Academic journal article Management Review : An International Journal

Three Core Competences and Product Architecture Strategy: Case Studies of Indian Markets

Academic journal article Management Review : An International Journal

Three Core Competences and Product Architecture Strategy: Case Studies of Indian Markets

Article excerpt

INTRODUCTION

Shortly after the global financial crisis in 2009, the world economy was deteriorating on a global scale. Nevertheless, since 2010, it has recovered gradually. However, this recovery process varied distinctly according to the countries and regions. The International Monetary Fund (IMF) forecast of the world economy in April 2011 indicated that the growth rate of the world economy in 2010 increased by 5% over that of the previous year following a record-0.5% decrease in 2009. The gap of economic growth between the advanced and emerging economies further widened since 2011, and the imbalance in growth in various forms is rising.

Emerging markets show fast economic growth and the speed of change among income groups is rapid. The accelerating growth rates of middle-income groups are transforming the economic structure from a pyramid shape of poor nations of the past to the diamond structure of advanced nations.

According to Japanese Economic Industry Bureau Statistics, the total number of households in Asia that have annual disposable income between $5,000 and $35,000 was 140 million in 1990, 220 million in 2000, and 880 million in 2008. This reflects the rapid growth of middle-income groups from China, India, and the Association of South East Asian Nations (ASEAN). From a global perspective, the large share of middle income groups is distributed in these areas. With rapid economic growth and increase in customer base, these economies hold amazing purchasing potential for new products and services.

Product strategy for these emerging economies requires linkage competence that combines technology competence for high functionahty quality -performanee - driven products and customer competence for high customer needs, lifestyle, and values-based products (Park and Hong, 2012). The obvious obstacle for advanced nations' global firms to penetrate emerging markets such as BRICs is customer competence. In particular, many Japanese global firms have relatively high technology competence through their long product development experiences for customers from North America and Europe that expect high quality, functionality, and safety of their products.

In contrast, these global firms experience patterns of business that are new. Comprehending different customer needs and translating them into successful products is the key for strategic positioning in these emerging markets. To enhance customer competence in the emerging markets, these global firms need to develop customer experts with sensing capability and who can utihze information technology (IT) infrastructure. For business"tO"Consumer (EHo-C) product markets, it is important to assess what particular types of products customers prefer to purchase through direct customer visits and marketing research in retail stores. The size of demand in B-to-C consumer markets is directly proportional to the increase of personal incomes. The growth rate of business-to-business (B-to-B) markets (i.e., intermediate industrial goods) corresponds to keeping up with the economic growth of emerging economies, while the purchasing pattern differs by regions.

For meaningful examination of these research questions, we employ case studies of Japanese firms in the context of emerging markets. Firms that participate in the case studies are carefully chosen to study the framework to show relationship between core competences and product architecture strategy. Case findings suggest that successful global firms build linkage competences to satisfy customer needs in the emerging market.

RESEARCH MODEL

Three Types of Core Competences and Global Expansion Strategy

In 2000, Malcolm Gladwell introduced Tipping Point: How Little Things Can Make a Big Difference. This book became one of the bestselling books for years. This book illustrates the idea of linkage competence in the daily context of American life. Malcolm Gladwell (2000) focuses on three types of people that play prominent roles in making particular ideas or concepts to spread like social epidemics. …

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