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Today's global automakers are working hard to rivals their global competitors. Through optimization of business level strategy if often insufficient, firms need to establish cross corporate level strategies to reap synergy among its various business units. Furthermore, rapid changing global business environment also required firm to consider their business relationship with their competitor and even supplier. Thus, automaker needs to employ network level strategies by seeking partner to innovate for further expansion. In addition, under today's complex global business world, auto producer certainly cannot ignore the "intrinsic values and treats" while progressing such as utilising corporate social responsibility to build strong corporate reputation and hinder threats of boycotts and litigation. Undoubtedly, automaker must recognise the force that influences business environment but it should not be exaggerated as the main strength in sustaining business is to learn and create knowledge and wisdom to respond with change. There is certainly no best model for companies to abide by as the only thing constant in today global business atmosphere is change.
Executive summary 1
1.0Business Level Strategy 3
1.1Global Business-Level Strategy 8
1.2 Corporate Level Strategy 9
1.3 Product Related Core Competencies 13
1.4 Process Related Core Capabilities 13
2.0 Network Level Strategy 14
2.2 Potential for Product synergies 15
2.3 Access to New Technologies and Emerging Markets 16
3.0 Corporate Social Responsibility 16
3.1 Corporate Social Responsibility of Honda Motor Co., Ltd. 17
3.2 Impact of CSR on organisational financial performance 21
3.3 Impact of CSR on organisational non-financial performance 22
3.4 Strategic leadership model 22
4.0 Conclusion 27
5.0 References 27
Constant increase of competition in global automotive industry required car assembler to persistently look for new market and new customer. Increase in size and scope of foreign operation has become the norm, particularly to countries like South America, ASEAN, China, India and Russia. However, by doing so, a substantial excess capacity has been created in global automotive industry and will further lower profit margin.
Cutthroat competition also leads to collaboration between automaker such as merger and acquisition to reap product synergies and access to new technologies and market. Nevertheless, such move does carry the risk of debt and bankruptcy. For example, merger between Daimler and Chrysler resulted in 40 billion Euro losses and entered record books of Germany, highest since the country's post-war history (Oliver et al, 2008).
On the other hand, fierce competition environment do not tolerate any fault in automobiles. The recent product safety recall that crash global auto maker, Toyota caused billion dollar losses in terms of fixing the error and re-building reputation. In fact, there is an increase demand for environmental conservation requirement such as lower emission and ever stringent product safety standard that rely heavily on technological breakthrough and R&D investment despite market saturation, reduction in profit (Verbeke & Brugman, 2005). Thus, automakers need to develop and sustain competitive advantages in order to survive in this harsh competitive environment.
Business Level Strategy
Business level strategy is defined as a comprehensive plan that enable single self-contained firm to achieve its objectives (Minztberg and Quinn, 1988; Koch, 2000). It is about relating a company to its environment by taking offensive or defensive moves to cope with the competitive forces to gain competitive advantage in the industry (Porter, 1980; Porter, 1987; Hitt et al., 2005; Pearce and Robinson, 1997; Rumelt cited in Minztberg and Quinn, 1988); De Wit and Meyer, 2004; David, 2007). Which synonym with outside-in perspective as firms are market driven (Kim and Mauborgne, 2005). The competitive forces are opponent, customers, suppliers, potential entrances and substitute products (Porter, 1980) (Please see Figure 1.0).
Figure 1.0: Porter's Five Competitive Forces
Source: Porter, 1980.
Every player in global automobile industry constantly pursues their strategies for survival. Even global player like Honda Motor announced in 2009 that it would be downsized to overcome 2008-2010 automobile industry crises (Honda, 2010). We will evaluate Honda's business environment before we examine Honda Motor's strategies (please refer figure 2.0).
Figure 2.0: Porter's Five Forces Analysis of Honda
Intensity of Rivalry
Mature industry with very little growth potential, lots of existing competitors were the features of this highly competitive industry.
High competition in the industry lowers the profit margin. To remain ahead in competition, auto-makers were tempted to offer value added services to the customers which incur more costs.
Easy finance options and long term warranties were offered to lure customers. But these measures cut into the profit margins.
Customer bargaining power
Constant number of buyers, high number of choice and options.
Conveniences in obtain information for price and spec comparison about an automobile significantly increases power of consumer to bargain down prices.
