Introduction

Strategy can be a controversial word, and the theories in strategic management can be misleading and not reflective of the real practical world in the competitive business environment. To different people, strategy carried different meanings, and to them, their own version of strategic management process and ideas are often assumed to be the best and true in the real world. However, this is simply not true, as what the many strategists perceive is based on their experiences, beliefs, mindset and knowledge – and can be nothing close to the reality. Their perception – is just a map; while the reality, is the territory. In the following section, interesting cases and discussion on Honda and how the company success stories and management thinking style is challenging the conventional strategic management thinking process in the Western literature are discussed. Readers may well be enlightened and recognize that what is often assumed to be true, may be wrong; or the best practices in the past, may no longer be relevant today, or in another part of the world.

Reconciling Dichotomies at Honda

Strategic thinking process is a complex, and often hotly debated area in the literature. In the west, several managerial dichotomies are implicitly assumed to be true, and the trade-off thinking is prevalent in the strategic management literature in the past. However, as we can see from the Honda success stories, it can be observed that the success of Honda is showing evidences that such trade-off thinking is nonetheless illusionary. This can be stunning to the vast researchers in the West, as the success stories of Honda are presenting a strong case to invalidate their theories. One simple example of trade-off thinking often assumed by Western literature in the past is the trade-off of quality versus cost – if you want to produce higher quality products, the cost will be higher. However, Honda is often said to successfully breakthrough such trade-off thinking and implement process and strategies to reconcile the dichotomies of quality and costs, in which quality products can be produced at a lower costs and thus enable the firm to achieve unique competitive advantages in the international automobile arena. In the following section, three sets of trade-off or ‘dichotomies’ often assumed by the Western strategic theorists and researchers to be true; but later were reconciled by Honda will be discussed.

Planning versus Learning

The paradox of planning and learning can be seen from the needs of an organization to be adaptive or to perform top-down planning strategies. Such a paradox separated the Western strategic management literature into two parts, namely the design and planning schools of thought, and the emergent or incrementalist approach. Under the planning approach, it is assumed that strategies can be planned upfront, with detailed analysis and research, before they are implemented. According to such line of philosophy, without planning, management is essentially plan to fail. In contrast, the incrementalist approach argued that strategies planned may be invalid, as the best strategy is to take action and try the new idea out in the marketplace. A good strategy is crafted, but not planned (Mintzberg et. al., 1998). Although both schools of thought have their points, the success stories portrayed by Honda indicate that the organization planned and learned their way to success.

In reconciling the two seemingly dichotomies in the real world, Japanese had been able to achieve manufacturing success through an overarching strategic plan that is executed in a committed manner with the willingness to experiment and feedback the results from the lower level employees in the organization (rather than just relying on the planning and guidance from the management). Specifically, the management may perform planning, and the entire organization learns their way to successes. It can be reasonably assumed that such an approach is a combination of both deliberate planning strategy as well as the learning and adaptive emergent strategy.

For example, Mintzberg et. al. (1998) provides the following example: ‘Honda’s managers made almost every conceivable mistake until the market finally hit them over the head with the right formula… The Honda managers on site in America, driving their products themselves (and thus inadvertently picking up market reaction), did only one thing right: they learned, firsthand… The Japanese used common sense, learning on the ground, whereas Western manager tend to be overly rational and dictate strategy of an organization from afar.’

Positioning versus Developing Internal Resources

In the West, both positioning and to develop internal resources are largely assumed to be different dichotomies. At one side, the company can choose to be good in marketing activities, and focus in positioning of the company brand name and products in the marketplace. Such a company yield great financial results by focusing on the customers. For theorists promoting such a perspective of strategic thinking, ‘customer is king’ is their core belief. From another end, there are theorists arguing that a firm should develop internal resources – and through the strong management and access to resources, a firm can achieve competitive advantages than the competitors who do not have the similar access to the necessary resources. From such a resources-based perspective, resources available are limited and crucial to the success of a firm. For example, by having the best human resources, the firm is set to great success as it is the talented workforce that is to bring in new customers, grow the company and to execute effective strategies to achieve superior profitability in the marketplace.

