Balancing the Paradox of Localization and Globalization: Research

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  • Balancing the Paradox of Localization and Globalization:

    Research and Analyze the Levels of Market Involvement

    for Multinational Carmakers in Chinas Market

    Authors: Chen Jun

    Jiao Zhiqiang

    Tutors: Dr. Philippe Daudi,

    Dr. Mikael Lundgren

    Program: Master's Programme in Leadership and

    Management in International Context

    Subject: Masters Thesis

    Level and semester: Masterlevel Spring 2008

    Baltic Business School

  • CHENJun &JIAOZhiqiang 16/05/2008

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    Acknowledgements

    OurPersonalThanks

    Wewanttothankthefollowingpeoplefortheircontinuedsupportsthroughoutthisprogramme

    andtheirhelpin writingthisthesis.Without their help,this thesis wouldnothavebeenpossible.

    In the first place, we would like to give thanks to our professor, Dr. Philippe Daudi for his

    supervision,advice,andguidanceall throughthis research.Abovealland themostneeded,he

    providedus great encouragementandsupportinvariousways.

    We also sincerely appreciate Mr. Mikael Lundgren for his encouragement, supervision,

    constructive suggestions and professional advices to us during the research. His crucial

    contribution to the thesis is of great significance. His involvement with his originality has

    triggeredandnourishedourintellectualmaturity.

  • CHENJun &JIAOZhiqiang 16/05/2008

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    Abstract

    Field: Masterthesisin changemanagement

    Numberof Pages: 94

    Title: BalancingtheParadoxofLocalizationandGlobalization:Research and Analyze the Levels of Market Involvement for

    MultinationalCarmakersinChinasMarket

    Authors: Chen Jun&JiaoZhiqiang

    Supervisor: MikaelLundgren,BalticBusinessSchool,Kalmar,Sweden

    Submission Date: 16thMay,2008

  • CHENJun &JIAOZhiqiang 16/05/2008

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    ExecutiveSummary:MultinationalCorporations(MNCs)arefacingtheparadoxof

    globalizationand localization in enteringeach newmarket.Generally, therearetwo

    perspectiveswhich regard to how aMNC configure its crossborder activities: The

    first is global convergence perspective, which focuses on leveraging corporate

    resources and attaining global synergies. The second is international diversity

    perspective,whichlaysmoreemphasisonlocaladaptationandharnessingdiversities.

    Both perspectives have their pros and cons, a balance between international

    standardizationandlocaladaptationisvital.

    For the major Auto Giants in the world operating and competing worldwide, the

    significance of Chinamarket is as clear as day to everyone. This paper focuses on

    how themajorAutoGiants balance theparadoxofglobalizationand localization in

    the China market. In other words, how the MNCs deal with the dilemma of

    globalization and localization under different strategic contexts?We adopt amodel

    whichdividestheiractivities inChina into6stagesandwhichincludescriteriawith

    regardtothedilemmaof localization andglobalization.

    Key words: Multinational Corporation Automotive Industry China market

    ParadoxGlobalizationandlocalization.

  • CHENJun &JIAOZhiqiang 16/05/2008

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    Title page 1

    Acknowledgement 2

    Abstract 3

    Table of content 4

    Chapter1 Introduction......................................................................................................7

    1.1. Background: ..........................................................................................................7

    1.1.1 Theglobaloverviewoftheindustry .................................................................7

    1.1.2 TheChinasautomotivemarketoverview.........................................................8

    1.2. Problemdiscussion:theparadoxofglobalizationandlocalization ..........................9

    1.2.1 Theglobalizationperspective ......................................................................... 10

    1.2.2 Thelocalizationperspective ........................................................................... 11

    1.3 Ourresearchquestion ........................................................................................... 11

    1.4. ImportanceandImplicationoftheresearch .......................................................... 13

    1.5. StructureoftheThesis ......................................................................................... 14

    1.6. Researchscopeandlimitation .............................................................................. 15

    Chapter2 Literaturereview ............................................................................................ 17

    2.1 ThediscussionontheparadoxofGlobalizationandLocalization .......................... 18

    2.2. Internationalmanagement .................................................................................... 22

    2.3 PortersFiveForces .............................................................................................. 28

    2.4. OrganizationalstructureofMNCs........................................................................ 30

    2.5. InternationalcompositionofMNCs ..................................................................... 33

    2.6. Thedefinitionofthesixstagesinthevalueaddingprocess................................. 34

    Chapter3 Methodology .................................................................................................. 38

    3.1. Qualitativeresearch ............................................................................................. 38

    3.2. Quantitativeresearch ........................................................................................... 39

    3.3. Ourapproach ....................................................................................................... 40

    3.4. Validity ............................................................................................................... 40

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    3.5. Theselectionofthesamplefirms ......................................................................... 41

    3.6. Credibilityofdatacollectingandanalyzing.......................................................... 43

    Chapter4 EmpiricalStudy.............................................................................................. 46

    4.1. Theautomotiveindustry ...................................................................................... 46

    4.2. BusinessEnvironmentinChina............................................................................ 47

    4.2.1. Theformulationofautopolicy ...................................................................... 47

    4.2.2. ThegeneralsituationofautoMNCsbehavioursinChina ............................. 50

    4.2.3. PortersFiveForcesmodelanalysisforChinasautomotiveindustry............. 54

    4.3. Empiricalstudiesoffivefirms ............................................................................. 57

    4.3.1. BMW:........................................................................................................... 57

    4.3.2. Volvo............................................................................................................ 62

    4.3.3. GM: .............................................................................................................. 64

    4.3.4. Toyota.......................................................................................................... 68

    4.3.5. Hyundai ........................................................................................................ 71

    Chapter5 Comparativestudy.......................................................................................... 76

    5.1. Comparativestudybetweenfirms ........................................................................ 76

    5.2. Comparativestudybetweendifferentstages ......................................................... 83

    References .......................................................................................................................... 91

    Listofcitationfromwebsite................................................................................................ 94

  • CHENJun &JIAOZhiqiang 16/05/2008

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    Chapter 1 Introduction

    1.1. Background:

    SinceHenryFordmassproducedautomobilesbyproductionlinefortheFordModel

    T, the world automobile industry had entered the fast booming period. With the

    thereaftertechnologytransfer,thedevelopmentoftheEuropeandJapanautoindustry

    were ledtosignificantgrowth.Recently,automotive industry isalsobooming inthe

    emergingmarketssuchasChina,eastEurope,IndiaandRussia.

    The automotive industry is regarded as the industry of the industries, which has a

    great influence on theworlds economy.The production accounted for 3.3%of the

    USAs GDP (BERA, 2004), for example. The automobiles manufacture relates to

    varietiesofmost important rawmaterials, steel, aluminum,dash boards, and rubber

    for tires and so on.Meanwhile, the automobiles industrycreates a great number of

    employments for the whole country. In the U.S., for example, the number of

    automotive industry occupied workers reached the peak of 1313600 in 2001(U.S.

    DepartmentofCommerce,2005).Theautomobilemanufacturecontainsthelatestand

    sharpesttechnologies,suchastheindustrialdesignoftheautomobilesandthesafety

    factors,allofwhichrequirethelatesthightechs.

    1.1.1 Theglobaloverviewoftheindustry

    Currently, themajor players in the industry are someU.S. companies, for example

    GM, Ford and the Chrysler, the German companies like DaimlerBe