Localization drivers in an emerging market: Case studies from Thailand

Abstract

Purpose - The purpose of this paper is to analyze the drivers that influence subsidiaries of international companies in the automobile industry in Thailand and how automobile companies pursue localization in response to these drivers. Design/methodology/approach - Using case research method, examined seven leading automobile manufacturers - Toyota Motor (Thailand); Hino Motors (Thailand); Honda Automobile (Thailand); Isuzu Motors (Thailand); BMW (Thailand); DaimlerChrysler (Thailand); and Auto Alliance (Thailand) - as well as 14 of their dealers and suppliers in Thailand. In total 120 Thai and expatriate managers were interviewed. Findings - Extending the knowledge body from existing research, this study found that there are four drivers for automobile manufacturers to adopt localization strategies. Those are host country characteristics, industry characteristics, company characteristics, and market characteristics. The results show that automobile manufacturers react to drivers by localization of their decision making, building and exploiting knowledge pool of local suppliers and distributors, increasing numbers of Thais at the management level while decreasing the number of expatriates, increasing R&D activities locally, localizing products, increasing usage of local suppliers, adapting manufacturer processes, reinvesting at subsidiary, and localizing corporate image. However, these vary in degree from company to company. Localization strategies produce benefits that go beyond allowing automobile manufactures to compete within the local situation, also enabling them to overcome challenges and use their successes to transform the parent company and other subsidiaries and eventually contribute to the parent company's globalization strategy. Practical implications - Managers in subsidiaries may first implement localization strategies to cope with driver factors to mitigate risks and uncertainty. By adopting localization, managers should not focus only on short term benefits to gain local advantages in host countries, but these advantages at the subsidiary should be transmitted to the parent company and other subsidiaries to build a competitive international strategy. Originality/value - CEOs of subsidiaries in emerging markets can learn what drivers influence localization strategies and how to cope and create local advantages for global competitiveness by implementing wide range of localization strategies.