business automotive industry
Jos Westemeijer March 2014
University of Groningen
Faculty of Economics and Business MSc Business Administration
Specialization Business Development First Supervisor: drs. J.C.L. Paul Second Supervisor : drs. H.P. van Peet
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How to become a global player in the business to
business automotive industry
Author: Jos Westemeijer Student number: s1921525 Brinkhoekweg 9 8034 PA Zwolle Tel + 31 (0) 6 49147044 or + 31 (0) 38 4547100 josw1987@hotmail.com Principal: Visscher – Caravelle B.V. Sisalstraat 85 8281 JK Genemuiden
Supervisor Visscher-Caravelle: T. van Dijk MSc
Education:
University of Groningen
Faculty of Economics and Business Nettelbosje 2
9747 AE Groningen
MSc Business Administration
Specialization Business Development Supervisor: drs. J.C.L. Paul
j.c.l.paul@rug.nl
Date: March 2014
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Acknowledgement
This master thesis is the result of my research internship at Visscher-Caravelle, Genemuiden. The internship is the last hurdle in obtaining my Msc. Business Administration Degree. The research is executed for Visscher- Caravelle, manufacturer of car mats for the automotive industry. I want to express my gratitude to everyone who contributed to this master thesis. Special thanks go to T. van Dijk (COO Visscher-Caravelle) and drs. J.C.L. Paul (Supervisor University Groningen) for their advice and support.
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Executive summary
Two major customers of Visscher-Caravelle invited the organization to discuss the opportunities for global support. The automotive market is growing and these car manufacturers have extended their production facilities, to become global players. This translates into developments in the automotive industry that directly affect the business opportunity that Visscher-Caravelle faces. Visscher-Caravelle need to identify which characteristics are necessary to provide global support.
The two main objectives of this research are:
A) are to serve all customers worldwide (market development) B) to use foreign production plants to serve new customers
In this context the following master research question is formulated:
To what degree does Visscher-Caravelle possess the characteristics which are necessary to become a global player in the business to business automotive industry?
The literature review, empirical company research and secondary sources have contributed to identify characteristics which are necessary to become a global player in the business to business automotive industry. This research starts with an introduction of the organization along with a explanation and validation of the business opportunity. Research design sets out the specifications of this research and is followed by the literature review. The developed theoretical fields in the
conceptual project design were the base for the literature review and empirical secondary research. Sub-questions for this research are:
- What are the contributing and adversely affecting factors in the internationalization process? - Which internal factors and resources of the organization influence the internationalization process? - What are the Supply Chain Management challenges and strategic options in the
internationalization process?
The literature review concludes with eight Internationalization Potential Points (IPP’S). The results section is presented per sub-question and ends with a scoring of the organization based on the eight IPP’S. The solution includes four alternatives which were scored in order to show the best applicable alternative for the presented business opportunity.
This research provides four alternatives. The two alternatives for the first objective; serving all customers worldwide, are ‘joint ventures for market development’ and ‘customer extension by using own current production plants’. For the second objective; use production plants to serve new customers, also two alternatives are developed namely ‘development of local production plants’ and ‘joint ventures for local production plants’.
Based on the literature review and empirical research the final design choice is a combination of a joint venture for market development and a joint venture for using a production plant to serve new customers.
This research showed that Visscher-Caravelle possess the characteristics for further
internationalization. With the right execution of the internationalization process Visscher-Caravelle can become a global player in the business to business automotive industry. The current conditions in the organization for example existing customers and networks as well as the culture promotes the thinking to become a global player.
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Content
Page number1. Introduction 6
1.1 introduction to Visscher-Caravelle 6
1.2 Business opportunity 6
1.3 Business opportunity validation 10
2. Research Design 12 2.1 Research questions 12 2.2 Research design 13 2.3 Research process 13 2.4 Research Method 14 2.5 Literature review 14
2.6 Empirical company research 14
2.7 Method of analysis 15
2.8 Quality criteria 16
3. Literature study 19
3.1 What are the contributing and adversely affecting factors in the 19
internationalization process?
3.2 Which internal factors and resources of the organization influence the 22 internationalization process?
3.3 What are the Supply Chain Management challenges (SCM) and strategic options 25 in the internationalization process?
3.4 Literature summary, business opportunities and IPP’S. 28
4. Results 30
4.1 Contributing and adversely affecting factors in the internationalization 30 process (Adresses IPP 1)
4.2 Which internal factors and resources of the organization influence the 31 internationalization process? (Adresses IPP 2,3,4,5,8)
4.3 What are the supply chain management challenges and strategic options 34 in the internationalization process? (Adresses IPP 6,7)
4.4 Market analysis 35
4.5 Scoring IPP’S 35
5. Set of alternatives 37
5.1 Alternatives objective one 37
5.2 Alternatives objective two 40
6. Conclusions 44
6.1 Conclusions, final alternative choice and recommendations 44
6.2 Academic reflection 46
7. References 48
8. Appendixes 52
8.1 Appendix A Literature search specifications 52
8.2 Appendix B Set up interviews 53
8.3 Appendix C Overview in-depth interviews 56
8.4 Appendix D Overview list secondary data 57
8.5 Appendix E Results coding interviews 58
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1.Introduction
1.1 Introduction
Introduction thesis
This research was initiated by the Chief Operations Officer (COO)of Visscher-Caravelle, in order analyze the current and future market as input for the strategic advice that will be contained within this master thesis. Management identified a business opportunity in the competitive market to improve the current and future position of the organization. This master research addresses issues which an organization may face in the internationalization process and if this organization is suited for this process. As there is no consensus in relevant literature this research includes a literature review and an empirical company research with in-depth interviews and secondary sources in order to provide consensus. The eight IPP’S defined at the end of chapter three are the base to score Visscher-Caravelle in the results section (chapter four) , these results are presented per sub-question. Chapter five explains the alternatives and chapter six contains the conclusions and recommendations of this research. Appendix F contains an additional systematic literature search about the
antecedents and effects of Global Mindset, the findings and recommendations of which are enclosed in the conclusions of this research.
