Corporate Strategies of Japanese Automaker in Europe: Case of Honda
Success in the auto industry depends in part upon the ability of automakers to build a superior product that functions efficiently and economically. Traditionally Japanese automakers have been associated with this success and efficiency in the world of auto manufacturing. Honda, one well-known competitor, is particularly well-known for its drive to set itself apart from other automakers in corporate strategy and in the fight to design quality products.
Auto Manufacturing Overview: Spotlight Honda
Studies of Japanese automaker strategies suggest that the success of Japanese car sales and corporate strategies in times of old can be attributed in part to the quality, workmanship and low operating costs of Japanese vehicles (Dardis & Soberon-Ferrer, 1994; Chapman, et. al, 1995). Japanese automakers have long been known for producing quality and highly desired vehicles. Honda is the seventh largest auto maker (Dardis & Soberon-Ferrer, 1994; Taylor, 2002).
They have successfully expanded into many markets including the U.S. market, where the Japanese automaker realizes an astounding 56% of its profits. Recent moves to expand into Europe however, have been considered bad, even labeled as failure. Though a reputable company, the Japanese automaker which established corporate headquarters for European affairs in the UK has been slow to adopt consumer preferences in Europe, including a desire for more diesel models (Shameen & Mustuko, 2001). Honda lags far behind other automakers such as Toyota and GM in this respect.
Honda has traditionally been characterized as an independent thinking risk taking corporation with a will and mind of its own; it often fails to follow the patterns established by other automakers, as is evidenced by its operations in Europe (Shameen & Mustuko, 2001; Dardis & Soberon-Ferrer, 1994; Taylor, 2002).
Need for More Descriptive and Exploratory Studies
Researchers in the past have focused their attentions heavily on product design, manufacturing processes and Japanese strategic management (Lincoln, 1992; Dardis & Soberon-Ferrer, 1994; Hanssens & Johansson, 1991; Chapman et. al, 1995). Other studies have concentrated on Japanese expansion into the U.S. market, and many have touched upon Japanese expansion in the European market, but only to the extent that they have acknowledged Japan's failure in the European market thus far, rather than explore the reasons for this supposed 'failure' (Dardis & Soberon-Ferrer, 1994; Chapman et. al, 1995).
There are a limited number of studies that have specifically examined the purchase and production of imported automobiles in Europe, and of those that do exist are dated (Dardis & Soberon-Ferrer, 1994). Additionally, virtually no studies have compared Honda's corporate strategy in Europe directly with other automakers strategies in Europe in an effort to ascertain whether or not changes are required to ensure the future profitability of the company in the European market. A majority of studies that have been conducted related to individual companies have focused on giants including Toyota and GM rather than Honda. This study will aim to fill a void in the research with regard to these studies by providing a case study analysis of Honda and Japanese corporate strategy in the European market specifically.
The aim of this study is to investigate the corporate strategies of Honda corporation, a self proclaimed 'independent thinker' in the world of auto making in order to determine whether or not strategic change is necessary in order to enhance productivity and sales in the European market in the future.
Specifically, studies show that though Honda corporation is the seventh largest automaker, and is doing quite well in foreign markets such as the U.S. (where sales account for 56% of profits) efforts to expand into Europe have failed at best. Honda seems to be falling behind its competitors in the European industry. Much research has focused on defining Japanese strategies and defining success, but few studies have actually examined Honda Corporation's future in Europe and evaluated whether or not specific changes are necessary to promote increased sales and profits in this market.
Goals of Study
The intent of this study will be to provide a descriptive exploratory case examination of Japanese automaker Honda with regard to operations in Europe. Primarily the researcher will attempt to engage in exploratory and descriptive analysis that results in conclusive evidence and theoretical conjecture regarding the potential future success of Honda Corporation and similar auto manufacturers, based on evidence reaped from the study.
In conjunction with this, the researcher will set out to answer the following questions:
What is Honda's corporate strategy in Europe?