Stringent of consumer protection regulation increase their power as their right is secured by law.
Power of Supplier
Plenty of suppliers depend on automakers to buy their products.
If the automaker decided to change suppliers it would badly affect the supplier's income.
Hence, power of supply is relatively insignificant to post a threat to Honda and the industry.
Threat of new entrance
Existing customer loyalty to certain brands, technological expertise, product liability, huge marketing cost and government license and regulations constitute high barriers of entry which reduce the threat of new entrance
Thus, threat of new entrance is negligible.
Threat from substitute
Even the rising of fuel price, cost of automobiles and costs of operating influence customers to look for alternative transportation options but people were not willing to give up to enjoy the conveniences that automobile brings.
In fact car has continued to receive popularity as it shape today's lifestyle and as a necessity of modern life.
Therefore, threat from substitute is negligible to Honda and even to the industry as a whole.
In order for firms to compete, Porter (1980) revealed that there are two types of strategies: low costs or differentiation. Combines with the market segment targeted, three forms of generic strategies exist for a firm to outrun its rivals (Please see Figure 3.0).
Figure 3.0: Generic Strategies
Source: Porter, 1980.
Porter (1980) claimed that firm must choose one of the three generic strategies; any firm that simultaneously serving a range of strategy cannot optimize the competitive advantage and "stuck in the middle". As being unique required a premium price and cost leadership need to compromise product features. Firm will neither have enough market share needed for cost leadership nor sufficient profit to sustain differentiation.
However, Minztberg and Quinn (1988) disagreed, they proposed that firm can achieve both simultaneously. Honda invaded American automotive market in 1970 through cost leadership strategy with automobile priced $1500 below its competitor. After establishing a firm base to produce such product, Honda gradually move up to towards higher end product by coupled with differentiation strategy to overruns its rivals (Ohmae, 1982; Pascale cited in Minztberg and Quinn, 1988; Mintzberg cited in Minztberg and Quinn, 1988; Mair cited in De Wit and Meyer, 2004; Honda, 2010). Such hybrids are called "best value strategy" stood between broad and narrow market where customer's diversity makes product differentiation a norm (Porter, 1980) (Please refer figure 4.0 below).
Figure 4.0: Competitive Strategies
Source: Porter, 1998.
Miltenburg (2005) best described Honda business level strategies in figure 5.0 below:
Figure 5.0: Contrast of Honda and its competitor's strategies
Best Value Strategy
A broad cross section of the market
Basis of competitive advantage
An ability to offer buyer something different from competitors
More value for money
Many product variation, wide selection, strong emphasis on differentiating features
Good to excellent attributes, several to-many upscale features
Creation of value of buyers; strive for product superiority
Incorporate of upscale features and attribute at low cost
Build in whatever features buyer are willing to pay for; charge a premium price to cove the extra costs of differentiating features
Either underpriced rival brands with comparable features or match the price of rivals and provide better features- to build a reputation for delivering the best value
Ways in sustaining the strategy
Communication the points of difference in credible ways; stress constant improvement and use innovation to stay ahead of imitative competitors; concentrate on a few differentiating features; tout them to create a reputation and brand image
Develop unique expertise in simultaneously managing cost down and up scaling features and attributes
Source: Miltenburg, 2005.
Honda utilized its capabilities in cost and quality to build luxury automobiles - Acura. Using know-how of making low cost cars to produce luxury vehicle to under-price rivals and utilise expertise in quality to make higher quality car than the rest. Such combination of cost and differentiation designed to draw price-conscious customers from BMW or Mercedes and dissatisfied customers away from Cadillac or Lincoln (Miltenburg, 2005; Thomson and Strickland, 2003). Porter (1980) revealed that rewards for such synergies are enormous as differentiation leads to premium price and cost leadership implies lower costs. Thus, Honda's business strategy reconciles dichotomies of low cost and differentiation (Porter et al., 2000; Mair cited in De Wit and Meyer, 2004).
Global Business-Level Strategy
In the context of global business level strategy, home country of operation is the most important source of competitive advantage. Firms must develop and implement appropriate strategies that take the advantage of each distinct country factors as portrayed Porter's Diamond model (please refer figure 6.0 below). Success in the home country allow firm to pursue strategy into global market. However, as firm continue to grow, the importance of country of origin diminishes (Porter, 1980).
