Strategic Management Case Study: Honda

Strategic Management Case Study HondaEver since the days of Henry Ford, the spherical car manufacturing fabrication, one of the mankinds biggest employers, has blazed the trail in some(prenominal) the harvesting innovation, and perhaps around notably for the Nipponese motor industry, the exploitation of leading manufacturing methods. The industry is not un standardized many differents, with blistering competition on all fronts, which makes strategical planning utterly important for both the sort as puff up as long term survival of any industry player. The ratification of the Kyoto Protocol for instance, spurred car manufacturing companies into the adoption of strategies such(prenominal) as the closed-loop-strategies, in the not only the breeding of more cost-effective engines, simply also the harvestingion, distribution, carrying forbidden and ultimately recycling of decrepit cars etc.This report presents a review of a number of strategic alternatives by Honda and o pposite automotive industries both in the West as wellspring as Japan, in an attempt to establish the driving force behind Hondas success and growth. The premier(prenominal) part of the report gives a description of Honda, followed by the reconciliation of several divergent strategies. Discussion of the differences, if any, between the Hesperian and Nipponese agencys of integrated leadership will unearth the myth behind Japans corporate culture before ultimately terminal with a discussion of the greatness of both corporate g everyplacenance as well as CSR. contents (Jump to)HONDA, COMPANY PROFILERECONCILIATION OF DICHOTOMIESPLANNING v. LEARNINGPOSITIONING VERSUS DEVELOPMENT OF INTERNAL RESOURCES fondness COMPETENCIES VERSUS kernel CAPABILITIESMANAGEMENT STYLESLifelong tenureCORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITYCONCLUSIONSRECOMMENDATIONSHONDA, COMPANY PROFILEWith oer 182,000 employees, 10,011, 241 million in annual revenues in 2009 couplight-emitting diode with upwardly of $ 1370.1 million$ and 1896.4 in operating earnings for the FY 2008 and 2009 respectively, Japans Honda is easily the industrys biggest manufactures of motor rhythm methods, as well as being a among the leading automobile producers. Operating across the globe, Honda is concern in the development, manufacturing as well as marketing and distribution of motor cars, motor cycles and a identify other power products (Honda Ltd, 2010).It was founded in 1946, by Soichiro Honda and subsequently incorporated two geezerhood later, followed by geezerhood of success and growth as a motor cycle maker. Away from its sum total business, the confederations 105 affiliates and 396 subsidiaries across the world provide monetary services to thousands of its clients. It operates a four tier business model which accepts the financial services division, motorcycle, automobile as well as power products (Honda Ltd, 2010). Besides multi wagons, Honda also produces a err of passenger c ars, SUVs, mini vans, passenger cars, mini vehicles as well as sports coupes among others. Hondas flagship car and motor cycle models include the Accord, Civic, Legend, Insight, Acura CSX and Acura RL, CR-V, Cross Road, ASIMO Robots as well as the scooters among many others.The go with recorded sales of over 10,114,000 units mainly in Japan, North America and Europe, representing an 8.5% rise over the previous years figures. Its sales stomach been on the rise despite by dint of the world-wide economic down routine that hit its American competitors, and generally driven by Toyotas PR woes over alleged flaws in the breaking system in its flagship Prius model. This success is more often than not attributable to the connection strategic prep bedness. Case in point, in 2002, it launched a interbreeding car model to tap into the ever growing environmentally conscious clientele, besides entree the environmental Learning Center ( ground in Texas), while in 2004, the company ent ered into a strategic partnership with GE, that led into the development and output of a trail blazing light jet engine, suited for business jets.Sethi and Swanson (1984), commencing in the year 2000, the company has embarked on an ambitious program to determine up production plants in the acclivitous car and motor cycle markets, notably China, Argentina, Russia and the motor bike hot spot, Vietnam. The company prides itself with the twin principles of respect individuals and the Three Joys Principle i.e. buying, selling as well creating. These values reflect the company does wish to make believe on each persons unique abilities and its endeavor to ensure that everyone who comes by purchasing the products or by other means should withstand a great/joyous experience. Honda ensures this by relentlessly, lead in the creation of value, innovation, unseasoned products at accessible prices.RECONCILIATION OF DICHOTOMIESHonda ltds strategic innovation is founded on a process of dichot omies reconciliation which include both learning and planning, positioning on the market vs. internal resources development and lastly, core competencies related to the product against the core capabilities related to the processes. These three dichotomies do representing divergent strategies etc that drive Honda as a company since its ecesis and through years of exemplary growth and expansion. De Wit Meyer (2010), assert that a critical look at Hondas strategies points especially its successful entry and dominance of new markets raises questions as to whether, Hondas outline and subsequent decision fashioning is solidly modestd on a meticulous, analytical and wise planning or whether its strategies are a direct result of the some decisions/ strategies haped at by the company, which evolved or became modified overdue to the environmental influences of the