Introduction to Visscher-Caravelle
Visscher-Caravelle is a young and dynamic supplier of automotive car mats for the automotive industry. Visscher-Caravelle mission states that they want to be the world’s favourite car mat maker. Their head-quarters are located in Genemuiden, The Netherlands. Visscher-Caravelle employs about 500 people. About five years ago the organization made a switch from the original after-market towards the professional and much larger original equipment manufacturer (OEM) and original equipment supplier (OES) market.
1.2 Business opportunity
This section elaborates on the actual business opportunity which was the trigger for Visscher-Caravelle to conduct this research. In the OEM / OES market the car manufacturers have been growing exponentially over the last decades; according to the forecast of Polk (2012) this is set to continue1. Visscher-Caravelle has a leading position in the car mat market2, their strategic goal is to become a global player serving all customers worldwide.
The market that Visscher-Caravelle operates within is competitive and dynamic. To maintain and expand their current leading position in the market Visscher-Caravelle faces different challenges from competitors, substitutes and changing customers. For the investigation of the market and customers Visscher-Caravelle uses the theory of Ansoff (1957) which divides the market into four categories (Figure 1). In figure 1 the distribution of the markets are visualized to explain what business development means for Visscher-Caravelle and to underline the role of Business Development for the organization.
1 Polk forecast global car production light vehicles May 2012 2
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Figure 1 Ansoff growth matrix (1957)
Within these four categories the organization has divided customers into two segments based on specific market characteristics. First one is OES (Original Equipment Supplier), in this market the product is transported to a warehouse before the car manufacturer uses the product. The second segment is OEM (Original Equipment Manufacturer) and is different in that the product goes directly to the manufacturing plant. These two different market types require a different approach for Visscher-Caravelle, which is used to classify the customers. For OEM customers the on time delivery is a very important section of the process this requires detailed production and transport planning from the organization. For OES customers the price aspect is more important in selecting suppliers. In order to hold and maintain their current leading position in the market Visscher-Caravelle has to expand their market in order to grow with their customers. The international car market is growing, but the European car market is declining and Visscher-Caravelle are losing product volumes, section 1.3 further elaborates on this development.
Figure 2: Production Plants Visscher-Caravelle worldwide 2013
As of 2014, Visscher-Caravelle has production plants in Poland, Malaysia and Australia. Major production takes place in Poland, Malaysia has just opened and is in the development phase. The
Plant director VC one market responsible BD manager VC three markets responsible
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production in Australia is more developed for regionally located customers. They are able to provide the product to the customer at geographically efficient locations. Regarding the volume per plant, Poland assumes 90% of the total production and the remaining 10 % is equally divided between Malaysia and Australia3.
Opportunity statement
The OEM / OES market is growing and the car manufacturers have extended their production facilities, thus becoming global players. Their are two main objectives of this opportunity:
A) to serve all current customers worldwide, for example the customer who initially invited Visscher-Caravelle and want to build a plant in a far foreign country.
B) to use foreign production plants to acquire new customers in these countries.
The first objective includes market development, the goal to serve the current customers anywhere in the world. The second objective is to expand the amount of production plants internationally with the purpose to use these plants to acquire new customers.
Becoming a manufacturer with global presence requires a large amount of resources to build and develop a worldwide network. Visscher-Caravelle is financially healthy but does not have the resources to invest in worldwide production and sales facilities4. An additional issue is that the majority of production is currently in Poland. This is not an ideal situation either logistically or for order reliability for a large automotive supplier. In order to maintain the current position in the market and stay in competition the organization has to grow with their customers. The future for the organization depends on the confidence current customers have in them. The current customer has to believe that this supplier is able to grow alongside the manufacturer and is able to supply in far foreign locations under the current logistics and quality conditions. It is a fact that the customers are growing and expanding in the emerging markets like China and Mexico. Visscher-Caravelle has to grow with these customers otherwise the organization will most likely lose them. Losing such large customers can result in insurmountable problems for the organization. In order to guarantee the future of the organization Visscher-Caravelle has to research this business opportunity thoroughly, researching where the customers build their production plants, how competitors respond to global developments and how the organization itself needs to develop a global network.
Following implementation of this opportunity Visscher-Caravelle need to take into account the different issues which facilitate the process of international expansion. How an organization starts with foreign activities has to be researched. Themes that need to be researched in order to execute the path to become a global player include: how the organization should look internally, which different influences the organization can expect in the internationalization process and
characteristics of the organization are all crucial. Theory should be researched on these different subjects and should also include an investigation into which strategic options are interesting for the future of the organization in order to compensate their resources.
After the first identification of the business opportunity the stakeholders at headquarters were interviewed to specify and further define this business opportunity. It became clear that financial resources have a major role in the first thinking of expansion. The second occurring factor is that the organization has to be able to execute the ideas. The organization also has to be able to connect with
3 Orally confirmed Head Purchase 4
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the supply chain of the customer. The expansion of the OEM customers in foreign countries influence the ‘Supply Chain Road Map’, Fawcett, Ellram and Ogden (2007) of the organization. The design of the global supply chain with the supply chain strategy and the customer fulfillment process all contribute to the execution of this business opportunity.
Analyzing the forecast information5 the global car market face large changes in volumes for the next five years. The automotive industry has never before seen this level of growth (Figure 3). This underlines the uniqueness of the research and the mandatory role of the research for Visscher-Caravelle explaining the research question: researching the necessary characteristics to become a global player in the business to business automotive industry.
Alternatives
The four alternatives were scored on the factors identified in the literature study (chapter three) that have major influence on the alternatives. The literature discusses the importance of these factors and they are named in this research as IPP’S (Internationalization potential points). The scoring of the alternatives makes it possible to test which alternative best fits the organization. The alternatives for both business objectives are presented in the following matrix (table 1).
Table 1 alternatives
Alternative One Alternative Two
Objective One; Serve current customers worldwide
Joint ventures for market development
Customer extension by using own resources
Objective Two; Use plants to serve new customers
Development local production plants
Joint ventures for local production plants Background information table 1
For objective which involves the market development for the current customers, alternative one includes joint ventures for market development and alternative two includes customer extension of the current customer by using the current production plants in Poland, Australia and Malaysia. Objective two which involves the expanding of the number of production plants, alternative one includes development of own production plants in foreign countries to serve current and new customers whereas alternative two includes joint ventures for expanding in number of production plants and to use the joint ventures to acquire new customers.
