Answer to Question #219290 in Economics for Lihle

Question

What was the motivation for VW to expand in the US market?

Answer 1

One of the main reasons for a company to expand abroad is to find a new market to serve. After the Second World War, high inflation hit Germany and the domestic market shrink quickly making high surplus of production for VW. This led them to export abroad to cut losses and start to seek more market to reach economies of scale in production. From neighboring European countries, Volkswagen starts to sell and produce in United States and Brazil. Going for a multinational company, Volkswagen does not only start market seeking at that time but also resource seeking in North America, creating Volkswagen Canada Ltd.