Figure 6.0: Porter's Diamond Model
Source: Porter, 1998.
Honda became the most international of all automobile manufacturers with 77 per cent of its sales outside Japan (Mair cited in De Wit and Meyer, 2004).
1.2 Corporate Level Strategy
As firm grows, businesses were divided into individual unit often referred as strategic business units (SBU). Each SBU possess different characteristic and driven by its own business level strategies. SBUs can be situated to its relative growth and competitive position under the growth share matrix (Please see Figure 7.0).
Figure 7.0: Growth Share Matrix
Corporate business strategy involves managing overall portfolio by coordinate each individual SBU matrix position (Hedley cited in De Wit and Meyer, 2004). Perhaps, cash generate from cash cow could be used to fund non self-sustaining stars or question mark for growth opportunities. Porter (1987) ascertained that corporate level strategy concern of how a diversified firm should manage a set of business units in a selection of industries because diversified firm do not compete; only their business units do.
Conversely, Prahalad and Hamel (1990) criticised that engaging in corporation level strategy is strategic while business level strategies were only tactical or short sight moves. Many diversified firms were obsesses in pursuing SBU optimization but overlook the coordination and synergy among SBUs. Cooperation among SBUs can create core competence to be spread over SBUs profiting the entire corporation (Kim and Mauborgne, 2005). This is in-line with inside out perspective of strategy as firms are operationally driven to build their own unique competency.
Honda developed corporate level strategy by establish a road map and build key technology extended across different product applications. Its core competency in combustion engineering multiplied from producing high-revving, smooth-running and lightweight motorcycles engine. And apply to car industry with superior fuel economy, fast acceleration, less noise and vibration automobile engine (Prahalad and Hamel, 1994; Koch, 2000; Prahalad and Hamel, 1990). Honda engines are core product; add value to end products and derive variety of end products (Prahalad and Hamel, 1990). Honda's engine are deployed across motorcycles, cars, lawnmowers, power generator, marine engine, formula 1 race cars engine and aircraft jet (Koch, 2000; Honda 2010; Rumelt, 1995; Porter et al., 2000; Thompson and Martin, 2005; Honda 2010).
Honda's corporate level strategy commits to technical and production synergies across its SBUs to breed core competency in engine-related technologies and transforms it into series of superior products (Prahalad and Hamel, 1990). The synergies were exploits further to create brand recognition (brand recall) and reputation (brand esteem) to enhance brand power to outsell every competitor (Please see Figure 8.0 below). Thus, Honda competes on both economy of scale and economy of scope that only can be achieve through interbusiness coordination (Prahalad and Hamel, 2005).
Figure 8.0: Honda's product and competitors
Formula 1 race car engine
Bombardier LearJet / Cessna Citation
Source: Prahalad and Hamel, 1990.
1.3 Product Related Core Competencies
Honda identified racing as pathway to develop engine as core competency product. Since 1954, Honda exploits race circuit as laboratory to achieve technological breakthrough (Porter et al., 2000). Compound Vortex Controlled Combustions (CVCC) engine introduced in 1973 that ran on cheap leaded fuel yet more efficient and powerful and meet U.S. Clean Air Act simultaneously had become a hit during 1974 Oil Shock (Porter et al, 2000; Minztberg and Quinn, 1988). This innovation overcame the trade-off of various pollutants resulted from different fuel combustion condition even without catalytic conversion cleaning (Mair cited in De Wit and Meyer, 2004).
In 1990, Honda overcame the trade-off of sports car only comes with high priced with NSX performance car that rivals Ferrari but only at a fraction cost. (Prahalad and Hamel, 1990). Honda claimed that NSX is a car maker's dream, not a car buyer's dream as no car buyer could have dreamt of this top performance car that reasonably prices. NSX first equipped VTEC (Variable Valve Timing and Lift Electronic Control) engine that deny the performance economy trade off as it produce more power but consume less fuel (Mair cited in De Wit and Meyer, 2004). Honda led again in 1990 with Insight, the first hybrid car to hit the mass market (Honda 2010).