Chapter three ends with the substantiation for these alternatives and chapter five describes the content and scoring of the alternatives within the IPP’S.
Chapter two will discuss the design of the research with all elements included for exploiting this business opportunity according to the methodological handbook of Van Aken (2007).
1.3 Business opportunity validation
The declining European car market is the main reason why Visscher-Caravelle has to research the internationalization situation to maintain their current leading position in the market. Investigating the current car market and near future forecasts it could be concluded that the global car market is
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growing, except in Europe 6. Strong growth of the market in North-America, Asia and the BRIC countries are responsible for one third of global output. The forecast information of Polk 7 indicates the growth of the industry and the expected growth in the following years. Figure 3 underlines the expected growth of the global car market production. Interviews within the organization with important stakeholders researched the phenomenon that as the market changes large suppliers become larger and smaller suppliers disappear8. Previous research by Friedman (2007) showed that when national economies become aligned, the world economy will integrate and globalize more.
Figure 3 Global car market production forecast
Visscher-Caravelle wants to improve the unmet customer needs within the organization. The stakeholders within Visscher-Caravelle identified the high level of importance of exploiting this business opportunity. Visscher-Caravelle operates in a market where change is normal and organizations constantly enter and disappear. In order to guarantee the future of the organization and to maintain current large customers, they have to research the common trends in the industry in order to maintain and eventually expand the current leading market position.
This business opportunity is also partly moved by the production shifts around the world. Global movements of OEM production activities in order to deal with production cost disadvantages and currency fluctuations are divided into ‘global regions’. With OEM facilities nearby the car
manufacturer import restrictions are alleviated and production follows the demand of the car manufacturer.
Murray (2001) concludes that a strategic alliance-based global sourcing for components is a viable and appropriate strategic option for an organization to gain competitor advantage and become more flexible. This conclusion explicates that strategic alliances can result in major advantages. In addition
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Polk Forecast Light vehicles production November 2012
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Polk forecast global car production light vehicles November 2012
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to these important results, the final section of the literature search researches the strategic options which could be interesting for the development of the identified alternatives.
Figure 4 productions shifts around the world 9
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2. Research design
2.1 Research questions
This research started with the global question to research the unknown customer needs within the organization. Validating the business opportunity the environment is analyzed to discover the real and more substantiated problem. Based on the introduction, problem statement , literature review and internal meetings with stakeholders of the business opportunity the following research question can be formulated;
To what degree does Visscher-Caravelle possess the characteristics which are necessary to become a global player in the business to business automotive industry?
Further defining the business opportunity, the sub-questions need to create specifications in order to answer the master research question. Therefore, in line with the former research question, three sub-questions are derived.
Sub-questions :
- What are the contributing and adversely affecting factors in the internationalization process? - Which internal factors and resources of the organization influence the internationalization process? - What are the supply chain management challenges and strategic options in the internationalization process?
After the design of the research question and sub-questions, the conceptual project design explicates the structure of the research, as presented below.
Conceptual project design
The costs of the project
The organization of the project
Figure 5: Conceptual project design by van Aken et. al. (2007).
The conceptual project design explicates the business opportunity, in the left block the theoretical fields of the literature review are presented. The literature review, empirical company research and secondary sources are used to answer the master research question, as presented in the right block. The conceptual project design visualize the written business opportunity, what makes it easier to understand.
Theoretical fields literature search
- Contributing factors internationalization process
- Adversely affecting factorsinternationalization process
- Internal factors
- Resources
- Strategic options (supply chain management)
Current situation VC based on theoretical fields
- Identifying the characteristics for a supplier which are required to achieve global presence in the b2b automotive industry
- generation of views, opinions and estimates
Confrontation
(between theory & V.C. current situation) insights / conclusions confrontation
2.2 Research design
The research is conducted according to the design presented by Van Aken et al (2007).
opportunity exploiting (BOE) project which will have the same steps as a BPS project. The Business Problem Solving project follows the logic of the problem solving cycle, presented in the regulative cycle of van Strien (1997).
Figure 6 : Regulative cycle by van Strien (1997).
Comparing these two approaches, the main difference betwee
oriented approach are the objectives. Empirical research is focused on knowledge whereas the design project is focused on improvement of the performance of the company. In order to provide appropriate answers to research questions presented in section 2.1 and to design a proper solution to exploit the opportunity, this research
explains the research methods with of analysis and quality criteria.
2.3 Research process
The reflective cycle is designed by van Aken et. al. (2007) and included the regulative cycle of van Strien (1997) .The aim of the reflective cycle is to exploit the opportunity by follo
the reflective cycle. Because this
effect diagram. Therefore the study starts with a introduction of the organization and continues with the actual business opportunity. This
point for collecting and analyzing of the data. The final design will implemented for Visscher-Caravelle.
2.4 Research method
The business opportunity project is design oriented, which means that the result of this study will be a design that contribute to the given opportunity in most optimal way. To achieve this, the solution should meet the specifications which are determined during the analysis of th
theoretical fields in the conceptual project design are the boundaries for the research.
research contains a literature review about the theoretical fields in the conceptual project design figure five. Secondary research includes
documents and secondary data, specifications are presented in appendix D 13
The research is conducted according to the design oriented business problem solving (BPS) approach (2007). The basis of this research project can be explained as
opportunity exploiting (BOE) project which will have the same steps as a BPS project. The Business blem Solving project follows the logic of the problem solving cycle, presented in the regulative
: Regulative cycle by van Strien (1997).
