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After the 1930s, the economy was so bad that the companies searched for a way out and they decided to go into hibernation during this period. Reeves and Deimler (2009) stated that the companies reduced their production capacity, labour force, discretionary spending and they decided to save some cash for later when the crisis is over.
This strategy has proved its usefulness for the companies, but it is of service in the cases that the crisis is over in a short period of time and that the competitors use this strategy and hibernate at the same time. But this strategy cannot be used nowadays as the crisis scenarios for the day lasts much longer than that, the economists, business leaders, and governments share the same opinion; they say that the how long the crisis will last is unpredictable and that the economy environment after the crisis will be much different than the scenario above, as stated by Reeves and Deimler (2009).
According to Reeves and Deimler (2009), the new trend is to settle with new competitive realities. The objective of the study presented is to understand the effects of the global economic crisis on the operations of the foreign car manufacturers in Turkey. Honda Turkiye is the subject of this study.
Honda Motor mainly works in the US and Japan and it is accepted as one of the world's most important vehicle manufacturers. It works on developing, manufacturing and marketing automobiles, motorcycles and power products. According to Datamonitor (2009), the headquarters of the company is in Tokyo, Japan, and 178,960 people work in the company as of March 31, 2008.
According to Datamonitor (2009), in the financial year ended in March 2008, the revenue of Honda Motor is JPY12,002,834 million, which is about $105,384.9 million and which is an increase of 8.3% over 2007. During the financial year of 2008, its operating profit was JPY953,109 million, which is about $8,368.3 million and which is an increase of 11.9% over 2007. During the financial year of 2008, the net profit of the company was JPY600,039 million, which is about $5,268.3 million and which is an increase of 1.3% over 2007.
Honda Turkiye was established in 1992 under the name of Anadolu Honda Otomobilcilik AS with the partnership of Anadolu Group and Honda. Honda Turkiye manufactures, imports and markets Honda automobiles; and imports and markets Honda motorcycles. According to Honda.com.tr (2009), the company commenced production in 1998 in the factory established in Gebze Sekerpinar; and it has been operating since January 2003 as Honda Turkiye AS wholly with the capital Honda Motor Co.
The vision of the company in Turkey is to reach the maximum production capacity; to provide automobile and after-sale services to Turkey, Europe and neighbour countries; and to become one of the two production and distribution centres of Honda automobiles in Europe. As stated by Honda.com.tr (2009), the company provides services on the grounds of 3-function distribution concept which consists of 42 distributors, services and spare parts throughout Turkey.
3. Research Objective and Questions
Identifying, how has global economic crisis affected operations of foreign car manufacturers in Turkey is the ultimate objective of this study. In doing this Honda Turkiye is chosen to examine as a case to study. Therefore, following questions are set to be answered;
What marketing strategies applied by Honda Turkiye in order to survive in the economic crisis?
What operational changes have been undertaken by the company in order to lower costs as well as stay competitive?
What strategic options that Honda Turkiye considers for the future?
What needs to be improved in Honda Turkiye to increase the competitiveness?
4. Literature Review
4. 1. Strategy
The "strategy" word comes from a mix of "army" and "to lead" concepts, which are from the early Athenian strategy understanding. De Wit and Meyer (2004) stated that the strategy description is given in relation to strategic actions and decision-making processes in modern companies. The content of strategic management is in relation to executive preferences and practices whose aim is to identify the company success. According to Robbins et al. (2005), the basic management roles, which are planning, arranging, carrying out and monitoring, need to be included in terms of strategic management.
The definition of strategic management can be given as determination and conducting of the objectives of a company by means of alignment of the capacity of a company with its requirement in its field (Dessler, 2001).
4. 2. Economic Recession
The term "recession" stands for the model of the shrinking economy at the times of a narrowing within the corporate cycle. There have been 10 recession periods in the United States since the World War II and the latest of these recession periods were observed from September 1990 to March 1991 and from January 2001 to November 2001. There have to be two or more sequential shrinking periods of three-months in the Gross National Product (GNP). The economy of the United States narrowed up to 2.6% in terms of real gross domestic product in the latest recession period, which lasted for 11 months. Pearce and Michael (2006) added decreased consumer expenditure and corporate investments to the narrowed economy in the latest recession period.
As the consumer expenditure decreases, available resources decrease in the periods of recession. This occurs in a sequence of factors, which depend on and affect each other. The consumers spend less, the amount of money lent by institutions decreases, and the competition in the market increases accordingly, and as a result, the resources present for corporations decrease to a great extent. The affects of this condition is firstly seen in consumers' attitudes. They spend less as their income decreases; they act more conscious in their buying behaviour and they start to pay more attention to the prices.
