How Germany wins out in the battle for foreign direct investment: Strategies of multinational suppliers in the car industry

Whilst many expected that mature industries such as automotive would necess itate strategic shifts in favour of low cost countries, we will demonstrate how the precise opposite has occurred, with respect to Germany.(1) We exam ined the investment and value-creating activities of 20 non-German multinat ional automotive suppliers in the German market and found that they investe d $14 billion in Germany between 1987 and 1997. This discovery triggered ou r research to develop a conceptual framework to explain the core motives be hind these investment activities. Two critical strategic propositions illum inate the activities: the first proposition tackles the pressure on supplie rs to grow and diversify in response to the global trend of restructuring t he value chain in the car industry. The second proposition uncovers the for ces behind the current trend why automotive suppliers adjust their strategi es globally. This proposition deals with the implications of the increasing use of global strategies in production and single sourcing by major automo tive customers such as Volkswagen or DaimlerChrysler. (C) 2001 Elsevier Sci ence Ltd. All rights reserved.