Kazuyuki Motohashi

Global Business Strategy Multinational Corporations Venturing into Emerging Markets

~ Springer Open

Contents

1 Introduction: Needs for New Global Strategies .................................. . 1.1 Is the World Fiat? .......................................................................... . 1.2 Global Strategies for Emerging Countries ..................................... 4 1.3 Perspective of Global Business Strategies ..................................... 6

1.3.1 Directions of Global Strategies ........................................ 6 1.3.2 Products and Services for "Good-Enough"

Product Markets . .. .... .. .. .. .. .. .. .. .. .. .... .. .. . . .. .. .. .. . . . . .. .. . . .. . . . . .. . . 7 1.3.3 Strengthening Cost Competitiveness ............................... 8 1.3.4 Creating Strong Business Models

That Discourage Catch Up ............................................... 11 1.3.5 Need for Strategies to Respond to Local Needs............... 13 1.3.6 Management Strategies Integrated at the Global Level... 14

1.4 Structure of This Book ................................................................... 15 References................................................................................................. 17

Part 1 Global Business Strategy

2 Management Strategies for Global Businesses.................. ................... 21 2.1 lntroduction.................................................................................... 21 2.2 Concepts of Corporate Management Strategy Theory ................... 22

2.2.1 Scope of Management Strategy ................ .............. ......... 22 2.2.2 The Three Cs and SWITT Analysis

in Management Strategy .................................................. 23 2.2.3 Global Strategies and Differences in Internat

and Extemal Business Environments............................... 26 2.2.4 Is China a Market or a Factory? ....................................... 28 2.2.5 Value Chains and Global Strategy .... ................................ 33

2.3 Relationship Between Headquarters and Local Entities ................ 35 2.4 Summary ........................................................ .... .............. .............. 38 References................................................................................................. 40

3 Changes in the Global Economic Environment ................................... 41 3.1 Introduction.................................................................................... 41 3.2 Long-Term Economic Growth by Country .................................... 42

vii

viii Contents

3.3 The Global Economic Forecast for 2030 ....................................... 46 3.4 Competitiveness Rankings: IMD's World Competitiveness

Yearbook................ ......................................................................... 49 3.5 Summary „.„ .... „„„„„ .. „„„„ ............ „ ...... „ ........ „„ .... „ ..... „.„......... 54 References „ ....... „ „ ................ „.................................................................. 55

4 Comparison of Economic Institutions in China and lndia ....... „........ 57 4.1 lntroduction „ ...... „„„„ .......... „„ .......... „ ............. „ ........ „ .. „„ ...... „... 57 4.2 Comparative lnstitutional Analysis of China and lndia .. „............. 59

4.2.1 Overview ............. „ ................................. „ ............ „.......... 59 4.2.2 China: State-Led Strategie Foreign Investment Policies.. 64 4.2.3 lndia: The Steady Progress of a Democratic State........... 65 4.2.4 Comparison of Political Systems .......... „......................... 66 4.2.5 Comparison of Economic Systems ... „ ........................... „ 68

4.3 Global Strategy lmplications ........... „ ... „ .................... „.................. 71 4.3.1 lnstitutional Voids .......... „ .............. „.„ ...... „ .. „ .. „ .. „.„ ... „.. 71 4.3.2 lmportance of Informal Institutions ....... „ .............. „........ 74

References„ ....... „ .............................. „ ........................ „ .............. „............ 76

5 New Business Model as Response to Competition from Emerging Economies ................................................. „.................. 77 5.1 Emergence ofThreats Associated with Rise

of Emerging Economies ................................................................. 77 5.2 Moving from a "Product-Centric" to a "Customer

Value" Model .......................................... „ ................. „„„ .. „„........ 79 5.3 ProductArchitecture and Technological Catch-Up ........ „.............. 81 5.4 Business Models That Are Difficult to Be Imitated „ ............ „....... 85 5.5 lnfrastructure Exporting as a Systems Integration Business.......... 87 5 .6 Conclusion ................................................ „ ........... „ .......... „........... 90 References ...... „ .............. „ ........ „ ... „ ..... „ ...... „ ............. „ ........ „ .. „ .. „.......... 91