However, Honda does not adopt any of the one-sided theory and perception in implementing its strategies. However, the company focused on both – to become well-positioned in the marketplace while at the similar time build up strong internal resources and capabilities. To reconcile the dichotomies, Honda has been linking up the entire supply chain, and both the internal operational activities are designed to be consistent with the external marketing functions, so that both the once assumed trade-offs are mutually supportive and internally consistent. From the operational side, Honda had implemented concepts such as design for manufacture, linking product technology to marketing in terms of new product development, and to implement efficient inventory logistic, assembly and suppliers systems that will enhance the quality of the end products which will finally further enhance Honda brand name and positioning in the market place (Mair, 1999).

Product-related Core Competencies versus Process-related Core Capabilities

Under the product related core competencies approach, it is argued that companies can obtain competitive advantage as long as they can deliver products with superior quality, features or outstanding performance to the end users. The success of an organization is highly dependent on the success of each and every product line introduced by the company. For this, what a company should do is to develop technologies related to products offering to be able to manufacture superior products to the competitors. In contrast, under the perception of process-related core capabilities, it is argued that companies able to achieve competitive advantage due to the effective and efficient value chain in the company, which then enable the company to lower the costs and enhance the quality of the final products.

However, Honda had successfully enhanced its competitiveness due to its commitment to build deep capabilities as well as competencies. For example, as compared to Ford, Honda competency level in terms of the engines and power-trains was said to be substantially better due to the cumulative effect whereby the process of diffusing Honda’s competencies across products lines (Mair, 1998). Not only that, in order to its capabilities, Honda had turned to focus on effective dealer management program – to train and support the dealer network with operating approaches and techniques for merchandizing, selling, inventory planning, and even for services management. As argued by Mai (1998) convincingly, Honda exhibit abilities to combine and utilize both competencies and capabilities concepts. Specifically, from Honda perspective, both competencies and capabilities are complementary in nature – can be combined – as competencies is focusing more on technologies and production expertise, while capabilities is focusing more broadly on the value chain.

Western vs. Japanese Management Model

Management theories and ideas are vastly different between the East and the West. From the Honda case study, it is found that apparently Japanese management model is diametrically opposed to Western management model. This is not surprising, as both Japanese and Western world have distinctive different culture – leading to different thinking style.

According to cultural expert, Hofstede (1993) in his writing titled ‘Cultural constraints in management theories’, the difference between Japanese and the Western management style is outlined. For example, it is argued that in the United States, the core of the organization is determined by the managerial lass, while in Japan, the core of an organization is consisted of the permanent worker group. In Japan, workers assumed the purpose to stay loyal to an organization and life-long employment in an organization he is serving. This is very different in many parts of the Western world, whereby the workers can be temporary or contractual in nature, where life-long employment is not practiced. For example, work groups consisted of women or subcontracted groups can be laid off in the recessionary period. Besides, the pay structure is also different. In the Western world, the reward is primarily determined by the performance and achievement; but in Japan, the pay structure is heavily determined and influenced by seniority, rather than position or performance. Not only that, the peer group pressure in Japan is higher; as Japanese has a collective culture while in the Western world, individualism is more favored and practiced. Thus, it is not surprising to find out in Japan that workers are controlled by their peer group rather than by their manager.

From the strategic management perspective however; there are many ways in which the Japanese view strategy very differently from the Western world. In the next few paragraphs, the differences between the two contrasting strategic thinking and management philosophies or concepts will be outlined.

The strategy thinking process by Japanese is often dynamic and adapting. The Japanese does not adhere to strict reliance on a framework or structure. In contrast, many of the theories developed in the Western, such as the portfolio theory, the BCG matrix and experience curve, are often too formulaic and structured. The various elements in terms of business management are often categorized, analyzed and distinguished in the Western business management literature – giving rise to many frameworks to be used in the strategic thinking process. However, according to Mair (1999), such a simple framework is too easy to be comprehended and therefore easily counter by the competitors. Besides, Mair (1999) also argued that Western consultants, management and academicians tend to prefer oversimplification of reality (in order to compress the complex observations and ideas into a simple framework) as well as involve too much on linear cognitive explanation of events.