Will the strategy employed by Honda in the past work in the present specifically in Europe?
What changes are required if any in corporate strategy to ensure continual success for Honda corporation?
How does Honda's strategy compare with that of other auto manufacturers?
Can Honda survive with a majority of business coming from U.S. alone?
Specifically, this study will employ use of descriptive analysis and a survey questionnaire to gather consumer opinions regarding Honda Corporation and to ascertain whether or not the company is likely to succeed or not in the European market in the near future. A literature review will be conducted examining previous research with regard to Japanese corporate strategy, in order to assess its past effectiveness. In addition the literature review will attempt to compare automaker Honda with several other primary auto manufacturers including Toyoda and GM.
From the literature gathered and the results of the survey questions, the researcher will formulate a hypothesis related to Honda's corporate strategy in Europe. The hypothesis will involve examination of the potential future success of Honda in Europe, and will make assumptions as to whether the company will fail or succeed in its endeavors based on close examination of historical practices, economic trends and consumer preferences.
During the examination the researcher intends to uncover the following:
Identify the major corporate strategies used by Honda Corporation, specifically those or any that are targeted toward the European market
Identify major corporate strategies used by competitors that have been successful in the same market
Analyze and synthesize the best practices or strategies used among all auto manufacturers
Develop a prediction and theory regarding Honda's future success in the European market
Develop and identify key principles for building a successful paradigm in corporate strategy with regard to auto manufacturing within the European market
These goals will be addressed through the exploratory process which will require analyzing and synthesizing material reaped from the literature review and surveys/interviews with consumers and auto manufacturers. The literature review will provide an overview of the literature currently available on corporate auto manufacturing strategies, emphasizing those used by Japanese auto manufacturers, particularly Honda. The purpose of the review will be to help identify past strategies that have been used successfully and unsuccessfully. The focus will then move to analysis, and the results of the survey will be combined with the results of the survey to provide concrete conclusions.
PRELIMINARY LITERATURE REVIEW
The intent of the literature review will be to provide a broad overview of auto manufacturing strategies used in varying markets, with eventual concentration on the European market. Any literature directly related to Honda in particular will be examined.
Background: Japanese Auto Manufacturing
According to one research study of the Japanese auto manufacturing process the following is true: "the most significant development in the automobile industry has been the growth and global expansion of Japanese auto producers" (Chapman et. al, 1995: p1). Automakers in Japan have grown into "transnational giants" competing in the U.S. And in European firms; statistics reveal that in the 20-year time span from 1970 to 1990 alone Japanese production of automobiles tripled (Chapman et. al, 1995, p.1; Law, 1990, p.16).
Japan carries with it a reputation of creating "trouble-free vehicles" that are smaller, fuel efficient and economical (Chapman, et. al, 1995). During the union of the European market in 1993, Japanese auto producers established many facilities in Europe, though most were confined to the U.K. during that time (Chapman, et. al, 1995). In the mid 1990s Honda and Isuzu both entered into joint ventures with Rover and GM (Jones and North, 1991; Chapman et. al, 1995).
The Japanese production system has been characterized as flexible, focusing on "lean production" which is why many automakers are interested in gleaning as much information as possible about Japanese strategic management practices (Womack, et. al, 1990). The Japanese production system does not focus on traditional mass production methods, but rather uses a "system of flexible production that is numerically controlled, reprogrammable machines capable of adapting movements to many different tasks" (Chapman et. al, 1995). In addition, worker in Japan are managed and trained in a flexible manner, learning to perform many different jobs instead of specializing in simply one (Chapman et. al, 1995). Production is usually organized in such a manner that 'just in time' delivery or assembly is available, which 'reduces the need for large inventories and floor space to accommodate it" (Chapman, et. al, 1995, p. 2).
Japanese Strategic System
Among the benefits of the Japanese strategic system that have…
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