Knowledge Management in International Automobile Sector - Research Paper Example

«International Business Study» I. Research Proposal i. Title ii. Background to the research iii. Research Questions and Objectives iv. Methodology v. Resources vi. References II. Literature Review III. Reference I. Research Proposal i. Title of the Research “Knowledge Management in Product Development Process of International Automobile Sector” ii. Background to the research The automobile market is one of the most attractive industries in the world. Product development process in this sector is knowledge intensive and technically complex. Knowledge management in this particular segment is very important from technical and non-technical aspect. The knowledge requirement will range from product knowledge, knowledge of consumer preferences and choices, knowledge of competitors, knowledge of new technological updates and many other factors. The requirement of knowledge varies from nation to nation and incorporating even small changes can be technologically complicated. There are several other issues and areas affecting the knowledge management process in the international automobile sector. This makes it a challenging area for study. Fortune Global list of the top 500 companies lists of top ten companies include four automobile companies. Automobile sector is growing with a fast rate in some parts of the world like China, India, Russia and others. At the same time in other part of world like most of the European markets, USA and other matured markets the players need to be innovative in their product offerings. Imagine a single player operating in these two different parts of the worlds. The kind of challenges this will have will be enormous. The challenges will be in every area of management like operations, marketing, human resource management, technology and others. One of the most challenging areas will be a product offering. Within a same country customer from different demographic and economic background will have different needs for their transportation. The product choices will vary for number of reasons. Globalisation and internalisation have opened avenues for marketers to reach various markets. Consumers have now various options available for their needs and buying decisions. This calls for proper product management decisions and this will be based on knowledge management. Rank Company Revenues ($ millions) Profits ($ millions) 1 Wal-Mart Stores 287,989.0 10,267.0 2 BP 285,059.0 15,371.0 3 Exxon Mobil 270,772.0 25,330.0 4 Royal Dutch/Shell Group 268,690.0 18,183.0 5 General Motors 193,517.0 2,805.0 6 Daimler Chrysler 176,687.5 3,067.1 7 Toyota Motor 172,616.3 10,898.2 8 Ford Motor 172,233.0 3,487.0 9 General Electric 152,866.0 16,819.0 10 Total 152,609.5 11,955.0 “Effective knowledge management in the product design process is now recognised as the key to success throughout the manufacturing sector (Ramesh and Timawa, 1999; Lynn et al, 2000), and there are acclaimed examples of its use in the automobile industry (McDermott and O’Dell, 2001).”1 Knowledge management is an important tool in the automobile sector. This sector is technologically intensive sector. The competition is high and the customer preferences are changing rapidly. Globalisation and liberalization has opened several new markets for the automobile companies. The recent studies reveals that China and India are potential market for the automobile companies. These countries not only offer high growth potential but also vary in product offerings within the country due to the demographic, economic and social differences among the customer within the country. It becomes very important for the automobile companies serving these markets to have right product for right market at right time. This will happen when the information regarding customer needs and choices has been analysed properly. This information is properly transformed into technical specification and the knowledge and previous experience in the same segment (if any) is shared among the product management team. The information and knowledge can be transferred within the workplace in various ways. There are various sources of this knowledge. It can be existing database compiling data related to customer specifications, needs and choices. The other form of knowledge with in the organisation can be the co-workers, superiors and seniors. Teigland, Fey et al. and Hansen studied the importance of co-workers as sources of knowledge and the difficulties associated with effectively transferring knowledge in the workplace in 1999. Danziger and Hull 2000 concluded that employees tend to seek answers to system questions primarily from the most informal, personal sources, and especially from co-workers. The technologically based sources are preferred less than the informal or formal personal sources. In the year 2000 Danziger and Hull studied various knowledge management approaches within organisation. They pointed out the importance of adopting a Knowledge management strategy and approach that supports “person-to-person” and “person-to-document” knowledge transfer mechanisms. The person-to-person approach is very important for knowledge management. Most of the employees rely upon this form of knowledge transfer from their co-workers, superiors and seniors. This form is quick, offers personal touch and customised solution to the specific problem. This is the reason why this particular area is getting lot of attention in the recent studies. iii. Research Questions and Objectives The research questions are designed to understand knowledge management in the product management