To explore subsidiary development in emerging markets and highlight the role of local factors on driving foreign firm business strategy.
This study builds upon the diamond of competitive advantage framework with regard to determinants in the local environment. Chinese motorcycle penetration into Vietnamese market has made considerable changes from which Honda has upgraded manufacturing capability, moved to higher value activities. It shows a confident process of subsidiary development. The analysis is supported by interview data in three field trips.
The penetration of Chinese motorcycle into Vietnam has brought more opportunities. Honda can utilize for long‐term investments than challenges the firm had to temporarily deal with. The effect of changes in the local market was quite specific to Honda business. Consequentially, local factors have driven the firm emergent strategy into low‐price model which is considered as Honda's local specific product in Vietnam.
Selective environment disadvantages play an important role in making pressures on firms to engage in more sophisticated activities. The distinctive competence is obtained from co‐evolution between external and internal resources rather than one itself. Continuous improvement, finding discontinuity, and reconciling resources are necessary for firms, especially when competing in international emerging markets.
The case study reflects an interesting picture of competition in motorcycle industry under the new stage of international competitive environment. Honda Vietnam case shows different features from Honda in the past and other subsidiaries in the region as the firm exists to harmonize the two dichotomizations of motorcycle business architecture: Japanese and Chinese model.