industry in which the company operates.PLANNING v. LEARNINGWhile foundinging its strategies, the company has consistent ly followed a rational approach based on a critical synopsis of the market and the industry environment. This strategy hinges on and it suited for a seasoned industry player such as Honda, since it seeks to built on, and exploit the companys capacious experience in the automotive industry (Johnson et al., 2005). As a strategy, this is an important bottom up strategy that uses the already gained knowledge to optimize the companys require. Planning takes into consideration both the companys resources as well as the environmental factors, as such will most likely utilize the companys send objectives within the constraints. Hondas largely seen as having successfully employed the planning strategy while entering into new markets notably while launching into the US motor cycle industry. Its recent strategic alliances with GE as well as its design and launch of innovative new products and expansion of manufacturing plants, in the ultimate attainment of huge scale economies and exceedi ngly law costs represent examples of internal planning.Planning is largely apparent from an outsiders point of view. However, interviews with the companys bloom worry reveal a out-of-the-way(prenominal) different picture that suggests at best a company that is far from an overly rational, academic planning seeking to impose its corporate values and policies on the market and the industry, but rather a company, with a focus structure that is at all times willing to learn. It is sheer and widely accepted by many stay freshrs that Hondas strategies confine evolved, without a clear plan or analysis of the industry. Case in point, the huge success attained by the companys 50 cc Supercab surprised everyone including the companys guidance. Mintzberg et al. (1998) observe that though the companys strategy may have looked analytical and well thought out, the trouble did blunder by the piece up until the market gave them the correct formula.Rational planning on its own is hardly, su ited to many organizations and is in fact removed from the day to day running of a business as compared to learning, which permits management to continually develop and adjust their policies and strategies as they are implemented, in the light of new experience (De Wit Meyer, 2010). Hondas development of hybrid vehicles and energy efficient models e.g. the Honda Civic Sedan, in the wake of Toyotas success in the same guinea pig represent examples of learning from the environment. Honda has as well launched joint ventures in RD with other companies. Using both strategies gives the company an advantage, not least because it only allows the formulation of strategies that best meet both the internal resources as well as the environmental factors prevailing in the industry.POSITIONING VERSUS DEVELOPMENT OF INTERNAL RESOURCESHondas positioning helps its brand to be associated with a given market segment. It is an every bit helpful guide to the companys other strategies, particularly the marketing strategy, not least because it does clarify the essence of the brand and the helps the consumers to better identify the goals that the product seeks to meet in a unique way. In positioning a product or brand, managers must make decisions, seeking to cost a given segment of the population, while at once risking losing the other(s). Honda has placed its various products on the buttocks of benefit, target, distribution as well as prices. The company offers competitive prices owing to its scale and technology advantages, which in turn permits it to achieve better client franchises. This strategy does however affect the prestige of the brand, besides cut down the profit margins. Target, distribution and benefit positioning, that has seen the introduction of green models to serve the needs of green conscious clients, linked by Hondas expansion into India, China and Vietnam, which was entirely meant at catering for emerging middle split in those countries.As against, develo pment of internal resources, Hondas product positioning allows it to use fewer resources but still reach the target markets. It however, has enormous resources in capital, management, cutting production technology as well as manpower, which have driven the companys expansion across the globe. More investment in RD is, and has been possible, leading to greater innovation. While other smaller industry players struggle with limited resources constraining their RD as well as expansion, bigger companies like Honda, Toyota and GM can attain a better edge in the industry. Hondas has been able to pursue both strategies owing to the availability of niche products that it has successfully positioned e.g. motor bikes in Vietnam (over 400,000 units in annual sales), coupled by its huge availability of resources which allows it rope for RD, diversification and expansion. This does not entirely hold though, Honda spends just a fifth part of GM expenditure on RD and launches fewer models than the latter, yet it products/models are more successful than GMs.CORE COMPETENCIES VERSUS CORE CAPABILITIESCompetencies are as a result of coordination of multiple production skills as well as a complex coordination of numerous technologies. They give a company access to newer markets provide high barriers for competitors to enter the market, besides contributing considerably to the benefits of the end product(s). Hondas core competencies as regards products are the driving force behind the development of the numerous, innovative end user products. Hamel Prahalad regard Hondas product competencies as a brilliant example of how a small company can break into, and establish itself in a mature, stable market. In 2010 alone, Honda has set up a solar H2 station (Los Angeles), introduced the versatile iGX and GX engine series for general purposes. The company has as well produced lithium-ion based batteries intended for the new range of hybrid motor vehicles, alongside an ELC to spear bearin g its green agenda.Honda is famed for its ability to recycle technologies in all its range of products, affording it RD efficiency. There are elements of core capabilities associated with its processes, but perhaps far lacking behind Toyota and many other industry players. These include efficient distribution channels, cost effective production processes. It trains dealers, determines shop floor plans and has strict operating procedures among others. Core product competencies in the automobile industry are far superior to the process capabilities and Hondas success is an outstanding testimonial to this fact.MANAGEMENT STYLESJapanese and Hondas management styles do differ from the American style in at least six distinct aspects. These include differences in the interdepartmental relationships, communication patterns, and supervisory styles, mechanisms for swan as well as existence of, or lack of a paternalistic predilection. According to Hofstede (2004), these differences largely st em from the constitutive(a) cultural differences between the two countries, which in turn influence the respective corporate cultures.Lifelong TenureMost of the companies in Japan do provide lifelong jobs to their employees, with greater emphasis being determined on not age, but also seniority. Promotions are thus much more difficult, just as there is greater job security for the workers. Many organizations effectively hire employees for the, and are interested in the long term objectives as against Americas corporate worlds obsession with short term goals. Case in point, Hondas chair management i.e. Satoshi Aoki (Chairman), Takanobu Ito, Koichi Kondo and Atsuyoshi Hyogo joined the company in 1968, 1978, 2000 and 1972 respectively, during which time they have risen through the ranks to reach the top management. On the contrary, the western sandwich corporate world is characterized by short term contracts for both managers and workers, charged with conflux short term objectives.T eams v. IndividualsIn contrast with the Western model where managers are responsible for decision reservation and subsequently accountable for the decisions reached, the Japanese system recognizes the importance of individual expertise, but the performance of the entire police squad is more emphasized than an individuals. In the western corporate world (Germany and American), certain employees have the star statuses e.g. in Germany, the engineers play central roles to the success of motor companies. Some elements of convergence exist though. Long apprenticeships and cadres (seniorities in Japan) do exist both in Germany, France as well as the Netherlands. Employees attain positions, promotions etc. through years of internships, apprenticeships or memberships to given classes-attained through education and or experience.Decision MakingWhile most western corporations are characterized by top down decision making, the Japanese style of management is largely characterized by embodied decision making by individual teams. Hondas decision making is characterized by the Ringi system, where decisions are passed based on a consensus of all the employees in a department or even the entire organization. This management style is identical to that practiced in Holland, except that the latter is anchored on existing contracts or class differences of among the employees.CommunicationAs against the largely bureaucratic communication, hierarchical channels characterizing western corporations, which is largely effective and efficient, the Japanese channels of communication compromise in large part of face-to-face communication. These comprise everything from provision of selective information regarding assignment of tasks, responsibilities, organizational goals and the development and rechanneling of feedbacks.Implicit Mechanism of ControlHonda ltd is refer with building of its relationships with it biggest assets, the employees. Inspired by its philosophy Respect for the In dividual, the company always seeks to develop collaborative relationships with each and every employee, where all mechanisms of control and supervision are largely informal. Supervisors work alongside other employees, who are involved, the decision making, which in turn renders decision making, execution of decisions and reception of feedback a lot more expedient. On the contrary, Hondas competitors run on a rigid, formal control mechanism. This sets goals, measurable, complete with targets that must be met by departments, franchises and individual employees, while the Japanese system is anchored on the management philosophies that all employees as well as managers identify with.Departmental RelationshipsPascale Athos (1981), states that attainment of the goals set for a department etc requires inputs not just from the concerned departments, but perhaps most importantly, close collaboration with other departments in the company or even other organizations. Formal (necessary) relati onships largely accomplish these goals (characteristic of the western model), while the Japanese style has an extra dimension voluntary collaboration which is far more fruitful and results in greater knowledge sharing.Paternalistic OrientationHonda and many other Japanese companies are concerned by the holistic needs of every employee, including the concern for the well being of their families (Culpan, 2009). This imposes a social run on role on the managers, a feature which is largely absent in the western world, safe for a limited number of family organizations.CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITYWith