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Honda Motors is one of the leading automobile industries in the world. The competitive forces model, which was developed by Michael Porter the five forces which he identified, will help Honda Motors, the nature of competition in the industry. Porter's Value Chain Analysis; draws attention to the chain of activities and a resource which is linked to the organisation to the sources of its income and its customers. For a successful strategy there must be a clear understanding of the 'current position'.
In understanding of the current position is by using methodical process known as the 'SWOT Analysis'. Where strength and weakness are internal factors and opportunities and threats are external factors. There is also environmental analysis such as Macro-environment which includes PEST analysis which does the environment scanning.
Strategic management this is whereby Honda Motors will try in looking at different strategies in order to facilitate to meet their objectives. In order for Honda Motors to help meet their objectives they have to interconnect all the activities such as objective setting, like producing an automobile with high quality materials, and be up to date with the rapid technology changes.
Activities such as competitive strategy, this is where Honda Motors will decide, on the basis of its own competitive strengths and weaknesses in comparison of their competitors. Including activities such as functional responsibilities this includes using of appropriate organisational structures which will facilitate Honda Motors to be efficient and co-ordinate in all functional areas which will hence help in reducing costs and improvement on their products.
The competitive forces model, which was developed by Michael Porter of Harvard University in 1980, has identified five forces that influence the nature of competition in an industry. (Porter, M.E 1980)
Threat of new entrants
This is whereby a new entrant tries to enter the market. The threat of new entrants is very low in the automobile industry, since there are many barriers associated in entering the automobile industries which includes, high capital requirement, access to distribution channels, high capital requirement for research and development which is necessary for innovation requirements, and also a government policy may be a barrier the government may ask the industry to acquire a special licence which is very strict on its safety rules.
Threat of substitutes
There aren't many substitutes product for an automobile industry, some of the substitutes include, walking, cycling or taking a train. The substitute products depend on various factors such as geographic location of the consumer, for example the consumer may be in UK and the subway may be the most effective way of transportation.
The power of buyers
Bargaining power of the buyer is quite high as the industry entirely depends on the consumers as the consumer's purchases the industry output. If Honda Motors is unable to keep the buyers happy, then the risk of losing them to the competitors is higher. Buyers have a low switching cost, if they are not satisfied with the car they will go for a new one. The reason why the power is not very high is because the buyers are not large in numbers but few, and the buyer does not have the ability to integrate backwards into the industry. If they want to purchase a vehicle they have to purchase it from a dealership.
The power of suppliers
The bargaining power is very low in an automobile industry, since many parts are used to produce an automobile; hence it takes many suppliers to accomplish this task. When suppliers are many they do not have much power, so there are many supplies to this industries. Manufactures can easily switch to another if is necessary.
Intensity of rivalry among competitors
Rivalry is very strong in automobile industry. In order to facilitate them to get their market share, they must gain market share by taking it from their competitors. One of the main reasons for rivalry is because there is lack of differentiation opportunities. All car manufactures will produce cars and the consumers will compare cars in terms of price, performance, durability, quality, fuel efficiency and other aspects.
(Porter, M.E 1980)
Porter's value chain techniques are divided into primary and secondary activities. Primary activities are mostly concerned with the creation and delivery of the product or service. These are:-
Inbound logistics: - these are activities where Honda Motors deals with receiving of raw materials, warehousing and input control of parts.
Operations: - these include activities such as transforming inputs such as the raw materials and parts into finished product.
Outbound logistics: - these are activities such as delivering the products to the customer and fulfilling their orders.
Marketing and sales: - this is a way of attracting customers to buy the products which includes distribution channel selection and ways and means of advertisement.
Service: - includes activity such as customer support.
Firm infrastructure:-this includes opening of different subsidiaries in different geographical locations, which helped in their activities. Honda has a wide international production network, with 89 production facilities in 33 countries.
HRM: - this is the recruitment of staff where Honda Motors directly employs 101,100 people, approximately 1/3 of them in Japan.
MARGIN: - With high fuel prices and a weak U.S. economy in June 2008, Honda reported a 1% sales increase (http://www.wikipedia.com)
Source of diagram (http://www.provenmodels.com)
In order for these groups of primary activities it is related to the supporting activities which hence helps in the development of the effectiveness as well as effectiveness of primary activities, they are as follows: -
Procurement: - this is whereby Honda Motors tries to get various resources inputs for its primary activities, such as purchasing of inputs.