6 India's Neemrana lndustrial Park for Japanese Firms ............... „...... 93 6.1 lntroduction ... „ ......... „ .. „ ........ „ .. „ .......... „.„ ... „ ................ „............ 93 6.2 Background of Neemrana lndustrial Park ............ „ ............. „.„...... 94 6.3 DMIC: Delhi Mumbai lndustrial Corridor..................................... 96 6.4 India's lndustrial Infrastructure ... „ ........ „ .. „ ............ „„ ............ „..... 98 6.5 Companies Operating at Neemrana lndustrial Park ... „.................. 99 6.6 The Smart Factory Concept at Neemrana lndustrial Park.............. 102 6.7 Significance ofThis Case Study and Suggested Questions ..... „.... 103

Part IT Fundamentals of Strategie Planning

7 Alliance-Based Global Strategy ..... „ .. „ . .................... „........................... 107 7 .1 lntroduction ......... „ ............. „ „ ...... „ .... „ ............ „ „ .......... „ „ „ .. „„ „.. 107 7 .2 Wholly Owned Subsidiary or Joint Venture

with Local Companies„ ......... „.„ .... „ ... „ ..... „ ....... „„ ........... „.......... 108

~ ix

7.3 Alliance Forms and Management Methods ....... ............................ 110 7.4 Governments as Alliance Partners in PPP

Infrastructure Businesses ................. ........................... ................... 114 7 .5 Conclusion„ .... „ ... „ ......... „ ....... „ ...... „ .„. „ .. „ ........................ „ .. .. ..... 118 References ......................... „ .... „... .. .... ..... .... ..... .... ..... .... ............ .. .. .. ...... .. .. 119

8 Hitachi Construction Machinery: Becoming a Wholly Owned Chinese Entity .... „ ...... „„„ .......... „ ............ „ ...... „ .... _.................... 121 8.1 Introduction .„ ... „ .. „ ............................. „ ........ „ ....................... „..... 121 8.2 Hitachi Construction Machinery (China) Co., Ltd......................... 122

8.2.1 Background...................................................................... 122 8.2.2 Creation of a Joint Venture.......... ....................... .............. 123 8.2.3 Dissolution of the Joint Venture and the Move

to a Wholly Owned Subsidiary ............. „......................... 125 8.2.4 Post-joint Venture Management. ....................... „............. 127 8.2.5 China's Business Environment and lts Risks.„ .. „ .. „........ 128

8.3 Global and Chinese Construction Machinery Markets ...... „ .. „...... 130 8.4 A Company with Balanced "Hardware," "Software,"

and "Regions" .„ ...................... „.„„ .... „.„.„„ ....... „ ........ „ .... „ ....... „ 133 8.5 Importance ofThis Case Study and Suggested Questions............. 134 Reference ..... „ .. „. „ ....... „ ..... „ .. „ ........ „„ .. „„„„„ .. „„ „„ ... „ .. „. „ .... „ „„ ....• „. 135

9 Marketing Theory in Global Business Context.„„ ........ „ ........ „„ .... „... 137 9.1 Global Strategy and Marketing in Emerging Countries .............. „. 137 9.2 Steps in Marketing Strategy ......................... „ ............ „„.„ ..... „.„... 138 9.3 Marketing, Planning, and Execution: Tue 4Ps„ ........................... „ 141 9.4 Market Analysis Examples: China and India .. „.„„ ...... „„„„ ...... „„ 146 9.5 ls the Premium Market a Volume Zone? .......... „ ...... „.„ ...... „ ...... „. 149 9.6 Tue Bottom of the Pyramid Business.„ ............. „........................... 151 9.7 Conclusion ... „ ......... „„ ......... „ ...... „„ .................... „ ...... „ .. „ .. „ .. „..... 152 References.„ ... „ ................................... „ ...... „ ...... „ .. „„ .... „„ .. „.„ ......... „.... 154

10 Shiseido Marketing in China .„ .. „.„ .. „„ .... „ .. „„ .. „ .. „„„ .. „ ......... „ ... „ .. „. 155 10.1 Introduction„ .. „ ....... „ ..................... „ .. „ .. „ ...... „„„ ... „ ..... „ .. „„ .... „.. 155 10.2 Corporate Timeline and Overview .„ ..... „ .. „ ...... „ .. „ .. „ .. „.„.„„„„„. 156 10.3 Shiseido's Global Business„ .. „.„ ... „„„„„„.„ .. „.„ .. „ .... „.„„„„„ ... „ 158 10.4 China's Cosmetics Market and Shiseido's China Expansion ...... „ 162 10.5 Marketing Strategy in China„ ... „ ... „.„ ... „ .. „„„ .. ...... „ ..... „ .......... „. 165 10.6 Competition with Western Brands.„ ....... „ .......... „.„ ...... „„„ ... „.„„ 167 10.7 Significance ofThis Case Study and Suggested Questions........... 170 References.„ .. „ .. „ .. „„„ .. „ ................ „ .... „„ ........... „„ ........ „ .. „ ..... „ .. „ ...... „ 171

