EXECUTIVE SUMMARY:

Being founded in 1948 in Japan by Soichiro Honda, the organization has

come a long way from motorcycle manufacturer at the early stages to
manufacturing high power electronic items and technologically sound
automobiles, trucks etc. in a short duration after its foundation, Honda
motors became the leading automobile industry, standing not only in the
top market players in its native market but leaving behind the regional
competitors and competing at the global level with automobile giants like
GM, Ford, Mercedes Benz and Chrysler etc. Being the first amongst the
Japanese manufacturing companies to expand its operations globally,
Honda faced numerous challenges in making its products acceptable by
the European and American customers who were used to big, fuel
consuming expensive cars. Honda played it beautifully by presenting low
cost, high quality less fuel consumption vehicles, and now with majority of
its sales volume generating outside the native region and approximately
half of the manufacturing facilities outside Japan, the basic principle
remains the same i.e. technologically advanced low cost vehicles. With
more than 400 subsidiaries and sister concern around the world, Honda
has managed the famous Japanese management theory of JIT (just in
time), also the management systems and decision making processes
applied by the organization has brought quite a stir in the management
theorists of the west, who found it imperative to study these and make
comparison with those applied in their region. Though, Honda has also
shifted from time to time to some of the western management concepts
but with some modification, the organization still adheres to the basic
Japanese management systems of giving human relationships most
importance and doing collective decision making and sharing
responsibilities down the line. In this case study, it was studied how Honda
motors handles various managerial dichotomies in organizational
hierarchy, new product development, JIT system & supply chain, product
strategies like designing and positioning, and planning & intraorganizational and inter-organizational relationships. It has emerged by
this study that Honda has managed and reconciled these dichotomies
successfully though some failures were also faced but the overall
performance of the organization can be termed successful.

INTRODUCTION
The todays highly advanced and technologically sound global automobile
industry has evolved successfuly from a humble origin of wooden craft in
1890s to engine based vehicles mass production in 1910s and the highly
popularized lean production methods of 1970s (Gopal, 2006). The industry
has made speedy advancement to stand amongst the worlds top
industries in terms of value and the leading industry in terms of its R&D
expenditures (Gopal, 2006). Due to such rapid growth of this business
sector Peter Drucker (1946) termed the world automobile indutsry the
industry of industries. Today, the global automobile industry has growth
plans keeping view the low cost, high quality, less fuel consumption

engines, innovation and modern techniques. Though the current

reccession has marred the growth rate of the industry like other sectors,
the global wutomobile industry is fighting hard to retain its profitability
and higher shareholder value.
The global industry was initially dominated by the US and European
manufacturers, but the post world war II Japan started to challenge the big
giants of the sector in the world market and penetrated the purely
European and American automobile market successfully during 1970s and
1980s (Mair, 1999). The Japanese manufacturers like Toyota, Nissan and
Honda shcoked their western competitors in producing low cost vehicles
to enter thier segments. Honda was most innovative, challenging and
strategically sound an\mongst all its Japaenes counterparts and not only
successfully captured the western markets but also succeeded in opening
its manufacturing sites both in the Europe and USA and achieved
economies of scale. Today, a large portion of its sales volume
(approximately 77%) is generated from these foreign markets with 46% of
its manufacturing facilities present off-shore (Mair 1997). The analysis that
is going to be presented in this report is how Honda succeeded to achieve
its present market positiong and how it tackled various obstacles in terms
of management or strategical policies & procedures.
Table 1: Worlds top car manufacturers (2008)
Group

U Pr
n od
i uct
t ion

General Motors

9
0
0
0

89
26

Toyota

9
0
0
0

80
83

Ford

7
0
0
0

62
68

Volkswagen Group

56

0
0
0

85

Honda

4
0
0
0

36
70

PSA

4
0
0
0

33
57

Nissan

4
0
0
0

32
23

Chrysler

3
0
0
0

25
45

3
0
Source:
0
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0

24
92

Renault
Honda has built its procedure of strategic management on a very special
thinking i.e. to reconcile the dichotomies or to resolve the issues
successfully, which means that Honda chooses to take advantage of all
the dichotomies or in other words, the contradictions of strategic concepts
such as individualism-collectivism, vertical-horizontal structure, vertical
integration-market relationship, sequential-simultaneous development,
cost-differentiation strategy and load more. Reconciliation refers to an
approach in which the two poles are somehow made in harmony with each
other. Hondas approach to reconciling dichotomies is an exemplary
innovation in management. Honda has contributed significantly in

