| Summary: | The world economy has observed tremendous changes in way businesses are expanding globally in the last three decades and ‘Foreign Direct Investment’ is the main reason behind this change. Multinational companies looks upon FDI as a major catalyst to fulfill their financial, technical, employment generation and competitive efficiency requirements. The highly developing South Asian country, India, has attracted an ample number of multinational companies from various countries. In FY2012 - 13, the country has attracted FDI of around US$46.8b from various sectors, in which Automobile industry contributes the third largest share after service industry and telecommunication. It is expected that India will be among the top five auto-producers in the world by 2015 because of various factors, like increasing incomes, growing the middle class and young population, greater availability of credit and financial options and strong demand growth.
To grab a piece of cake from the Indian market, many foreign auto manufacturers entered Indian market via various entry modes. To compete with such highly competitive market, selection of entry mode plays vital role. In this study, we will examine ‘Indian Automobile Industry’ to determine the effectiveness of transaction cost theory, Institutional theory and Cultural theory on entry strategy choices. Transaction cost analysis (TCA) has been most followed in previous research. Along with transaction cost factors, we will be considering institutional factors and cultural factors as well. An influence of transaction, institutional and cultural cost together on firm’s entry mode and its performance will be determined.
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