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State-level analysis offers comparisons between countries; a comparison of the differences from industry to industry is also required. Thus, there is a need to focus on industry in order to be more precise in analysis.

Economic geography generally explains the collective behaviour of a certain industry and perfectly explores the motivation of transnationalisation. One representative example of this is that Peter Dicken (Dicken 2007) has done extensive work on multinationals through case studies of various industries. Under the perspective of economic geography, the motivation to transnationalise, the choice of spatial location for each subunit of an organisation, and the consequences of transnationalisation are explored.

As far as the motorcycle industry is concerned, analysis from economic geography is required in order to portray the situation of the whole worldwide industry in terms of competitive advantages and general weaknesses, so as to view where China stands. In the history of the motorcycle industry, the production and market were dominated by America and Europe up to the early post-war period.

Famous brands such as Harley-Davidson in America and Triumph in Britain were not only the major forces and exporters in the global market, but also stood out as key icons of ‘coolness’ within popular culture (Pinch and Reimer 2007).

After World War II, the production centres for motorcycles gradually shifted from America and Europe to East Asia, with Japan as the leader, followed by mainland China and the Southeast Asian countries. Up to the 1980s, Japan was the dominant global producer of motorcycles, headed by the four Japanese giants -Honda, Yamaha, Kawasaki and Suzuki, and maintained this overwhelming global dominance in the industry for decades (Figure 2.2).

Figure 2.2. Production and sale of motorcycles in eight countries: 1975-2005.

Source: Quoted from Fujita, M. (2007). "Local Firms in Latecomer Developing Countries amidst China's Rise-The case of Vietnam's motorcycle industry.",IDE Discussion Paper. No. 97. Institue of Developing Economics, JETRO.http://hdl.handle.net/2344/543

In actual fact, the motorcycle industry had endured a big contraction in developed countries throughout the 1980s. As automobiles gradually replaced motorcycles, the demand for motorcycles in these countries shifted towards high-end leisure and sports-use models. Since the 1990s, large markets for motorcycles shifted from Japan, France and Italy to developing countries such as China, India and Indonesia, where low-end, low power and low cost vehicles are now in great demand for the purposes of work and family transportation.

Global sales of motorcycles have followed the steady upward trend of production. In 2004, over 85% of all sales of motorcycles were done in Asia. In terms of unit sales in 2006, Asia⁸accounted for 32.91 million units, Latin America for 2.75

8Total for 11 countries: China, India, Indonesia, Vietnam, Thailand, Taiwan, etc.

million units, Europe 2.47 million units and North America 1.85 million units (JAMA news, 2007). Therefore, it is clear that the Asian region enjoys a dominant share of motorcycle sales.

Regarding the high-end market, data on world production has highlighted a clear polarisation between Japan and Europe, whereas the US, or rather, North American countries in general have a much lower volume of production. With regard to production on the European continent, the main producers are located in Italy, France, Spain and Germany, with Italy in the lead (Muffatto and Panizzolo 1996). Meanwhile, production in developing economies is dominated by Japanese firms. However, the most recent producers from the developing economies have begun to project a new era of competition.

By 2005, China, India and Indonesia had become the top three motorcycle producers in the world, together accounting for 74.9% of the global supply. The rise in output has overwhelmingly been based in Asia, which accounted for over 90% of global supply in 2006 (Figure 2.3). Of this, the most vigorous development has been China’s rise to become the largest motorcycle producer in the world.

Figure 2.3. Worldwide motorcycle production (unit: 10,000 motorcycles).

Source: Quoted from JAMA news, 2007 http://www.jama-english.jp/motor/2007/200707.pdf

In the process of globalisation, sourcing patterns may vary across industries.

Unlike more globalised sourcing industries such as the apparel and electronics industries, the motorcycle industry tends to be locally sourced. For example, the local content ratio of major Japanese lead firms has reached 98% in Thailand and 91% in Indonesia (Fujita 2007). As Fujita has suggested, this type of sourcing pattern in the motorcycle industry exists for several reasons. These include sufficiently large local markets, low entry barriers for local firms, the non-standardised nature of the product (parts that are specifically designed to meet the road conditions, climate and consumer preferences), and the need for closely coordinated adjustments between the parts (Fujita 2007).

The sourcing strategy is closely related to the assembler-supplier relationship.

Profound changes are occurring in the nature of the assembler-supplier relationship in the motorcycle industry, driven primarily by the time, price and technology/design pressures exerted by the assemblers on suppliers (Dicken 2007). It has been argued that the superiority of Japanese firms over their competitors in terms of quality and price lies in their integrated mass production, the closed-integral business architecture. Specifically, this means sticking to the in-house production of strategic components, such as the engine and frame; procuring other parts from a few designated suppliers that the firm has long-term relationships with rather than buying them in the open market with short-term contracts; and having the assemblers use custom-designed rather than universal parts for their models.

However, the China shock in Vietnam forced the Japanese lead firms to reorganize and change their sourcing patterns. The flush of Chinese motorcycles into the Vietnam market for the first time won out over its competitors, although they were subsequently defeated when the Japanese manufacturers had transformed themselves,

leaving only one Chinese enterprise there. While economic geography helps in achieving an understanding of the historical evolution of the motorcycle industry and the collective behaviours of transnationalisation, this perspective does not cover extreme cases within an industry. Specifically, it explains perfectly why Chinese motorcycle manufacturers transnationalise in certain locations and their competitive advantages as well as disadvantages, but a detailed explanation of the behaviour of the market leader and its role both within and beyond the industry is missing. In order to understand the market leader, some form of organisational analysis is required in order to observe how it has emerged as a market leader; this is where the entrepreneurship perspective comes in.