Besides, it is also argued by Mintzberg et.al. (1998) that the Western managers and theorists are more straight-forward and rational, and tend to manager from afar (to the extent that they may not put sufficient observations on the front line feedback). However, the Japanese strategic thinking process is harder to be characterized, as they learn and adapt to the changes in the environment, while taking and assume calculated risks on their way to achievement of an organization mission. For example, Western company such as British motorcycle firms pull out from the motorcycle industry in America when Honda starts to drop price, as it is no longer profitable to get involved in the market anymore. However, Honda took a different approach, in which the company willing to sustain a degree of losses in the market when they are new and as their volume get higher in the later days, they not only able to attain economies of scale and then to derive higher profitability as the competitors start to pull out from the market due to pricing issues.

Moreover, Mair (1998) also argued that Western managers have been adopting one-sided reductionism subconsciously. For example, the Western automotive management style deliberately views the various possible strategies in two polarities, i.e., planned and emergent strategies, competencies against capabilities, quality versus costs, and many others. In contrast, Mair (1998) asserted that Honda apparently adopted the two-sidedness or the non-dualist strategic thinking process. Perhaps the list presented as follow can make clearer on what is asserted by Mair (1998) on such context:

• Model renewal (Western) versus facelift (Japanese) in the context of product design
• Top down or bottom up (Western) versus middle-up-down (Japanese) in the context of organizational design
• Individualism or group work (Western) versus Individualism-Groupist (Japanese) in the context of organizational and team work performance
• Efficiency or human work (Western) versus ‘free-flow’ production line (Japanese) in the context of operation management
• Product volume or variety (Western) versus small-bath production system (Japanese) in the context of operation management
• Product flexibility or long term employment (Western) versus ‘flexi-factory’ (Japanese) in the context of strategy and human resource management
• Single sourcing or multiple sourcing (Western) versus ‘parallel sourcing’ (Japanese) in the context of supplier relation
• Economies of scale versus responsiveness (Western) versus ‘strategic localization’ (Japanese) in the context of global organization design

Apart from that, Mair (1998) also argued that Western companies are often slower in implementing successful strategies in the automobile industry as they are responding to the customers’ demands. Such king of strategies seemed rational and reasonable, as it is though fulfilling customer needs that a company can become successful. However, Japanese companies such as Honda would choose to go for the extra miles, to anticipate what is required by the customers and then to offer what is desired by the customers. As such, the customers end up following the more imaginative competitors from Japan such as Honda.

Corporate Governance and CSR in Honda, Nissan and Chrysler

Introduction

Corporate Social Responsibilities and Corporate Governance is the current trend of company’s social responsibilities by contributing back to the community and stakeholders, planning their organization processes around sustainability of the environment, have external bodies for auditing and governance while operating their business as usual. Stakeholders are aware of the urgent need of corporate governance to prevent ethical lapses and followed by sustainability of community and environment for business to continue to thrive.

Theories related to Corporate Governance and Corporate Social Responsibilities

In today’s business environment; it is important for companies like Honda, Nissan and Chrysler to project to the stakeholders that the company operates with integrity; implementations of policies, procedures, accountable reporting and manages risk appropriately. All three companies have achieved strategies of social responsiveness categorized by Caroll (1979) to be pro-action; where the organization seeks to go beyond industry norms and anticipate the future expectations by doing more than is expected.

Corporate governance provides the platform for companies to engage external parties to supervise that business operation achieve company missions and meanwhile consider all importance of stakeholders in the company. Main function of external supervision is to give the stakeholders confidence that the organization’s business operations are doing the right things.

Corporate social responsibility is a social program where community and the environment benefits from the business operation in form of sustainability and giving back to the community. CSR through Milton Friedman (1970) philosophy was managers were responsible for making the most money for the shareholders and CSR is deemed as expenditures not enriching shareholders. In the late 19th century CSR is viewed as vital to improve the bottom line through responsible business operation. Western Europe coined the term triple bottom line where economic, environmental and social aspect apart from financial as integration of responsible business operation to stress that CSR is part of the company’s operation.

Major companies through global CEO survey believe that integrating corporate governance and corporate social responsibilities as part of responsible organizational practice are essential to help improve company image, competitiveness and ultimately profitability.

Corporate Governance and CSR Impact on Financial and Non Financial Performance

It has always been a topic of interest for research to link if there are any relationship between CSR, corporate governance and financial performance. Through observation, Honda, Nissan and Chrysler recorded growth in their profitability during 2005 to 2007. During the financial turmoil around the world; 2008 and 2009 has recorded reduced profitability across the industry; however these three companies still recorded positive EBIT.

