Complex-Unstable Market Environment of Honda and Ford - Case Study Example

Organization Theory Name Institution Date Part 1 Simple complex dimension Environment is infinite and it involves all the aspects that are outside the organization. The events occurring in the environment has direct impact on the organization. Uncertainty leads to lack of adequate information about the environment by the organization and hence increasing the risk of failure (Zhang, Linderman & Schroeder, 2012). The simplex complex environment is concerned with heterogeneity as well as the number of dissimilarity of the external elements. Ford is a public company that has offices and production worldwide. By 2015, the company had 199,000 employees (Ford, 2016). The company has to interact with thousands of suppliers, the government, customers, competitors and many other stakeholders in the external environment. The company must comply with government regulations such as environmental laws and labour laws. As a result of this, the company operates under a complex environment. The company closed its production plant in the United Kingdom in 2002 due to pressure from the external market environment. This indicates that the company is facing a lot of pressure from the external environment. Honda is one of the most competitive companies in the industries and it produces about 4 million vehicles every year and it also has over 100,000 employees (Honda, 2016). The company is the largest motorcycle manufacturer in Japan and it also manufacturers power equipment, automobiles, aircrafts and different types of motor vehicles. The company faces completion in the market including from Ford and other manufacturing companies. Some of its products also utilize technology which is changing at a high rate. The company interacts with governments when dealing with different laws and regulations. The company is also important some of the manufacturing materials which is influence by external factors such as prices of oil. The economic conditions in the market also determine the sales at the company (Andersson, Forsgren & Holm, 2015). The external environment of the company is therefore complex. The company is also investing heavily in the development of new products that meets the needs of the customers. Stable-unstable dimension The stable-unstable environment refers to how dynamic the elements in the environment are. An environment is considered stable if the environmental domains remain the same over a period of months or years. However, the environment is considered unstable if the domains shifts abruptly. Ford is popular in the United States of America where it was founded. However the company is facing a lot of completion which has led to some of its products being grounded (Acharya, Schaefer & Zhang, 2015). Some of the car models were grounded as a result of completion from General Motors which is also popular in the United States of America. Currently, the environmental concerns require the companies to modify its vehicles in order to prevent environmental pollution. Such moves mean that the company may be required to stop the production of some of the models. The external environment is therefore unstable Ford as changes may take place at any time. Honda is popular in Japan and other parts of the world due to its customer friendly models. The motor vehicles of the company are also cheap as compared to that manufactured by most of the companies. However competition in the market is on the increase due to focus on development of new models that are environmentally friendly and low energy consuming (Honda, 2016). Such types of motor vehicles have the ability of putting the company out of the market. In Japan where the products of the company are popular, the economy is under recession. This has impacted negatively on the growth and development of the company as it has reduced sales. The market leaders are also financially stable and have a lot of influence on the market and this is a challenge to companies such Honda. The external environment for the company is thus unstable. Uncertainty Both Honda and Ford operate under complex-unstable market environment. This means that the companies operate under an external environment that has high levels of uncertainty. The likely changes in the external environment are high which may threaten the existence of the companies. The high uncertain market can be attributed to the high number of elements in the external environment that have a direct influence on the organizations. The factors such as oil process have a direct impact on the organizations as their products are dependent on it. It is due to the uncertainty that the two companies in the past have suffered huge losses amounting to billions of dollars. Ford experienced a huge drop in profitability in 2007 and the same applied to Honda in 2011. However, the companies can also make huge profits when they come up with new products that are attractive to the customers. Such factors have played an essential role in enabling the companies in the industry to survive the high uncertainty levels (Zhang, Linderman & Schroeder, 2012). References Honda. (2016). About Honda: Operations overview. Retrieved on 5th May 2016 from, . Acharya, V. V., Schaefer, S., & Zhang, Y. (2015). Liquidity risk and correlation risk: A clinical study of the General Motors and Ford downgrade of May 2005. Quarterly Journal of Finance, 5(02), 