MASTERARBEIT Titel der Masterarbeit „A Comparison of the Competitiveness of the Automobile Industry in China and South Korea on the Basis of Porter’s Diamond Model“ Verfasser Andre Warmers, BA angestrebter akademischer Grad Master of Arts (MA) Wien, 2014 Studienkennzahl lt. Studienblatt: A 066 864 Studienrichtung lt. Studienblatt: Masterstudium Wirtschaft und Gesellschaft Ostasiens Betreuer: Univ.-Prof. Dr. Rüdiger Frank 1. INTRODUCTION ............................................................................................................................................ 1 1.1 RESEARCH RELEVANCY: WHY STUDY THE AUTOMOBILE INDUSTRY IN CHINA AND SOUTH KOREA? ......... 2 1.2 RESEARCH QUESTIONS ............................................................................................................................................. 4 2. ORGANIZATION OF THIS THESIS AND RESEARCH METHODOLOGY .......................................... 5 2.1 DATA SOURCES .......................................................................................................................................................... 5 2.2 PORTER’S DIAMOND THEORY ................................................................................................................................. 6 2.2.1 Factor conditions ................................................................................................................................................11 2.2.2 Demand Conditions ............................................................................................................................................13 2.2.3 Related and Supporting Industries .............................................................................................................14 2.2.4 Firm Strategy, Structure and Rivalry ........................................................................................................16 2.2.5 Chance ......................................................................................................................................................................18 2.2.6 The Role of Government ...................................................................................................................................19 2.2.7 The Dynamics in Porter’s Diamond ............................................................................................................22 2.2.8 Clusters.....................................................................................................................................................................22 2.2.9 Multinational Enterprises ...............................................................................................................................23 2.2.10 Critics and Modifications of the Diamond Model ..............................................................................24 2.3 LITERATURE REVIEW AND CURRENT STATE OF RESEARCH ............................................................................. 28 3. COMPARISON OF CHINA’S AND SOUTH KOREA’S AUTOMOBILE INDUSTRY ........................ 29 3.1 INTRODUCTION TO THE CHINESE AND SOUTH KOREAN AUTOMOBILE INDUSTRY ...................................... 29 3.2 GENERAL COMPETITIVENESS ................................................................................................................................. 30 3.2.1 General Competitiveness of China ...............................................................................................................31 3.2.2 General Competitiveness in South Korea .................................................................................................36 3.3 FACTOR CONDITIONS .............................................................................................................................................. 40 3.3.1 Factor Conditions in China .............................................................................................................................40 3.3.2 Factor Conditions in South Korea ...............................................................................................................45 3.4 DEMAND CONDITIONS ............................................................................................................................................ 48 3.4.1 Demand Conditions in China .........................................................................................................................48 3.4.2 Demand Conditions in South Korea ............................................................................................................62 3.5 RELATED AND SUPPORTING INDUSTRIES ............................................................................................................ 69 3.5.1 Related and Supporting Industries in China ..........................................................................................69 3.5.2 Related and Supporting Industries in South Korea.............................................................................71 3.6 FIRM STRATEGY, STRUCTURE AND RIVALRY ...................................................................................................... 74 3.6.1 Firm Strategy, Structure and Rivalry in China ......................................................................................74 3.6.2 Firm strategy, structure and rivalry in South Korea ..........................................................................90 3.7 GOVERNMENT .......................................................................................................................................................... 99 3.7.1 Government in China .........................................................................................................................................99 3.7.2 Government in South Korea ........................................................................................................................ 108 4. CONCLUSION .............................................................................................................................................115 5. ABBREVIATIONS .....................................................................................................................................123 6. REFERENCES .............................................................................................................................................124 7. APPENDIX ..................................................................................................................................................152 List of Figures Figure 1: Porter's Diamond Model ............................................................................................................ 9 Figure 2: Porter's complete Diamond Model ..................................................................................... 10 Figure 3: The generalized Double Diamond....................................................................................... 27 Figure 4: World Auto production Market Share of selected Countries in 2000 .................. 32 Figure 5: World Auto production market share of selected countries in 2013 ................... 33 Figure 6: Car production in China 2000 - 2013 ................................................................................ 33 Figure 7: Development of export and import of automotive products in China from 1995 - 2012 (in Million US$) ...................................................................................................................... 35 Figure 8: Car production in South Korea 2000 - 2013 ................................................................... 37 Figure 9: Development of Export and Import of automotive products in South Korea from 1995 - 2012 (in Million US$) ............................................................................................... 38 Figure 10: Car sales in China 2005 - 2013 .......................................................................................... 50 Figure 11: Largest automobile markets in Terms of world wide sales in % ......................... 50 Figure 12: Car Sales in South Korea 2005 - 2013 ............................................................................ 63 List of Tables Table 1: Car Production Statistics of selected Countries and Years ......................................... 31 Table 2: Car production statistics of selected countries and years ........................................... 36 Table 3: FDI Flows in South Korea’s Motor Vehicle Industry (in million $ US) ................... 38 Table 4: FDI by sector in China in 2011 ............................................................................................... 41 Table 5: Car sales in selected countries in selected years ( with a focus on China) ........... 49 Table 6: Motor vehicles per 1,000 people in selected countries ................................................ 51 Table 7: Top Twenty car brands in the first half of 2014 in terms of sales ........................... 52 Table 8: Top Twenty car brands in 2013 in terms of sales .......................................................... 53 Table 9: Top 25 bestselling Sedans/ Hatchbacks/ Coupes in the first half of 2014 ........... 54 Table 10: Top 20 bestselling SUVs in China in 2013 ...................................................................... 55 Table 11: Top Chinese car makers in terms of txport .................................................................... 61 Table 12: Top Ten export destinations