In a competitive business environment such as the automotive industry, established auto manufacturers such as Toyota, Honda, Nissan and Daimler Benz must incorporate proper and best suited strategies and decisions in order to make sure that the customers' requirements are met perfectly.
In such a competitive and ever changing atmosphere, where a customer is king of the market and to cater to the needs and demands of these customers is the foremost target and aim of any good managed company or organization, it becomes very essential for the Company to research deeply about the present and the probable needs of the customers in future to ensure a safe position and existence in the market.
This report about the analysis of a case study on Honda Automakers will discuss three main topics related to the corporate strategies found in the automobile industry and for which Honda is taken as an exemplary company.
The first part will evaluate the operations at Honda in relation to the three key Dichotomies that are planning vs. Learning, Market positioning vs. Developing internal Resources and Product-related Core Competencies vs. Process-related Core Capabilities. The second part will discuss about the differences in Japanese Management Model in comparison to the Western Management Model with references to the Honda Case study. Last part will deal with the impact of 'corporate governance' and 'corporate social responsibility (CSR)' on the global financial and non-financial performance results of Honda Motors.
Planning vs. Learning
Many analysts and critics have studied the concepts of Managerial Dichotomies. There are many to be discussed like rational vs. incremental or planning vs. learning etc. experts have argued over the fact that companies cannot follow both the poles of a dichotomy that either a company can be planning oriented or learning oriented, it cant be both planning and learning based at same time (Andrew, 1999).
Honda has reconciled these dichotomies and has formed it own dichotomy's strategies. By the term reconciliation, it means to find a way which is in between the two poles of a dichotomy and a company can follow that tactic by making both the poles compatible and complementing to each other (Andrew, 1999).
Honda has reconciled the dichotomy of Planning vs. Learning in such a way that it has benefitted the company at vast. At many points in production and designing of the engines, Honda has first learn from the market about the lacking in the engine designs, reverse engineered it and then planned for the new design incorporating the changes to cover the lack points in the former engine design. In one of its engines of CVCC (compound vortex control combustion), they went against the normal trends in the market which were in the favour of not to bring any changes in the engine design to control the pollutants emission (Ebrahimi and Holford, 2005).
Positioning vs. Developing internal resources
Honda has always played such a role in the market that theories written by many theorists get proved to be wrong in case of Honda. Reconciling the dichotomy of Positioning in the market in comparison to the development of the resources within in the company's boundaries is yet another example of Honda's strategic dichotomy reconciliation. Honda has positioned its vehicles throughout the world in a well planned way, with the support of facilities in Europe, North America and many other locations becoming the first of Japanese firms to produce in such locations (Andrew, 1999).
The internal resources of Honda motors have always been on the innovative side, as written by a lot of experts and critics Honda with their reconciling strategy of dichotomy has enabled them to become innovative and competitive at the same time. The use of robots in Car manufacturing took a boom in beginning of 1990's Honda was first of its type to take initiative and launch and implement such a robotic engineering throughout their facilities in the world. These humanoid Robots were used to increase their versatility in car manufacturing in relation to time management. These robots (ASIMO) were used for welding purposes which were far better in quality than manual work. Thus increasing and strengthening their internal operations (Official Honda Website, 2010).
Product-Related Core Competencies vs. Process-Related Core Capabilities
Japanese cars in comparison to American cars always got an edge because they were priced lower than American cars. Honda followed the same strategy. Their cars were well built in quality and the prices they charged for them were also affordable by the lot. Honda had been very smart in this aspect as they reverse engineered the American cars, found the processes and engineering involved to make those cars successful and then tried to make the same technology based cars in cheaper cost. Thus it became one of the core competencies of Honda Motors which gave them an edge and even Americans began to buy Japanese cars instead of those made by their home country themselves. Along with being Cheaper than other made cars, Honda has continuously upgraded their cars like recently they have launched their new V-6 model of Honda accord along with a new navigation system, the new hybrid model as well as a well simulated technology based Word Champion Formula 1 (F1) racing cars (Gregory, 2004).
