The prevailing policy in China has had mixed results since China is the largest automobile market in the world but the automotive industry of the country is flooded by state owned enterprises and most of these have entered into a joint venture with foreign companies. The Chinese consumers as per the policy are charged 30%-4-% more on each vehicle compared to their much more developed counterparts like USA, Japan and Western Europe. The cause of this hike in prices is that the joint ventures with foreign companies are forced to buy raw material at an excessive price from domestic and state owned enterprises in China (Lin, C; 2001, pp. 5-35).
But despite the barriers to entry, there have been new entrants who have done much better business compared to state owned organizations and it is because of their profits that the prices quoted by the particularly few and efficient new entrants have more or less come to the same level as that of Japan and the Western countries. These new entrants adopted a new strategy of taking over the already bankrupt state owned enterprises, this strategy of entering the market from the back door was supported by the government as a means to save the jobs that were going to be lost with the shutdown of the companies. These new entrants followed a different entry strategy so were not bound to purchase raw material from expensive and flimsy state owned companies. This gave them an edge over the state owned companies as well as the joint ventures in theindustry. These new companies have an entrepreneurial set up that results in low costs and the absence of beauracracy plus the red tape result in much more efficiently run organizations unlike any other in the industry (Gao, 2004).
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