The Automotive industry
The Automotive Industry in Emerging Economies:A Comparison of Korea, Brazil, China and IndiaIndian Institute of Management, Ahmedabad 380015, IndiaThe automotive industry in Korea, Brazil, China and India is currently going throughimpressive growth. Governments have played a key role in the evolution of the industry in allthese countries. The Korean industry has made the most significant progress, and is nowexporting cars to developed markets. It is the only country that invested in R&D for productdevelopment, retained management control in joint ventures with multinational companies(MNCs), and had ambitious export targets. The industry in Brazil is controlled entirely byMNCs. Although this has led to growth and adoption of lean production, indigenous productdevelopment is lacking. Tariff barriers have come down, forcing domestic production tobecome more market responsive. Fluctuating tariffs and taxes, and cyclical demand havecharacterized the industry. Indian industry is experiencing a revolution with rapid growth andthe entry of 9 MNCs and plans for 3 more to enter in the next two years. The Chinese industry
With stagnation in developed markets and huge additions of capacity in emergingmarkets, monopoly of MNCs over car production could erode although they will continue todominate product development. The strategy was toobtain foreign capital and technology, and they were forced to give managerial control tointernational partners. The development of the Brazilian automotive industry has been described by Ferro (1995). Previously, thefocus of government poilicy was on import substitution, as is typical of most developingcountries. OFASSEMBLERS(%) (1985-95)OUTPUTSHARE OFTOP 3 FIRMS(%)GROWTH INOUTPUTSHARE OFTOP 3FIRMS(%)(1985-95)MNCs PRESENTKOREA 6 100 95 -5 Mazda, Mitsubishi,GM, Ford, Honda,MercedesBRAZIL 5 28 95 15. Lowinvestment in R&DSuppliers Moving towards world classstatus. MNCs have not chosen to enter on their own and have entered into joint venures with Indianpartners. Amsden and Kang (1995) call this group of countries `emerging economies ormanufacturers' and not just `emerging markets. Implications and ConclusionsThe table in the Appendix summarizes the comparison between these countries. 6OEM:RM Split 80:20 50:50 50:50 20:80OverseascollaborationsManylicensingagreements20% of firmsare foreignaffiliatesMany licensingagreements60% of firmshave Japaneselinks38% offirms haveforeign tieupsExports 10% of sales 15-20% ofsales20% of sales 10% of salesOne of the reasons for the success of the Korean automobile industry is the closely knitassembler-supplier structure. Some are able to designproprietary partsGetting restructured for leanproduction. Later they developed theirown models for the world market. This is because the Korean government has always supported as well as disciplinedthe Korean industry through export targets and incentives and through price controls.
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