Strategic Management; shaping the long-run performance of the business
Strategic management can be described as set of executive action and conclusions that helps in shaping the long-run performance of the business. It is inclusive of environmental scanning, both internal and external environment, and strategy formulation, implementation of strategies, assessment and control processes. Henceforth, strategic management highlights on the evaluation and monitoring of the external threats and prospects in the background of organization’s inner potencies and weaknesses (Karami, 2007).
1. Strategic Corporate Development History
Honda, being the largest producer in automobile industry, was founded in the year 1948 by Soicharo Honda as a motorbike company but it remained self-determining since then. The company identifies that engines are their core competency and built their organization around its core competency (Frank, 2003). Now, Honda is involved in the production of light trucks, motorcycle, automobiles, lawn movers, generators and personal watercraft; these all are built keeping in mind the core competency to produce the high quality goods and services. In contrast to other companies like Toyota or General Motors, Honda has not adopted any strategic alliances and is not involved in any merger process, it is moving ahead independently. It also provides customer-in- house financing schemes (Nelson, 1998).
Their present field informs that Honda covers more than 400 associates and auxiliaries that generate their universal network leaded by Takeo Fukui as chief executive and noticeably traced a total of US$94.24 billion proceeds in 2007 whilst making use of 16000 populous and even more. With apparitions of worth formation, ‘globalization’, and pledge for the outlook, they put forward an extensive diverse range of products arraying from minute general-purpose engines and scooters to forte sports automobiles. Today, their dependability in providing goods of uppermost superiority that engenders new standards and sane price constructs them dazzling in terms of universal customer contentment. Even the reasonable price and high quality seems to be the two characteristics that also hand round as their gung ho periphery.
Honda has taken the steps towards the long term strategic approaches, producing the very first hybrid electric cars and is ready to continue with the leading of automobile industry. The company is also set to research for the hydrogen powered cars. Traditionally, Honda aims to expand the facilities devoid of building of any excess capacity. Any requirement for the additional capacity in Honda, calls for the building of a new plant. Nonetheless, company is ahead for bringing innovative products then its competitors and aligns new factories ahead of the schedule time.
Evolution of Strategic Management in Honda
Initially it was believed that strategies in organization cannot be implemented successfully if the company expands itself, environment modifies considerably and if there is any increase in the layers of managers. Four phases were formed:
Phase 1 – it consists of the planning on basic financial matter and is aimed to meet better control on the operation process by meeting the requirement of the budget.
Phase 2 – in this planning is based on the forecasting and seeks to meet effective growth by predicting the future circumstances.
Phase 3 – it focuses on the strategic planning or the planning based on the external operations. It aims to meet more responsiveness in the market and entails all the competitive advantage by thinking strategically.
Phase 4 – this phase deals with the strategic management and aims to build core competencies in the organization and planning for the successful future by managing the resources.
Phase 4 is suggested to bring the evolution of strategic management in the Honda including the implementation of the strategies, evaluation and control whilst focusing on the principles of Phase 3.
Concepts of strategic management
The concepts of strategic management are in relation to the corporate sector and its each part is concerned with the goals and objectives of the business (Hitt, 2009). The concepts of strategic management are even distinguished into various segments:
Objectives of a Business
Plan of Attaining Business Goals
Evaluating the entire Process
Objectives of a Business
It is indispensable for each manager to be acquainted with in advance the situation which it wants to lead in the future within a given time period. Devising specific goals or objectives is central for the progress of every organization.
Several factors are to be considered before devising the goals, these includes client base of the company, supervision of the available resources, creation of the company and so on.
After the formulation of goals, the management or the administrator is prepared to make a plan to accomplish the goals which are being formulated. This plan of action is known to be as business strategy (Aaeker, 2001). The main objective of this plan is to utilize the resources judiciously to offer maximum advantage for the functioning of the business.
Evaluating the business Process
After the framing of the definite business strategy or plans and its application in the association, the evaluation and assessment of the process is required. This is necessary so to know the specific changes that are needed to alter in the procedures or operations that are being applied by the business plans (Combs, 2000). If the changes are not taking place appropriately or are not satisfactory, then the modifications can be done in accordance with the present situation.
Imperative Aspects Related to Strategic Management Concepts
Many of the attributes are there that have given importance as they are central to the concepts of strategic management. In actual, no businesses procedures cannot be similar and minute differences are there that distinguishes the business processes. Thus, objectives and goals are different for every organization. Although, the strategies or plans formulated for the long-term and short term purpose is different and have to be put into practice individually. This is the reason why every goal and objective of the business is different. Identification of the opportunities and risks is another important element that is needed to be considered for the study of strategic management concepts. If every business identifies the external opportunities correctly, then they have great chances to go ahead in the market. The owner or the entrepreneur of the organization should be responsive to the potencies and flaws of the association and of the personal skills of employees that are working in their organization. The better use of the external opportunities or sudden changes in the industry or market proves to be the major source for the identification of strategic management concepts.
