Global capacity expansion strategies: Lessons learned from two Korean carmakers

Abstract

This research was motivated by an empirical observation that two Korean carmakers, Daewoo and Hyundai, have pursued very different globalisation strategies despite their structural similarities. From in-depth case studies and extensive interviews with top managers, we learned several lessons. Being direct competitors in the Korean automobile industry has affected the firms' globalisation strategies to a great extent: each company took into account its competitive position vis-a-vis the other's when forging its global strategy. For instance, Daewoo focused on achieving economies of scale by targeting the East European markets for its overseas capacity expansion, as a way of overcoming its manufacturing cost disadvantage in the domestic market vis-a-vis Hyundai's. Likewise, Hyundai's globalisation strategy-exporting supported by technological advancement-was driven by an implicit assumption of its competitive advantage vis-A-vis Daewoo's. This initial pattern of decisions was formed mostly by such determining factors as top management's commitment to specific strategic decisions and resources, both managerial and financial, from each company's parent business group, or chaebol. Subsequently, it was altered or reinforced as each company accumulated different learning experiences. Unless the learning process is well managed, however, it can do as much harm as good to the company. (C) 2001 Elsevier Science Ltd. All rights reserved.