CORPORATE FORESIGHT FOR FUTURE COMPETITIVE ADVANTAGE THROUGH VALUE CREATION AND LOCAL AFFILIATE ENGGAGEMENT: EVIDENCES FROM ASEAN AUTOMOTIVE LOCAL AFFILIATE COMPANIES

• Main Author: Purwanto, Jaka
• Format: Dissertations
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/79613
• Institution: Institut Teknologi Bandung

The global automotive industry significantly impacts the world economy (Orsato & Wells, 2007). In 2019, it manufactured 92.7 million vehicles, underscoring its pivotal role (Kirbac & Ph, 2021). Beyond production, the automotive sector contributes substantially to global Gross Domestic Product (GDP) and employment, with millions in various roles from design to distribution. Likewise, Indonesia has prioritized the automotive sector, fostering GDP growth and providing jobs for millions. This sector's supply chain, spanning carmakers to dealers, accounts for about 10.16% of the manufacturing sector and employs approximately 1.5 million people. However, the automotive industry faces dynamic challenges due to macro-environmental changes, including government regulations addressing climate change and the megatrend of CASE (Connected, Autonomous, Sharing, Electrification), reflecting consumer preference shifts. These challenges necessitate adaptive responses. To navigate this complexity, corporate foresight takes on an important role, particularly in extended vehicle development timelines by the principal companies (PCs). Early design-phase input is crucial, maximizing value creation and minimizing costs, aligning with the widely embraced front-loading approach. In that case, automotive local affiliate companies (LACs) play a vital role in this context, positioned at the intersection of local markets and PCs. This study investigates corporate foresight in automotive LACs, addressing the need for clear definitions of value creation and empirical evidence of their contribution to competitive advantages. To achieve the research goal of investigating the corporate foresight value creation and the interaction process of value creation in automotive LACs, this study employed a mixed research method, incorporating both qualitative and quantitative methods in a sequential manner. As a consequent, the pragmatic research paradigm guided the research process, influencing the approach taken from research design to the conclusion. The study was conducted in two phases: the first phase was qualitative research, and the second phase was quantitative research. Qualitative research is intended to gain insights into what and how value is created and to develop a hypothetical theoretical framework. Therefore, in-depth interviewing using semi-structured questions was employed. To avoid biased information, practitioner experts from certain relevant functions who understood the context of the research were selected as a source of information. Quantitative research will focus on testing the theory based on the findings from the first phase. This study involves ASEAN automotive LACs as the cases under investigation. The empirical research findings unequivocally highlight the significant positive impact of corporate foresight on value creation within automotive local affiliate companies (LACs). Corporate foresight enhances various aspects of organizational capability. Within this context, LACs are exposed to a substantial volume of externally sourced information, which serves as early indicators of forthcoming business challenges. This information abundance accelerates organizational learning processes. When corporate foresight is integrated with organizational learning, a more precise understanding of current circumstances and potential future scenarios is achieved. This understanding results in enhanced organizational agility and ambidexterity, all of which play pivotal roles in achieving future competitive advantages. Additionally, it highlights the role of corporate foresight in continually monitoring the local environmental landscape. Both PCs and LACs can utilize this information to inform the development of future strategies, such as product planning and other strategic initiatives. Considering the escalating uncertainties in the external business environment, LACs are encouraged to extend their organizational learning capabilities beyond their current scope to effectively address future challenges. Enhancing organizational learning capability stands as the key factor for bolstering organizational value creation. The evidence demonstrates that enhancing organizational learning capability in automotive LACs is vital for further improving organizational agility and ambidexterity capabilities, setting the stage for future competitive advantages. Future in-depth studies should consider case units with high scores to gain a deeper understanding of how to create organizational environments conducive to promoting good practices of organizational learning capabilities in automotive LACs. Prahalad and Ramaswamy (2004) emphasized the pivotal role of interaction in value creation, with value co-creation and extraction relying on stakeholder interactions and shared co-creation experiences. In corporate foresight activities, three phases - perceiving, prospecting, and probing - play a vital role. During the perceiving phase, internal Local Automotive Companies (LACs) gather external information with minimal interaction. In the probing phase, interaction for analysis is less extensive. The prospecting phase, however, emerges as the central hub for interactions. Here, extensive discussions and analyses occur within the company and with the principal company. This phase includes analyzing changes, assessing business impact, cross-coordination, prototype development, and vertical coordination. Prahalad and Ramaswamy's insight is particularly relevant to corporate foresight in automotive LACs. It highlights the prospecting phase as the primary driver of value creation through key actions such as gaining insights into future changes, demonstrating speed and responsiveness, balancing exploration and exploitation, and promoting cross-functional collaboration, all of which contribute significantly to value creation. In conclusion, this study successfully addressed two research objectives and answered four research questions. It demonstrated the significant positive impact of corporate foresight in automotive LACs, enhancing organizational capabilities, particularly organizational learning, agility, and ambidexterity. Organizational learning plays a crucial role in mediating the impact of corporate foresight on strengthening organizational value.