Internationalization Strategy of Suzuki and Volkswagen Companies - Case Study Example

Case Name: Case: Course: Tutor: Institution: Date: Question 1: Internationalization Strategy Suzuki Company The Suzuki Company, since its establishment as a textile industry venture, and the subsequent later diversification into the motor vehicle industry, has applied the subsidiaries expansion approach. In this regard, besides having its key manufacturing facility in Japan, Suzuki expanded its operations into India and Pakistan among other Asian nations through establishing organizational subsidiaries in the respective markets. A subsidiary expansion approach involves the development of organizational production unites in the new markets, which, besides following the strategic guidelines and strategies as per the headquarters, have their own production schedules and designs. In this regard, the subsidiaries operate as unique and autonomous profit unit centres in the respective markets. Volkswagen Company On the other hand, the Volkswagen Company adopted and applied the partnership approach as its internationalization strategic approach. In this regard, the approach involves the process of developing a feasibility study in which key and potential partners in the foreign markets are evaluated and prioritized base on the development of a cost benefit analysis. As such, the most preferred partnerships for the venture are those with immense benefits in the long term period at reduced production costs. In this context, through alliances with other motor vehicle manufacturers, the organization as of 2011 consisted of over 342 group companies both in Europe and beyond. As such, the organization has relied on the influence and the presence of the group partners on the global foreign markets to exert its growth and spread as well as brand image development. Question2: Internationalization Strategies Analysis Suzuki Internationalization Approach The internationalization strategy adopted by the Suzuki Company has its share of advantages as well as disadvantages. On one hand, the autonomous nature of the venture subsidiaries allows it to increase its diversification and focus on the respective markets. In this regard, instead of developing and manufacturing standard vehicles across the Asian market, the Suzuki Company has developed an initiative approach through which the respective culture needs are served with unique small vehicle designs. To this end, this has promoted its access and possibility for increased market penetration in the region. In addition, Lohr (2014, p.5) argued that the adoption and use of subsidiaries adopted by the company increases the overall organizational flexibility in responding to consumer needs. As such, the regional officers and managers have the power and mandate to make strategic decisions, with minimal headquarters consultation. Therefore, this increases the organizational decision making speed, and eventual consumer response rate, satisfaction and thus loyalty. On the other hand, the internationalization strategy approach has a disadvantage in the retention of an organizational culture. In this case, it is clear that through the system, the respective subsidiaries have their administration and operational liberties, independent of each other. Consequently, this leads to the establishment and development of diverging cultures. Consequently, it is not easy to retain a standard and unique organizational culture across its subsidiaries. Therefore, the sustainable competitive edge of a unique and cohesive culture enjoyed by its peers in the motor vehicle industry, enhancing smooth organizational operations and reduced costs of production is lost for Suzuki Company. Volkswagen Internationalization Approach The partnerships internationalization approach adopted by the Volkswagen Company has both its advantages and challenges. On one hand, under the merits, the approach enhances reduced expansion costs. One of the main challenges in organizational internationalization approaches is the involved internationalization costs which involve both marketing and infrastructure development costs. On one hand, under the marketing costs, this involves funding activities such as creating a brand awareness as well as bran positioning in such new markets. On the other hand, the costs involve the development of a business model infrastructure such as the supplies and distribution infrastructure to reach out to new customers. On the contrary, through the application and the adoption of a partnership internationalization approach, the costs are eliminated as the ventures rely on the already established brand image and infrastructure of its partner embers. In addition, the partnership internationalization strategy allows for organizational benchmarking in that the organization acquires the opportunity to evaluate and compare the varied partners’ management approach. As such, through such a relevant and appropriate benchmarking process, the organization acquires the ability to compare adopted strategies and consequently benchmark and apply the best evaluated strategy, thus improving its overall performance in the motor vehicle industry. However, the application of the partnership approach reduces the organizational influence and reputation in the market base. In this regard, Sachse (2012, p.17) argued that there is reduced contact and relationships development between the organization and its consumer bas, thus negating the gains of a close consumer relationship approach such as consumer loyalty and brand reputation development. Question 3: German and Japan Culture Analysis One of the key cultural differences between Germany and Japan is the power distance concept. On one hand, while as Germany, supported by its wide social approach