Comparing these two approaches, the main difference between an empirical research and the design oriented approach are the objectives. Empirical research is focused on knowledge whereas the design project is focused on improvement of the performance of the company. In order to provide
rch questions presented in section 2.1 and to design a proper solution this research focus on empirical research. The following paragraphs explains the research methods with literature review and empirical company research
is designed by van Aken et. al. (2007) and included the regulative cycle of van The aim of the reflective cycle is to exploit the opportunity by follo
this research is an opportunity and not a problem, there
effect diagram. Therefore the study starts with a introduction of the organization and continues with the actual business opportunity. This opportunity statement is the basis for this research and starting point for collecting and analyzing of the data. The final design will contain alternatives
Caravelle.
project is design oriented, which means that the result of this study will be a design that contribute to the given opportunity in most optimal way. To achieve this, the solution should meet the specifications which are determined during the analysis of the opportunity. theoretical fields in the conceptual project design are the boundaries for the research.
research contains a literature review about the theoretical fields in the conceptual project design ncludes several types of sources; in-depth interviews, company , specifications are presented in appendix D. The secondary research
oriented business problem solving (BPS) approach he basis of this research project can be explained as a business opportunity exploiting (BOE) project which will have the same steps as a BPS project. The Business
blem Solving project follows the logic of the problem solving cycle, presented in the regulative
empirical research and the design oriented approach are the objectives. Empirical research is focused on knowledge whereas the design project is focused on improvement of the performance of the company. In order to provide
rch questions presented in section 2.1 and to design a proper solution The following paragraphs literature review and empirical company research, the methods
is designed by van Aken et. al. (2007) and included the regulative cycle of van The aim of the reflective cycle is to exploit the opportunity by following the steps of
is an opportunity and not a problem, there is no cause effect diagram. Therefore the study starts with a introduction of the organization and continues with
opportunity statement is the basis for this research and starting contain alternatives which can be
project is design oriented, which means that the result of this study will be a design that contribute to the given opportunity in most optimal way. To achieve this, the solution
e opportunity. The theoretical fields in the conceptual project design are the boundaries for the research. The primary research contains a literature review about the theoretical fields in the conceptual project design in
depth interviews, company . The secondary research
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has an semi open view, the insights developed in the literature review was the input for the secondary research. In order to provide good solutions, this project uses qualitative research methods , because the context of this research is dynamic, subjects are complex and face current processes.
2.5 Literature review
For the literature review and research design, electronic sources from online databases like; Business Source Premier, Scopus, Google Scholar are used. Specifications for the literature search can be found in Appendix A. In addition several books are used like; van Aken et. al. (2007) and Cross (2008), which also are included in the reference list. The generated insights from the literature review are the input for the secondary research, which explains the research method of the literature review presented in section 2.4.
2.6 Empirical company research
This research makes use of two types of data collection. First type of data collection is interviews as explained below. The second type of data collection is empirical company research. The situation within the company will be researched by empirical company research. The literature review provides the theoretical fields for input for the data collection.
Internal interviews
Boyce and Neale (2006) is used to design the interview set up for the internal interviews, which will be further explained in section 3.4. In addition the semi-open interview method is chosen to stimulate the generation of views, opinions and estimates of the respondents. Qualitative methods are focused on the quality of things, properties of objects, phenomena, situations, people, meanings and events van Aken et. al. (2007). According to van Aken et. al. (2007) qualitative methods are extremely suitable to study organizations, which explains the use of in-depth interviews. The set up contains a list of themes and a structure, the interviewer did not stay to this structure, did not ask the same question, but stimulated the respondent to explain and elaborate on their answer. The employees and managers of Visscher-Caravelle who are selected are active in the top regions of the automotive industry, as can be seen in appendix D. The selection of candidates is based on global coverage of the main top regions of the automotive industry, in order to involve the most important regions and global coverage for Visscher-Caravelle. One project leader is interviewed to capture the operational and tactical level of the organization and the project manager is interviewed to address the overview of the total projects with related information. The sales manager of Germany is interviewed because Germany is the mother market of the automotive industry. The business development manager is interviewed to address the emerging markets like China and Mexico in the internationalization process. Head Purchase is interviewed to address the customer requirements in the whole process, related with purchasing. Table 1 provides the overview of the conducted
interviews. The interviews showed the importance of underlying processes and tools, therefore in addition the HR manager is included in list of interviewees.
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Table 2: Interview schedule
Function Duration Date Step
Project leader 45 minutes 20/03/2013 1
Sales manager 50 minutes 21/03/2013 1
Head Purchase 60 minutes 22/03/2013 1/2 Operations manager 50 minutes 25/03/2013 2
HR manager 45 minutes 28/03/2013 2
Business development manager 60 minutes 16/04/2013 2
Key account manager Germany 90 minutes 16/04/2013 2 Internship
The internship was at headquarters, during the internship to obtain the view of the whole
organization and to be aware of the manufacturing process, the production plant in Poland has been visited three days. Observation of the production process, meetings with different employees on different management were on the agenda.
Secondary company documentation
Besides the interviews, specific secondary data like company documents, market analysis are used to elaborate on the specific environment of this business opportunity. In appendix E the overview of used sources are presented. For the investigation of the market, near future of the market and fact & figures Polk & Co is used, in Appendix E the used documents of Polk are listed. Besides the Polk information, production reports of Visscher-Caravelle, strategy plans, business development plans are used to zoom in on the specific situation.
Confrontation
After presenting the primary and secondary research the confrontation between the two research approaches will follow with the shortcoming and weaknesses. This conclusion per sub theme will be followed by a generation of solutions and requirements for the (sub) solutions.
2.7 Method of analysis
In order to use the data gathered from the primary and secondary research, the data has to be analyzed properly.
Method of analysis literature review
A literature review is done in order to research the theoretical fields as presented in the conceptual project design in section 2.1. These are the theoretical fields which are relevant in researching which characteristics are required in order to become a global player. In appendix A the specific search list and method of analysis of the literature review is enclosed.
Method of analysis empirical company research
The analysis of the data is focused on the generation of characteristics required to become a global player in the b2b automotive industry. This will be done by conducting in-depth interviews. With this method it is possible to develop theory out of the qualitative data in a systematic way. The list of keywords with the number of weights enclosed is the main objective of the empirical company research, which is input for the selection of the set of alternatives.
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All interviews are taped and transcribed afterwards, because of confidentiality reasons the transcriptions are not included in the appendix. Each respondent is contacted to verify the
transcription of the interview in order to enhance the quality of the results. After each interview the questions and topics of the interview on the basis of the emerging themes of the former interview. The first three interviews were conducted to develop the keywords as input for the weighting table. All answers of the seven in-depth interviews are enclosed in the weighting table. In addition to stimulate the generation of views, opinions and estimates the interviews were semi-open.