1550006. Zhang, D., Linderman, K., & Schroeder, R. G. (2012). The moderating role of contextual factors on quality management practices. Journal of Operations Management, 30(1), 12-23. Andersson, U., Forsgren, M., & Holm, U. (2015). Balancing subsidiary influence in the federative MNC: A business network view (pp. 393-420). Palgrave Macmillan UK. Ford. (2016). Our company. Retrieved on 5th May 2016 from, . Part 2 The strategies of the company play an important role in terms of determining its ability to meet the set goals and objectives. Porter’s Generic Competitive Strategies play an important role in terms of determining the strategies used by an organization. This is through the utilization of the cost leadership, Differentiation and focus (Tanwar, 2013). Cost Leadership In terms of cost leadership, the strategy of the company is to become the low cost producer in the industry (Panwar, Nybakk, Pinkse & Hansen, 2015). This ensures that company is able to achieve above average performer. Ford in its mission emphasizes on the use of lean business operations. This has been achieved by the company through the diversification of the assembly lines. In order to reduce costs, the company has established subsidiaries in different regions across the world. The company has entered into joint ventures and also agreements with other companies in different regions as a means of reducing the production costs. The diversification is a strategy that is used by most companies to reduce costs. The company has put in place measures to reduce the consumption of energy in order to reduce costs. This has been achieved through the use of NightWatchman software which is set to reduce costs of power by $ 1.2 million annually (Ford, 2016). Honda is also utilizing the cost leadership strategy in order to improve on its profitability and ability to meet the needs of the customers. Honda has assembly plants in different regions across the world. However, most of the assembly plants are located in the developing countries where the cost of production is much cheaper. Large production plants of the company are located in Vietnam, Philippines, Thailand, Peru, India, Mexico and Brazil (Honda, 2016). This cost cutting strategy has however seen the company being accused of exploiting workers in the developing countries by underpaying them. The company in most cases has however denied such allegations. Honda however does not utilize much the cost leadership strategy as compared to Ford. The strategy is only limited to the production process. Differentiation This strategy is mainly aimed at creating uniqueness in the market based on the needs of the customers. This attribute strategy is mainly aimed at enhancing the competitive advantage of the organization (Teeratansirikool, Siengthai, Badir & Charoenngam, 2013). The mission statement of the company indicates that the company intends to pursue a one team, one plan and one goal strategy. This involves developing new products and services that are based on the needs of the customers. The company is currently involved in research on hydrogen powered vehicles which is considered environmentally friendly. A lot of investments are also being directed at hybrid cars and electric cars which are considered environmental friendly. Differentiation is the main strategy that is utilized by the Honda. This is through the production of different products that are required in the market by the customers. Honda is a market leader in motor cycles, power equipment, construction equipment, bicycles and different types of cars (Honda, 2016). The company is also investing in technological aspects of manufacturing. The company is involved in the manufacturing of electric car and it also successfully developed a hydrogen powered car. The differentiation strategy has seen the company gaining popularity in different sectors due to the use of its equipment. Focus Focus involves the choosing a narrow competitive scope within an industry (Teeratansirikool, Siengthai, Badir & Charoenngam, 2013). This strategy can be implemented with a view of differentiating a target segment. The focus strategy ensures that the organization is able to understand the choice and preferences of the customers. At ford, this strategy is utilized to meet the needs of the customers. This is through the production of motor vehicles that is required by a specific customer segment. This has seen the company developing sports cars and being actively involved in formula 1 cars. The focus strategy is also being utilized by the Honda for the purposes of encouraging growth and development. The company is focused on providing products that are required in different industries. The company is focused on industries such as sports, construction, automotive among other industries. The company produces products that are required by specific industries which have played an essential role in expanding its market. The strategies have also seen the company developing custom made motorcycles which is a common practice in the United States of America. Honda therefore utilizes the focus strategy more as compared to Ford (Honda, 2016). The strategy has seen the company developing products that are suitable to almost every segment of the population. The company utilizes this strategy since it has the manpower and expertise to produce a wide range of products. References Tanwar, R. (2013). Porter’s generic competitive strategies. IOSR Journal of Business and Management, 15(1), 11-17. Panwar, R., Nybakk, E., Pinkse, J., & Hansen, E. (2015). Competitive Strategies and Small Firms’ Social Responsibilities. In Proceedings of the International Association for Business and Society (Vol. 26, pp. 99-111). Teeratansirikool, L., Siengthai, S., Badir, Y., & Charoenngam, C. (2013). Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management, 62(2), 168-184. Ford. (2016). Our company. Retrieved on 5th May 2016 from, . Honda. (2016). About Honda: Operations overview. Retrieved on 5th May 2016 from, . Part 3 Organizational structure mainly defines how activities which includes task allocation, supervision and coordinated are directed towards achieving the aims of the organization. The organizational structure plays an essential role in determining how the company interacts with the customers and how its activities are performed (Ashkenas, Ulrich, Jick, & Kerr, 2015). Ford has a worldwide presence and its organizational structure is based on the needs of the market in different regions. The components of the system and its configuration are determined by the organizational structure. The global automotive industry conditions influences the organizational structure of Ford. The division of the organizational structure according to regions can be considered useful in ensuring that the needs of customers in the market are fulfilled. The activities that the company carried out are also based on the regions (Ford, 2016). The divisional structure is therefore utilized by the company in order to ensure that the needs in the market are met. The division organization structure ensures that businesses in different regions are able to operate as separate entities. The divisional structure also ensures that all the activities of an organization are coordinated at the local level. The divisional organizational structure is common in the United States of America and this enables the business units to make decisions based on the conditions in the market. The main features associated with the organizational structure of Ford include Corporate hierarchy, regional geographic divisions and global functional groups (Ford, 2016). The functional groups indicate some elements of functional structures are utilized by the company. The corporate hierarchy is mainly enables a better coordination and supervision of activities. Through the hierarchy, the executive vice presidents report to the CEO. All the middle managers report to the executive vice presidents. The corporate hierarchy ensures that effective top-down approach control management approach is utilized. The main regional geographic divisions of the company include The Americas, Europe, Middle East and Africa and Asia Pacific. Each of the regional division is headed by an executive vice president. The global functional groups deals with a specific business function. A vice presidents is also in charge of each of the global functional group (Ford, 2016). The functional group involves manufacturing and labour affairs, global marketing, sales and service, human resources and corporate services, quality and new model launch, global product development, government and community relations, global purchasing, communications, finance, legal and accounting. At Honda, the organizational structure is mainly decentralized. The company just like Ford has a worldwide presence with operations being divided into regions. Honda has divided its operations into six regions in order to ensure that it operates effectively (Honda, 2016). Each of the region is in charge of its operations but managers have to report to the headquarters with regards to various aspects including performance. The regions are also responsible for developing their own strategies based on the conditions in the market. The decentralized organizational structure has enabled the organization to develop products that are required in the local market through autonomy in decision making. Due to the decentralization of operations in different regions, the company utilizes the divisional structure. The organizational structure of Honda is similar to that of Ford due to the diverse regions that it operates. Most of the multinationals use the divisional structure for the purposes of ensuring a better response to the regional markets. The use of the divisional structure is suitable for multinationals as its activities cannot be controlled and coordinated from the headquarters (Fan, Wong & Zhang, 2013). The use of the divisional structure has played an essential role in ensuring that the company is able to achieve its goals and objectives at different regions. The company divisional organizational structure has played a vital role in ensuring that the company is able to establish a good relationship with the stakeholders at the local level. The local people view the company more positively as most of the decisions are made at the local level by local managers. Decision making at the regional level is thus easier for the company due to the divisional structure. The divisional structure has greatly contributed to the success of the company. One of the main advantages of divisional structure is its ability to delegate authority which ensures that performance is measured within each group (Csaszar, 2013). Since Honda has various subsidiaries, the individual performance can be measured based on the delegated authority. The performance of the managers can also be measured