Product Development for Country
Specific Vehicles in Asia:
A Dynamic View in Global Strategy
Taka Fujimoto and Yasuo Sugiyama
IMVP Sponsors Meeting
Oct. 5-7, 1999
Purpose
• To explore dynamic aspects of strategy
in global product development
• To describe product design and
organizational choices for Asian Car,
particularly for Indonesia
1
Road Map
1. Introduction
2. Framework: A Dynamic View
3. General Characteristics of Japanese
Automakers and Asia
4. A Case: Indonesian Vehicle
5. Conclusion
Newly
I
Designed
II
P la t for m
Applied
III
Old
IV
P la t for m
Globa l Design
Figure 1
Local Design
Product Design Strategy for Local Market
2
Local
Home
Sources of
Information for
Problem-solving
•Market
•Supplier
•Plant
Problem-solving
Capability
Product
Development
Organization
•Intra-firm
•Inter-firm
Scope Economy in
Problem-solving
Price of
Problem-solvers
•PS tools
•Inter-Project
Coordination
•Engineer
Environment
Government Regulation
Market
St r at egy of
Int er n a t ion a l
PD
St r a t egy
St r a t egy
F or m a t ion
Performance
P r odu ct
Resou r ce
Design
Config.
E xecu t ion
Organizational Capability
Manufacturing
Supplier
3
Newly
I
Designed
II
P la t for m
Applied
III
Old
IV
P la t for m
Globa l Design
Figure 1
Local Design
Product Design Strategy for Local Market
Framework
1. Strategy Choice in International PD
• Product Design
• Resource Configuration
2. Dynamic View
• Adaptation to Environment and
Capability
• Path-Dependent Selection
• Co-evolution of Strategy, Capability and
Environment
4
Environment
Unexpected Change
Evolution
Government Regulation
Market
St r at egy of
In ter n at ion al
PD
St r a t egy
St r at egy
St r a t egy
For m a t ion
Performance
Pr odu ct
Resou r ce
Design
Con fig.
of IP D
Performance
E xecu t ion
Organizational Capability
Manufacturing
Capability Building
Supplier
Over-adaptation
• Flexible development system generates
inflexible models
– The Adaptation to the Local Production
Capability >>> eliminates the pressure
– The Adaptation to the Local Market
Condition >>> isolates local customer
• Over-adaptation against environment
• Asian Crisis revealed the problem
5
Market Characteristics in
Southeast Asia
• Small Market, Rapid Growth
Big leap in 1990s
0.8mil (1990) >> 1.5mil (1996) units
• Limit of Income Level
– Highest of ASEAN 4 amounted only to 1/10
of Japan (GNP per capita)
• Diversified Market Needs
• Tolerant of Product Quality
Figure 3 Automobile Sales in ASEAN 4 Countries
1600
1400
1200
Amount (1,000)
1000
Philippines
Malaysia
Indonesia
Thailand
800
600
400
200
0
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
Year
6
Localization Policies &
Suppliers’ Capabilities
• Import-Substitution Policies
– Local content regulation leads low
productivity and quality
• Limit of Export-Promotion Policies
– Regional complementation scheme such as
BBC,
>>> Limited effect
Japanese Automakers’
Capabilities
• Flexible and Agile in Development
– Early and Integrated Problem-solving
• Black-box Parts
• Manufacturing Capability
• Overlapping Problem-solving
>> Localize Product Design
>> Centralize Resource Configuration
7
Amount (1,000)
80
81
Figure 7
82
83
84
85
Bo
dy
-M
id
Br
ak
es
St
ee
rin
g
-R
ea
r
/E
xt
er
io
r
Bo
dy
100
86
87
88
89
90
In
Se
str
at
um
en
tP
an
el
En
gi
En
ne
gi
Tr
ne
an
Co
sm
nt
iss
ro
ls
io
n
/T
ra
ns
Su
ax
sp
le
en
sio
n
-F
Su
ro
sp
nt
en
sio
n
-R
ea
In
r
ter
io
r/
Tr
im
U
pp
er
U
nd
er
-F
ro
nt
Bo
dy
Bo
dy
U
nd
er
U
nd
er
Figure 5
Configuration of Development Resource
5
4
3
Asia
NA & Euro
2
1
Automobile Sales in Indonesia
400
350
300
250
200
150
Comercial Vehicle
50
0
Passenger Car
Year
91
92
93
94
95
8
Indonesia:
Context of Product Development
• Government Regulation
– Import substitution and Localization
– Advantage for Commercial Vehicle
• Market Condition
– Strong preference for van type commercial
vehicles
– Kijang: the most popular vehicle
– 387 thousands (97) >> 58 thousands (98)
Product Development of
Indonesia Specific Model
• Two cases in 1990s
– Van type commercial vehicles
– Expectations for Rapid Growth
– Fit for the local production environment, low
cost, and that met the local needs
– Need special capability building
– Revealed over-adaptation problem
9
Product Design Strategy:
“Old Platform Derivative”
• Application of Old Platform
– Suspension and transmission: unchanged
from the first generation
– Engine: Old facility transferred (60s)
• Locally Adapted Design
– Van for passenger use (> 7 persons)
– Utilize the local production technology
– Evaluation criteria adapted
Resource Configuration
• Centralized for local fitness
– Model X
• up to design prototyping >> in Japan
• after trial production >> in Indonesia
– Model Y
• up to Product Engineering >> in Japan
• after Process Engineering >> in Indonesia
• Process with High Capability (Exterior Die
Making etc.) >> in Japan
10
Capability Building in "Old
Platform Derivative"
• Organizational Innovation
– Shortening the total lead time
• not to use the prototype dies
• front loading of problem-solving
• Specific Capability for the Strategy
– Unpacking Embedded Information
• simplified drawing
• BBP
• manufacturability
Asian Crisis: Manifestation of
“Over-adaptation”
• “Old Platform Derivative”:
– Good Balance of Global-Local Trade-off
• Economic Crisis of Indonesia
– Drastic shrink of market (1/6)
• Problem Revealed
– Relatively Low Quality
– Isolated Taste
>> Export Difficulty
11
What Learned?
• Importance of Dynamic Capabilities
– Learning organizations may accumulate
certain dynamic capabilities in the long run,
by which the firm can re-adjust the product
strategies quickly to the environmental
changes
Conclusion
1. Strategy Choice in PD of Asian Car
– “Old Platform Derivative”
– Centralized Configuration
2. Path-Dependent Selection
3. Co-evolution of Strategy, Capability and
Environment
4. Importance of Dynamic Capabilities
12