car markets in the developed world already saturated, most car companys are looking abroad in the emerging markets notably China, India and Brazil. A recent study by TNS shows that car buyers rate car makers more according to their CSR than those consumer in the first world, thus companies that perform better in this sphere stand a far greater take on of winning the hear ts and minds of the new middle class is guaranteed success.In 2005, Honda was ranked the UKs best car company based on its social responsibility initiatives, by the foremost research company on automotives, TNS Automotive. It performs equally well in the US, Indonesia, Italy and Spain among other countries alongside BMW, Shell, Malaysias Petronas, Michelin and Germanys Porsche (Nissan Corp., 2010). Honda spent over 2.3% of its annual revenues in 2009, on its CSR commitments, with the environment taking the lions share of the budget. The company has undertaken numerous actions in an attempt to meet the challenges posed by global warming and climate change. With the reputation of the automobile industry and fossil fuels already damaged, due to its huge century footprints, and the growing fears among the public of air pollution, it is only reasonable that companies act in accordance to the wishes of the consumers. Honda has initiated the LCA system, which identifies and sets targets fo r the required actions. The company develops energy efficient models, adheres by the 3Rs (in design) and noise reduction etc.Hondas corporate governance is a characteristic Japanese style bottom down structure, characterized by collective decision making and a collective sense of belonging among to the company that in turn reflects on the companys performance (Honda Ltd, 2010). Any companys corporate governance does determine the direction that it assumes, which ultimately reflects on its financial performance.Nissans corporate philosophy, governance as well CSR activities are not different from Hondas. It seeks to bring enrichment of the peoples lives and the environment in which they operate. It has made CSR an important part of its corporate management policies. It has devised its green purchasing guidelines, coupled with Nissan-Renault Suppliers Guidelines, which ensure that the companys entire supply chain is green and serves the purposes of the policies set by its top managem ent.Through its charitable arm, Chryslers management makes annual donations to needy communities, projects and causes (Chrysler, 2010). In 2009, the company advanced upwards of $100000 to Good Harvest geared at combating hunger. The companys CSR initiatives are not as extensive as both Nissan and Hondas partly because the company caters for the luxury market segments that are in the main concerned roughly the quality and luxury as against a companys CSR etc.CONCLUSIONSHonda is largely touted by observers and varied literatures in strategic management. Its strategies have largely been used either rightly or wrongly to back up a number of conceptual dichotomies, with contracting positions i.e. learning v. analytical planning, core capabilities v competencies etc. Most of these assumptions, and evidences have however, proven erroneous owing to empirical mistakes that result into the over emphasis of the companies strengths, while its mistakes go largely unnoticed. Further, strategies and explanations are expressed in form of reductionist, single-sided theories that largely fail to portray the actual strategic orientation of Honda. Hondas thrives on reconciling dichotomies. Thus many observers in the west have largely missed out in studying, learning from and understanding Honda.Rohlen (1974), it is evident that capabilities as well as competencies can possibly complement one another, forming into one theory. The latter does focus on the production expertise and technologies while the capabilities serving to modify the whole chain of value. Capabilities are far more visible and easily appreciated by the clients than are product competencies.Hondas ability to meet high targets and post tremendous growth rates is largely due to its tendency to set stretched targets, which brings into direct competition with the biggest players in the automotive industry. In order to compete, it uses its resource base to compete by either providing niche products or undercutting c ompetitors on basis of cost advantages, attained through scale economies. This ability to leverage her resources offers the key to its success, as against the widely fabled Japanese management styles. This style is widely different from and more appealing that the western style corporate management is only equal for the Japanese and Asian environments.There are aspects in both management styles that could beneficially be, and have largely been adopted by either side to the great advantage of the corporations, but not the complete management packages as they will be utter failures in the other ones environment (Schein, 1981). Finally, this report has demonstrated the importance of corporate governance, policy and CSR is important in the ever changing consumer tastes as well as preferences, and most importantly, increasing consumer awareness.RECOMMENDATIONSIncreased spending and expansion of Hondas and other automotive companies in CSR, environmental protection and production of inno vative environmentally friendly models should continue as the only way counter changing consumer needs as well as the changing times.The Western and Japanese styles of corporate management should be amalgamate to suit both the practical and strategic objectives of each organization.Reconciliation of strategies is crucial for success and helps companies reap the benefits of divergent strategies, thus companies must seek common grounds between strategies rather than opting for only one.