and a strong middle class population base is a among nations with the lowest power distance values at 34, Japan is to the contrary higher on the distribution of resource inequalities thus has a power distance core of 54. In this regard, this nation’s variances indicate that while as the German companies such as Volkswagen are oriented towards developing a system of equal representation. On the contrary, the Japanese culture based organizations are capitalist in nature and orient in increasing overall returns and profits (Mayes, 2002, p.69). Therefore, the variance in that while as the German culture is based on social welfare development and the Japanese culture based on profit maximization, could have influenced disagreements between the two motor vehicle companies based on their approaches to achieving the set goals. In addition, a major difference between the German and Japanese cultures is evident under the uncertainty avoidance. Under this culture evaluation approach, the acquired score demonstrates the willingness by a culture to invest and engage in risky activities and business endeavours. In this regard, although Germany has an average uncertainty avoidance at 65, Japan registers a high uncertainty avoidance value at 92. In this regard, the scores indicate that the Japanese culture is risk averse and thus unwilling to venture in any risky projects (“Hofstede Centre”’ 2015). Consequently, in the case of the Suzuki management, they would not accept or engage in any of the partnership agreement activities unless certain of the outcomes and likely outcomes and side effects of any adopted decisions. On the contrary, the Volkswagen Company management would be willing to risk and enter into a business initiative in the partnership although some of the actual outcomes would be unknown. Thus, with this variance in risk perception, the partnership management was likely to disagree leading to its eventual collapse in 2011. Question 4: Criticism Analysis The Hofstede’s model on national culture analysis has experienced a wide range of criticism over the decades, especially evaluation on the rationality and comprehensiveness as well as accuracy of the developed components on national culture analysis. On one hand, criticism has been developed on the adopted study approach where the theory and model was based on a survey approach. In this case, Pearson-Evans and Leahy (2007, p.61) developed theory argued that through the adoption of a survey approach, the model was increasingly exposed to the risk of research bias and thus the potential risk of developing non inclusive conclusions. Therefore, the opponents of the model argued that alternative approaches in the system should have been applied. However, although this argument is valid and justifiable, it is imperative to note that among other quantitative data collection approaches, the survey approach is the most relevant for covering a wide population base. Thus, this argument does not discredit the models ability to measure and evaluate a nation’s culture. In addition, criticism was developed based on the adopted study population sample. On its part, the study evaluated the respective IBM Company subsidiary workers operating in diverse nations. In this regard, arguments were developed that the adoption of single company subsidiaries employees, as the only sample cannot be applied to reflect the entire national culture. In this regard, it is widely argued that due to the existing organizational cultures and management policies, the likelihood of the employees depicting a different culture rather than that of the base nation. Therefore, based on this review, the model opponents argued that in order to authenticate the model as a measure of national cultures, it should have applied a wide range of employees from across organisations and industries (McSweeney, 2002, p.94). However, this argument fails to consider and evaluate the actual statistical data applied. In this regard, the obtained country scores correlated with other obtained scores in the respective nations. Therefore, this develops the conclusion that although only a single company subsidiary was adopted, the established findings were representative enough and thus could be adopted as a measure of the respective nation’s cultures. Finally, criticism has been developed on the use of nations as the ideal culture evaluation unit is not the most appropriate. In this regard, arguments have been developed that a nation could have different cultures within and thus such a generalization could at times fail to represent the overall culture behaviours and trends in such nations (McSweeney, 2002, p.107). In this case, although in such cases, the analysis would fail to represent a nation’s culture, it is the only available rational approach through which global cultures can be evaluated and analyzed, thus making the model relevant and applicable in measuring such nation’s cultures. References Hofstede Centre, 2014, Germany in Comparison with Japan, Author. [Online] Available at < http://geert-hofstede.com/germany.html> [Accessed January 18, 2015]. Lohr, N., 2014, Foreign market subsidiary mandates: A select and temporary MNC phenomenon?, Springer Gabler, Wiesbaden Mayes, P., 2002, Language, social structure, and culture: A genre analysis of cooking classes in Japan and America, Benjamin’s, Amsterdam, Ph McSweeney, B., 2002, “Hofstede’s model of national cultural differences and their consequences: A triumph of faith – a failure of analysis”, Human Relations, Vol. 55, no. 1, pp. 89-118 Pearson-Evans, A., & Leahy, A., 2007, Intercultural spaces: Language, culture, identity, P. Lang, New York Sachse, U., 2012, Internationalization and mode switching: Performance, strategy and timing, Gabler Verlag, Wiesbaden Read More