of automobile products. It includes the new product development, product up gradation, product re-launch and various communication and other aspects of product management process. The flow of information and knowledge is vital in this area. The research questions on for the study are as follows. What are the day-to day operations of product management in the organisations? Which are the existing knowledge management sources within the organisations persons, database and other? What are the sources of new product development? How organisation utilise their existing knowledge in new product development? How the existing knowledge helps in transition of customer preferences and non-technical aspects to the technical specifications? How the knowledge is utilised in the branding and communication of new product, existing product or product re-launch? What were the reasons of failure of any particular product in a particular country or and learning to the organisation for product management? How organisations are managing non-technical knowledge within the organisation? Utilisation of the customer queries, feedback and suggestions from the website in the product management process. Frequency of transfer of knowledge from person to person, person to document and person to external sources. All the above questions are based on understanding the information requirement on various stages of product management process. The information regarding the failure o the product will also be useful in the re-launch of the product or development of other product in the same category. The ability of organisation to utilise its knowledge resources for the best practices of product management is the key objective of the research. Three international automakers will be studies in this research process. The product management is one of the most important functions of international business. This is due to the fact that customers in different countries will have different need and affordability for their transportation requirements. There preferences will differ from country to country. This information regarding consumer behaviour would be available to the people serving that particular region for long period of time. This information can also be available in the documents within the organisation if the organisation follows proper record keeping for the product management. Purpose of the Research Purpose of this research is to identify various factors of product management process and impact knowledge management on product management in the automobile sector. Aims and Objectives To define and analyse the concept of knowledge management in the product management process. To investigate impact of knowledge management in the automobile sector. To investigate the relationship between changing preferences of various consumer groups and adaptability of the organisation with the help of knowledge management. Finding factors involve in the various product management processes and impact of knowledge management on each factor. iv. Methodology In the previous studies the focus had been on studying the technical aspects of knowledge management. Though the consumer feedback, socio-cultural influences, political legal framework o the countries had provided vital inputs on knowledge management but less efforts were done to study non-technical aspects of knowledge management. Product management is a set of processes. Product management is a process by which a company deals with the day-to –day decisions related to product or group of products. It includes the process of new product development, upgrading the existing product, product pricing and cost decisions, branding and promotion decisions, decisions, product launch, translating the customer requirements into engineering specifications, decisions related to supply chain management and other. There are various factors influencing consumer decision-making process i.e. socio-psychological. This is important for strategy makers and decision makers to have this vital information. The way this information is utilised within an organisation is part of knowledge management. The study will be based on the Literature review. It will focus on concept of knowledge management in the product management process and to obtain a thorough understanding of the existing knowledge and perception from various professional groups that will provide with useful information to compare the pattern of knowledge management particular to the international automobile industry. Various product launches, failures, product development processes and other useful information will be obtained from the secondary resources like websites of the major international automobile players, journals, prestigious automobile magazines and books and references regarding the study in business industry will be produced by various marketing forums, seminar and research papers, institutional publications and industry magazines. Primary data is important for this study. Fieldwork for the study will mainly involve postal or email questionnaires and interviews, concentrating on various professional groups, their knowledge of the product management, their dependency on the know-how, experiences, databases of the organisation, country specific studies, competitor knowledge and other factors where they have utilised some form of knowledge base in their decision making process for product management. The issues to be asked by the questionnaires will fall into some major categories or topic areas of product management and knowledge management. Product management in different country will be different from the same