IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v28y2019i3p550-569.html
   My bibliography  Save this article

To Adapt or Design: An Emerging Market Dilemma for Automakers

Author

Listed:
  • Sreelata Jonnalagedda
  • Haritha Saranga

Abstract

Multinational automakers tend to be biased toward adapting products designed for their primary markets to emerging or secondary markets. The preference for such adapted product design (APD) approach arises from reduced costs associated with product design and development. However, the growing importance of emerging markets combined with the recognition of their idiosyncratic needs have led automakers to consider an alternative product development approach that simultaneously incorporates the needs of both the markets and exploits scope economies. We term this approach as the customized simultaneous design (CSD) approach. Motivated by case studies of Ford and Hyundai, we abstract key elements to set up an analytical model for the APD and CSD approaches. We derive the optimal prices and extent of commonality between products for both the markets and compare the attractiveness of the two product development approaches. The relative profitability of the two approaches is driven by the trade‐off between the consumer‐side disutilities and the cost‐side scale and scope economies, and is moderated by demand uncertainty in the secondary market. Interestingly, we find that scale and scope economies reinforce each other in making CSD a more profitable approach under certain conditions. When the automaker is located in the secondary market, other factors such as market size, uncertainty and dissimilarity between the markets determine the most profitable approach. In addition, we demonstrate that higher profitability of one approach over the other is not necessarily achieved by providing higher commonality.

Suggested Citation

  • Sreelata Jonnalagedda & Haritha Saranga, 2019. "To Adapt or Design: An Emerging Market Dilemma for Automakers," Production and Operations Management, Production and Operations Management Society, vol. 28(3), pages 550-569, March.
  • Handle: RePEc:bla:popmgt:v:28:y:2019:i:3:p:550-569
    DOI: 10.1111/poms.12932
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.12932
    Download Restriction: no

    File URL: https://libkey.io/10.1111/poms.12932?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vic Benuyenah, 2024. "Economies as 'Makers' or 'Users': Rectifying the Polysemic Quandary with a Dualist Taxonomy," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 3100-3121, March.
    2. Fan, Di & Lo, Chris K.Y. & Zhou, Yi, 2021. "Sustainability risk in supply bases: The role of complexity and coupling," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    3. Choi, Tsan-Ming & Luo, Suyuan, 2019. "Data quality challenges for sustainable fashion supply chain operations in emerging markets: Roles of blockchain, government sponsors and environment taxes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 139-152.
    4. Christian Weckenborg & Karsten Kieckhäfer & Thomas S. Spengler & Patricia Bernstein, 2020. "The Volkswagen Pre-Production Center Applies Operations Research to Optimize Capacity Scheduling," Interfaces, INFORMS, vol. 50(2), pages 119-136, March.
    5. Wang, Min & Huang, Hongfu & Liu, Feng, 2023. "To adapt or to standardize? Cross-market green product design under parallel importation impact," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    6. Ma, Haicheng & Lou, Gaoxiang & Fan, Tijun & Chan, Hing Kai & Chung, Sai Ho, 2021. "Conventional automotive supply chains under China's dual-credit policy: fuel economy, production and coordination," Energy Policy, Elsevier, vol. 151(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:popmgt:v:28:y:2019:i:3:p:550-569. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.