Reconciling Managerial Dichotomies At Honda Motors Commerce Essay Example

the organization (Johnson, Scholes and Whittington, 2005). Individual units within each geography or product/service category must have their own plans that align with the top-level strategy (Johnson, Scholes and Whittington, 2005). The overall organizational strategy is known as corporate level strategy, while the various individual business units at geographic or product/service levels are referred to as business level strategy.

Honda, a company that operates in multiple locations and offers various products such as cars, engines, power products, aircraft, and financial services, needs to develop a hierarchical strategy to effectively manage its operations. This strategy will be divided into different components to address the specific business strategies for each location and product/service area. These corporate strategies typically include aspects such as geographic coverage, product diversity, resource allocation, acquisitions, and mergers (Johnson, Scholes and Whittington, 2005). The corporate level strategy defines the scale and scope of the organization (Cousins, Lamming, Lawson and Squire 2008).

To exemplify this, let's consider Honda, which has successfully expanded its car business into aircraft manufacturing with its subsidiary Honda Jet (hypertext transfer protocol: //hondajet.honda.com/). This decision and strategy to diversify into a completely new industry was made at the corporate level based on a revolutionary and innovative design. The business level strategy involves specific considerations for each area, whether it is geographical or product/service-wise. This includes analyzing local market conditions, assessing internal and external factors, conducting competitive analysis, and identifying customer needs (Cousins, Lamming, Lawson and Squire 2008; Johnson, Scholes and Whittington, 2005).The concern degree scheme must align with the overall corporate degree scheme in order to achieve the overall objectives. This includes factors such as pricing structure, discounts, purchasing decisions, etc. at

the unit level (Floyd, 1997).

The main theme of the case study being analyzed here is accommodating dualities. It has been argued in the case study that Honda has been able to resist traditional concepts of management style practiced in Western countries, such as the either-or strategy or more commonly known as the trade-off strategy. While Honda's product core competence is evident from the literature and widely respected, the process-related core competence is not convincing from the case study.

According to Hitt et.al. (2009), Honda has utilized its capabilities to bring engineers, designers, and even frontline sales and marketing teams together to develop innovative product solutions for the automotive market with its less polluting CVCC engine and fuel-efficient VTEC engines. Keillor (2007) states that Honda's success in competency comes from their passion to be world's best designers and manufacturers of internal combustion engines. Barnes (2001) quotes Hamel and Prahalad to say that Honda successfully entered the business segments of lawn movers and outboard motors from its traditional automotive segments due to its core competence in engines and powertrains.Honda has successfully demonstrated its core competence in developing new products. However, it is important to consider the issues associated with core competence. Merely developing new technologies may not necessarily make a company a global leader in any industry. There have been numerous examples of innovative products failing due to lack of public demand, being ahead of their time, or inadequate marketing to the target market.

According to Barnes (2001), Honda's success in the automotive industry goes beyond product-related core competence. It also involves process-related competencies in dealer management, including training and implementing operational procedures for sales, planning, and service management.

These competency factors have allowed Honda to expand into new business areas effectively.

Barnes (2001) points out that the product design cycle, as illustrated in the case study by De Wit and Meyer (2004), is itself a process competence. This competence is crucial for Honda to design and develop new and innovative technologies before its competitors. The fact that Honda delivers new advanced products to the market ahead of its competition suggests that their development process plays a significant role.Again, according to Prahalad and Hammel (1990), nucleus competence refers to the combination of individual technologies and production skills that support a company's various product lines. Therefore, it is evident that product and process core competences are closely related.

Global Car Industry Consolidation and Mergers:

Amalgamations, acquisitions, and joint ventures are considered as means for companies to expand their presence in new markets or product segments across different locations. Essentially, these forms of expansion involve foreign presence (Campbell, Stonehouse, and Houston, 2002).

These methods offer the advantage of reducing risks by gaining access to local knowledge or expertise. Additionally, the acquired company can bring in new knowledge and synergies that are valuable for operating in new market conditions. However, there are also associated disadvantages such as the possibility of accumulating debt due to the leveraged nature of acquisitions and increased risk of bankruptcy.