Strategies adopted by Honda
It involves the corporative decision making process and only few people have clear cut individual responsibilities.
This entails the development of innovative technologies for the efficient utilization of the fuel and available resources. Also, Honda has developed new models so as to meet the demands of customers which keep on changing basically in design, environmental responsibility and fuel efficiency. Formulation of better strategies for the operation process like Kaizen, JIT etc. and creation of new and innovative markets assumes greater possibilities of higher risk.
HONDA: Reconciling Dichotomies
Operation management is purposely a change procedure. It includes a sequence of alteration activities and tasks for changing inputs into outputs that are ready to be sold in the market.
The right-the-first principle suggests that any result of the process should be error free so as the further processes which are based on the predecessor tasks are not burdened with errors and there need not to be made any corrections to it or waiting for the reworks that can cause the delay of production works as well as increase the operational costs and the opportunity costs of sales that are earned from the customers which are not willing to wait an switch to other brands. Thus the aim centers on the operational efficiency which can be entailed by not wasting time and the resources, thereby increasing productivity. It also permit the organization to control the inventory accurately thus saving on costs and money.
If this principle is performed at repetitive speed in all the tasks, then the final outcome so achieved will be error free. According to this strategy, focus is on the process related capabilities.
The strategy of build in quality focuses on the effectiveness and efficiency of the recital result of associate alteration actions and tasks. The actions of efficiency are customer-defined standard of performance. This can be achieved by the break down of the total standards of performance
This is achieved by breaking down the aggregate standards of performance measures as expected (if not demanded) by customers to more granular metrics in each sub activity/task so that value-adding can be realized at every step of the way to give a bigger accrued value by the time the operations process reaches its end. This not only saves costs, but may exceed (not merely meet) the customers’ expectations. In this sense, build-in quality emphasizes more on product-related capabilities that are ultimately measured by the customers.
2. Current Strategic Situation
Strategic management has now developed as a primary value that assists Honda in operating successfully in such a dynamic and complex environment. It is required that the organization be less beaurocrative and have to be flexible so as to stand in the complex environment.
Honda is required to develop strategic flexibility which means the capability to shift from one strategy to another. Strategic flexibility stresses on a long term commitment for developing and nurturing of the available resources. It even demands that the organization has to become a culture organization which is skilled at engendering, taking and transferring of acquaintance as well as it needs to demand the alterations of the actions to outline new technology and knowledge. Employees of the organization are required to take part in the process of strategic management, assists the managers in scanning of the environment or they can even suggest the ideas for changing or altering the strategies so that organization should be able to take advantage of the external potencies. Strategic management in actual deals with the future aspects of the organization and is inclusive of three main factors:
Unusual strategic decisions – these do not any models to follow.
Consequential strategic decisions – these have committed themselves to sizeable resources and stipulate a great amount of assurance.
Directive strategic decisions- these set standards for dwindling the verdicts and future proceedings in the intact strategic process.
The more typical approaches for the decision making process are planning, adaptive and entrepreneurial. However, planning mode is said to be the more rational approach and thus helps in better decision making process.
Eight steps are proposed by Honda to be followed in the decision making process while keeping in mind the environment:
1. Evaluation of present performance outcomes
2. Estimation of the Corporate Governance
3. Inspection of the peripheral environment
4. Examination of strategic factors
5. Generating, examining and choosing the best substitute strategy
6. Execution of the selected strategies
7. Finally, the assessment of the applicated strategies
Environmental scanning and analysis of Honda Company
Environmental scanning demands the observing, evaluating, and broadcasting of the information that is being collated by the external and internal environment of Honda so as to keep customers within the organization. It can be termed as a tool that corporation utilizes for ensuring long-term health (Ahmed, 2008).
Environmental scanning by Honda requires the identification of environmental variables that can manipulate the future decisions of the organization. These forces are inclusive of political, economic, social and technological factors.
Scanning of social environment requires evaluation various possible strategic factors. The social factors are numerous when Honda came to realize that every country has its own set of unique societal features which seems to be different from the respective country.
Honda categorized the overall social environment into four different sectors and focuses on the scanning of each sector in significance to corporate sector.
Scanning of the task environment
Honda’s scanning of the task environment involves all the relevant factors. This kind of analysis is presented in the form of individual repots that are being written by various people of the organization. All the reports are then summarized and is submitted to the upper level of hierarchy i.e., top managers for the effective decision making process. If there is any report regarding the development of a new product, then the top management will send memos to all the people of the organization so that they can look for and can report to the management in respective product areas.