11 International R&D Management .„.„ ... „ ... „„„ .. „.„„ .. „ .. „„ ... „ .. „„„...... 173 11.1 Introduction ...... „ .. „ ..... „. „ ... „„„„ ..... „„ ... „ ...... „.„.„.„ ... „.„.„ .. „„„. 173 11.2 Foreign R&D Activities of Japanese Companies„.„ ... „.„ ...... „„.... 174

X Contents

11.3 R&D Intemationalization Theory ......... „ ........................ „............. 178 11.3.1 Merits and Demerits of Foreign R&D Centers................ 178 11.3.2 Activities ofForeign R&D Centers.................................. 181 11.3.3 Selecting a Destination Country....................................... 183

11.4 Reverse Innovation .... .... .............................. .................................. 184 11.5 Conclusion ..................................................................................... 186 References .. .............. .... .... ..... .. . . . . ... . . . . . .. . . .. . .. . ... . . .. . .. . . .. . . . . . .. .. .. . . ........... ...... 188

12 Multinationals' R&D in China and lndia............................................. 191 12.1 Introduction.. .. .......... .. . .. ... .... .... .. .. .. .... .... .. .. .... ...... .... ........ .. . . . . . . . . . . .. 191 12.2 China.............................................................................................. 192

12.2.1 Overview . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ... . .. . . .. . . ... .. .. .. .. .. . . .. . . .. . . 192 12.2.2 R&D Objectives and Regional Diversity ......................... 195 12.2.3 Differences Due to the Nationalities ofForeign Firm...... 197

12.3 India ............................................................................................... 198 12.3.1 Overview .......................................................................... 198 12.3.2 Market-Driven R&D in Maruti Suzuki ............................ 201 12.3.3 Reverse Innovation at GE Healthcare .............................. 203 12.3.4 Organizational Management of Local R&D Centers....... 204

12.4 Conclusion ........................................................ „ ....................... „.. 207 References................................................................................................. 208

13 Thailand's National Science and Technology Development Agency and Japanese Finns ......................................... „........................ 211 13.1 lntroduction.................................................................................... 211 13.2 Thailand as a Business Destination .............. „ ..... „........................ 212 13.3 Thailand's Science and Technology Policy

and a NSTSDA Overview .............................................................. 213 13.4 NSTDA and R&D Activities of Japanese Firms in Thailand........ 215

13.4.1 Shiseido Thailand............................................................. 215 13.4.2 Polyplastics Technical Solution Center ......... „„............... 217

13.5 Thailand's R&D Environment from the Perspective ofForeign Firms ............................................................................ 218

13.6 Main Themes of This Case Study and Points for Consideration ... 220 References ... .. .. .. .. .. .... .. ...... .... .. .. .. ...... .. .. .. .. .... ........ .. .. .. .... ... . .... ......... .... .. .. . 221

14 Suzuki Motor's Expansion in lnd.ia....................................................... 223 14.1 Introduction ................................................................ „„„.............. 223 14.2 Suzuki Motors Corporation and Its Overseas Business................. 224 14.3 Suzuki's Business in India............................................................. 227 14.4 Supply Chain Creation and Local Development Infrastructure..... 232 14.5 India's Automotive lndustry: Huge Opportunities

and Increasing Competition .............. .... ............................... .......... 234 14.5.1 Hyundai Motor India (HMI) Limited............................... 237 14.5.2 Tata Motors ...................................................................... 238

14.5.3 Mahindra & Mahindra...................................................... 239 14.5.4 Toyota Kirlroskar Motors................................................. 239 14.5.5 Honda Siel........................................................................ 239

14.6 Significance ofThis Case Study and Suggested Questions........... 241 References................................................................................................. 241

15 Strategy Integration at the Global Level ........................... ................... 243 15.1 Main Points ofThis Text and Remaining Topics ........................... 243 15.2 Knowledge Management in Global Corporations ......................... 244 15.3 Diversity in Overseas Entities........................................................ 246 15.4 Organizational Structure Within Global Corporations .................. 248 15.5 Conclusion ......................................................................... :........... 251 References ............................. ........... „ .•.....•.. .•..••...•......•• „.......................... 253

Index .................................... ............................................................................. 255