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 necessitate strategic shifts in favour of low cost countries, we will demonstrate how the precise opposite has occurred, with respect to Germany. We examined the investment and value-creating activities of 20 non-German multinational automotive suppliers in the German market and found that they invested $14 billion in Germany between 1987 and 1997. This discovery triggered our research to develop a conceptual framework to explain the core motives behind these investment activities. Two critical strategic propositions illuminate the activities: the first proposition tackles the pressure on suppliers to grow and diversify in response to the global trend of restructuring the value chain in the car industry. The second proposition uncovers the forces behind the current trend why automotive suppliers adjust their strategies globally. This proposition deals with the implications of the increasing use of global strategies in production and single sourcing by major automotive customers such as Volkswagen or DaimlerChrysler. c 2001 Elsevier Science Ltd. All rights reserved.