After the ‘step 1’ interviews the key words emerge and could be grouped into concepts. The ‘step 2’ interviews are conducted by the use of the developed keywords. The ‘step 2’ interviews test the emerged keywords and groups these concepts into categories. The purpose of the first step is to get insights in the existing factors that are indicated as relevant within this topic. During the second step the re-design can be tested to the existing business operations and procedures which is necessary for creating the final solution alternatives.
Data collection and analysis empirical company research
The company reports and market information include many tables with information about the market, forecast information and strategy. The strategy of Visscher-Caravelle will be compared with the forecast information of Polk. The data collection of this research contains a empirical company research within Visscher-Caravelle.
The data collection by in-depth interviews and the empirical company research are related with the market and environment of the organization. Within the in-depth interviews the semi-open structure offer space for self reflection of the respondent. This gives the opportunity to obtain views, opinions and estimates and to discover the opinions of the respondents. How management views the current situation within this topic.
2.8 Quality criteria
The quality of the research can be evaluated on several criteria. A distinction can be made between research-oriented criteria and change-oriented criteria. A solid business opportunity exploiting project should be client oriented and performance focused. The result should be grounded in state-of-the-art knowledge and the outcomes of the research should be design-focused. Moreover, Swanborn (1996) define the quality criteria for research as follows; controllability, reliability and validity. These definitions will be explained and extended in the following paragraph and provide the basis for inter-subjective agreement on the results of this research.
Controllability
Controllability is the first requirement for reaching inter-subjective agreement on research results. In order to make the outcomes of the research controllable, it should be revealed how the research design is set-up and executed. This research presents the set-up and execution of the research in this chapter, Research Design. The design of the literature search of the primary research is explained in appendix A, the selection of the respondents for the secondary research is presented in appendix C and the design of the interviews is enclosed in appendix B. This chapter describes the whole process in such a way that it could be repeated. By this extensive explanation in this chapter, it could be concluded that the controllability of this research within Visscher-Caravelle is high.
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The results of a study are reliable when they are independent of the particular characteristics of that study and can therefore be replicated in other studies, Swanborn (1996). The results of the study should be independent of the researcher of the study, the respondent, the measuring instrument and the specific situation in which the study was carried out. This means when the study is repeated by another researcher with a different research instrument, with different respondents or in another situation, should produce the same results.
Researcher and reliability
Investigating the reliability of research results, it can be concluded that it can make a huge difference who conducted the research, observations, interviews, concludes or performs any other research activity. Goldman (1999) defined two distinct research biases, hot biases and cold biases. Hot biases deals with the personal interest, motivations and emotions of researchers on their results, like to pay more attention to results that favor the sponsor of the research. Cold biases refer to subjective influences of the researcher that have a cognitive origin and no personal motivation, like people have a tendency to pay more attention to evidence to interpret observations in such a way that they are in accordance with their beliefs. The reliability can be improvement by standardization of procedures for data collection, by using structured interviews instead of open interviews. The research within Visscher-Caravelle leaves room for researcher bias. The effects are minimized by using the set up for the interviews of Boyce and Neale (2006).
Instruments and reliability
There are several instruments or techniques available for studying the same phenomenon. Research findings should be independent of the instruments used, outcomes should be replicable with other instruments. This study gathered data from 4 sources; Literature review, in-depth interviews,
company documents and secondary data. The findings from the 4 sources (Figure 8) can complement and correct each other.
Respondents and reliability
Different people have different conceptual schemes, different values, different observations and draw different conclusions, Van Aken et. al. (2007). In total, seven in-depth interviews from different departments (Figure 4) were conducted. This variety of respondents improves the reliability of the results. The grounded theory approach which is used to conduct the interviews, contributes to the reliability of the interviews.
Circumstances and reliability
Differences between circumstances under which the measurement are executed can be another source of unreliability, Van Aken et. al. (2007). Reliability is influenced by for example time, a respondent may give different answers in the early morning than in the late evening. This is important to include in the execution of the research. The interviews were conducted on different dates and different times, as can be seen in Figure 4. All in-depth interviews were conducted in a private office without other employees or other factors that could influence the respondent. Validity
Validity is the third major criteria for the evaluation of the results of the research. Validity refers to the relationship between a research result or conclusion and the way it has been generated, Van
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Aken et. al. (2007). Swanborn (1996) defined three types of validity; construct validity, internal validity and external validity, these three types will be discussed in the following paragraphs. Construct validity
Construct validity refers to the quality of the operationalization of a concept, to which extent a measuring instrument measures what is intended to measure. Appendix E includes the weightings of the key words, this framework can be used for measuring the keywords. This input is used for the extension of the step 2 interviews. The change to miss important elements is lower than using a model that is fixed upfront. All respondents were employees of Visscher-Caravelle, advantage is that the respondents were familiar with the organization, disadvantage is the question of the answers were an objective view, or socially desirable answers. Within this research the situation is that specific and confidential, it is not possible to select external respondents.
Internal validity
Internal validity in the research concerns conclusions about the relationship between phenomena. The results of a study are internally valid when conclusions about relationships are justified and complete, Van Aken et. al.(2007). The concept of this research is about the characteristics necessary to become a global player in the business to business automotive industry, it is likely to include all important elements of the concept that are discovered. Studying the research question and sub-questions from multiple perspectives facilitate the discovery of all causes. The literature review and the empirical company research are confronted in chapter four and are the input for the conclusions. External validity
External validity refers to the generalizability of research results, less important in this research because it focuses on the solution for one particular business opportunity. There is no need to generalize the findings to other organizations, countries or industries. The instrument with the eight IPP’S can also be used in other industries or other markets, which will be explained in the academic reflection (section 6.2).
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3. Literature study
Introduction
This literature search aims to take stock of the prevailing insights of what characteristics a company should possess for successful internationalization. This results in a set of international potential points (IPP’S). To explain the internationalization process, first of all the internationalization streams are explained.