It is believed through CSR and corporate governance has positive impact on the organization as a whole. Looking at just a financial viewpoint, we would have to look at the pattern of how many percent of allocation is given to CSR and corporate governance. However many research has found that there are no significant results to support CSR and financial performance (University of Gothenburg, 2010).

Investor and stakeholders’ confidence of the company is an important factor in the financial stability of the company. Continuous projection of themselves as a transparent and responsible company will continue to provide the platform for Chrysler, Honda and Nissan to maintain its position in the market.

Direct impact from corporate governance may not be measureable numerically; Nissan however has developed its own scorecard to measure its CSR and corporate governance programs effectiveness based on eight focus areas; namely 1) corporate governance and internal control, 2) environment, 3) safety, 4) economic contribution, 5) quality, 6) employee 7) philanthropy, 8) value chain. Each focus areas have indicated previous years result, current achievement, next year’s objectives and its long term goals.

Corporate governance and CSR impact are intended not for short term gain, as the main objectives of these efforts is to gain long term strategic value to the organizations (Bert Scholtens, 2006). To achieve brand recognition and public perception as socially responsible and high integrity, Chrysler, Honda and Nissan similarly has implemented CSR and corporate governance generally based on these three areas:

• Training and education – proving education and training opportunity to its employee and society such as worldwide literacy programs for the poor. Parts of the program are scholarships for staff and undergraduates, meant as recruiting staff and retaining employees. Chrysler success is measured on literacy rate in developing countries through their literacy programs especially in Africa.
• Society- Chrysler focus healthcare issue AIDS in the Africa region, focus mainly on giving education and creating awareness of the illness.
• Sustainability – All three companies has its main focus on research and development of electric vehicle. Creating environmentally sustainable supply chain and business operation. The main impact it to create a business model and sustainability of its operations.
• Corporate governance – includes non executive directors and external parties as to provide transparent and maintain integrity in its business operation. It creates governance and confidence of the stakeholders towards the business operation.

All three companies, Chrysler, Honda and Nissan have geared towards projecting image value of responsible and sustainable business operations. Corporate Governance and CSR impact on non financial performance, in general for Honda, Nissan and Chrysler can be viewed as public and customer satisfaction from the effort to reduce carbon foot print as part of their CSR effort on global pressures on impact of climate change. Gaining customer satisfaction is important to any organizations as to engage public and customer perception towards their role as a responsible brand. Chrysler, Honda and Nissan role in research and development of sustainable energy cars such as hybrids and electrical cars convinced its customers on its environmentally green policy.

In Short

In conclusion CSR and corporate governance has been adopted as an organizations strategic planning and have moved beyond monetary contribution. Its impact on business and its stakeholders are extended to beyond its business operation; it is about sustainability in the business.

CSR and excellent corporate governance provides stakeholders and society to benefit from responsible and sustainable business practice. Chrysler, Honda and Nissan all together have developed own CSR and corporate philosophies to achieve company strategic goals with the consideration and supervision from its stakeholders.

Conclusion

As we had discussed in depth in various sections above, it is obvious that Japanese and Western management style and strategic thinking process are different. In the global context, strategic management and application of existing strategic ideas into other region of the world may not be relevant, as people from every part of the world have different belief system, culture, social norms, habits and mindset. Thus, a well-established theory, such as those developed from the Western world, no matter how widely adopted and true these theories may be, can be irrelevant in other part of the world. Simply, management is concerning about human, and if the human to be managed are different, the theories should differ as well. Not only that, it is also critical for us not to apply any theory as it is, as in the process of defining a framework, many assumptions are made. For example, Porter three generic strategic is widely accepted in the West, but strict adoption of such theory can be risky, as it set limitations on our thinking process and mindset. Users of such theory with great faith may be led to believe they have not other choices but to choose to improve the quality or lower the costs in the product offerings. Perhaps the success stories of Honda should reveal the reality that management is never a fixed subject, and changes are to be expected. It warns us to be cautious in becoming too rigid, and encourage us to learn, adapt, innovate and think of out the box – to cope with the complexity and to solve the various seemingly unsolvable paradoxes in the real world.

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