Honda not only remained strong in positioning their product in the market well in fact they combines this product core competency with their process operations and made their production stronger as well. The general concept about the cost, quality and time that if a product is produced at low cost, its quality is bound to be low as well whereas high quality products are highly costly as well as take longer time to be produced. Once again Honda proved it wrong in their case. Honda came up with Right in Time principle which suggested that the product should be produced at low cost, as Honda was already following yet the quality should not be compromised. Honda implemented the concept of Just in Time as well to reconcile these dichotomies. They produced at low cost with good quality and in lesser time with the help of Just in time Strategy whereas westerns follow and prefer the style of just in case strategy but Honda wherever has its facilities have followed the just in time strategy (Andrew, 1999).
Japanese Management Model Compared to Western Management Model
The conventional style of managements in Japan commonly known as Japanese Management model or style is found in organization or firms with distinct Japanese characteristics of management that are highly decentralized with a flatter or a horizontal structure of firm. Honda being a Japanese firm follows both the western and the Japanese style of management thus again forming an example of Dichotomy between western and Japanese management styles. Honda follows what it finds good for the company (Andrew, 1999).
Honda has a decentralized structure in Japan based facilities and it stresses on the rewards and compensations for the employees. Honda has set another example where it follows a decentralized decision making and the rewards given to the employees are based on their merit and work quality rather than on the basis of seniority as normally expected in Japanese firms
The major differences in western Management Model and Japanese Management model which demarcate one from the other and hence firms are differentiated on these basis, some of these criteria and differences are discussed below.
The organization structure refers to the "who reports to whom" formation of command, control of span. Western management model supports a vertical structure of firms and organizations which shows that the west follows a centralized decision making procedures rather than a decentralized and horizontal structure like a Japanese firm is expected to have (Andrew, 1999).
Type of Duties
The Japanese firms divide the duties among their employees in a broader sense that is to say one person has to look after a broader aspect of operations whereas the western organizations which follow the western style of management goes for formalization and standardizations, they rather believe in specialized task divided among the employees not a complete aspect. This sometimes might create troubles for both the systems, no one can say which style is best appropriated in the situation, it is about what is suited when and whether the decision is correct in that time frame of not (Hofstede, 1993).
In western management model, employees are hired for their skills and work, if an organization feels the need of firing a particular person, they can and they should fire whereas in Japanese management style, it is believed that every one has their own capabilities and thus if hired once he/she should be for the life time until the employee himself/herself wishes to leave the organizations. This style is now been adapted in other countries too as it plays a psychological affect on the employees mindsets that they feel needed and valued by the organization and thus they work hard to prove the fact. This approach and strategy is found to work in lots of companies where the employee turnover was high and following this not only did they improve their work quality they were able to reduce their employee turnover as well. Honda follows the same approach by rewarding and appraising their employees and firing only in the cases where it is inevitable (Andrew, 1999).
Push vs. Pull system
The Japanese typical style of just in time production and inventory system has enabled them to customize the products according to the needs and demands of the customers. It was not originally introduced by Honda but yet it was first initiated by Japanese Firms so it becomes a part of Japanese management style where they deal with a pull system rather than a push system like western firms do, they produce in bulk and then push the inventory or stock in the market to be purchased (Andrew, 1999).
Standardization or Flexibility
Western organizations and manufacturing firms follow a standardised and formalized procedures of working, they believe in specialization in tasks and distribution of work accordingly. On the other hand Japanese firms do not show this much rigidity and follow an approach of flexibility according to the job type, time and situation. They believe that best done is important rather than who does what. This has its own pros and cons, this sometimes causes troubles as well as nothing is distributed before hand, decisions are to be taken on hand a lot. Honda therefore has to be very careful in their decision making and their strategies.
Individualism and Collectivism
Japan being a collectivist society prefers to work in teams and group because of the cultural orientation towards family and groups it is one of the fundamental characteristics of Japanese that they wish to be belonged to some group or team or a family and therefore same is seen in their firms as well. People work in a form of groups rather than work alone and be responsible for that like happens in western management followed firms. They prefer individualistic approach. Western firms therefore work on the principle of individualism as their culture suggests (Hofstede, 1993).
There is another difference in the western management model and the Japanese management model that is related to the over all operations style of the business. Japanese firms produce in the small lots whereas western management following companies produce bigger and larger lots of products. Japanese firms believe in the quality products and thus produced less at one time. This difference is visible in the strategies they follow as well. Japanese follow just in time strategy whereas western companies follow just in case strategy.
