developed, and it
so successful employs a large
The Chinese around the world. number of
automotive sector talented and
has shown ● The German knowledgeable
tremendous automotive industry workers.
strength and is a strong research
continued growth. performer. A major ● If a US vehicle
For the first time, portion of this is business decides
China overtook channeled into to invest in
the United States developing Russia, it is
as the world's alternative drive certain that the
second-largest systems. employees will
automaker, be well-trained.
producing 9.5
million vehicles. ● The company's
innovation can
 ● Early participants profit from new
into China's most technology and
promising country skills in Russia.
will have huge
first-mover ● The Russian
advantages, while government
late entrants will continues to
be at a introduce new
disadvantage. support
programmes for
The mistakes of both car
the first movers manufacturers
can be learned by and buyers,
the second thereby
movers, and via stimulating the
this experience, a growth in
US automobile demand, as well
business can as production
avoid making the figures.
same mistakes as
the first movers.
● In the home ● It has a substantial ● The Russian
country's market share in the government
company, there is international expects
a lot more debate market. joint-ventures to
about indirect cost cooperate on
issues. Furthermore, specific
because these production
For example, well-known segments, such
when American enterprises have a as jointly
automakers lengthy history of assembling
convey their better development, each automobiles and
COST
technology and has its own unique producing parts.
manufacturing supplier for vehicle
procedures to supplies. ● As a result, there
Chinese will be no optimal
enterprises, they As a result, if a cost-effective
are revealing their major American way to produce
secrets. automaker decides cars, which will
indigenous to invest in have a severe
businesses with Germany, the future influence on
superior market area is American
technology and unlikely to grow. automakers'
 cutting-edge ability to
management One reason is that maximize profits.
practices. a big number of
vehicle facility ● Foreign
● a disaster for producers have companies
us-auto Company, created competitive investing in
forcing them to cut relationships with Russia incur
the prices in order newcomers, and substantial
to retain their they all have transaction
market share. established costs,
customers. necessitating
lengthy
discussions with
potential
partners in order
to establish a
working
relationship.

● In general,
foreign
companies
interested in
investing in
Russia will
encounter
lengthy
discussions or
negotiations with
their partners,
initial projects
will be altered,
and discussions
with locals will be
time consuming.

● there would be an ● The local market ● It is impossible

increase of has a very limited for carmakers to
potential rivalry’s demand. gain majority
RISKS productivity and ownership of a
competitiveness in In comparison to company.
China. China and Russia,
 ● The effect of it must confront ● The obstacle for
competition greater risks. a US company
should also be investing in a
considered by In addition, the cost Russian auto
us-auto of investing in company is that
managers; in Germany is it will have to
order to maintain extremely high. deal with a
market share. Germany's severe
consumption level corruption
● home-country is well known to be problem.
companies will substantially
raise the quality of greater than ● a third of
their products and China's and businesses are
increase their Russia's. doing
innovation Businesses in
operations in ● In Germany, the Russia say they
response to average pay is are compelled to
intense likewise extremely pay bribes in
competition. high. order to do
business, and
If the vehicle firm that this will be
chooses Germany subtracted from
as its target market, the total cost of
it will have to pay a doing business
greater operational by more than
cost in order to stay 4%.
in business on a
daily basis.

CONCLUSION
In comparison to Russia, China's potential as the world's second largest automaker is
more appealing to the United States.  To invest as an automobile manager. It has the cheapest
workforce and a great demand potential. In comparison to Russia and China,  Despite the fact
that Germany's vehicle sector is more advanced than China's, the operational costs are far
higher.  Implying that if a corporation chooses to conduct business in Russia or Germany, the
risk is far higher. China has also long pushed for the development of high-tech industries and
the introduction of new technology.  It has a number of preferential policies in place to
encourage FDI. It is in the company's best interests to expand into new markets. China has the
world's largest population, with the rise of In the current economic climate, purchasing a private
car for each family must become a future trend; it is an opportunity for the individual. providers
of automobile facilities. It may be deduced from the following analysis of the three countries that
as can be observed, each of the three countries has its own distinct characteristics. However,
China remains the best option for the United States to expand the business of a car
manufacturer.