These factors will be further analyzed below.

Debt and Bankruptcy Risk

The risk of bankruptcy arises from the use of borrowed funds during company acquisitions and mergers. In order to pay off existing shareholders, the acquiring company often relies on taking on debt at interest rates that may become unsustainable if expected values or returns are not realized after the

acquisitions. In such cases, the entire organization may face financial failure due to the accumulated debt.
A notable example of this is General Motors in the automotive industry. From 2000 until the recession hit in 2008, GM pursued a series of acquisitions. It acquired stakes or majority shares in numerous European and Asian companies, either to enter new markets or to increase market share of these companies. These investments were financed through debt, and initially they yielded positive results, with GM obtaining significant market share and becoming the world's largest car manufacturer. However, during the recession, these investments became unsustainable and GM was unable to generate enough financial returns to service its debt. As a result, GM had to sell off assets and seek financial assistance from the US government to avoid bankruptcy.Honda ended its relationship with Rover in a timely manner to prevent the failing company's problems from affecting Honda. It was BMW that suffered from the acquisition of Rover, as BMW's efficiency measures were unable to fix the ongoing issues with Rover's poor quality and inefficiencies. This led to BMW having to write off $3 billion. The potential for product synergies in mergers and acquisitions is important, as it allows for the combined strengths of both companies to create more value than they would individually. These synergies can take various forms, such as operational, financial, research and development, or product/service improvements. The consolidation of operating expenses, restructuring of outsourcing, and expansion into new markets are examples of ways to capitalize on product synergies.According to Spedding and Rose (200), true synergism occurs when the acquiring company recognizes the core capabilities of the company being acquired,

and both companies have a clear understanding of the integration goals and optimized combination of assets, whether they be intellectual, physical, or informational. A recent example of achieving product synergies is Tata Motors' acquisition of Jaguar and Land Rover. Through this acquisition, Tata Motors aimed to enter the UK market and gain access to the extensive technical and research and development capabilities of both companies.

Accessing new technologies and entering emerging markets is also a goal of acquisitions or mergers. In the case of Tata Motors acquiring Jaguar and Land Rover, new technologies are now available to Tata Motors through the research and development activities of both companies over the past 50 years. Tata Motors aimed to enter the UK market and gain access to the vast technical and research and development capabilities of both companies (Bhabatosh, 2009). Honda also entered the emerging market in India in 1984 through a joint venture with the Hero Group.Honda formed a joint understanding with SIEL Limited to manufacture cars in India, joining other companies like Suzuki and Kawasaki who have also made joint ventures in emerging markets. Honda's partnership with the hero group has strengthened its position in India. Many car companies in Asia have followed a strategy of forming joint ventures with local companies to leverage their market knowledge and drive sales and marketing activities. This approach was necessary due to government regulations requiring foreign companies to have majority partnerships with Indian counterparts. However, recent relaxations in these regulations have allowed companies to acquire their partners and consolidate their operations for increased profits.

Corporate Social Responsibility

According to Kotler and Lee (2005), corporate social responsibility refers to

a commitment by businesses to enhance community well-being through discretionary business practices and the allocation of corporate resources. The expansion of the free market economy worldwide, driven by capitalist countries and multinational corporations for their own gain, is widely accepted as beneficial across all societal classes. This belief has been reinforced as communist and Marxist economic systems in many countries have collapsed, while others have transitioned or remained stagnant. As transnational companies and major corporations strive to enter new markets and generate profits, pressure on developing and third world countries to relax their regulations is increasing. However, it is important to acknowledge that many of these corporations engage in activities that exploit people, natural resources, and encourage corruption for the sake of profit (Bacchus and Crowther, 2004). Notable examples include the collapses of Enron and World.com, the utilization of low-wage labor by Nike in Indonesia, and various instances of corruption in arms trafficking within BE Aerospace.The activities mentioned above have damaged the reputations of individuals in major corporations and administrations, as well as the economies they represent. As a result, many major corporations are now engaging in social causes alongside their profit-building activities. This practice is commonly known as corporate social responsibility (CSR). According to Hopkins (2007), CSR is a systematic approach that considers both internal and external stakeholders. By implementing CSR activities, organizations can enhance their relationships with employees, shareholders, suppliers, and others. This leads to improved company reputation through the fostering of trust, dependability, quality, consistency, credibility, relationships, and transparency. It also boosts employee morale, innovation, creativity, and better risk management. Financially, companies can benefit from improved performance by gaining a better understanding

