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Aiming Big with Small Cars

Emergence of a Lead Market in India

Authors: Rajnish Tiwari, Cornelius Herstatt

Publisher: Springer International Publishing

Book Series : India Studies in Business and Economics

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

This book focuses on the small car segment of India's automotive industry to explain the emergence of lead markets. The authors contend that the current understanding of lead markets does not sufficiently explain the business practices that are born out of the intensified globalization of innovation. Lead markets are considered crucial for the global diffusion of new products and this book investigates whether sustainable lead markets can also emerge in developing economies, and if so, under which conditions. The authors question the conventional wisdom and propose updates and extensions to the lead market theory to better reflect the changing ground realities on ground.

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Table of Contents

Frontmatter

Chapter 1. Setting the Scene

Abstract

The example cited above, published by the respected weekly The Economist, illustrates but one instance from a series of disruptive and potentially game-changing innovations emerging out of India in recent years. Termed as “indovations” by the business press such innovations—e.g. GE’s handheld electrocardiogram (ECG) Mac 400; the world’s cheapest passenger car, the Tata Nano; or Vortex’s solar-powered automatic teller machines (ATMs), Gramateller—may be regarded as products characterized by their affordability, robustness in dealing with infrastructural deficits, and (at least) “good enough” quality in a volume-driven market.

Rajnish Tiwari, Cornelius Herstatt

Chapter 2. Developing Countries and Innovation

Abstract

This is how the late John H. Dunning, a highly distinguished scholar of international business management, has described America’s ascent as an economic powerhouse in the second half of the nineteenth century. Now, if we substitute the reference to the United States in the first sentence of the previous paragraph with “India” and imagine the time period in question to concern today’s times, we might as well feel stunned by quite a few striking parallels between the two countries and situations.

Rajnish Tiwari, Cornelius Herstatt

Chapter 3. Exploring Opportunities for Global Innovation

Abstract

James M. Utterback, a renowned scholar of management and innovation at the Massachusetts Institute of Technology, and known for introducing the concept of “dominant design”, has noted that innovations, apparently, take place in some geographic locations more often than in others (Utterback 1994: vii). Similarly, Raymond Vernon has emphasized the role of location in regard to the type of innovation by proposing that “the innovations of firms headquartered in some given market tend to reflect the characteristics of that market” (Vernon 1979: 256). It could be observed, noted Vernon (1979), that US firms tended to develop and produce products that targeted cutting labour-costs or responded to wants of high-income consumers, whereas firms from continental Europe developed products and processes that were targeted at saving material and capital.

Rajnish Tiwari, Cornelius Herstatt

Chapter 4. Growing Demand for Affordable Solutions

Abstract

The example described above, excerpted from Wall Street Journal, is a telling example of how lead market tendencies are emerging in India and are being utilized by firms, whether domestic or affiliates of MNCs. Such product innovation take place as a response to given local market conditions (limited budget, limited need for frill-features, need for robustness, and large potential demand), even as existing products from incumbent lead markets in developed economies often fail to satisfy these prerequisites. The product, once successful in the domestic Indian base, diffuses to other countries, where similar product features are also demanded.

Rajnish Tiwari, Cornelius Herstatt

Chapter 5. Need for a Rethink

Abstract

In this chapter we transfer the condensed insights from the case studies to the lead market framework and compare them with the existing theoretical assumptions to identify possible point of “mismatches”.

Rajnish Tiwari, Cornelius Herstatt

Chapter 6. Investigating India’s Small Car Industry

Abstract

Having generated some preliminary propositions on the emergence of lead markets in developing economies on the basis of five cross-sectoral case studies of frugal innovations from India, this and the next chapter serve as a platform to critically evaluate these propositions by the means of an in-depth study of a specific industry, namely the automobile industry. This industry has become known as a hotbed for low cost small cars and applying those propositions in its settings seems to offer promising results. Almost all global carmakers have either already launched or have announced plans to launch India-specific small cars, as will be demonstrated in the following chapters.

Rajnish Tiwari, Cornelius Herstatt

Chapter 7. Profile of India’s Automobile Industry

Abstract

The quote above, excerpted from the “Automotive Mission Plan 2006–2016” of the Government of India, succinctly summarizes the recent developments in the automotive industry of India. The Mission Plan, simultaneously, also puts forth a vision, which is defined as: “To emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10 % of the GDP and providing additional employment to 25 million people by 2016” (GOI 2006: 26).

Rajnish Tiwari, Cornelius Herstatt

Chapter 8. Role of Small Cars in India’s Passenger Car Segment

Abstract

The quote above, excerpted from the Economic Times of Sept. 8, 2009, read in conjunction with the previous chapters not only illustrates that India’s passenger car market is dominated by small cars but also beautifully sums up the developments and root causes of the phenomenon, as will be discussed in greater detail in the following.

Rajnish Tiwari, Cornelius Herstatt

Chapter 9. Shaping the Context

Abstract

This chapter serves to interpret and analyse the key message of the case study in the previous chapter from the perspective of the stated research purpose of this study; namely to critically examine evidence for an eventually emerging lead market for small cars in India and its potential implications for various actors, i.e. the scholarly research, the business practice, and policy makers. At first key findings are analysed in the context of preliminary propositions and their validity ascertained. Once confirmed, the final propositions are used to posit some postulations for the theoretical framework of the lead market theory and their implications are deliberated. Additionally, an emergence process of the lead market potential is identified on the basis of the case study presented in the previous chapter.

Rajnish Tiwari, Cornelius Herstatt

Chapter 10. Conclusions

Abstract

With this study we intended to examine the implications of the tremendous and on-going shift in the global centre of economic gravity for the theory and practice of innovation management. Developing countries as a group, and more specifically some large and fast growing economies, such as the BRIC nations, are increasing their share in the global economy. Decreasing poverty and a growing and increasingly affluent middle class has been driving the consumption in unsaturated markets like that India which are still faced with infrastructural deficiencies. This is creating new business opportunities for firms to develop products that can fuel growth while raising standards of living in those nations. However, to benefit from those opportunities firms need to acquire first-hand (technical & market) knowledge in the respective geographical regions.

Rajnish Tiwari, Cornelius Herstatt

Backmatter

Title: Aiming Big with Small Cars
Authors: Rajnish Tiwari
Cornelius Herstatt
Copyright Year: 2014
Publisher: Springer International Publishing
Electronic ISBN: 978-3-319-02066-2
Print ISBN: 978-3-319-02065-5
DOI: https://doi.org/10.1007/978-3-319-02066-2

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