company. This will lead to further analysis of applicable practice in product management. The respondents will be from different companies of the international firm. The data will be analysed data analysis tools like MS Excel, SPSS and SAS. v. Significance The study will help the marketers to understand the use of knowledge management in the product management process of international automobile sector. The will also help in utilisation of knowledge in the non-technical segment to understand and respond to the changing patterns of various countries in product management process. Research oriented study with direct feedback of professional group always ads value to the understanding of knowledge management. Knowledge regarding the impact of country of origin, socio-cultural aspects, political and legal aspect, consumer profiles like age group and sex, changes, changing patterns and possibilities will help marketers to develop cost effective product management strategies. The knowledge management strategies, its utilisation and impact on overall product development, communication, distribution channel and other related areas would help the marketers and strategy makers. They will be able to prioritise knowledge management strategies in the non-technical areas. vi. Resources The resource includes journals for management, product management, knowledge management and other related journals, magazines of auto industry, educational websites and links, industry websites and links and library resources. The qualitative research will be based on secondary resources from the above-mentioned sources. The quantitative study will utilise designed questionnaire and interview with various professional of auto industry with the prior permission and concern of the organisation. The questionnaire will include open ended and closed questions. The collection of data can be done by sending mail to the respondent or structured interviews. The organisational resources will be utilised with the consent and permission of the organisation. vii. Reference Alavi, M. and D. Leidner (2001) “Knowledge Management and Knowledge Management Systems: Conceptual Foundations and Research Issues.” Management Information Systems Quarterly 25(1): 107-136. Danziger, J. N. and S. M. Hull (2000) Managing Knowledge In A High Tech Company: Knowledge Sharing About Information Systems. Irvine, Ca., Center for Research on Information Technology and Organizations, University of California. Hansen, M., N. Nohria, et al. (1999) “What's your strategy for managing knowledge?” Harvard Business Review March-April (1999): 106-116. Johansson, J.K., Nebenzahl, I.D; 1987, "Country-of-origin, social norms and behavioural intentions", Advances in International Marketing, Vol. 2 pp.65-79 Kapferer, Jean-Noël. 1998, Strategic brand management: creating and sustaining brand equity long term. London: Kogan Page, Kotler, Philip: 2000 Marketing Management, New Jersey: Prentice-Hall Inc., 10th Edition Piercy, Nigel F, Market Led Strategic Change, Butterworth Heinemann, 3 e, Charted Institute of Marketing Schmitt and Simonson: 1997, “Marketing Aesthetics” The Strategic Management of Brands, Identity, and Image. New York: The Free Press Teigland, R., C. F. Fey, et al. (1999). Knowledge Dissemination in Global R&D Operations: Case Studies in Three Multinationals in the High Technology Electronics Industry. Stockholm, Stockholm School of Economics. Thorelli, H.B., Lim, J. -S., Ye, J. (1989), "Relative importance of country of origin, warranty and retail store image on product evaluations", International Marketing Review, Vol. 6 No.1 II. Literature Review In today’s business world, all the business has become very much technology and knowledge dependent. The information needs of the organisations are increasing with the increase of their operations, exceeding customer expectations and intensive competitions. Knowledge management is not a new concept for management professionals. It was 1995 when the explosion of the literature related to this particular concept flooded the market place. The concept grew further with research and efforts of the academicians and professionals. Even today the concept is used for reference material vastly. The business world today is experiencing immense competition in each sector. The globalisation and liberalisation has opened various new markets for the marketers. At the same time it has also increased the competition by attracting more players in various industries. Various definitions have been given for knowledge management. According to Ponelis and Fair-Wessels (1998) knowledge management is a new dimension of strategic information management. Te stress here is more on the strategic use of the knowledge management. On the other hand Davenport and Prusak (1998) describe knowledge management as the process of capturing, distributing, and effectively using knowledge within the organisation. Knowledge within any organisation can be in many forms. It can be stored in the documents or in person’s head as experience. Skyrme (1997) had given another aspect of knowledge management; knowledge management is the explicit and systematic management of vital knowledge. It is associated with processes like processes of creating, gathering, organizing, diffusing, using, and exploiting information. The concept of knowledge management expanded vastly from 1997 to 1999. In the start of 2000 the concept contracted in its popularity. It recovered from this condition very soon in 2001. As per Skyrme (1998) gave three main processes for knowledge management. The first is creating and discovering the knowledge management concept. The