They prefer not to buy everything they want, they cancel or postpone their buying decisions as a result of their worries about money and their savings. Similar to the consumers, corporations tend to spend less; they prefer to decrease or postpone new investments with the aim of saving liquid assets. Pearce and Michael (2006) stated that corporate customers are likely to become less dependable as their buying behaviour is likely to change in accordance with new business conditions during recession periods. The profit margins decrease in parallel with the changes in the economy, which are given above. According to Perry et al. (1993), the cost efficiency in manufacturing decreases. The competition in the market increases as the companies decrease their prices and provide better services to the customers with the aim of increasing their cash inflows. However, while some companies act like that, others have to cut their prices as a result of their rivals' behaviour. Domowitz et al. (1987) stated that the profit margins reduce as a result of more intense competitive environment in the market, decrease in prices, and shrinking cost efficiency in manufacturing. Pearce and Michael (2006) added that this situation gets worse as a result of international companies' behaviour during global recession periods.
Consumer behaviour affects the banks accordingly. Banks tend to save their corporate loans and lend less with the aim of improving the value of their loan portfolios during recession periods. As a result, some companies, whose financial configuration is not sufficient, cannot borrow loans from the banks in recession periods when they need the loans more; and this leads to more bankruptcy. The sales decrease, the profit margins reduce and available loans shrink during recession periods; and this results in an important reduction in available resources for the companies, as stated by Pearce and Michael (2006). Economic crisis have an influence on corporations in many aspects, just like individual consumers.
Several corporations have to put an end to their operations, and as a result of a decrease in the consumer demand for products and services, many corporations need to have lower manufacturing levels accordingly. Besides, prices in the raw material sector, production costs for companies, and the prices for the purchase of end-products also increase. All these factors have negative effects on the competitiveness of the corporations within the market. Zehir and Savi (2004) stated that the corporations have to decrease their salary expenditures by discharging their employees; and this ends up with several problems to be handled by the management team.
There are many other problems besides those mentioned above. The management team sometimes has to put off or cancel their investments. Corporations take essential steps in the period of adaptation to new conditions in the economy in order to keep up with the changes, just like the individual consumers, as stated by Koksal and Ozgul (2007).
4. 3. Strategies of Car Manufacturers in Crisis
The sales strategies used for selling commercial vehicles and passenger cars are explained in Kuang-Jung's study (2000). The topic of the study is the adopted retail institutional strategy. This strategy is handled in four concepts by Kuang-Jung (2000): a) wheel of retailing; b) retail accordion; c) dialectic process, and d) adopted behaviour model.
According to Kuang-Jung (2000), the first concept "wheel of retailing" is mostly used for discounts on older products; whereas the second concept "retail accordion" is mostly used for target marketing and having various locations. The third concept "dialectic process" is fundamentally used for selling of high quality products at high prices, while "adopted behaviour model" concept is for determination of customer needs by means of working on customer behaviour.
Another issue dealt with in the study is sales force management; it was handled in terms of showroom display and a good blend of sales environment within the showroom. Establishing a business around vital and fruitful subdivisions is recommended. In order to establish and improve relationships with the customers, follow-up calls are regarded as fundamental. Kuang-Jung (2000) expressed that with the aim of selling automobiles, advertising on the television and making personal contact with friends are seen as the most useful methods.
There are many factors that affect consumers' preferences for automobiles. According to Kuang-Jung (2000), some of these factors are basic transportation, prestige, having the most sophisticated technology, good mileage, safety, and comfort.
The influences on customers' buying decision are also affected by the purpose of the customers, whether they need a car for business, for general needs, or for household use. The customers who need a car for household and general use choose both inexpensive and durable quality of cars. But the cars needed for business use are generally more expensive. Kuang-Jung (2000) stated that the purchasing capacity of consumers does not have anything common with this understanding; difference of the car brands is not related to the income of the buyers.
Some other factors are expressed by Kuang-Jung (2000), which have an influence on consumers' decision-making processes. These factors are given as price, product features, showroom visit and collecting information and hearing comments from friends using the car or in contact with the company.
The car dealers need to meet their customers' needs and expectations, and it is important for the dealers to maintain customer patronage and loyalty. According to Kuang-Jung (2000), if the dealers are able to meet the demands of their customers, they will get less complaint from their customers.
As stated by Gatignon and Xuereb (1997), there are three fundamental strategic firm orientations that play vital role in the success or failure of new products, which are customer, competitive, and technological orientations. Kuang-Jung (2000) described the customer orientation as the sufficient understanding of the firm's target buyers with the aim of establishing high value constantly.
Customer interests are at the centre of customer orientation. The definition of competitor orientation can be given as being able to identify, analyse and respond to competitor's actions, and also the will to carry out these duties. Kuang-Jung (2000) added the identification and construction of advantages in the competition field through quality or certain features that help the company to last and operate for a long time.