Porter’s 5 Forces analysis of Honda
Threats of New Entrants
In the 1970s and the 1980s the threats of new entrants in major western economies was fairly low, with established automotive industries. The “Big Three” namely: Ford, GM and Chrysler, in the economy of North America were thought to be safe. But this contemplation was proved wrong with the establishment of the first ever plant of the Honda Motor Co. in Ohio. The market share of the North American companies began to undermine with the emergence of those foreign competitors possessing better operational management skills, capital and the required technologies (Porter, 1980). This was proved true to the rest of the world with the risky stepping of Honda in the European and British markets.
Power of Suppliers
The supply business of the automobile industry holds many firms and is quite fragmented all-throughout numerous regions of whole of the world. In order to purchase a majority of their products, ample of the suppliers rely solely on a single or two automobile manufacturers. Just in the off chance if the automobile companies came up to a decision of switching the supplier, it could prove to be extremely devastating to the business of the previous supplier (Porter, 1987). As a result of which, no wonders, that the suppliers cleave to very petite supremacy because the manufactures tend to order in volume and hence are enormously inclined to the requirements and the demands of the automakers
Power of Buyers
Went unchallenged, historically, the bargaining powers of the automobile manufacturers. Ample of the customers initiated looking forth to other alternatives with that of better and stylish designs, better fuel efficiency and better of technology because the national automobile manufacturers could no longer woo them and hence they became disenchanted. The foreign competitors endowed the displeased customers with the above mentioned attributes (Porter, 1985). On the very other hand, although being very sensitive towards price, the customers, individually, do not possess much of the supremacy of buying, the sole reason being that they never buy cars in big bulky volumes.
Availability of Substitutes
Other means of transportation need to be considered as substitutes or alternatives, besides the posing threat of someone purchasing a different automobile. The likelihood of the masses choosing the bus, airplane or the train as the mode of reaching to their destinations also needs to be looked at. People are more prone to looking forward to alternative modes of transportation if in case the cost of operating a vehicle is at a gigantic hike. The decision of buying a vehicle of the consumer is highly affected by the prices of the fuels. Though trucks and sport utility vehicle have a tendency of guzzling more gas as and when compared to those light-weight trucks and sedans, they are the ones that provide with a privileged profitable margin. Money, time, personal convenience and preference as well in the industry of auto travel are the things that should be considered when it comes to determining the availability of alternative automobiles or substitutes. The trend that penetrates in the present era is towards more environmentally friendly, fuel efficient and safe cars. The cars with these attributes should be feasible to the pockets of the globally increasing middle-classes.
Because of the high cost of competition prevailing in the automobile industry, the industries which are highly competitive generally gross petite returns. Auto industry is regarded as an oligopoly – an industry which assists in nullifying the effects of the competition based on price. The automakers comprehend that competition based on price does not necessarily lead to an increase in the marketplace’s size. Historically, though the automakers have tried hard to avert such competition but recently the competition has rather been more intensified.
In order to fend off their foreign competitors, the automakers established more traditionally like the American, British and the European are progressively acquiring or merging more with their foreign counterparts from Korea (Daewoo and GM) and Japan (Renault and Nissan). Nevertheless, the automakers that are still emerging are also undertaking the opposite tasks such as India (Jaguar and Land Rover from Ford acquired by the Tata Enterprises) and China (Volvo from Ford and Geely).
When there is a constant change in market, the strategies to be formed should be flexible enough to meet the changes effectively. With the use of IT, the key element is the planning process.
3. Strategic Direction For The Future
In accordance of Japanese culture, the leadership style used by the Honda Company is effectual particularly for the achievement of the greater levels of employee’s satisfaction and his commitment, delegation and motivation so as they can contribute to the process of decision making and bring in new ideas. Chief recommendation to Honda is that they can apply American style of leadership process so that they can enhance the encouragement of collative decision making process. The leaders of Honda are required to be effectual in their respective fields. The harmony among the groups is being identified as one of the main requirement of the organization. All the employees of Honda are bonded with human relations so that they can be familiar with the lifestyles of their subordinates and have proper understanding of their acts, thereby giving lead to the formation of leadership techniques. Honda has all the important or vital tools for recognizing the situation or problem areas in the workplace.
Being the largest producer or manufacturer of motorbikes and cars, Honda has maintained their high quality products in context to the beliefs set by Soichiro Honda. The beliefs of Honda revolve around four basic provisions which are:
(1) Great amount of potential for the organization and for its suppliers,
(2) The transmitting of resources that is required for the completion of the processes.
(3) Commitment for the support of group effort and teamwork,
(4) Unstoppable attention is being featured in Honda. All the processes and strategies of Honda show the performances of the employees and business in relation to the strategies for advertising and marketing.
Honda, is different from all the other automobile companies as it has set its own beliefs and values which directs the organization to act at all levels in the company. With this, the accomplishment of objectives is achievable and thus creating brand name.
