\"You must evaluate the industry and country of investment to determine if the c
ID: 470167 • Letter: #
Question
"You must evaluate the industry and country of investment to determine if the current circumstances in the specified country can support a business of your type. Country evaluation should focus on economic, financial and political risk of the country. Industry structure analysis would look at the regulatory structure as well as the competition in the target country. Issues such as privatization, identification of major competitors and overall strategy for entering the country should be discussed."
Faraday Future with a possible investment in China:
-Basics of China
-Basics of Faraday Future
-Purpose of expansion
-Project specifications
Explanation / Answer
Basics of China:
Economic status: As per the reports, Real GDP raised by 6.7% year on year in the first half of 2016, but they expect a slowdown in the second half to lower full-year expansion to 6.6%. Subsequently, the reports revealed that economic growth will slow gradually, to 4.1% by 2020, as the authorities take delayed steps to tackle an unsustainable build-up in debt. Finally, the government's authoritarian behavior and its disappointing progress on market reform indicate the China's weak economic prospects.
Auto industry status in China:
The China’s automotive sector is growing at the rate of 24% compounding between 2005 and 2011 and, in 2010. Its growth has dominated the United States new car market which is an attractive point for FF to enter in China auto market. The forecasts of China auto market indicates that there are chances of slowing down the growth rate to 8% a year between 2011 and 2020 but still it could be an attractive one for FF company as the sales forecasts to reach 22 million by 2020 which is bigger than the European or North American markets.
Basics of Faraday Future:
Company: The Company is a user-centric, advanced mobility company with headquarters in Silicon Valley and Southern California.
Industry: Automobiles
Product: Electronic Cars
Strategy: Their global team leverages the talents of leading thinkers and passionate creators from the technology and automotive industries to bring premium, intuitive, and seamlessly connected electric vehicles to people worldwide.
Purpose of expansion: There are three main elements to consider China as the platform for company expansion:
Competition: BYD, Chery, FAW Volkswagen, GAC (Guangzhou Auto), BAIC (Beijing Auto) and Beiqi Foton and others have occupied electric car market in China. But there are still chances for the new players to exploit the market. The Electric vehicles are expected to grow in the A model segment due to increased public environmental awareness and expected government policy initiatives. Two trends are driving the Chinese auto market those are consumers will increasingly choose to buy bigger and more expensive cars. Another point to be focused is that the used-car market in China is growing, a development that could increase new car sales of the lower price segment in particular. Emerging urban alternatives such as improved public transportation, increased availability of car rentals and sharing could change the consumer behavior and could influence the auto market segment in China. The estimations say that by 2020, 20 Chinese cities will exceed this car-density threshold. The Chinese automotive structure faces major changes and the industry consolidates as a result of increasing competition.
Financial Risk: China has a different structure to finance the corporate. It poses challenging elements to get a deal and obtain financing. Companies should be able to showcase a variety of financing options when negotiating business projects in China. The companies should understand and communicate the western financier's perspective and the Chinese official's perspective while negotiating the projects. The companies should maintain a specialist to engage the operations of banking with Chinese banking community.
Political Risk:
There exists a unique type of political risk in China. There is a constant fight between the country’s central government and other provincial, local governments over the applicable law and observance or non-observance of it. This concept makes the companies to be more cautious about rules of China. So, there is a dynamic political environment in China and the FF Company should be cautious about the political changes and take decision accordingly.
Project Specifications:
The company can try to invest in China to produce electric cars. It could concentrate on upper class people to market their cars. They can enter into market with some suitable pricing strategies based on market and product that is targeted. Based on the present analysis, the company should manufacture small and affordable which are suitable for china market. The marketer should formulate suitable strategy to market the same.
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