According to technological orientation concept, innovative firms adapt themselves to new technologies for improving the quality of their products, and they are fundamentally inclined to R&D. The company can use new technological developments and their own technical knowledge in order to meet their customers' needs by the help of a new technical solution. According to Kuang-Jung (2000), it is accepted in the marketing strategy literature that the strategic orientation of a market-driven company proves the performance of the company.
Kuang-Jung (2000) stated that the companies put the customer at the centre; and thus customer orientation covers technological and competitive orientation. The company needs to improve its technological background and its place in the competition system in the industry.
Adopting a pro-social movement strategy and utilising it successfully leads to a better market share (Osterhus, 1997). The communication strategies can be used for the customers of business organisations (Warren, 1992). Many communication types are used by business organisations in order to develop relations with their customers. Kuang-Jung (2000) stated that the communication needs to be comprehensive and utilise several medium types wholly.
According to Kuang-Jung (2000), target customers should get accurate information on the products and services provided by the customers and the policies that they adopt, such as employment, customer care or environmental issues. If the companies provide consistent and well-planned promotional campaigns, they can reduce and even eliminate customers' suspicions about the product performance of the company. If the customers get familiar with the product or the brand, they would prefer it more frequently.
As stated by Kuang-Jung (2000), representing the corporate image to the public is regarded to be important in the car industry. The companies in the car industry pay attention to being prestigious or dependable, and they may establish a link between automobiles and their characteristics.
Customer oriented market strategies play a significant role in the success of the companies within the automobile market. They need to adopt such strategies in order to be a leader in a competitive market. According to Howard (1996), there is a possibility of a relation among quality, firm performance and customer satisfaction; and customer satisfaction leads to customer loyalty; and also economic returns is related to customer satisfaction.
If customer satisfaction is maintained, cash flows to the company increases accordingly. Kuang-Jung (2000) stated that customer satisfaction and loyalty directly lead to an increase in the revenue; thus the resources for this purpose need to be regarded as an investment, not expenditure.
This study has been carried out with the aim of explaining the affects of the global economic crisis on the operations of the foreign car manufacturers in Turkey; thus a phenomenological approach is needed in order to meet this aim. Phenomenology can be described as a science of phenomena that is a perceived or a concrete fact; and it is related to the comprehension of the participant's behaviour from its own point of view, as stated by Collis and Hussey (2003). In this study, case study approach is adopted among the phenomenology methodologies.
Case study approach is related to descriptive or exploratory research frequently. Exploratory case study approach will be adopted in this study. Sekaran (2003) expressed that if the information about the condition is not sufficient or available, and if related or similar issues are not known, exploratory study is adopted. Exploratory approach will be adopted in this study as the economic recession is a new phenomenon, what will happen after the recession and the conditions of the post-recession period is unpredictable and cannot be observed beforehand.
Lincoln and Guba (1985) stated that in order to get a better understanding of the experiences of the individuals and not to get stuck with generalisations, qualitative methods will be preferred. Moreover, qualitative methods form the basis for the phenomenological paradigm. These methods offer a better understanding of human behaviour and they better explain the attitudes, thus they are helpful in this respect for the users. Qualitative methods will be adopted in this research with the aim of understanding the actions of the Honda Turkiye in the economic recession period.
Primary and secondary data will be used in this research, and the libraries will be utilised fundamentally for gathering secondary data. And interview method will be used for gathering primary data. According to Wisker (2001), interviewing could be useful for gathering detailed information because the subjects participated in this research can give contextual information about both themselves and the study topic. As stated by Easterby-Smith et al. (1991), he unstructured interview method will be adopted for this study. Unstructured interview method should be used when;
The basis of the participant's opinions and beliefs on a certain matter should be understood.
The participant's world should be known in order to get a better understanding of his or her responds independently or collaboratively.
There is an ambiguity in the systematic logic of a situation.
The subject matter has a confidential feature to a great extent or it is commercial sensitive.
The participant tends to give false answers and deceive the interviewer.
The objective of this study necessitates to understand the strategies of Honda Turkiye in coping the economic recession. The researcher aims to conduct three in depth face to face interviews. One with the marketing director of the company, on with the director of operations and one with the outside expert to evaluate the strategies applied by the company. Interviews will be conducted at the offices of the interviewees and appointments will be taken by the researcher's family member, who used to work in the company. Interview results will be analysed in narrative style in which the unnecessary data or information will not be presented in the paper.
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De Wit, B. and Meyer, R. (2004) Strategy: Process, Content, Context (3rd Ed.), London: Thomson
Kuang-Jung, C. (2000) "Sales Strategies of Car Dealers During Currency Crisis in the Philippines", Asia Pacific Journal of Marketing and Logistics, Vol. 12, No. 4, pp. 22-40
Mariampolski, H. (2001) Qualitative Market Research: A Comprehensive Guide, London: Sage Publications
Reeves, M. and Deimler, M. S. (2009) "Strategies for winning in the current and post-recession environment", Strategy & Leadership, Vol. 37, No. 6, pp. 10-17
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