Technology development: - technology will help to understand how the industry is going to undertake its processes such as improvement in services with the help of technology like product and process design, research and procedure development.
Human resource management: - it's normally done by the management, which deals with activities such as recruiting, training of the staff, managing, giving incentives to the staff.
Infrastructure: - this consists of all activities that support the value chain, which includes finance, planning, general management, government affairs and quality management.
De Wit, B. and Meyer, R. (2004, pp 241-242)
QUESTION 1 (B)
Ries and Trout (1972) "Positioning is not what you do a product it is what you do the mind of a prospect." (www.quickmba.com)
Positioning is vital because it is the means where goods and services can be differentiated from one another and giving the costumer a reason to buy. There are two elements in positioning this is the physical attributes, such as the functionality and capability where Honda Motors can offer things such as engine car specifications, its designs and carbon emissions. The second element is concerned with the Honda Brand how it is communicated and how consumers distinguish the brand relative to the other competitor's brands in the marketplace.
Kotler (1997) brings these two elements together when he says that 'Positioning is the act of designing the company's offering and image so that they occupy a meaningful and distinct competitive position in the target customers' minds.' (www.books.google.com)
Honda came with 'Right-first-time' or 'build in quality' approach which revealed that there are better ways to manage these dichotomies. Which focused on how to 'build in quality' to products rather than 'test in quality' after that, there was possibility to reduce costs and to downsize production with minimal stocks, thus reducing delivery lead times. This example involves a strategic approach to manufacturing, and it has widespread ramifications for marketing, product positioning and competitive strategy.
Honda has been recognized for its 'core competence' in the advanced internal combustion engines which power the whole range of its products.
Honda's product goes far deeper a dichotomy reconciling approach characterizes both the mental process of technology research and the philosophy behind the actual product designs.
The technology and design features of Honda products are the embodiments of successful reconciliations of dichotomies which deliver direct and immediate competitive advantage. One of such example of Honda's technology is the CVCC engine which was widely accepted in the world's automobile industry, namely a trade off among the various pollutants emitted from internal combustion engines.
The advancement in high technology built into all its products and it was quick to offer features like advance engines, antilock brakes, electric windows and sun roofs as stand rather than optional extras, thus simplifying product variety within each model helping the customer in distinguishing with other brands.
Developing internal resources
While creativity is exercised by strategic and tactical planning, that is, analyzing the environment to determine how best to use the existing internal resources and capabilities at Honda Motors such as establishing a global management structure which was reorganised with clear and direct lines of responsibility to the top management group.
Also the way Honda's solution to the group- individual dichotomy and the horizontal-vertical dichotomy is to progress flexibly with a 'tacking 'motion along a well defined and narrow path.
Finally Honda had a remarkable penchant for praising the successes of individual employees and for encouraging a sense of competition among them. Within Honda R & D, the subsidiary company that develops Honda Products, competitive and individual based basic research foster individual inventiveness.
QUESTION 1 (C)
Haspeslagh and Jemison (1991) explained that "global integration actually carries a different meaning for various parties involved in different situations". This means the possibility that a subsidiary, operating on a distinct market environment, can develop a different perspective and understanding of global integration relative to the mother company or other subsidiaries operating in different markets.
Schweiger and Goulet (2000) stated that the "different perspectives commonly revolve around the combination of the assets and human resources of the target and the buyer or the subsidiary and the mother company"
Pressures for global integration of activities
Getting a cross-border synergy on as a large scale as possible can be an opportunity for a global automobile industry. Realising global synergies is often less and opportunity than a competitive demand.
The pressures for global integration of activities in an automobile industry, such pressures include where for example, Toyota may have already effectively implemented a global strategy, and there can be severe pressure to collect benefits of globalization through standardization, co-ordination and centralization.
Such pressure for global integration of activities include, where the international automobile tries to be in ideal position where it strives to attack locally oriented rivals. By coordinating its competitive hard work and bringing its global power to put up with on a few national markets, the automobile firm can push back or defeat its local competitors country by country; also keeping in mind the Automobile industry must have its capability of defending itself against such a globally coordinated attack by a rival international firm.
