Government policy and competitive advantages: A study of the Indian automotive industry

Sammanfattning: This study aims to determine the pertinence of industrial organization and the resource-based view relative to regulatory changes in India, and the impact of these changes on passenger car producers' strategies. The predictions of the former theorem are valid for gaining an understanding of the impact of policy changes on the market, while the latter theory provides a more detailed understanding of how firms benefit from different resources and capabilities under varying regulatory circumstances. Our research thus takes an inductive approach, based on secondary sources. Specifically, the study shows that institutional ties provided a competitive advantage for Maruti-Suzuki during the period of heavy regulation in India. Another key factor of success for this company, as well as the subsequent entrants Hyundai and Tata, was the efficient transfer of technology and know-how to its Indian operations and suppliers. This also impacted positively on the overall market performance in India. The establishment of high levels of indigenous production allowed for economies of scale in production, as well as the avoidance of costly import duties and tariffs. However, high capacity utilization in domestic production was possible only by targeting a large share of the highly price sensitive Indian consumers. This meant that offering a car within the low-cost, small car segment became pivotal in order for auto manufacturers to gain market shares and achieve economies of scale in production.