creativity techniques, data mining, text mining, environmental scanning, knowledge elicitation, business simulation and content analysis are important factors of knowledge management. The second process given by Skyrme was sharing and learning in the process of Knowledge management. This process included communities of practice, learning networks with stakeholders, sharing best practices of the organisation and industry, after action reviews, structured dialogue, sharing fairs and working of cross functional teams and maintaining decision diaries. The third and last process in the knowledge management is organising and management of knowledge sources. It includes management of knowledge centres, expertise profiling, knowledge mapping, information audits/inventory, information resources management and measuring intellectual capital. Knowledge management seeks to leverage from competitive advantages. This competitive advantage comes from proper knowledge management. The marketer needs to have information regarding market moves and competitors. The products of competitors their offering, promotional strategies and other strategic decisions influence the strategic move of the company. The automotive market is more active for competitor knowledge. The competitor knowledge helps in various decisions regarding new product development, product up gradation, product management and others. Knowledge management supports the organisation in various stages of product management process. The speed of connectivity increases with it. The increased knowledge content in products and services helps in various stages of product management processes. It also shortens new product development cycles. Knowledge generation decreases the information overloading process. It helps the organisation by leveraging on the expertise of people across the organization. This process also helps when individuals are retiring in larger numbers after a long period of serving the organisation or industry. Knowledge management helps defining new products and product requirements. It helps in defining product business criteria. This business criterion includes the strategic decisions related to cost, promotion and other relevant information. Transformation of product specifications into engineering specifications is one of the most complex and challenging tasks in automotive industry that can be handled well with knowledge management. It can also provide a good support tool for the supportive works. The knowledge management helps in proper working across all functions of the organisation to bring a product to launch. It also helps in adopting proper differentiation strategies for the products. The knowledge utilised can be competitor knowledge, expertise of the team or documents available in the organisation. The promotional strategy, the small and big decisions related to graphics, message and legal frameworks etc. Overall portfolio management, product positioning, decisions related to different stages of lifecycle of any product are influenced by knowledge management. Product development includes understanding customer needs and desires; translating those needs into “key characteristics”; developing the concepts, systems, components, and tools to deliver those key characteristics; and designing the immense logistical systems required to deliver vehicles in quantity at competitive cost and quality.2 In an automotive sector players like General Motors, Japanese Major Toyota and others have faced different situations in various countries. It was not always that the product was well accepted in the market. The product was failures like Toyota Camry in UK in its first launch. The same product was very successful in US market. The product was redesigned for the market and planned to launch again. All the decisions regarding re-launch were based on the previous experience of failure, reanalysis of the customer needs and specifications, study of their life style, buying behaviour and distribution channel management. It helped the organization to understand the reasons of failure and again the same knowledge was applied for other product launches as well. In the same manner the new markets for automobile like China and India has been very promising where on an average per hundred-person only 1-2 posses four wheeler. These account for one third of world population. The GDP is growing and these are highly potential market places especially China. The consumer behaviour in China is price sensitive. The involvement is high in the purchase behaviour of product like automobile. At the same time brand loyalty is less even for their first purchase. Consumer are much more price sensitive in China than their counterparts in developed countries. The price and performance ratio is considered well before making purchase decision. Most of the successful cars in China have good price and performance ratio. One of the successes in this market for Hyundai was its model Elantra. Elantra was a product of mid size sedan offer at the compact car price. The result was blockbuster success for Hyundai. Other competitor and players in the automobile market in China utilized the same knowledge. The development of the product offering is a network effort Individuals, teams and organization work together and interact frequently forming a network of knowledge. One of the important factors mentioned here by Skyrme (1999) was trust factor among the member of same network for knowledge sharing. These people trust each other to share the knowledge and utilization of information. Trust is an important pat of any organisation and its human