Mini case paper #1-Building “world car”
1. Discuss the strategies implemented by Toyota and Honda to achieve greater efficiency in car production. One of the major strategies implemented by Toyota and Honda to achieve greater efficiency in car production is pursuing the continuous improvement and using “lean” production system in order to eliminate waste in the organization. Toyota and Honda show a strong emphasis on total product quality not only at the expense of lead time but also in the development of productivity. Lean production system has combined the flexibility and quality of craftsmanship with the low costs of mass production (Hindle, 2008). It aims at eliminating the waste in the different stages throughout manufacturing system and process by empowering employees and developing smooth relationship with suppliers and partners. The other key strategy implemented by Toyota and Honda for greater efficiency is the global strategy. In order to expand and exploit potential scale economies, Toyota and Honda establish the global manufacturing system. Toyota and Honda’s home market is not large enough to gain cost efficiencies which leads the companies to look to international markets. They employ the method of foreign direct investment (FDI) to set up their plants and operations in their major foreign markets. They achieve greater efficiency by taking advantages of national differences on cultures, market conditions, politics and others. Besides, Toyota and Honda set up foreign plants that can decrease the input costs through reducing the transportation costs, which gain the distinct efficiency. Another important strategy implemented is the best-cost strategy that combines low-cost strategy and differentiation strategy. The main concept of Toyota and Honda’s business is reducing the costs of inputs includes tangible and intangible costs and increasing the outputs. The best-cost strategy makes Toyota and Honda different from American and European car companies and enhances the global auto industry level.

2. How do the automobile companies plan to simultaneously manage risk and gain efficiencies? Automobile companies adopt the global strategy in order to manage risk and achieve efficiency. They expand their facilities overseas to reduce or eliminate high transportation costs and diffuse their risks. This strategy helps companies disperse environment risks of doing business not just in one country. According to Hymer, firms that venture overseas can utilize foreign production as transferring (Phatak, Hagat & Kashlak, 2009). The automobile companies can export from the host country to a third country which plays an important part on their global development and solves the issue of export quotas from their home country. Automobile companies with a portfolio of country businesses have abilities to hedge against the economy recession caused by one foreign market. Moreover, from the political perspective, companies can avoid the negative effect caused by the political pressure and cross-exchange rates between the host countries and their home country which can limit the companies’ growth and reduce their profit margins. Automobile companies that open their operations in the major foreign markets have achieved overall efficiency by lowering the costs of inputs due to the comparative production costs between transportation costs and FDI costs from the operations perspective, and exploiting potential scale economies. Furthermore, companies venture overseas can take advantages of the host government incentives and inducements. According to Hymer, firms that venture overseas can utilize the host country’s specialized assets, knowledge, capabilities (Phatak, Hagat & Kashlak, 2009). In addition, the automobile companies accrue distinct efficiencies by producing products in the foreign markets which increase their abilities to meet the demand for the product quickly, develop good public relationships with customers and the host government, and improve services.

3. Discuss how the car companies use national differences to gain a strategic advantage in the global car industry. Different countries have a variety of cultures and perceptions which can be reflected in the companies’ theory of business. For example, Japanese car companies concern about environment and energy resource, so they employ best-cost strategy which combines low-cost strategy and differentiation strategy to manufacture highly fuel efficient lightweight cars that are different from American and European cars in terms of design and quality. American and European car companies prefer to adopt differentiation strategy or focus strategy based on their cultures and consumption concepts. Japanese car companies’ theory of business has gained a huge successful during the period of the economy recession and the energy crisis. The car companies use national differences to gain competitive advantages by venturing overseas and setting up plants to operate in major foreign markets. The car companies would locate labor-intensive production in low-wage countries like Malaysia, or locate R & D activities in high-technology and low-wage countries like India, or locate operations in high-demand countries like China. Car companies can gain added cost efficiency by establishing car manufactories in major foreign countries due to the comparative costs. This can reduce the transportation costs by transferring from home country to the foreign countries. The political pressure and the problem caused by cross-exchange rates may be different in one country to another. Car companies can export from the host country to a third country which can ease the limitation of import quotas from the home country. Moreover, car companies have joint venture partnerships with other national companies that can take advantage of both sides of resources and capabilities to gain competitive advantages. Both sides can complement their quality and strategy in terms of national differences which improves the quality standard for the entire auto industry of the world.

Reference
Hindle, T. (2008). Guide to management ideas and gurus. Bloomberg Press.
Phatak, A. V., Hagat, R.S., & Kashlak, R. J. (2009). International management. McGraw-Hill Irwin.