1.4 Process Related Core Capabilities
Automobile manufacturing processes involve tedious tasks, time-and-motion are defined as efficiency and sacrifices worker satisfaction. Honda reconcile dichotomies of process efficiency and human dignity in free flow line at Kumamoto factory whereby speed of the conveyor can be altered anytime and worker stops the line to perform job and release to next station only when finished. The line is designed with three or four idle position before and after each station to prevent downtime. Such system simultaneously increases efficiency and relieving workers stress from chasing constantly running conveyor and lead to quality improvement as worker are empowered to execute task properly (Sakiya, 1987; Mair cited in De Wit and Meyer, 2004).
Furthermore, Honda's flexible production planning system resolved dichotomies of mass production and one piece flow system (Mair, 1994); Mair cited in De Wit and Meyer, 2004). Honda's small batch production system made up of 30 or 60 identical automobiles at a time enable workers to execute same task continuously. The objective is to combine the advantage of mass production that reduces task variations and errors and obtain product variety concurrently. Such system reduces machine change frequency that necessary to make various products and enable job rotation through reconfiguration of workers group because flexible workforces are trained to perform different task as batch changes. Relationship between workers and process enhanced and increases worker satisfaction, productivity and quality (Mair, 1994; Mair 1998). Production planners can make abrupt changes to production sequence despite advance production schedule to avoid downtime caused by parts or process failure to maintain full capacity and economy of scales (Mair, 1994).
Combined flexible people and adaptable production planning, facelift or new model can be introduced more frequently with minimal cost to cope with demand shift. Mair (1994) concluded that such approaches facilitate balance between supply and demand and it's a tool to improve elasticity of supply and gives manufacturing a central role in overall corporate strategy which is vital for company's growth.
Nevertheless, Mair (1994) argued that such process competency has its limit. Minimum re-tooling tends to offshoot 'trade off' in new product. As the dimension of Accord stationwagon produced in Honda's Marysville plant, U.S. in 1990 had to be designed to fit existing production equipment that sacrifices room compartment (Mair, 1994).
Besides, model replacement able to cope with single market segment subsides to maintain capacity and employment. Regional sales decline also can be dealt with reallocating production capacity geographically. But when several market segments or regions deteriorate concurrently, there are no 'room' to reorganise production. Difficulties that Honda faced in current global automobile industry crisis have proved to strain the flexibility and reveal the threshold.
2.0 Network Level Strategy
Network level strategy is defined as a shared strategy of two or more firm move beyond transaction relationship and work jointly towards a common goal to reap synergies (De Wit and Meyer, 2004). Firm is a hierarchy organisation whereby central authority coordinate strategies and dissolve inter-departmental disputes. Relationships between firms are transactional that took place in "market". Networks level strategies tend to combine the benefits of hierarchy and market. It coordinate and resolve dispute through collaboration arrangement such as merger, acquisition or alliances (De Wit and Meyer, 2004). Mergers create a new organization from organizations of equal size. Acquisitions add a small firm onto a larger organization. Alliances combine firms with mutual interests to work on particular projects that benefit both (Acquire, ally or merge, 2005).
2.1 Too much debt and risk of bankruptcy
Acquisitions are often expensive as stock price tends to gets bid up in the acquirement process. Debts taken onto finance acquisition can become liability to the acquiring company and cause negative effects such as downgrade of firm's credit rating and increase likelihood of bankruptcy. Moreover, debts hinder investments and demote firm's strategic competitiveness (Hitt et al., 2005).
Honda and Rover (previously known as British Leyland) come to a merger in 1979 as Honda taking 20 per cent stake in Rover, likewise Rover to Honda's European manufacturing operation (Oliver et al., 2008). When the alliance started in 1974, Rover was operating in lost due to uncompetitive product and inefficient facilities. Rover interested in Honda's product and proposed for collaboration (Sato, 2006). Soichiro Honda, the founder of Honda confronted Kiyoshi Kawashima CEO that Honda cannot bail Rover out of debt (Sato, 2006) and could cause Honda into debt and risk of bankruptcy. Therefore, Honda started with low risk approach by licensed its product to Rover for licensing fees. Rover first produced and sold Honda's model under the name of Triumph Acclaim (Sato, 2006). The collaboration expands as both firm enjoy huge profit (Oliver et al, 2008; Pilkington, 1999; Sato, 2006).