teaching todays managers the best ways to resolve some of the hardest
management dilemmas. It is also a great reference for management
students all around the world (Mair, 1997).
Keywords:
a) Global corporate Strategy: Andrews K (1971) has defined the corporate
strategy as the pattern of minor objectives, purposes or goals and
essential policies or plans for achieving those goals, stated in such a way
as to define what business is company in or is to be in and the kind of
company it is or is it to be. In todays global village, organizations develop
strategies to cater internal as well as off-shore customers to achieve the
competitive advantage.
b) Managerial dichotomies: When one thing is divided in two or more
different parts or opposite opinions, we said that a dichotomy occurs1.
When we talk about managerial dichotomies, it means clash of different
strategic concepts that are contradictory to each other in a business run.
c) Japanese vs. Western style of management: in view of Wickham
(2009), the comparison of these two thinking of management could well
be defined as To do the Right Things or do Things Right? The What and
the How. At one hand, if Japanese management style focuses more on
human relations and team working, the western style is more inclined
towards hierarchy i.e. it is more top-down style which gives CEOs more
importance and rewards whereas, Japanese emphasize more on advanced
manufacturing technologies, just in time theory and TQM (total quality
management), their western counterparts believe on trade-offs between
cost & quality and individualism & group etc (Wickham, 2009).
d) Corporate Governance: It defines the relationship between all the
stakeholders in a company. This includes the shareholders, directors, and
management of a company, as defined by the corporate charter, bylaws,
formal policy and rule of law (Investopedia). It is also defined as the set
of processes, customs, policies, laws, and institutions affecting

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the way a corporation (or company) is directed, administered or

controlled.(Barrons Accounting dictionary).
e) Corporate Ethics: It is the study and evaluation of the decision making
by the businesses according to moral concepts and judgments. Ethical
questions range from practical, narrowly defined issues, such as a

companys obligation to be honest with its customers, to broader social

and philosophical questions, such as a companys responsibility to
preserve the environment and protect employee rights (Paluszek, 2005).
f) Corporate Social Responsibility: When an organization recognizes what
are its corporate social responsibilities, it imposes a self regulation upon
itself and its management system and the business model. This regulation
enables the organization to monitor business practices to ensure that
these practices and activities are in alignment with the law, ethical
standards and international laws (Wood, 1991).
Question 1:
a) Planning vs. Learning
For the success of any business, it is imperative that the organizations
resolve some of the dichotomies that run in the business. Honda used to
introduce their products by considering the geographical differences and
cultural variations and it yielded them good results in their business as
well. The dichotomy of whether an organization is a planning organization
or learning one is very difficult to resolve (De Wit, B. and Meyer, R., 2004).
Honda has handled and reconciled this dichotomy successfully; in view of
Mintzberg (1987) Honda is a company which epitomized in a very
exemplary way that its a crafted organization rather than a planned
one. Pascal (1984) is also of the opinion that the mangers at Honda got
the firsthand reaction on their automobiles by driving their own products
and learnt after making simplest of the mistakes till they struck the right
formula while entering the US motorcycle market. During the whole
course of this entrance, they learned and made it a part of their system.
Mintzberg (1989) has hailed Honda by declaring it as a company with
some common sense, not overly-rational, but which learns from different
markets and do not try to impose distant corporate views. It can be
extracted from the case that the under discussion organization is learning
one but with strategies planned with such detail and accuracy that the
organizational system first learn then adjust itself to the changes in
business environment easily. Honda case reveals the necessity of
emergent learning alongside deliberate planning Mair (1999), also
Mintzberg (1991) is of the opinion that though both planning and learning
are necessary , the leaning should come first, he has also argued that the
rationale thinking on part of Honda would not have helped the
organization sell its motorcycle in USA. Honda is strategically active
organization with a well thought of and planned strategic system that is
why it has been able to resolve this dichotomy successfully exchanging
both planning and learning with each other.
b) Positioning vs. Developing internal resources
It is very difficult for an organization to choose between deciding the
positioning strategies of its product or to develop its internal resources in
such a way that would automatically position its products better in minds
of customers, Honda also faced this difficult scenario and got through it

