The Relevance of Entry Strategy in China: A Case Study of IKEA and Coca-Cola - Essay Example

Coca-Cola goes back to China 18 CHAPTER IV - METHODOLOGY 21 CHAPTER V - RESULTS & DISCUSSION 23 IKEA 23 Coca-Cola 28 The Franchise Mode of Entry (1979-84) 30 The Joint Venture (1985-1992) 32 Hybrid Mode of Entry (1993-Present) 34 CHAPTER VI - CONCLUSION 37 Recommendations 38 REFERENCES 40 CHAPTER I - ABSTRACT China’s vast market potential makes it attractive to foreign direct investors. However, there are many barriers and challenges that a multinational company is likely to encounter. An entry strategy is deemed necessary to overcome these barriers and challenges and to come out successful in its foray into the Chinese market.

This paper will present two case studies of companies that have successfully entered China: Coca-Cola and IKEA. Empirical studies as well as other secondary data from various sources including textbooks, journals, news articles, and websites contributed to this research. Both these companies are top producers and marketers of their products, in China and as well as the rest of the world. Their entry into China was not without enormous challenges, specifically for Coca-Cola who has a long history of investment in China.

Analyzing their entry strategies provides a deeper insight into how a multinational company can utilise appropriate entry strategies to expand its global operations, even in a country that poses many difficulties. CHAPTER II - INTRODUCTION. therefore decided to open its doors to trade liberalization and to invite Foreign Direct Investments (FDI) to boost its international trade and commerce, in order to improve its economy. Globalization offered China a welcome opportunity to open up its economy to free market operation.

The objective was threefold; first to invite FDI into China with a motive to expand its manufacturing capability and provide employment opportunities for its vast and growing population; second to enable its industries to upgrade with new technologies and to regain economic balance; and lastly to again become an economic power in the world as it had been historically. IKEA and Coca-Cola are two of the multinational companies (MNCs) that went into business in China after it opened its economy to foreign corporations.

The two took distinct tracks and had differing learning experiences. Coca-Cola bears more colours in its entry mode being the first one to establish an inroad into the vast Chinese market. The Coca-Cola affair is rich with data that can provide good learning on how China shifted from communist market control to that of a socialist-market economy. It shows the intricacies that Coke underwent and reveals how it was able to surmount the odds. IKEA came in later when restrictions had been eased and China has already taken initial lessons on how to handle foreign corporations.

The more favourable environment coupled with IKEA’s dynamic entry approach provided for a smoother inroad than was experienced by Coca-Cola. Nevertheless, the experience of both MNCs provides a comparison and contrast to equate in a critical analysis of how foreign corporations got back into the Chinese economy. The stories are as interesting as they are entertaining. Aims & Objectives This paper aims to