There is no one best way to follow when it comes to running and operating a business therefore companies ten to blend in the characteristics belonging to different styles of management and find a mutually compatible way of following all the required policies and ways which are favourable to the company or a firm. Honda has therefore set an example for other firms that following one cultural rules and policies in a company not necessarily lead to success whereas if you manipulate the norms and values according to the best suited for the company it proves to be beneficial, at least for Honda it is (Honda official website).
Corporate Governance and Corporate Social Responsibility (CSR)
Honda motors, the world famous auto manufacturers, one of the Big three in Japan since its evolutions has worked on certain principles which has given this company a royal status in the automobile industry and market all around the world. With its facilities in more than 80 countries in this world Honda had always strived to produce better each time (Karmayog, 2008).
Honda with its stable quality in manufactured cars has also contributed to the community for its betterment with the help of establishing new plants and facilities thus creating job opportunities for the people in that location. It is researched and proved that people belonging to the emerging and developing areas and markets tend to rate the companies belonging to the automobile industry more in corporate social responsibility as compared to the businesses of other industries. The reason being that automobile industry provides a bigger platform and opportunities for new jobs. Honda throughout the world has been involved in different community services thus contributing to the Social responsibilities. Recently they set up a new community service project in a village of Delhi, India. These Corporate Social responsibility activities done in Delhi, India includes different projects like
Implanting hand pumps in under developed areas to provide clean and fresh water.
Constructing proper sewerage and drainage systems thus reducing the chances of illness among the people in nearby areas.
Constructing and renovating the primary schools and colleges.
And like wise a lot of such community services have been provided by Honda motors all around the world differing with the needs of the people on the locations (Karmayog, 2008).
(Corporate Governance Organization; Honda Motors, Honda official Forum)
Corporate Governance is a vast subject which deals with the policies, rules and regulations in the firm made for the harmony and for the sake of stakeholders directly involved in the organization. These policies and system governs the organization or any firm according to the values and needs of the directly involved stakeholders, in order to avoid the conflicts between them.
Honda has always contributed to the community and therefore Honda plays great importance in the welfare of the people involved in the stake of the company. To ensure that Honda makes sure that the ethical values are met properly and the highest possible standards and codes of laws are reached (Honda, official website).
Honda in order to maintain the stable laws and regulations in the organization has organized a complete Corporate Governance system which makes sure that these laws and policies are followed at all levels of operation is the business, not only at the management and top level but also among the first line supervisors in their daily working schedules (Honda, official website).
The principles that signifies the corporate governance system of Honda are
Compliance refers to the part of the Corporate Governance System which makes sure that the business operations are meeting all the necessary laws and regulations and thus the consumers and other stakeholders have maintained their trust on the company's management and operations (Honda, official website).
Honda has formed business ethics committee which takes care of all the issues related to the ethical laws and regulations. This committee meets 6 times in a year and is run and governed by the compliance and corporate officers. The ethical issues can be related to anything like female abuse, child labour or anything related to the labour relations (Honda, official website).
Honda has its own way of dealing and has a typical style of management with its reconciling Dichotomies which has set many examples in the market. Honda has therefore its own risk management systems. The top management has formulated a complete set of rules and policies which are to be followed when in times of crisis or troubles. Honda's top management is always vigilant as well through the process of research and forecasting. Their analysts propose before hand the controlling actions which they might need in the future thus preparing the Honda risk management team for any upcoming hurdles and crisis. This approach of Honda was imitated by a lot of other companies as well and it was then proved that Honda has a strong think tank and its innovations in strategies are responsible for its success in the automobile market (Honda, official website).
Financial Impact of Corporate Social Responsibility and Corporate Governance
The over all impact of corporate social responsibility on the company's finances is that all the stakeholders when satisfied and contented with the company's image and profile they seem to put more trust in the company and might invest more.
From a consumer's perspective, it is always proved by the marketers that consumers and general public tends to see such companies in a positive light who are engaged in the services for the community and work for the betterment of the societies which are under or less developed. People also encourage and incline towards to organizations that open and launch their facilities in new markets thus providing opportunities for new careers and jobs in turn increases the sales and revenues which shows a positive impact in the financial books of the company. Corporate Governance on the other hand id for the betterment of the individuals who run the business of the organizations, these policies and such systems create a bright future for the company because employees tend to think and feel important because of whom these systems are implemented in the organizations. This effect is same as the psychological impact on the consumers who think that organizations are working for their welfare. This creates a positive image in both employees as well as consumers favouring the over all business of the Company (Honda, official website).