Despite that, the collaboration broke down in 1994 when owner of Rover, British Aerospace sold Rover to BMW (Oliver et al, 2008). Honda sees their trust been violated as BMW is their rival (Koch, 2000) and tried to pull out the joint venture. Rover were surprised by the reaction and believed that they had served their shareholders well. Two mutually uncomprehending cultures collided. It caused damages to Honda's revenue as Honda supplied 71 per cent of Rover's parts (Oliver et al, 2008). Furthermore, the withdrawal decreases Honda U.K. plant's output and Honda's market position in Europe was not sufficient to generate economic of scale without Rover (Mair, 1998). Likewise, Rover also suffered from lack of licenses to produce cars (Pilkington, 1999). Thus, the collaboration posts a significant risk of debt and survival for both as the separation cost is enormous. (Burton, 1997; Oliver et al, 2008).
2.2 Potential for Product synergies
New model replacement determined automaker's success. Honda possesses skills in compact cars but lack experience in luxury vehicle. Honda was attracted to Rover's European design studios as it helps reduce development lead-time and cost (Sato, 2006; Sakiya, 1987; Pilkington, 1999). In 1981, Rover and Honda agree to joint develop a Project XX give birth to Honda legend andÂ Rover 800 that brings Rover back to U.S. market (Sato, 2006; Pilkington, 1999; Honda, 2010). Honda reap product synergies under this collaboration with model luxurious than Accord yet affordable than Jaguar. Rover also improves their sales and reputation for reliability and quality through Honda-designed models (Pilkington, 1999). Nevertheless, Rover design capabilities were eroded as it became too dependent on Honda for product development (Pilkington, 1999; Porter, 1987). As collaboration only success when firms are clear of what they want and have the ability to control, protect and grow owns capabilities from the venture and (Porter, 1987).
2.3 Access to New Technologies and Emerging Markets
As market saturated, global automakers tried to secure larger market by penetrating into foreign country. Europe was Honda's next most important market after U.S. in the 70's and partner with Rover can instantly tap Rover's facilities and dealer network in U.K. and Europe. It was also a solution to U.K. government import restrictions, an competitive advantage to compete with Nissan who have been in the U.K. longer (Pilkington, 1999; Porter, 1986).
Besides, Rover obtained technology of making compact car from Honda as compact cars constantly enjoy strong demand despite the finite size of global market. Fuel optimisation, emission control, new safety features were the features (Sato, 2006). Recently, Honda collaborates with Chinese automaker of Guangzhou and Dongfeng Automobile for speedy penetration into China's emerging market (Wang and Yang, 2008).
3.0 Corporate Social Responsibility
Corporate Social Responsibility (CSR) is defined as companies overall treatment of human beings and the environment (Mittal et al., 2008; Peng, 2006). Social contracts theory suggested that all businesses operate upon social contract whereby society grants license for business to operate (Moir, 2001). In return, businesses are obligated to act responsibly by pursuit fair profit and promote principle below:
to treat employees fairly and equitably;
to operate ethically with integrity;
to respect human rights;
to sustain the environment for future;
to be a caring neighbour in their communities.
Anderson and Skjoett-Larsen (2009) summarised that CSR concern of dealing with environmental and social issue voluntarily and often exceeds legal requirement. Companies that regarded as solid corporate citizen not only fulfil their social obligations but also to their own corporate values and principles (David, 2007; Rolland and Bazzoni, 2009; Thompson et al, (2005) and Moir, 2001).
3.1 Corporate Social Responsibility of Honda Motor Co., Ltd.
Honda philosophy consists of company principle, management policies and the fundamental beliefs of "Respect for the Individual" and "The Three Joys - The Joy of Buying, The Joy of Selling and The Joy of Creating" as depicted in figure 9.0 below (Honda, 2010).
Figure 9.0: Honda Corporate Philosophy
Source: Honda, 2010.
Such philosophy serve as basis of Honda CSR initiatives under a vision statement of "Striving to be a company society wants to exist" through three directions of (please refer to figure 10.0 below):
Creating new value by applying innovative ideas to anticipate changing needs.
Expanding value to help people realize their dreams by contributing to local communities.
Commitment to the future to improve safety for everyone while minimizing burden on the environment and consumption of the earth's resources (Honda, 2010).
Figure 10.0: Honda Corporate Social Responsibility Vision
Source: Honda, 2010.