component. Trust, proper encouragement and motivation to creativity leads to new product development and innovations. Trust s a factor of human component, information is component of communication management and sharing of this information among the members of the organisation is relational aspect of any organisation. Altogether these form knowledge management aspect of the organisation. Technology is getting obsolete in every six months here. Especially in the filed of software management things are getting obsolete in days. Any organisation largely depending on the technology needs to promote innovativeness within the organisation. As mentioned in the work of Kim et al Mauborgne, 2000 “Companies follow innovation strategies because of these technological discontinuities”. The innovations are always based on the existing knowledge within the organisation or the industry it operates in. A small change in the customer preferences in the field of automotive sector may lead to some complex changes in the technological aspect of the product and organisation. The proper transfer of knowledge from one part of the organisation to the next part of the organisation becomes vital. The strategies may not always directly aim towards competitors. Market changes so fast that the automotive company focusing on customer will have better chances to get succeeded than those focusing on competitors. Any automobile company has various divisions within it. The overall concept of competition has changed in last few years. R& D cooperation strategies as per Hedberg, 1981, Almeida and Kogut, 1999, Ahuja, 2000 have been more highlighted. These R&D partnerships are based on various kinds of cooperation modes. Several connections between companies have been prevalent in last few years (Powell, Kogut et Smith-Doerr, 1996). There had been many reasons for cooperation between companies. Some on them are research and controlled diffusion of knowledge as mentioned by Hagedoorn (1993), The creation of a new market (Hamel et Prahalad, 1991) and discovering of a market segment (Starbuck, 1983) was another reason for it. There has been some other factor of strategic collaborations in the product management process like knowledge and competences transfer as mentioned in the work of Simonin (1999). There had been various changes in worldwide marketplace. Transfer of skilled workers and employees were also one source of information from one company to another. The expertise and knowledge that they had gained in one company they took it to another company. Some other alliances factors were technological complementarily and the reduction of the innovation cycle (Hagedoorn, 1993). As the organisation grew up in its knowledge and expertise, the innovation cycle duration decreased. The efforts have been towards finding new processes that are smaller and cost effective. It resulted in reductions of the innovation cycle. It speed up the emergence of new processes and reorganisations. Zaheer and Zaheer, (1997) mentioned reactivity, agility and flexibility to be the key competences for companies. These factors are important for the companies that want to stay competitive in their new environment. Alliances or mergers are an effort in the similar direction. In the work of Penrose’s (1959) it is mentioned that the essence of organizational capacities are creation and integration of knowledge (Grant, 1996; Meso and Smith, 2000). Knowledge has been perceived to be a most important resource of organisations. It is required for each activity of the organisation, at every level of any organisation and to serve any kind of customer of the organisation. There are two kind of knowledge within an organisation. One is the tacit knowledge. This knowledge got due importance from academicians and researchers for its ability to maintain the competitive advantage (Grant, 1996). Nonaka and Takeuchi have linked the tacit knowledge with organisational learning and innovation (1995). This knowledge is considered as the greatest strategic resource of a company. It is useful in maintaining competitive advantage. This knowledge is handy, easily available, easy to share or store and best to use for the competitive advantages (Cohen et Levinthal, 1990). From the view of Wright, van Wijk and Bouty, (1995) success of any organisation or firm depends on the development, integration and exploitation capacity of real flows of knowledge within it. Grant in 1996 mentioned how knowledge-based view of the firm has emerged. There has been various works and views of various academician and researchers regarding organisations behaviour to get the knowledge from outside the boundaries of the organisation. Work of Powell, 1987; Bleeke and Ernst, 1991, Hagedoorn, 1993, Hutt, Stafford and Walker and Reingen, 2000 have mentioned cooperative agreements for the same. According to them firms pursue cooperative agreements in order to obtain fast access to new technologies or markets. With this fast access to new technology firms take profit of scale economies in joint research and production. This helps them to know sources of knowledge outside the firm boundaries. These firms share risk together, they contract for complementary skills and it reduces the individual firm cost they might have borne if they would have done research independently. By these partnerships and alliances companies have access to resources they need. (Hagedoorn and Schakenraad, 1994, Harrigan, 1988, Nohria and Garcia-Pont, 1991) It helps them to learn new capacities (Kogut, 1988; Hamel, 1991; Powell, Koput et Smith-Doerr, 1996; Ahuja, 2000; Baum, Calabrese and Silverman, 2000). With this strategy