If the organisation is investment intensive such as Honda Motors then a global strategy is required to search for large product markets to return the investments.
Honda motors, which is high in technology may require IT services which may be costly at host country, it may require outsourcing from other locations in order to facilitate the cut down on costs which requires strong global co-ordination and management, and the adaptation of standards.
De Wit, B. and Meyer, R. (2004 pp 543-544)
The demand for local responsiveness
Pressure for local responsiveness arises from when consumer tastes and preferences differ significantly between countries.
Also when there are differences in substitutes such as other means of transportation such as bicycles, trains and planes.
Where the economic and political demands are forced by the host country governments may require a degree for local responsiveness.
Differences in infrastructure; includes services that entirely depend on one type of transportation system such as public means of transportation in a country.
(SIM336 Module Workbook, 2011 pp 196)
QUESTION 2 (A)
Whittington's 'classical' school of thought
In Whittington's 'classical´ school of thought, there is a formulation of an opportunity or a problem. Honda motors may be imagining where they are currently now, where do they want to be, and what are the ways in reaching their objectives, this can be Honda Motors mission. In order for Honda Motors to go through objectives, it has to go through processes, which are purposely set like now and future. It's normally based on the micro economic assumption of "ceteris paribus" keeping all factors constant.
Alfred Sloan (1963:49), quoted "that the strategic aim of a business is to earn a return on capital and if in any particular case the return in the long run not satisfactory, the deficiency should be corrected or the activity abandoned".
In order for Honda Motors to have a flourishing strategy there must be a clear view or understanding of its 'current position'. There is a methodical process for understanding process for understanding the current position by using SWOT analysis, where strengths and weakness are internal factors, and opportunities and threats are external factors.
There is also environmental analysis such as macro environment which includes PEST analysis, which does the environment scanning.
There is micro environment which includes Porters 5 analysis.
As well as there is the internal environment PLC (Product Life Cycle) which illustrates the condition of a product establishment, it grows and finally declines.
Finally the porters value chain analysis which draws the chain of activities and a resource which is linked to the establishment to the sources of its income and its customers.
(SIM336 Module Workbook, 2011)
'Processual' Schools of Thought
Pluralism means more than one. Pluralism has always existed in organisations, since everyone has their own way of seeing the world, and their own preference for what happens to them and around them. People outside the organisation do not have much power to control its strategy, compared to those people inside the organisation.
Having power and using it are two different entities, some individuals and some organisations are far more 'political' than others creating more obvious conflicts.
Morgan (1997) has tried the ways as how people can deal with conflicts and came up with five categories of behaviour, which was based around the degree to which an individual is assertive or unassertive in attempting to satisfy his/her concern, and if the individual is able to satisfy concern of others, whether he/she is co-operative or non-cooperative.
Unco-operative assertive people see organisational life as a fight that they must win.
Unco-operative people who are not assertive will try to keep away from situations where they have to deal directly with others.
Unassertive but co-operative people will try to accommodate the wishes of others.
Those who are not particularly assertive, but who are prepared to co-operate with others to some extent, will look to negotiate acceptable compromises.
People who are both co-operative and assertive will tackle differences and propose positive new solutions that allow them and others to get what they want.
Processualists try to establish strategies as a result of the method of political activity among the concerned stakeholders and the managers. Processual strategies normally define as the processes dimension as a growing and the outcomes dimension is pluralism.
Due to the development in the standards of living and education, it is important for organisations to be seen to take account of stakeholders and not just shareholders, since the industry societies have become more unrealistic.
Stacey (1996) integrates 'organisational context' and 'the effects of individual psychology' with the 'processes of decision-making and control'.
Stacey's (1996) identifies four loops these are:-
The rational loop which is normally discover-choose-act, this is where we have to make analysis of the strategic position of the entity. This is the formation of strategies, selecting and finally implementing them.
The rational loop is essentially 'unitary'. The outcome of this loop is that very good ideas can be left out because of being strict. Decisions made may be slightly faster as well as the firm will go towards one direction, because of the unity in the organisation.
Strategies will be based on the information that will be done on the analysis of the organisation. The implication can either be a positive or negative result.