Internationalization process
According to Korsakienė & Tvaronavičienė (2012) internationalization studies are based on four internationalization streams; stage, learning, contingency and network approach. The four internationalization approaches defined by Korsakienė & Tvaronavičienė (2012) will be explained: Stage approach: is seen as the earliest group of theories explaining the internationalization process. Firms with the least commitment of resources and with experience in the market increase their commitment of resources to international activities. Internationalization is a gradual process and the stage approach helps the organization analyze how to become a global player.
Learning approach: the internationalization process is a dynamic process with a focus on
evolutionary and sequential building of foreign commitments over time. Internationalization starts with international activities in nearby markets via an intermediary and then on a direct basis. Learning by doing helps the organization to make progress in the internationalization process.
Development of new competencies can be researched in the learning perspective in the organization. Contingency approach: the organization responds and evaluates to an opportunity as it occurs. The environment of an organization is the source for opportunities. Internationalization activities mostly are related with an opportunity that occurs in the network or environment of the
organization. This explains the relation of the ‘contingency approach’ with the internationalization process.
Network approach: the focus within this approach is on the role of relationships in the
internationalization process. By creating relationships with partners in new countries, by rising commitment to already established foreign networks and through integrating their positions in networks in various countries. Success depends on its position in the network and relationships within the current market. The network position of the organization influences the opportunities. These opportunities occur in the environment of the organization and explains the ‘network approach’ in the internationalization process.
3.1 What are the contributing and adversely affecting factors in the
internationalization process?
This section describes the factors which affect the internationalization process .
Researching the acquisition of market knowledge, Armario, Ruiz, Armario, (2008) proved that market orientation positive influence the acquisition of market knowledge and resource commitment in the foreign market. Market orientation is the organization wide generation of market intelligence
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pertaining to current and future customer needs, Kohli and Jaworski (1990). The role of market orientation is large. Market orientation constitutes an entrepreneurial feature that promotes proactive behavior in foreign markets, Armario et. al. (2008). Besides this important result market orientation has a direct effect on the international competitiveness of the organization. An organization that wants to improve their international performance and competitiveness has to develop their market orientation. Development of market orientation also positively influences the resource commitment in the foreign market. The internationalization process is characterized by market knowledge and market commitment, development of the international performance starts with developing the market orientation within the organization.
Unraveling the definition market commitment, the degree of commitment is defined as the amount of resources integrated in the process. Commitment is only possible to learn by doing business in a foreign country, learning through how customers, government, competitors and public authorities act and react in different situations, Johanson & Vahlne (2003). The development, integration and transfer of knowledge among the employees takes time and is a critical aspect in the strategic management of internationalization, Johanson & Vahlne (2003). The organization has to learn from doing business in foreign countries and has to develop value from these activities for the future in order to increase its commitment to those markets.
Researching the literature, the model of Johansson and Vahlne (1977) is presented below to explain the internationalization mechanism.
Figure 8 The basis mechanism of internationalization, Johansson & Vahlne (1977).
The internationalization process of Johanson & Vahlne (1977) underlines the role of market knowledge and market commitment. Both factors determine the speed of the internationalization process. When the organization facilitate the development of these two factors the organization can enhance the pace of the internationalization process. Vertical integration in the foreign market increases the market commitment (ibid.).
With the knowledge of the well known model of Johansson and Vahlne (1977) the literature study continues with a search into which factors influence this process besides market knowledge and market commitment.
Contributing factors in the internationalization process
Researching the literature about contributing factors, many authors state the importance of the role of the government, Ananthram (2010); Kaufmann and Jentzch (2006); Budzinski (2008). Every
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An example is the difference in import and export tariffs which result in large cost differences between countries.
Identifying the contributing factors for internationalization, Ananthram (2010) present four categories; market forces, cost forces, government forces and competition forces. Market forces includes the development of an international customer base and extension of the amount of the total customers. This also influences the latest force - competition. Competition means the extension of the competitive scope. Comparing these categories with Patel (2012) the additional important factor in the article of Ananthram (2010) is the government. The government has large influence in different factors involved in the internationalization process. The government can be seen from both perspectives; as a contributing factor in the way of cost and regulation advantages and as adversely affecting factor when local regulation result in a disadvantage for the organization.
Kaufmann and Jentzch (2006) investigated the eight parameters which favor an internationalization process of an organization for the automotive suppliers in China; import barriers, local content requirements, customer requests, local integration, low factor costs, volume flexibility, exchange-rate effects and customization demands. Import barriers, local content requirements, low factors cost and exchange-rate effects are influenced by the government role, Ananthram (2010); Kaufmann and Jentzch (2006); Budzinski (2008). Local integration in terms of local business contacts and public image can gain large positive benefits for the foreign supplier in comparison with a supplier that does not produce in China. Low factors cost is another advantage of investing in expansion of
internationalization of production plants. With this local production facility the supplier is more flexible to volume fluctuations of OEM customers. Kaufmann (2006) specified on China to present the advantages and disadvantages of a foreign production plant in an emerging car market.
Adversely affecting factors internationalization process
Government regulations can also have an adverse affect on the internationalization process. Categorizing the adversely affecting factors for internationalization the government , Ananthram (2010); Kaufmann and Jentzch (2006); Budzinski (2008) are the result of government policy which create advantages or disadvantages to different countries. These disadvantages convert into barriers for organizations in the internationalization process. Different countries have specific regulations which could disadvantage the foreign organization.
Spathelf (2008) proved that contract requirements have major influence on the selection of suppliers. Contract requirements in China obligate the car manufacturer to locally source three of the five assembled parts of the car (excluding engine, suspension, gearbox and electrics). Researching the regulations per country is important in order to deal with the differences. Besides this specific example in China, to underline the consequences of regulations, tariff barriers determine the import tariff of goods. Spathelf (2008) researched that the import tariff for India of fully-built cars is 60%, China only 28%. These large differences translate into large cost differences per country this is important in the selection of suppliers and countries in which to operate.
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3.2 Which internal factors and resources of the organization influence the
internationalization process?
