Huge numbers of middle-income groups are distributed in China and Association of South East Asian Nations (asean). In this context, global firms recognize the need for localization strategy. The practical upcoming challenge of global companies is to determine the best way to accomplish localization. In this paper, we present the development of a self-contained localization system based on organizational capabilities, and suggest the self-contained localization strategy through case studies of Japanese firms. The foreign subsidiaries with self-contained units include their own R&D, operations, marketing, service, and human resource functions. Therefore, the self-contained localization strategy allows the foreign subsidiary a large degree of autonomy in responding appropriately to local competitive conditions with locally responsive strategies. When we analyze the relationships between Japanese headquarters and local business subsidiaries, we find the larger a degree of autonomy of self-contained subsidiaries, the higher their global market share.
AboTetsuoHiroshiItagakiK.KamiyamaT.Kawamura and H.Kobun.1991. “Japanese Production System Applied in US: Application and Adaptation in the Local Factory.”Touyou Economic Newspaper (in Japanese). Tokyo.
FujimotoTakahiro. 2003. Noryoku kochiku kyoso (Capability-building competition) Chukousinsyo (in Japanese). English translation: Competing to be really good (translated by MillerBrian). Tokyo: International House of Japan.
HendersonRebecca. 1993. “Underinvestment and incompetence as responses to radical innovation: evidence from the photolithographic alignment equipment industry.”The Rand Journal of Economics24(2): 248-270.
HongPaulWilliam J.DollElenaRevilla and AbrahamNahm. 2011. “Knowledge sharing and strategic fit in integrated product development: An Empirical Study.”International Journal of Production Economics132(2): 186-196.
OkiK.2009. “Building capabilities of overseas subsidiaries in the context of international functional specialization: A case study of Japanese HDD makers.”Journal of International Business1(1): 19-34(in Japanese).
ParkYoungWonTakahiroFujimoto and PaulHong. 2012. “Product architecture, organizational capabilities and IT integration for competitive advantage.”International Journal of Information Management32: 479-488.
ParkYoungWon. 2009. “[A 33th Story of Monozukuri’s Journey in Asia] Korean firms’ localization strategy in Indian market: From local accommodation marketing to premium market pioneering.”Akamon Management Review8(4) April: 181-211(in Japanese).
SidhuJatinder S.Harry R.Commandeur and Henk W.Volberda. 2007. “The multifaceted nature of exploration and exploitation: Value of supply, demand, and spatial search for innovation.”Organization Science18(1): 20-38.