Honda committed to enhance safety for society by developing safety technology exceeds standard in force in various countries that can be best portrayed in figure 11.0.
Figure 11.0: Honda Safety Initiatives
Source: Honda, 2010.
Honda active safety system offer accident prevention technology for driver to avoid dangerous situations and hazard avoidance technology helps driver to take preventive action when danger is present. Passive safety focuses on injuries minimization in the event of an accident. Pre-crash mitigate collision impact minimize injuries (Honda, 2010).
Honda's environmental initiatives aimed to protect the environment by minimize adverse impact to the environment from construction of their manufacturing plants, production process to the end-of-life of their products (Nunes and Bennett, 2010; Thompson et al, 2005; Moir, 2001) (please refer to figure 12.0).
Figure 12.0: Honda Environmental Initiatives
Source: Honda, 2010.
Car design is the key to address environmental concerns that vary from conventional fuel efficiency and clean-emissions technologies of CVCC, VTEC engine, intermediate hybrid technology and future substitute fuel technology. Honda believes as such technology become widespread, the effect on the environment will be further mitigated (Nunes and Bennett, 2010).
3.2 Impact of CSR on organisational financial performance
Rolland and Bazzoni (2009) indicated that CSR activities will attract stakeholders because it reflects stakeholder concerns. CSR retain business partners; encourage customer loyalty and strengthening supply chain by maintaining firm's licence to operate. Mittal et al. (2008) further supported that CSR initiatives have universal positive financial impacts on firms because business result is not dependent on whether the company follows the code of ethics or not, but the perception of the investors about the company.
Nevertheless, CSR initiatives do impose significant administrative costs on businesses. Aras et al, (2010) stressed that CSR is often perceived as dichotomy with financial performance as it incur high cost crucial to pursue shareholder value simultaneously. Thus, businesses that can afford the "CSR overhead" are those already financially successful (Mittal et al., 2008). Moreover, Aras et al, (2010) revealed that CSR do not always posed a positive impact on financial performance particularly in emerging economies because investor are more concerned with profit rather than long-term sustainability as they can obtain lucrative returns easily in emerging markets.
3.3 Impact of CSR on organisational non-financial performance
Draper (2006) explained the core driver for CSR is competitive differentiation that improves the competitive position of a firm through:
Key internal and external relationships
Company with good CSR reputation are better in attracts and retain employee compared to companies with tarnish reputation. It fosters higher productivity; induce creativity and greater employee commitment to company's goal.
CSR initiatives help to reduce the risk of reputation-damaging incident as it prevent costly legal and regulatory actions because consumer, environmental and human rights activist group are constantly alert to criticise firm for social irresponsible business behaviour. Such incident caused widespread adverse publicity, influence sympathetic buyer for boycotts and ultimately damage company reputation. Instead, company that are socially responsible wins applause from consumer and fortifies its reputation (Thompson et al, 2005).
CSR strategy gives company an edge in differentiating itself to attract those who prefer to do business with companies that are solid corporate citizens. There are increasing numbers of mutual funds that restrict stock purchases only to company that meet social responsible criteria. Arise of such awareness has led to many companies publish formal reports on their CSR activities (Moir, 2001). Nevertheless, as a strategic assets to maximize shareholders wealth, firms need to justify that the resources spent on CSR activities outweighs the benefits and reduces the bottom line by a justified amount (Thompson et al, 2005).
3.4 Strategic leadership model
Prahalad and Hamel (1994) revealed that there are huge disparities between western and Japanese strategic leadership model. Western companies focus on trimming their ambitions to match resources and search only for advantages they can sustain. But Japanese corporation leverages resources by accelerating the pace of organisation learning and try to attain seemingly impossible goals. Ohmae (1982) perhaps best describe the distinction between Japanese and Western strategic leadership model summarised in figure 13.0 below:
Figure 13.0: Distinction between Japanese and Western strategic leadership model
Fundamental different in the concept of the corporation
- More like communes
- post-World War II turmoil leads to communal growth (not programmed strategy)
- for well-being of people; to help people through toil and hardship (wages were paid in food during post war period)
- stockholders are moneylenders the same with banker
- workforce as people
- profit seeking body
- viability corporation with strategy
- to maximise shareholders wealth
-Stockholders are owner of corporation.