successfully again, though failures are inevitable part of this paradox, but
the organization got through them as well. Many reasons could be cited to
determine the rationale behind this success, Hamel and Prahalad (1994)
are of the opinion that this was not to any significant part of its
management of the dealers network, rather on the difference of driving
the Honda experiences over its competitors. They have also stated that
Hondas ability to produce some of the worlds best engines and power
trains does provide customers with high valued benefits. A large portion
of companys global sales comes from the conservative and simple brand
like Civic and Accord, which is in contrast to the general opinion about
Honda being the producer of mainly the sporty and technically innovative
cars, these sales figures show how customers perceive its products, i.e. as
a combination of high quality vehicles with low prices and this concept is
based on Hondas core capability of product and process designs. Also,
the R&D of Honda is stronger than its competitors mostly the Americans,
as it introduces innovative products more frequently in the market (Hamel
and Prahalad,1994), it presented Honda NSX was presented as a
replacement of the Ferrari but at a fraction of the cost. It conducts
research ad is able to identify customers and presented products which
they wanted to have but didnt know it themselves (Hamel and Prahalad,
1994). Yet today, it is making huge investments in strengthening its core
capability of technological advancements, low pollution power sources
e.g. electric or solar power and less fuel consuming engines, so that a
potential breakthrough in the market position could be achieved. Thus,
Honda is integrating both these functioning successfully in attaining the
competitive advantage in the global automobile industry.
c) Product-related core competencies vs. Process-related core
capabilities
The technological edge that Honda enjoys over its competitors enables
the organization to produce its well known internal combustion engines
which in a way reduces pollution and the latest technology they
introduced in their product is CVCC. Though the new models introduced by
Honda are less in comparison to its competitor GM & Ford, the quality of
these new products helps it to gain the competitive advantage. This
innovative technology is then also used in other product lines as well
(motorcycles, automobiles and other power products). The technology
developed for the power trains and engines is also transferred to other
products such as cars, tractors, generators and marine engines (Mair,
1999).
The manufacturing concerns depend heavily on their process related core
competencies, which represent the quantity in contrast to the product
related core competency which represents quality. Honda has acquired
both competencies and is successfully utilizing them simultaneously by
producing at a large scale and specializing in low polluted and less fuel
consumption auto and power engines. As the organization believes on the
right-first time principle, the outcome is the right one without with errors
(Mair, 1999), enabling the organization to save time which would

otherwise spend in resolving the errors if there are any in its products.
Errors increase the operational cost and lead time for product availability,
which would force shift in customers preference from their brand to other.
Honda has developed another competency, i.e. built-in-quality, gained
through various sub transformational tasks in operations and determines
its effectiveness via observing customer satisfaction. Thus, it proves that
Honda has created an amalgam of both dichotomies by incorporating its
core competencies both the products and process successfully. Whereas,
Western manufacturers view their businesses and operations only with the
perspective of the manufacturer, Honda views them both from
manufacturers and customers point of view.
Question 2: Japanese management model vs. Western management
model
Western organizations are more inclined to the managerial class in their
enterprises, Japanese on the other hand, prefer the worker. As Hofstede
(1993) has stated that, the Japanese are controlled by their peers rather
than by their managers. Western organizations believe in large lot mass
production in manufacturing helping in reducing the cost and time, with
few options in the hand of the customers, Japanese enterprises contrarily
are based on the flexibility of production in which more importance is
given to innovation (Mair, 1999).
The recruitment in the Japanese firms are mainly made from the school
levels on the basis of the general characteristics of the incumbent, they
also believe in long-term relations with their employees rather than a
short-term relation as are usually seen in the western organizations which
break-off in the downslide periods. Also the western firms view the
technical skills of the new entrant most important (Hofstede, 1993).
Practices for the progress in the career of the employees also differ in
both styles, Japanese give seniority most importance while western
organizations view merit as the sole criteria. Same is the case with
remunerations paid in both systems, where Japanese prefer seniority while
considering wages the western organizations give efficiency most
importance. Human resources are the most important fixed assets in the
Japanese organizations which in their counterparts is considered to be a
semi variable asset. Japanese prefer working in teams and have open
offices while in the western organizations offices are filled with cubicles
and employees work individually.
Group decision making is the charter of the Japanese organizations while
western ones believe in the individualism with employees stick to the
tasks given to them in western organization in contrast to the more
independence given to workers in Japan. In Honda factories, they are
performing free flow of assembly line system where employees are taking
decision to send the product to the next level (Mair, 1997).
Trade-offs between product quality, cost and delivery, with high quality
costing more and vice versa are common thinking in the western style,