Internal factors are the factors within the organization which influence the internationalization process in foreign market entry. This literature study adopts the view of Johansson and Vahlne (1977) that internationalization is a process influenced by market knowledge and market commitment. The original internationalization model of Johanson & Vahlne (1977) is based on the assumption that knowledge is fundamental to the internationalization of an organization and that firms
internationalize gradually and progressively. Johanson & Vahlne (1977) concludes that there is a pre-established internationalization pattern, in terms of the entry modes and in terms of the countries served. Within the entry modes from simple to more complex modes and in countries from closer to far distant countries. The revised model of Johanson & Vahlne (2009) see the business environment as a web of relationships. In order to develop and extend relationships the model is extended with trust building and knowledge creation. The recognition of opportunities has become very important in the revised model.
After researching the internationalization mechanism the internal factors in the organization has to be researched in order to have a broad understanding of the complete situation. The internal underlying processes drives the internationalization process in organizations, Chandra (2012). This include the internal knowledge, the role and impact of relationships within the organization. Chandra (2012) proved that the context where the organization operates is determinative, being involved in networks is crucial for the internationalization process of an organization.
The internal environment of market orientation is influenced by; opinions and approaches of top management, inter functional coordination and employees, Tomaskova (2009). The largest barrier is the perception of market orientation by top management. The perception could be very high; managers could be disappointed by the results. The second barrier is connected with top
management knowledge, skills and commitment. Harris and Ogbonna (2001) proved that managerial behavior is a key barrier in developing a market oriented culture. Without management support it is very difficult to be market oriented and to be successful in market.
The organization has to understand the culture, including the popular elements like language, time orientation, use of space and religion in the foreign country, Barhem (2008). Barhem (2008)
explicates the understanding of globalization, how managers are able to respond to new challenges in this process. A global organization needs a thorough understanding of their foreign partner to achieve mutual respect, first requirement for collaboration in a global network. Hiring a foreign employee could function as bridge towards the new country to overcome barriers like language and culture, Kossek & Ozeki (1998). Researching the internal factors in the internationalization process (Uppsala model) of Johanson & Vahlne (2009) changed the input of their model. ‘Market knowledge’ changed to ‘recognition of opportunities’, opportunities constitutes a subset of knowledge, Johanson & Vahlne (2009). This indicate that considering opportunities is the most important element of the body of knowledge that drives the process.
Summarizing, factors that adversely affect the internationalization process could also favor the internationalization process. Market knowledge and market commitment determine the pace internationalization process and the contributing and adversely affecting factors of the organization
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affect the internationalization process. Import barriers are an example of an external factor, as result of government regulation. Learning about foreign markets is an example of an internal factor.
Global Mindset
The recognition of opportunities is influenced by the characteristics of the managers. A primary ability of managers is to deal with the different foreign cultures of the other business party. A second ability which managers need is strategic thinking, which requires a corporate and a similar view of all managers in the organization.
Rhinesmith (1992) concludes that managers need a global mindset to deal with the unexpected. Managers with a global mindset look for the broader picture, they look for the context of the current situation. These managers are constantly scanning the horizon to learn about competitors,
customers and new markets: a very important skill of the manager. Managers with a global mindset trust organizational processes rather than structure to deal with the unexpected, Rhinesmith (1992). These managers also value diversity and multicultural teamwork, which are inevitable issues in a global network. People with a global mindset continuously seek to be open to themselves and others, by rethinking barriers and looking for improvements. This global mindset is a foundation, more specific the article of Rhinesmith (1992) developed the characteristics of a manager. Adding to the global mindset foundation, Rhinesmith (1992) further specifies the characteristics of a manager. The global management training programs and the ways that global managers can be selected and developed is based on personal experience and not empirical derived. The following characteristics of managers outlines the relationship between global mindset and characteristics; knowledge, conceptualization, flexibility, sensitivity, judgment and reflection (ibid.).
The global mindset requires a more generalized and broad expertise rather than a narrow specialty, a less definitive set of decision rules and most important, emphasis on processes, Parker (2005) ; Rhinesmith (1992). How to develop an important global mindset is crucial information for
organizations in becoming a global organization. The global mindset is about learning, dealing with the unexpected and recognition of opportunities, Parker (2005); Rhinesmith (1992). How the
organization uses and retain this knowledge is about the knowledge transfer within the organization. The absorptive capacity of the organization means the structural and cultural attributes of the receiving organization as a whole that are conducive to acquiring and assimilating new knowledge, Jane Zhao & Anand (2009). Collective- based knowledge transfer mechanisms like collective teaching and collective absorptive capacity are more efficient than individual based knowledge transfer mechanisms, Jane Zhao & Anand (2009) . This indicates the necessity of an explicit approach for transfer and development of collective knowledge within the organization.
Chandra (2012) proved that learning opportunities is positively related to the internationalization process. These global activities of the organization enhance the global mindset of managers, the research of Rhinesmith (1992) proved that managers with a global mindset are better able to deal with the unexpected, preferable characteristic in a unknown international process.
In order to overcome resource barriers, this section elaborates on control and securing of networks. The organization can use the networks as resource for competitor and market analysis, searching for strategic options and for discovering developments and trends in collaboration within the networks.
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Summarizing, the global mindset of a manager in the organization and market commitment are the internal factors that define the performance in the internationalization process. The global mindset is determent for the recognition of opportunities, which is substitute for market knowledge,
Johanson & Vahlne (2009). The recognition of opportunities is extremely important for an
organization. Market knowledge and market commitment determine the ability of the managers to recognize business opportunities. An organization can facilitate in this process by developing strong human capital, in order to exploit the business and to create value for the future. In order to capture and retain the collective knowledge, an organization has to build an approach for the transfer and development of collective knowledge within the organization. To explore these opportunities further Appendix F contains an additional systematic literature search with the antecedents and effects of Global Mindset. All the findings and recommendations of this additional literature search are enclosed in the conclusions and recommendations found in chapter six.
Human, organizational and relational capital
Human capital, organizational capital and relational capital defines the organization’s intellectual performance, Roos and Roos (1997).
