Why Localization Is Necessary as a Business Strategy in Emerging Markets: The Case Comparison of Hyundai and Volkswagen

Jungyoun Lee,Jungyeon Kim,Jiwoo Kim,Seungho Choi

doi:10.3390/joitmc7030190

Jungyoun Lee, Jungyeon Kim + Show 2 more

Open Access

https://doi.org/10.3390/joitmc7030190

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Abstract

Localization, the process of establishing the most adequate system in the target market according to the given environment to produce the most viable product in the market, can help multinational enterprises (MNE) to better understand the market, and take the most appropriate actions needed. Business strategies in emerging markets must account for the environment’s distinctive characteristics because emerging markets are characterized by underdeveloped institutions, also known as institutional voids. What would be the best strategy to respond to these voids? The primary focus of this article is to investigate how multinational businesses deal with the institutional voids of emerging markets such as the Indian automobile market, and how the different strategies affect the players’ performances. By comparing Hyundai Motors Company and Volkswagen Auto Group’s different strategical approaches, this research demonstrates that better creation of a local value chain and ecosystem leads to better performance in emerging markets. Survival within emerging markets requires thorough market analysis in an institutional context, and rapid response to environmental shifts resulting from institutional voids. Localization can help in both aspects.

Highlights

Over the years, numerous companies have been operating in the Indian automobile industry, seeking potential opportunities in this rapidly growing market
It is clear that the Indian automobile industry is rather more difficult and trickier for global companies to settle down in, since more than a decade has passed since certain multinational enterprises (MNE) have entered and they are still struggling to win the hearts of Indian consumers
This study focuses on localization as a strategy to fill the institutional voids in an emerging market—India in this case—and compares two cases of automobile multinational enterprises and how they dealt with the market situation

Summary

Introduction

Numerous companies have been operating in the Indian automobile industry, seeking potential opportunities in this rapidly growing market. It is clear that the Indian automobile industry is rather more difficult and trickier for global companies to settle down in, since more than a decade has passed since certain MNEs have entered and they are still struggling to win the hearts of Indian consumers. This led to the following research question: “How do different strategical approaches taken by the MNEs in the Indian automobile industry influence the firms’ performances?” This question will be answered through two sub-questions:

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Discussion

Conclusion