-workforce as employed labour
Meaning of organisation
- organisation means people
- encompassing duty
- loose defined job, overlaps others (organic)
- lifetime employment
- promotion by age
- single status
- organisation means functional establishment (copied from military)
- unambiguous line of command, without redundancy
- jobs with specific description (bureaucratic - constantly required reorganisation)
- career development
- promotion by competency leads to Peter principle
- job demarcation
- Government as couch
- Government as captain
Notion of strategy
- rely on individual or group initiative and execution to improve
- empowerment to people (promote creativity)
- change battle ground (avoid head-to-head competition)
- high financial leverage (high borrowing induce effective business function and focus on long term investment)
- long term strategic planning
- centrally planned and controlled
- fight head on for recognition; sequencing means underperform
- grant resource superiority
- high equity funding lead to vicious financing cosmetic (opt short term profit to make stock price look good to appeal for fund)
Source: Ohmae, 1982.
One of the distinction were Japanese lifetime employment whereby manager works in the same business for decade compared to western's job rotation as part of 'career development'. Another dissimilarity spanning across Western culture is "job demarcation" whereby "class" and "status" attitude has been the barriers to flexibility, mobility and communication. But Honda manage to knock off both with "single status system" whereby all new recruit include graduate need to undergone an identical training program. Moreover, wearing uniform is compulsory for all with no differentiation between white and blue collar. Mair (1998) describe such strategy as Honda's ideological offensive against western status-oriented attitude.
Nevertheless, Honda is "not-Japanese" in their small batch production system that distinct themself from the typical Japanese production system of "one-piece flow" adhered by Toyota which overcome western culture of perceiving "asking for redundancy" as "living in mental prison" that seems inevitable in automobiles production line with job reconfiguration as batch changes. Honda had incorporated both Japanese and western model (Mair cited in De Wit and Meyer, 2004).
Additionally, Koch (2000) commented that western management tend to portray a decision as fixed and final but Japanese managers make decisions based on continuously unfolding set of events. Such claim reminded us of Rumelt (1995) argument between "design school" and "process school" views of strategy. "Design school" of taught clarify strong forces such as scale economies, accumulated experience and development of core competencies. Contrary, "Process school" defined that good process must not being constant and business success depends on generating new knowledge and capabilities to adapt whereby secondary vision and rapid accustom are critical.
Rumelt (1995) argue that typical analysis of strong forces is often imputed rather than observed. Strategic thinking is a necessary but not to overrate as too much brainpower leads to "McNamara syndrome" (Ohmae, 1982). Business success not necessarily required a "strategy" explanation but can be as simple as effort to achieve particular position. Pascale supported with his "little brain" theory and defined strategy as "all the things necessary for the success of organisation as an adaptive mechanism" whereby strategy is not an intention but realisation of whatever it takes to make things work (Pascale cited in Minztberg et al, 1995). this is synonym with "Wisdom of the Anthill" that explain decentralized control of organisation increases efficiency by avoiding ordinary top-down processes that help businesses to be more alert and prepared for changes to find solutions itself quicker (CNNMoney.com, 2010).
Automakers in the present day are working hard to match the competitive advantages of their new global rivals. They venture into foreign market through manufacturing offshore, rationalising product line to capture global scale economies. Then competitiveness still seems out of reach, they merge and form alliances. It is not surprise that many firm feels trap in endless game of catch-up. Prahalad and Hamel (2005) further stressed that success is not depend on imitation but competitive innovation. It's the art of dealing with competitive risks with manageable proportions.
Rumelt (1995) further revealed that Honda initially knew little about the market they are entering. They took the risk being the pioneer and success in U.S. market took the entry team by surprise. Honda's strategy in "innovation, build market share, exploits economy of scale and scope" is merely a business approach that does not flow from a strategic thinking of how to march towards global market leadership. Ohmae (1982) cited that Japanese firm's success was only the post-world war II turmoil and basic instinct to survive. Minztberg (1987) further ascertain that one person's strategy depends on where you sit and when you sit, regardless to neither western nor Japanese model but to adapt with what around you and react, as Sun Tze told us 2500 years ago (Foo and Grinyer, 2000):
"Knowing the place and the time of the coming battle, we may concentrate
from the greatest distances in order to fight".