Relational capital isn’t enough, Intellectual capital drives the internationalization process. The theoretical framework in the Uppsala model, Johanson & Vahlne (2009) explains how
relationships and the knowledge driven by it can influence the internationalization process of the organization. The authors conclude that internationalization is a multilateral process of developing relationship networks. The original input in the theoretical framework of Johanson & Vahlne (1977) called ‘market knowledge’ is disappeared and changed towards knowledge opportunities, this underlines the changes in the internationalization process. The organization has be able to develop relationships with their environment, to build gradually and progressively networks. The internal knowledge in terms of R&D knowledge is very important. The technical product specifications require large R&D resources in order to could develop high quality products. For the further
internationalization of a organization, the competitive advantage is important, which can be achieved with a high experienced R&D department. This is required in the dynamic automotive industry. The internal R&D knowledge is important, knowledge should be actively managed and it provides competitive advantages for the organization, Henard & McFayden (2006).
Human capital and relational capital influence the development of relationship networks. The level of the human capital available in the organization determine which and how the employees recognize and execute business opportunities. Relational capital determine the amount and of networks involved and the level of influence in the networks. Relationships are bridges to international opportunities, Costa ,Pacheco, Meneses & Brito (2012) which facilitate the internationalization process. Intellectual capital is the most important source for competitive advantage of the
organization and includes the ‘hidden assets’ of the company, what is in the head of the employees and what is left in the company when they leave. Conclusive, human capital, organizational capital and relational capital can be seen as a early warning signal of subsequent financial performance, Roos and Roos (1997).
Successful execution requires strong human capital, which can positively influence the relationship between internationalization and firm performance. Hitt et. al. (2006) explicates the role of human capital and relational capital on internationalization. Human capital means the employees in the
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organization, the different levels of education and their capabilities. Relational capital means the corporate clients and the foreign government clients. The execution is the most important phase of the process, the level of the human capital in the organization is strong connected with the execution performance.
Financial resources & managerial resources
Defining the financial resources which influence the internationalization process contains the results of Bellone, Musso, Nesta, & Schiavo, (2010) which stated that firms with high liquidity are more likely to export. An organization that wants to grow in the internationalization process need financial resources like foreign capital. Because internationalization activities are expensive and have to be financed. First export is needed to overcome this new situation and to build a buffer for further exploration of export to foreign markets. This development is approved by the research of Knight (2000), whereby the small enterprise is compared with medium size enterprises in the challenge of globalization. The article of Knight (2000) researched that small enterprises lack the capabilities, don’t have the resources available to overcome the barriers in the process of internationalization. Medium size enterprises have more resources available, which make the internationalization process much more difficult for small enterprises.
Brouthers et. al. (2009) researched that besides the precondition in the previous section, managerial resources and foreign market expertise limit export to foreign markets. Managerial resources is linked with the already presented characteristics of managers in section 1, only the strategy of the organization defines the resources available which influence the level of education and intelligence of the managers. The managers should be able to execute the internationalization activities. Emphasizing the highlights of this paragraph. Internationalization is a multilateral process of developing relationship networks. An organization need in order to build and expand their network human and relational capital. Managers need a global mindset to deal with the unexpected, human capital to recognize opportunities and relational capital for international opportunities. Financial resources facilitates in order to overcome barriers in this process.
3.3 What are the Supply Chain Management (SCM) challenges and strategic options
in the internationalization process?
The supply chain is very important and influence the competitive position of the organization, therefore the following paragraph specifies on the supply chain. First elaboration on the internationalization strategy and the role of SCM in global competition will follow. Challenges
International strategies are critical because globalization has made the world flat, Friedman (2005). A growing challenge for global managers is to decide which business provide current and future global opportunities, Parker (2005). This challenge can be endorsed by forecast information for the automotive industry, to determine the market for the near future. Internal organic growth facilitate this process, to extend the internal knowledge, educate managers to develop their global mindset. The internationalization process can be speed up by acquisitions of foreign companies. With acquisitions the organization purchase knowledge about local characteristics like consumer
preferences, supply chains, traditions and legal and administrative issues, Budzinski (2008). Using the knowledge of Child and Yan (1999) the organization has the possibility to use specific resources to manage the foreign business. Strategy in combination with strong human capital could execute the
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The global business competition is no longer between organizations, but between their supply chains, Kuei, Madu, & Lin (2001); Li. et. al. (2006). The design of the global supply chain major influence the competitive advantages and organizational performance of the organization. The production shifts around the world, global movements of OEM production activities in order to deal with productions cost disadvantages and currency fluctuations, named ‘global regions’, which divide the world in competitive regions around the world10.
The supply chain road map contains what must be done to create customer value. Making and delivering a valued product is the responsibility of purchasing, production and logistics, Fawcett, Ellramm, & Ogden, (2007). These functions are the building blocks of the Supply Chain strategy. This starts with the first element of the supply chain road map; business purpose, the Supply Chain strategy, customer fulfillment, process thinking, new product process and fulfillment process. Second element involves environmental scanning, supply-chain mapping. Third element, based on the understanding developed during the SC design process creating the capabilities needed to meet customers real needs. Latest element in the integration of the supply chain, creation and communication of common SC vision, building a team of allied companies.
The supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer or consumer, Lysons (2006). In a dynamic environment as the automotive industry, the supply chain is one critical element in helping manufacturers and suppliers differentiate themselves from the competition. Vanichchinchai & Igel (2011) proved that total quality management (TQM) directly facilitate the implementation of SCM and directly enhance the supply performance of the organization. The effectiveness and efficiency of SCM requires internal and external business integration of the whole supply chain, Chin et. al. (2004). The strategic success factors include; building customer-supplier relationships, implementing
information and communication technology, re-engineering material flows, creating corporate culture, identifying performance measurements, Chin et. al. (2004). Operational issues are considered to achieve the SCM initiatives; reducing costs of operations, improving inventory, improving customer satisfaction, improving lead-times and to stay competitive as organization. The ‘concentrated chain’ can be found in the automotive industry, Lysons (2006). In this chain the customer has demanding requirements, for example a requirement for JIT (Just in Time) deliveries. Researching the supply chain results in a description of the network, with high visibility of the networks involved, customer requirements, which can used as resource for collaboration with organizations. If an organization becomes more comfortable and experienced with their supply chain relationships, when the processes are going well, there is a tendency to extend the supply chain with second and third-their suppliers and customers, Wisner (2005).
Options
Researching the options for internationalization, different options occur. With the knowledge of the costs related with internationalization, financial attractive options deserve attention. A strategic option in the internationalization process with the resources in mind could be joint ventures.
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