The better way to provide cost effectiveness is to put the available resources in such a manner that they are judiciously used while fulfilling the requirements of the job at the same time. Event he rising amounts of capital adds to the problems of the company. With the increase in prices, the company is required to go with the gush. Therefore, the chain of demand and supply is affecting to the intact organization. As long as Honda sticks on the accessible resources, the chances of steadiness of finance are sure. In relation to the human personnel needs, Honda is required to work with multi-talented personnel who are capable of performing tasks of all the types in different situations and have abilities to grab the external opportunities. The potencies of growth and development are affluent. Besides, the cost of unlock communication, collaboration and optimistic attitude is replicated. Thus, Honda should encourage the cost management or its administration in the organization. Also, the sharing of resources including raw materials and semi finished goods can cause the reduction in cost which is no less than to the merged cost.
Even the commitment of Honda to the teamwork and cooperation has enabled the company to find wider prospects that can lead the company to prolific economics undertaking and attainment of human ideas. Even the strong communication and networking with the suppliers can lead to the continual growth of the branches and dealers. The plans for expansion by Honda tend to be engulfed with risks and uncertainties but are one of the prominent strategies (Cokins, 2009). All these are considered most favorable because of the economies of scale, scope and cost efficiencies but the greater threat is posed by the investment part. With the development of subsidiaries, joint plants and regional offices, the paths for grants for exports and licensing have opened up.
The unchangeable consideration to the plans of the company is still effective in many ways. If we look at the environmental friendliness aspect of Honda, then the company has worked hard for enhancing the environment and contributes a lot to the safety purpose of its products. This opens up the paths for the brand recognition and loyalty. Even, Honda is constantly keep on doing the research and development work and checks out the emerging trends that can bring in the innovation in the company. Also, the future planning is done in advance for setting up of the plants and regarding products.
Besides this the company is able to address the problems regarding the satisfaction of the customers and environment. The advantages for preserving the international viewpoint generate wider scope for the activities like sales and operational, it even provides brand name, awareness and ability to complete globally. But the main problems that can be affective are the stiff competition, unstable economy, diverse locations and functions. But if the company focuses on the appropriate functioning of the functions of administrators, on the strategies and dedication of the company for supplying products of high quality that too on the reasonable price with 100 percent guarantee of customer satisfaction, then it is likely to be successful in the future.
Focusing on the reduction in cost, it need not seems to be the problem for the Honda.
As it is analytical in their vital viewpoint, Honda has all the compulsory resources or means to produce high quality products yet cost proficient and effectual. Even in some of the cases cost diminution is severely put into practice when there are financial and economic difficulties, changing trends and production behavior. In building and maintaining the relationship with suppliers, Honda and its organization without difficulty can pass on to the existing culture of supply chain management that is being utilized by their Company all the way through the long years of procedures. To retain good relationship with the suppliers, acquisition and integration are tends to be the most potential methods. With the increase in knowledge of the conditions of subordinates and peers can bring into the potency for the Honda. Training and maintenance is termed to be the main elements for the organization.
Quality improvement is the basic element for Honda (Bauer, 2006). In totality, Honda not only produces quality products but also renders the safe, affordable and environment sensitive products. Improvement can be seen as the research based activities of Honda. The research and innovation tasks are needed not to be carried in all the subsidiary offices. Honda’s strategy for intensifying the R&D efforts does not indicates that it will going to personalize the models in every country but it can be viewed as a strategy that centers on the maximization of the resources.
The improvement in technology is however linked to the environment friendly aspect of the brand (Miller, 2001). Innovations are also implemented in the research, distribution and manufacturing mobile. The enhanced integration of local associates into international spectrum will hasten up the improvement of technology. A global strategy to be implemented so as to create the value added parts and components as well as create brand loyalty to the consumers. Besides, safety is termed to be the essential ingredient in “Safety for Everyone” scheme.
Thus, strategic management is the demeanor of summarizing, implementing and assessing decision making process that enables Honda to accomplish its long term goals and objectives (Saloner, 2001). It is a procedure that specifies the vision, mission, objectives or goals, development of plans and policies in relevance to projects and programs, which are specifically designed to accomplish these objectives and then apportioning the resources to put into practice the policies and programs. To evaluate the overall performance of the Honda Company, a balanced scorecard can be used.
Strategic management in Honda is set at the managerial level which is under the setting of goals and over the tactics. It generally provides direction to the Honda and suggests it the ways that it should lead for the growth purpose. It even assists the Honda in examining and evaluating the opportunities and threats posed by the external environment in context with the internal strengths and weakness of the organization. In the end, recommendations are given so that Honda can lead to a better outlook in terms of efficiency, resources, planning, operations etc.