Seizing business opportunities abroad is all multinational enterprises’ mission nowadays. With development business internationally, MNEs may benefit from an expansion of market size, a lower cost structure and improving the products quality. However, the challenges on international environment are a crucial issue that MNEs should face to.
The Korea automobile company, Hyundai Motor Company (HMC), focused on developing the overseas markets due to the small domestic market and Asian financial crisis in 1997. At that time, one of the countries with fastest-growing economies, China, has attracted Hyundai Motor to move into its market.
2. International business environment in China
Under the environment dimensions, PEST analysis is a tool for understanding the external factors of China and consideration with international expansion, which involves the political, economic, socio-cultural and technological contexts (Morrison, 2009).
As a result of the liberalized market by joining the World Trade Organization (WTO), China’s economy has a fast growing rate which indicates the nation’s economic prosperity. According to the statistics from the World Bank, China’s gross domestic product (GDP) is increased dramatically from US$1.931 trillion in 2004 to US$4.521 trillion in 2008 and the purchasing power parity (PPP) based on gross national income (GNI) per capita at current international dollar from 4,340 in 2004 to 7,480 in 2008 (Exhibit 1).
The rapid growth on China’s GDP and PPP through the past years has reflected the promotion on living standard and value of total economic activity. Along with the continuous growth on GDP and PPP, the China’s economy is driving the consumer demand on automobile market. This can be evidenced by the Chinese personal automobile market has 38.3% growth rate from 2000 to 2006, which sold 4,260,000 units in 2006 and experts estimate its sustained growth in future (Barnett et al., 2008). As the...