they not just learn to manage their dependence on other firms (Pfeffer and Salancik, 1978) but also to maintain parity with their competitors. According to Pfeffer and Salancik (1978) companies can stabilize in a turbulent environment through cooperative agreements. All these things are based on the knowledge management. The relationship these companies enter into is symbiotic relationship. The transfer of knowledge, technical know-how and expertise helps to improve them further to serve the market. At various countries different companies have adopted similar strategies. For example the largest car seller in India is Maruti Udyog Limited that have collaboration with Suzuki. The combined brand name was Maruti-Suzuki. Maruti leveraged upon the technical knowledge of Suzuki where as Suzuki gained the knowledge and understanding of the Indian market. Both the companies got benefited in this process profitably. There had been further study on the knowledge management in various sectors. Ahuja, 2000; Powell, 1996 concluded that inter-firm relationships make easier absorption and development of technology. It was due to the sharing of expertise from two different firms. It also helped in reducing the impact of environmental changes (Miner, Amburgey and Stearns, 1990). The financial performances of the firms improved (Baum and Oliver, 1991; Hagedoorn and Schakenraad, 1994; Mitchell and Singh, 1996; Zaheer and Zaheer, 1997). The inter-organisational learning increased in this kind of relationship. The intensity of learning was higher in the competitor partner firms (Hamel, 1991). As per Kogut, (2000) cooperative agreements can be viewed as knowledge concessions allowing the use of one’s own knowledge by another firm. The importance of knowledge increases with the growth of overall industry. The industry in today’s scenario has become complex and bigger. The demand for expertise has increased where in the sources of expertise got dispersed. The dynamics of innovation have changed. The learning networks become more active than individual firms (Powell, Koput and Smith-Doerr, 1996). “Innovation is the result of internal knowledge development, but also external knowledge acquisition and use” The external sources of knowledge are also very important for the innovation of new products. This transformation of knowledge was based on the resource-based view of the firm (Wernerfelt, 1984; Cool, 1989; Barney, 1991). The concept of Knowledge management took place in early 1990’s. This was the duration when humanistic approach of management was on its peak. The intangible aspects of the organisation was identified and evaluated against time, efforts, cost and ethical ways. The focus was more on the cost benefit side of these intangible factors. One of the intangible factors of studies was knowledge resource. (Hamel, 1991; Leonard-Barton, 1992; Peteraf, 1993; Nonaka et Takeuchi, 1995; Grant, 1996) During this period companies pursued this strategic view and focus on information. It was the impact of knowledge that changed their structures and paradigms. The knowledge transfer within a firm is job specific and based on personal relationship at times. According to Rolland (2000) “trust appears in literacy as a compulsory condition for alliance formation and knowledge transfer (Koenig and van Wick, 1993; Gulati, 1995; Bidault, 1998); it can be defined as an internal control mode that manage actors (van Wick, 1985).” The partnership process will succeed only if managers and employees involved are confident and trust each other (Hutt, Stafford, Walker and Reingen, 2000). According to Quinn (1999), companies focused on capacities that appear very important for customers, reducing organizational weight. Companies also constantly innovated to have a best performance in comparison to competitors. It was done with the help of good information system and constant search of reliable external information. Companies developed flexibility in various ways to address customer needs. The flexibility was to adapt easily to customers needs, integrating customers’ resources and providers’ technology. The trend of outsourcing increased and externalisation grew up. The outsourcing was done on those areas of the business operations that were regular, routine bound, not very strategic and costly like customer care centres. This externalisation also provided important knowledge regarding customer and stakeholders. The overall knowledge management process differs from the strategy to strategy with response to the changing environment. The study so far done is for the technical and inter-firm relationships. The way that firms’ response to the market and customer needs with their knowledge management tools is one of the potential areas of study. It becomes more important in the manufacturing firms, which are knowledge intensive. The transformation of a simple customer need to the technical specifications can be a complex task for the organisation. There is a need to study the response to various needs of customers in different countries by the major automobile companies in the world. The different nature of market and consumer need and responses to that specific need with the tool of knowledge management is an interesting area of research. III. Reference Abrahamson, E. & Fairchild, G. (1999). "Management fashion: lifecycles, triggers, and collective learning processes." Administrative Science Quarterly. 44. Ahuja, G. (2000), "The Duality of Collaboration : Inducements and Opportunities in the Formation of Interfirm Linkages", Strategic Management Journal, pp. 317-344. 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