easily when the divisional structure is used. The divisional structure also enables the company to develop new products at the regional level. References Ashkenas, R., Ulrich, D., Jick, T., & Kerr, S. (2015). The boundaryless organization: Breaking the chains of organizational structure. John Wiley & Sons. Fan, J. P., Wong, T. J., & Zhang, T. (2013). Institutions and organizational structure: The case of state-owned corporate pyramids. Journal of Law, Economics, and Organization, 29(6), 1217-1252. Csaszar, F. A. (2013). An efficient frontier in organization design: Organizational structure as a determinant of exploration and exploitation. Organization Science, 24(4), 1083-1101. Ford. (2016). Our company. Retrieved on 5th May 2016 from, . Honda. (2016). About Honda: Operations overview. Retrieved on 5th May 2016 from, . Part 4 Ford is the fifth largest automaker in the world and the second largest in the United States of the America. The company has been experience growth and development in the last few years after encountering turbulent times at the start of the 21 century. The company almost went into bankruptcy at the start of the 21st century. The revenue of the company was $ 14.5 billion in 2015 while the operating income was $ 7.648 billion. The net income of the company was $ 7.373 billion which is an improvement from the previous years. The total assets of the company are $ 224.9 billion while the total equity is $ 28.64 billion (Ford, 2016). During the financial crisis in 2008, the company was also faced with a lot of financial difficulties as most of the US based companies were affected by the crisis. However, the company has since recovered from the losses and is back to profitability. The company in 2008 had more than 210,000 employees. However, it has since scaled down to below 200,000 due to the financial reasons. In 2015, the company sold 2,613,162 motor vehicles (Zaheeruddin, 2015). Customer loyalty is one of the aspects that contributes towards the growth and development of an organization. Customer loyalty is high in the USA where the company was established. This has seen the company enjoying a lot of support in the region. It is through the loyalty of the customers that the company has been able to achieve its goals and objectives (Zaheeruddin, 2015). However, the customer loyalty in some of the regions such as Africa is low. The quality of the products of the company is also high. This can be attributed to the high levels of innovations at the company. Innovations have also seen the company developing new products which has improved on its profile in the market. As a result of innovations, the company has developed electric cars and it is currently working on hydrogen powered cars. The level of employee satisfaction at the company is high in the United States of America (Zaheeruddin, 2015). Ford is usually involved in surveys to determine the levels of customer satisfaction. The information is also used by the company to drive innovations. Honda is the 8th largest automobile manufacturer in the world and the second in Japan. However, the company is the largest motorcycle manufacturer in the world. Honda is also the leading manufacturer of internal combustion engine in the world. About 14 million internal combustion engines are usually produced by the company every year (Honda, 2016). In 2014, the revenue of the company was $ 119 billion which has higher as compared to that of Ford. This can be attributed to the high levels of diversification and differentiation of its products. The net income of the company in 2014 was 750 billion Japanese Yen. The total assets of the company are valued at 11.780 billion Yen (Jothi & Kalaivani, 2015). The company usually invests about 6% of its revenue for research and development. This amount is much higher as compared to that of Ford. Honda is quite competitive in the market in terms of its performance as compared to Ford. Currently Honda is the largest automobile exporter in the United States of America. The company produces about 4 million motor vehicles every year which is higher as compared to Ford. This is also attributed to the diversity of the company in terms of the product lines. The company has about 200,000 employees working in different parts of the world. The levels of employee satisfaction unlike Ford are low. The company has been faced with accusations of exploitation of employees in developing countries (Jothi & Kalaivani, 2015). The working conditions for employees in the third world countries are also poor in some of the instances. This has impacted negatively on the levels of employee satisfaction. However, in terms of customer loyalty, the company enjoys a lot of support from the customers when it comes to some of its products such as the motor cycles. The high levels of customer loyalty have impacted positively on the sales at the company. Technology is utilized by the company for the purposes of promoting innovations. The innovations at the company have seen it develop hydrogen powered vehicles, electric cars, robots and aircrafts (Honda, 2016). The company utilizes technology and innovations to come up with new products in the market. The performance of Honda is terms of quality are also high as a result of innovations and focus on the customer needs. The overall performance of Honda is good and it almost at the same level as that of Ford. References Ford. (2016). Our company. Retrieved on 5th May 2016 