3. Should Volkswagen make a strong effort to maintain market share? Volkswagen is the market leader in automobile manufacturing and sales in China. It has benefited from several strategies it has pursued: its early entry into automobile manufacturing in China; its effective adaptation to the business, political, and legal environments;

the strength of its commitment; its development of management and employee training programs for local personnel; and changes in its product line as competitive conditions have changed.

Volkswagen began manufacturing in China in a joint venture with Shanghai Automotive Industry Co.

(SAIC) in 1985, and formed a second joint venture with First Automobile Work Group (FAW) in 1991.

Volkswagen has had rapid growth in production, sales, and profits in China. It has been the market leader since 1985 and retains that position though its market share is falling. Volkswagen held 58% of the automobile market in 1997, 50% in 2000, and 48% in 2001. In 2002, VW increased its sales by 42.8%, but its market share dropped to 38.5% as new competitors entered the market and existing competitors expanded production to meet rapidly rising Chinese demand. In 2003, VW’s market share continued to fall, even as both sales and profits rose.