Case Study Equity – Based Entry Modes

When considering how to enter markets, international companies can choose between entry modes that will, or will not, involve foreign direct investment. This exercise focuses on a number of different equity-based modes of international market entry, exploring some of the most important advantages and disadvantages of each alternative.

Read the case below and answer the questions that follow.

The Asia-Pacific region has been projected to be the most rapidly growing market for commercial air travel in the next two decades. China is a major factor in that growth forecast, due to booming demand for flights to, and within, that country. The Chinese government has actively encouraged and supported efforts by domestic companies to become involved in the design and manufacture of commercial aircraft and their parts, with an ultimate goal of developing Chinese aerospace companies into a major global competitive force in the commercial aircraft manufacturing industry.

In their efforts to develop world-class skills in the design and manufacture of aerospace products, many Chinese companies have formed joint ventures with foreign companies, especially global leaders based in the United States and Europe.

1. Describe the Asia-Pacific region.

2. What is a joint venture?

3. From the perspective of a major aerospace firm based in the United States, what is not a potential benefit your company might gain from forming a joint venture with a Chinese partner?

4. Expand on the role Chinese aerospace companies have played into a major global competitive force in the commercial aircraft manufacturing industry.