About AMA

Executive Summary
In recent years, China has developed into a promising business location as both a local consumer market and a potential global, low-cost production and supply base. When firms decide to internationalize into China, managers of foreign companies must chose the right path. Kaufmann and Jentzsch examine the paths that have been and will be taken by international automotive suppliers in China.

China is especially attractive for automotive suppliers, which are under continuous price pressure by car manufacturers in their stagnant home markets. China offers both top- and bottom-line improvement potential simultaneously. However, many suppliers that relocate their operations to China are not successful. Competition has increased, and early movers’ weaknesses have been uncovered. Suppliers are forced to rethink and potentially adjust their chosen internationalization processes.

Kaufmann and Jentzsch address this challenge by providing a framework for internationalization processes that combine strategies and modes. Internationalization strategies lead to geographic distributions of value-creation activities. In this case, the question is what to internationalize. In addition, internationalization modes represent varying degrees of resource commitment, risk exposure, and control. In this case, the question is how to internationalize. The framework allows for the analysis of potential strategy–mode combinations and their evolution paths over time. Empirical findings show that specific parameters influence the choice of strategies and modes. Kaufmann and Jentzsch find four distinct evolution paths that represent different supplier categories. These paths follow a general trend toward higher global integration (strategies) and more ownership (modes).

Because internationalization into China has yet to receive sufficient empirical exploration, Kaufmann and Jentzsch conducted multiple case studies. They conducted in-depth interviews with leading industry executives in China and Europe. As rules for selecting the appropriate field sites and ensuring validity of results, they considered only first-tier automotive suppliers. Thus, the respondents had comprehensive experience with different internationalization processes in recent years.

China attracts senior executives’ attention worldwide as a very promising business location. Kaufmann and Jentzsch’s study provides novel ideas for executives who make market entry and expansion decisions. The presented framework could help firms structure internationalization processes and managers understand largely unknown evolution paths and their associated parameters. Management could use the discussed parameters as a checklist to evaluate their company’s particular situation and, if appropriate, to initiate the next step of their evolution path.

Biography
Lutz Kaufmann is a professor and Herbert Quandt Endowed Chair in International Management in the Otto Beisheim School of Management at WHU, Germany, where he also serves as Director of WHU’s Asia Center. He holds a PhD from the University of Giessen, Germany. His main areas of expertise are international expansion strategies and global sourcing. Lutz has worked for several years in the automotive industry and as a consultant in many other industries, such as machinery, chemicals, pharmaceuticals, electronics, and insurance. He has published in Journal of International Marketing, Journal of World Business, Journal of Operations Management, and Transportation Research Part E: Logistics and Transportation Review. He is also a coauthor (with Dirk Panhans, Boney Poovan, and Benedikt Sobotka) of China Champions: How German Companies Can Successfully Integrate China into Their Global Strategies (European Management Publications 2005) and American Allstars: Success Strategies of German Companies in the United States (coauthored with Dirk Panhans, Thomas Aulbur, and Markus Kurch; European Management Publications 2006). In the future, offshoring, outsourcing, and integration will remain the main areas of his research. His work on supply management complements these efforts, covering the value-creating activities that a company does not carry out by itself.

Andreas Jentzsch studied Business Administration at the University of St. Gallen in Switzerland and in the Stern School of Business at New York University. In addition, he holds a PhD from the Otto Beisheim School of Management at WHU, Germany. His areas of expertise include internationalization of the firm, market entry and expansion modes, and international strategic alliances/joint ventures. Currently, Jentzsch is a senior consultant at the Boston Consulting Group in Munich. He also has several years of experience within the industrial goods and automotive industries.