from stakeholders such as employees and shareholders. Additionally, implementing CSR initiatives can improve the financial foundation of companies as it facilitates better access to credit.With the improved financial performance within the balance sheet, companies are able to implement their projects more effectively than their competitors who have not implemented CSR initiatives. The case study examines the contrasting management styles between Japan and the West, specifically within the Honda organization. It is argued that in traditional Western management systems, certain trade-offs are necessary. These trade-offs involve choosing between two opposing positions, each with its own merits and drawbacks. For example, a company's management structure can be either individualistic or leftist, with each system having its advantages. The choice of management structure depends on the needs and specific characteristics of each organization. However, by adopting one management style, the organization neglects the benefits that could have been gained from the other style. Traditionally in the West, it is believed that firm decisions need to be made and these decisions should be viewed objectively by external parties.Therefore, when a company chooses to adopt a collective approach to decision-making in construction, it disregards the individual's roles and instead shares responsibility as a group. This has numerous benefits, including teamwork and a sense of camaraderie. However, there are disadvantages to this leftist approach as well. Shared responsibility can lead to complacency within management, and there are certain tasks that individuals specializing in specific areas can accomplish better than a group. The case study argues that Honda implemented both approaches simultaneously, not just in one instance but also in multiple cases, such as product development and design. This concept is referred

to as "accommodating dualities" in the case study. It suggests that Honda has tried to incorporate the positive aspects of opposing management methods into their structure. A prime example of this is their innovative development of a low-emission engine, where the traditional dichotomy of reducing one pollutant at the expense of increasing another was reconciled. The traditional or Western approach would have been to choose one end of the spectrum and proceed accordingly, prioritizing the reduction of one pollutant while accepting an increase in the other.Honda engineers developed engines that emit fewer pollutants, enabling the company to accommodate both environmental concerns and performance requirements. Similarly, Honda balanced individuality and Bolshevism by implementing a top-down decision-making process in the boardroom, while also fostering individualistic approaches in product development and design to improve decision-making and productivity. While some argue that Honda's approach is superior to the traditional trade-off approach, it is often not possible to simultaneously prioritize both ends of the spectrum in many situations. In my opinion, many companies strive to adopt positive qualities from opposing systems, but their success rates vary. Honda's strategy has proven effective, and it is likely that other Western companies will adopt similar approaches. The new matrix management style is an example of blending positive aspects from different systems, but it may not work well for all companies. In conclusion, this report examines the global strategies used by Honda and other car companies in their management practices. The first part discusses business-level and corporate-level strategies, emphasizing the importance of aligning business-level strategies with overall corporate objectives.The central theme of the case study is the accommodation of dualities. It is argued that

Honda has been able to resist traditional management concepts practiced in western countries, such as either/or strategy or trade-off strategy. While Honda's product core competence is well-established and highly respected, their process-related core competence is not convincing enough. It has been established that both must be combined to achieve core competency in the administration.

The case study also discusses how mergers and acquisitions can help organizations expand their presence in new markets and product segments. The mergers and acquisitions in the automotive industry are explored, along with the risks involved, product synergies, and new market potentials. Although there are hazards associated with these activities, there are also opportunities for achieving better product synergies and accessing wider markets.

Finally, the case study addresses corporate social responsibility (CSR) and highlights the financial and non-financial benefits that can be achieved through its implementation.The text discusses the Honda and western styles of management and concludes that few companies are able to achieve the benefits of both approaches. It suggests that in some cases, certain compromises in management are necessary.