from, . Honda. (2016). About Honda: Operations overview. Retrieved on 5th May 2016 from, . Zaheeruddin, M. (2015). Customer Retention Management and Strategies with Reference to Ford Motors. The International Journal of Business & Management, 3(1), 67. Jothi, K., & Kalaivani, P. (2015). A Study on Financial Performance of Honda and Toyota Automobile Company A Comparative Analysis. Journal of Progressive Research in Social Sciences, 2(1), 33-35. Part 5 The company has a lot of similarities as well as differences which can be attributed to the environment in which they operate. Both companies operate in almost the same environment as they are in the same industry. The similarities in approach can be attributed to the similarities in the market environment. This includes the operations of the company in terms of the regional levels. The organizational structure of the two companies has similarities as both utilize the divisional structure. This is in response to the market environment and the global nature of operations by both companies. However, there are also differences in the organizational structure as Ford also utilizes the aspects of functionality. The functionality structure is mainly used by Ford in response to the environment. It enables the company to carry out its functions effectively in different areas under the control of vice presidents. The uses of both divisional and functional structures are thus useful in enabling the company to respond better to the environment (Csaszar, 2013). The use of different organizational structures has enabled the company to deal effectively with complex issues in the market. The use of both the divisional as well as the functional structures by Ford is for the purposes of creating the best fit between the internal structures and the external environment. This has also seen the company adding more positions and departments. The response to the environment has great influence on the internal structures of an organization. The external environment has greatly contributed to the differences in performance between the two companies. The economic factors such as inflation and global economic crisis greatly affected Ford. The company was also near inflation as a result of the economic factors. The economic factors had a direct impact on the revenue and profitability of Ford. Honda was however least affected by the global recession and other economic factors which has impacted positively on the growth and development of the company. Employee satisfaction at Honda is however low as compared to Ford. This can be attributed to the internal factors as the decisions related to labour are made by the company. The strategies used by a company are influenced by the external environment (Tanwar, 2013). The strategies used by Ford are mainly for the purposes of reducing the cost of production. This is in response to the external environment. However, the strategies being used by Honda is based on differentiation. The differentiation is in response to the needs of the customers in the external environment. The company through this strategy has been able to develop a high number of diverse products that are required in different sectors. The differentiation strategy has played an essential role in improving the performance of Honda. It has also seen the company becoming the largest motorcycle manufacturer in the world. The response of a company to the external environment is an important aspect that determines the strategy that is likely to be used. The levels of uncertainty are high for both companies due to the nature of the external environment. The levels of uncertainty vary depending on the industry (Zhang, Linderman & Schroeder, 2012). The automotive industry has a high level of uncertainty due to the high influence from the external environment. The high levels of uncertainty have seen Ford and Honda face near collapse and bankruptcy. The reporting relationship in both companies has been influenced by the organizational structure. Both companies have modified their organizational structures in order to respond better to the reporting structures. The effectiveness of both organization is dependent on their response to the external environment. Research and development is common in both companies and it is for the purposes obtaining information about the external environment. The environment also influences how the members of the public perceive the company. Honda is perceived positively in most of the regions due to its high quality products. This is especially the motorcycles which can be made depending on the needs and requirements o the customers. Environmental factors play an influential role in determining the approach used to deal with the market forces. Both companies are faced with a lot of challenges that is related to the external environment. The survival of the companies based on the organizational structures and strategies that have been put in place. References Csaszar, F. A. (2013). An efficient frontier in organization design: Organizational structure as a determinant of exploration and exploitation. Organization Science, 24(4), 1083-1101. Tanwar, R. (2013). Porter’s generic competitive strategies. IOSR Journal of Business and Management, 15(1), 11-17. Zhang, D., Linderman, K., & Schroeder, R. G. (2012). The moderating role of contextual factors on quality management practices. Journal of Operations Management, 30(1), 12-23. Read More