Q: 1 Why are Ford and GM entering the Russian car market now? Why did they not invest earlier, and why do they do not postpone investment until the market is bigger?
For any company going out for the foreign market is because of any one out of globalization, reducing tariff all over the world, to increase the market share, saturation of the local market, for getting the economies of scale of production, to use their excess capacity and use the resources where it is available at law cost.
The several factors for the Ford and GM moved to Russian market, out of above mentioned are as follow:
- The demand for cars and light commercial vehicles remained relatively stable prior to, and implementation of market reforms in 1992, For example as per the case study data in 2002 about 1.5 million new and used cars were bought in Russia, about 0.5
million were the car made from foreign manufacture.
- After economical crisis in 1997 there is a stable growth of economy.
- The Russian government has increased import duty of 35% which resulted the more cost for the foreign made car.(As per the Data in case study)
- Increasing the sell of foreign manufactured car.
If we see some current trend of selling of the cars in Russia
Built by: 2002 2003 2004 (1st Quarter)
Thousand units & market share $ billion& market share Thousand units & market share $ Billion and market share Thousand units & market share $ Billion & market share
Russian Manufacturers 842 (59%) 3.7 (35%) 870(58%) 4.3(35%) 222(68%) 1.4(47%)
Foreign Makes Made in Russia 11 (0.8%) 0.1(1%) 54(3.6%) 0.6(5%) 22(6.5%) 0.3(10%)
New Imports 117 (8.2%) 2.7 (25%) 170 (11.4%) 3.5(28%) 43(13%) 0.9(30%)
Used Imports 447(31%) 4(38%) 400(27%) 4(32%) 41 (12.5%) 0.4(13%)