Japanese model, on the other hand, follows Right-First-Time in which all

the errors are removed during production. Priority is given to built-inquality which in turn reduces production costs and also reduces product
delivery time. Western enterprises practice centralized management
where all decisions taken by the top management and implemented by
the other staff in lower hierarchy, Japanese on the other hand, practice
decentralized management which is characterized by the round table
discussions. Thus western organizational structure is vertical and Japanese
is horizontal (Mair, 1997).
There are no doubts in the effectiveness of both the management styles,
both are successful in their own capacity and also have their own
shortcomings as well. An edge is obtained by the Japanese style due to
better maintenance of and participation of employees in the decision
making processes, customers could choose from various choices so
quality is given the priority. Due to specific hierarchical system of
management in Japanese organizations, the responsibilities are shared
which brings out the best from all the employees.
Question 3: Corporate governance vs. Corporate social responsibility
Nowadays, CSR (corporate social responsibility) has consumed all focus of
the managers in the world, an old thinking given new dimensions in the
management function each organization is expected to exhibit some
ethical behavior and moral management. Recently, the organizations
have made it imperative to practice corporate social responsibility
(Carroll, 2000). Automobile industry is the largest industry of the world
after construction and grocery industries on capital and investment ratios
with topping the list on technological perspective. Though Flores (20010
agrees that the main objective of this industry is to produce more cars
with profitability, he is of the opinion that the profit should be made but
not on the expense of ignoring responsibilities towards the community.
Every organization makes CSR an imperative part of its corporate strategy
as they have certain obligations towards the society from which they are
generating their profit and of which they themselves are the part.
Demands of organizational stakeholders are also met via CSR, through
which the customers make notice of such organizations as a good one.
CSR has a large horizon with social, economical and environmental
aspects as its integral part. However most of the organizations try to avoid
social and environmental aspects and cope up with economical aspects
only (Aguilera, 2008). Honda strictly shows its commitment towards
society by taking initiatives regarding environmental issues. Honda Civic,
a new model of Honda was introduced with clear air test using Muskie Law
and it was to follow the American environment regulations 2.
Crane, Matten and Laura (2007) stated that CSR should not be
considered as an ethical add on to the existing business, but it should be
considered as a part and parcel of corporate strategy itself. Adoption of
CSR activities eventually leads to prosperous company and society. It

helps organization building good name for them in the minds of

customers, good relationship with employees, clients and other
stakeholders which ultimately improves the organizational performance
and profitability. If CSR is not being followed, the organizational business
is affected as the firms good name & will are destroyed in the customers
minds. Thus,
2

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organizations need to practice CSR, as it is vital in building a good rapport

with the customers and increase business. By the introduction of
environmental friendly engines with low pollution helped Honda to
increase their revenue. It created a good name among its consumers as
well.
Apart from the financial aspects, non-financial aspects of an organization
are also get affected by CSR, like selection and recruitment process of
organization, employee motivation and employee retention and the
innovation. Also, the environmental factors and ethical factors force the
organization to come up with innovative products and these innovative
products increase companys overall profits as well and assist them to
sustain in market for a long term by making better quality cars for their
customers, it ultimately increases the reputation of the company. CSR
enables the organization to get rid of risks and errors from their
production and operations by realizing the upcoming issues. CSR are thus
result in giving more competitive advantage and profit by marketing
positions. As automobile companies are going greener and environmental
free, cost of production may reduce and it will improve their performance
in the market (Hill and Knowlton, 2006) Toyota Prius is a new model which
is a hybrid car which runs using electricity and gas. Even though it is not
fuel effective, it is sold in great numbers as they are eco friendly. Honda
too introduced Hybrid cars and it attracted more customers as well. Thus
it shows that companies who are following CSR can generate great profit.
Toyota showed their CSR when one of their hybrid car models faced brake
failure in the market and the same thing happens to Ferrari in the year
2010 as one of their model exploded. Honda was chosen as the top CSR
Company in UK during the year 20063.
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CONCLUSION:
It is evident from the study of this case that the managerial dichotomies in
the organizations are well handled by our focused organization i.e. Honda.
Despite some failures in the course of these applications, the overall
performance of Honda is satisfactory and can be called successful,
creating an example to follow for other organizations on how to perform
specially in the period of downslides. Honda handles these dichotomies
with precision, applying a web-like organizational structure i.e. the
combination of both vertical and horizontal systems of hierarchy levels in

the management, implying teamwork and individualism simultaneously

and developing both formal and informal relationships within the
organization and also outside with other business organizations or the
stakeholders. As the managerial dichotomies that exist at the business
and corporate levels and are more complex and multilayered as compared
to those present at the operational levels, they should be handled with
great care and planning and Honda has been very successful in achieving
this target. This handling of these dichotomies has attracted global
management and strategic theorists to shift their focus from studying the
strategies adopted by the western organizations to those adopted by their
Japanese counterparts mainly Honda. Western management thinking of
trade-offs between various vital functions
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option=com_content&task=view&id=672
Like product quality & cost, cost & product delivery etc are challenged by
Honda by developing build in quality process. The firm is also focusing
in manufacturing high quality technological cars to attract customers who
go for the quality with low cost rather than other aspects. Honda has also
left behind its competitors in the field of product development, with
continuously bringing in new products with less fuel consumption engines,
a core competency of the organization, power engines not only for heavy
vehicles but for product lines of motorcycles and cars as well. The
introduction of new products in the market are also made at sufficient
intervals and with great care, planning and R&D, when the consumers are
desperately start looking for more advanced and sophisticated products /
models. The organization avoids re-launching its existing brand with only
some face-lifts done to the previous models.

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