AbstractHuge numbers of middle-income groups are distributed in China and Association of South East Asian Nations (asean). In this context, global firms recognize the need for localization strategy. The practical upcoming challenge of global companies is to determine the best way to accomplish localization. In this paper, we present the development of a self-contained localization system based on organizational capabilities, and suggest the self-contained localization strategy through case studies of Japanese firms. The foreign subsidiaries with self-contained units include their own R&D, operations, marketing, service, and human resource functions. Therefore, the self-contained localization strategy allows the foreign subsidiary a large degree of autonomy in responding appropriately to local competitive conditions with locally responsive strategies. When we analyze the relationships between Japanese headquarters and local business subsidiaries, we find the larger a degree of autonomy of self-contained subsidiaries, the higher their global market share.
