Differences between innovative automakers' strategies in Brazil

Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Berlin (2010)

Keywords:

Automotive industry, Emerging countries, Intenrational Strategy, International Management, International Strategy

Abstract:

This study analyses the change in the strategies of Brazilian subsidiaries of automotive MNCs, specifically the ones that had developed products in Brazil. The main goal is to identify the reasons why subsidiaries of the same sector in the same country, earn different roles inside their corporations after developing engineering capabilities for innovation, offering a causality hypothesis. The analytical framework involves the discussion about subsidiary development, productive models, and the internationalization degree of each company.

The study was carried out in five Brazilian subsidiaries: Renault, General Motors, Volkswagen, Fiat and Ford, between 2007 and 2009. Results suggest that these subsidiaries occupy a continuum of corporate roles that vary from Global Centre of Excellence (CoE) to Local Implementer, with intermediate categories such as Unit of Excellence (UoE), World Product Mandate (WPM) and Headquarters’ Partner in Global Projects. The construction of an explanatory hypothesis resulted in a model the internationalization process for the auto industry. The ten stages of this evolutionary model proposed, with the productive context of each stage, product characteristics and motivation for reaching the stage, are shown below. The dates refer to the period when the phase was the industry cutting edge.

  • I – CBU Export (1890-1910). Vehicles are exported completely assembled. Product standardized, and the motivation is market reach.
  • II – SKD assembly shop (1900-1920). Vehicles are exported semi knocked down and locally assembled in a shop floor, using low-qualified workforce. There is no local supplier industry. Product standardized. The motivation is overcoming market imperfections (tariff and non-tariff barriers).
  • III – CKD assembly shop (1900-1920). Vehicles are exported completely knocked down with 100% of imported parts, and locally assembled in a shop floor, using workforce with some basic technical skills. There is no local supplier industry. Product standardized. The motivation is overcoming market imperfections (tariff and non-tariff barriers).
  • IV – CKD assembly shop with growing local supply (1920-1950). Assembly parts are gradually being “nationalized” (localized), until very close to 100%. There is the development of the suppliers and of the workforce. Product is basically standardized, with minor adaptations due to the substitution of the imported parts. The motivation is matching host government demands and lowering the production costs.
  • V – Autonomous manufacture of standardized vehicles designed by headquarters (1950-1980). Manufacture autonomy (which means freedom to perform minor necessary adaptations in the original project) for vehicles centrally designed. MNCs practice international product life-cycle management. Subsidiary exports. Product is less standardized by mandatory adaptations to match local demands: terrain, legislation, and limitations of suppliers, machinery, and raw materials. The motivation is lowering the costs of non-innovative models facing price competition.
  • VI – Autonomous manufacture of “localized” vehicles originally designed by headquarters (1980-1990). Global models show low competitiveness. Emerging markets gain progressive importance in the MNCs sales. Product is adapted to local markets. The motivation is the enhancing importance of emerging markets and the superior commercial performance of “localized” vehicles.
  • VII – Manufacture of “localized” vehicles with enhancing participation of the subsidiary in the product development (1990-2000). Traditional centres of design and product development cannot perform all the international projects centrally due to pipeline pression. Some subsidiaries with engineering capability seize the initiative to design derivatives and complete models. The product is adapted to local markets and few international regions with similar markets. The motivation is the impossibility of performing international adaptations centrally.
  • VIII – UoE (1990-2000). Some unities develop excellence in the product and process development to local performance. Product as in phase VI. The motivation is the subsidiary competence development.
  • IX – WPM (1990-2000). Some UoE gain global mandates for product development and other functions. The product follows local expertise characteristics. The motivation is international rationalization, scale and competitiveness seeking.
  • X – CoE (2000-nowadays). Some subsidiaries with innovation initiatives and influence over other subsidiaries earn the status of CoE. Product follows local expertise characteristics and gains “Preparation” (generalization in parts characteristics) to receive adaptations to be manufactured and marketed in other countries. The motivation is the strategy of the subsidiaries, the profitability of the decentralized initiatives and the influence of the subsidiary towards its sisters. The brief description of each of the five cases is followed by the classification of the subsidiaries in the internationalization model, explaining their roles in the respective corporations.

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Géry Deffontaines

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