The overt politics loop, these are individuals in the organisations where they use their power individually to influence events, or groups might be formed. These can be coalitions of the same minded people or people although they don't share the same interest, but are willing to act together in the short term to oppose others.
The political process is 'overt' meaning its part of inevitable bargaining for resources in the organisation. Some of the implications can be:
There will have low productivity, the staff will be de-motivated, high staff turnover hence the organisation will not be able to achieve its goals. The decision making is very rapid because they are safeguarding their interest.
The cultural and cognition loop, sustains the unitary organisation in its shared mental values, this means individuals within that organisation would like to retain that way of culture, if the culture is challenged, for example, if a new person is appointed who tries to approach issues with different methods and ways on how the work is supposed to be done. In this way contradictions and conflicts will begin, and the unitary organisation begins to fragment into pluralism. The implications are it may hinder creativity because there is no change, and the progress will remain constant.
Covert politics loop it describes on how a person will response to contradiction and conflicts. As people fear failure and challenges arising from change and move back the way they know like the old methods. In this way they form a group, they try to remove the conflict by forcing out those elements that are believed to be the cause of it.
People form alliances to take actions and make them feel safe again and some of the implications are as follows; productivity is most likely to go down, the productivity is likely to go down, decisions making will be slowed down and new projects are not likely to come.
'Public sector' decision-making' has to be taken into account the differing world views that are held by the professional service providers in the public sector and the representatives of the communities that the public sector is supposed to serve. Then, among the providers there are many different groups who each have their own strategic preferences, and among the representatives there are people from very assorted communities, with different needs and wishes. An added difficulty is when most of the resources for the provision of local community services are channelled through central government, the taxes having been collected nationally rather than locally.
(SIM336 Module Workbook, 2011)
QUESTION 2 (B)
I would have chosen the Whittington's 'classical´ school of thought in Honda Motors because it's going to give me a clear view of where Honda Motors current position in the market. As I shall be able to use different analysis such as the SWOT analysis, PEST analysis, Porters 5 analysis and Porters value chain analysis. With different analysis I shall be able to generate a clear report on what Honda Motors require to do, and what strategies to use in order to generate good revenues, keeping in mind what my competitors are up to, customers needs, looking for ways of being innovative in terms of technologically, design, come up with better engines such as the CVCC. It shall give me a better understanding of the primary and the secondary activities, and what is required in each activity for better improvements.
While Whittington's 'processual' school of thought will guide me on individual who have different powers and how their using of power will have an impact on the organization. As there are different individuals who have different behaviour, some are co-operative and some are not, while others are willing to change and others are persistent. With that Stacey (1996) tries to integrates 'organizational context 'and 'the effects of individual physiology´ and the 'processes of decision making and control´
I would choose both the school of thoughts as its going to aid me at Honda Motors, because I will be able to get a clear image of Honda Motors as well as how to handle different people with different behaviours.
Systematic strategists see an organisation as a complex purposely entity whose survival and prosperity depends on making appropriate and productive relationships with its environment. According to Marrington (1982) a business organisation is a complex system relatively open to the environment and dependent upon it for the throughput of energy that ensures its survival. It is composed of a hierarchy of subsystems that are all interrelated in some way.
Some of the implications of these cultural dimensions for international strategic managers at Honda Motors in building productive relationships with the outside world
One of the most frequently cited pieces of research is by Geert Hofstede (1993) 'Cultural
Constraints in management theories'. He proposed, amongst other things, that different cultures differ most greatly in five dimensions. We are interested in this because global strategic management is conducted in a community of managers from all over the world, and its success depends on clear communication and understanding between them. Secondly, international strategic management means making close business connections across national boundaries, in which better knowledge of the worldview of the managers on the other side can only be helpful.
In our case where Kawamoto's new ideas were significant, he established a clear hierarchy at executive level, with two leading executives joining him form an innermost leadership circle. Honda's global management structure was reorganized with clear and direct lines of responsibility to the top management group. Also when Kawamoto came up with joint board room, which helped encouraging executives to talk about their problems and solutions with each other, and to prepare the younger managers for the day when founders will retire.
Porter, M.E (1980) Competitive strategy: Techniques for Analyzing industries and Competitors, Free Press, New York.