Paper Presentation: "The Honda Effect Revisited" by Mintzberg, Pascale, Goold & Rumelt, 1996
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Presentation for the Seminar "Strategy-as-Practice" @ University of Zurich
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Paper Presentation: "The Honda Effect Revisited" by Mintzberg, Pascale, Goold & Rumelt, 1996
- 1. presentation of scientific papers seminar: strategy-as-pratice »the Honda effect revisited« University of Zurich 23rd of September, 2010 A. Schwarzinger Boris Morgounovski Mintzberg, Pascale, Goold & Rumelt, 1996. Page 1 Presentation and Discussion of scientific papers in the field of Strategy-as-Pratice University of Zurich Seminar in Strategy-as-Pratice 23rd of September, 2010 Andreas Schwarzinger Boris Morgounovski
- 2. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 2 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 3. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 3 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 4. »what they want to tell us« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 main message of the paper A. Schwarzinger Boris Morgounovski Page 4 main message » Honda became one of the motorcycle market leaders in Japan and the US in basically just 5 years » research questions & purpose » Strategy is ”all things necessary for the successful » functioning of an organization as an adaptive what is Honda? mechanism” » the Honda » Strategy is not something that always happens or is intended or planned intentionally effect » summary » The Honda case is a perfect example of how complicated it is for outsiders to judge what the » discussion strategy of successful companies were or are
- 5. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 5 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 6. »any questions?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 research questions of the paper A. Schwarzinger Boris Morgounovski Page 6 main message » Understand the success factors of Honda’s motorcycle division in Japan and the US market » research questions & purpose » Understand how Honda was dealing with » what is Honda? problems and challenges they had during the penetration of the US motorcycle market » the Honda effect » Debate: Did Honda use any strategy to become » successful? If so, which one? summary » discussion
- 7. »what is it for?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 purpose of the paper A. Schwarzinger Boris Morgounovski Page 7 » Major shift in the 1960s: US motorcycle registrations main increased from 0,575 to 1,38 Mio in 1965 message » 1960: Harley Davidson was the main market player in » research questions the US motorcycle industry & purpose » US motorcycle industry attracted only few people (the » what is “leather jacket stereotype”) Honda? » the Honda effect » » 1965: Market share loss and profitability declines summary (market share of British motorcycles in the US dropped from 49% to 9%) » » Scale disadvantages in technology, distribution and discussion manufacturing in comparison to the competitors in the US market
- 8. »what is it for?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 purpose of the paper A. Schwarzinger Boris Morgounovski Page 8 » Major shift in the 1960s: US motorcycle registrations main increased from 0,575 to 1,38 Mio in 1965 message » 1960: Harley Davidson was the main market player in » research questions the US motorcycle industry & purpose » US motorcycle industry attracted only few people (the » what is “leather jacket stereotype”) Honda? » Market Entry of Honda to the US Market the Honda effect » » 1965: Market share loss and profitability declines summary (market share of British motorcycles in the US dropped from 49% to 9%) » » Scale disadvantages in technology, distribution and discussion manufacturing in comparison to the competitors in the US market
- 9. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 9 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 10. »tell us more about it« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Honda as a company A. Schwarzinger Boris Morgounovski Page 10 » The Honda Motor Company, Ltd. main message » Manufacturer of automobiles and motorcycles » research questions » World’s largest manufacturer for & purpose internal combustion engines » (e. g. used in boats, lawn-mowers, …): what is >14 Mio. each year Honda? » World’s largest manufacturer of » motorcycles the Honda effect » Second-largest Japanese automotive manufacturer, » fourth-largest in the US, sixth-largest in the world summary » Revenue: 120 billion USD in 2009 » » Net income: 1.4 billion USD in 2009 discussion » Employees: 182’000 » Motorcycle sales: 2 Mio. units in 2009 (peak: 3 Mio. in 1982)
- 11. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 11 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 12. »the way of success« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Honda‘s success factors in Japan A. Schwarzinger Boris Morgounovski Page 12 » Honda in the late 40s one of many producer of clipon engines main message » 1949: Honda meets Fujasawa » research questions » 1950: Introduction of D-type motorcycle, which was not successful & purpose » Combination of two people: technological ability and wish to express » what is himself through invention together with marketing and financial Honda? strengths » » 1951: Honda invents a new design that has double of horsepower of the Honda effect the competitors’ four-stroke engine » » Market demand required new organization, plant, production summary facilities » » By 1954 Honda has a market share of 15% of the Japanese motorcycle discussion market » DESIGN AND PRODUCTION METHODS
- 13. »the way of success« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Honda‘s success factors in Japan A. Schwarzinger Boris Morgounovski Page 13 main message » research questions & purpose » what is Honda? » the Honda effect » summary » discussion
- 14. »the way of success« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 challenges in penetrating the US market A. Schwarzinger Boris Morgounovski Page 14 » “Success against all odds” culture, Honda implemented main message » Focus on competition with European firms » research questions » Started in Los Angeles, with the inventory of 25% each of the & purpose Supercub CC model » » Distribution channel: direct through retailers (1960: 40 dealers) what is Honda? » 1960: machines were leaking oil and encountering clutch failure » the Honda effect » Different market conditions: motorcycles are driven much faster, much farther and the motorcycles are much bigger and luxurious » (testing lab trying replicate the failure) summary » Self-marketing led to first success » discussion » While it was harming the image in the “heavily macho market”, it was a big success in sporting goods stores (customers: Every-day Americans)
- 15. »the way of success« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Honda‘s success story in the US A. Schwarzinger Boris Morgounovski Page 15 main message » research questions & purpose » what is Honda? » the Honda effect » summary » discussion
- 16. »let the fight begin« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Mintzberg vs. Goold – the Honda paper debate A. Schwarzinger Boris Morgounovski Page 16 main message » research questions & purpose • Reply to Goold report. Left Critics on BCG • Managerial perspective of » • What is managerial report? out main points the case what is Honda? • • Random experiments vs. No rational planning • Incremental learning and process byto the chance to exposing Honda deliberate planning don’t » • More incremental/ be surprised by the “intetrwine” the Honda effect emergent learninglearn marketplace and and • Mintzberg would say “try • Honda people came with deliberate planing are something, see if it works » needed their experience to US and learn from your summary • You can’t work all out in prepared to learn experience” • Argues with Goold: future, » advance , predict the • Learning 1, Planning 1 identify non-starters in “danger to go too far discussion • Learning 1, Planning 0 other direction”
- 17. »more of the same?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 BCG report on the Honda case A. Schwarzinger Boris Morgounovski Page 17 main message » BCG: recognize importance of relative cost/experience/ market share and aim to build sufficient share in targeted » research segments of the market questions & purpose » Report was not able to come up with a strategy to save the » British motorcycle industry what is Honda? » Strategy proposed by Mintzberg/Pascal is problematic, » because the British motorcycle industry was already in the Honda effect decline and needed practical advices » » Rumelt: success comes from innovative products summary » discussion
- 18. »the way of success« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 competence, intent and strech A. Schwarzinger Boris Morgounovski Page 18 main message » Creation of new resources and strengths in the pursuit of long-term intent » research questions & purpose » Usage of innovating approaches is important » » According to the view of Prahalad and Hamel, company’s what is Honda? direction is deliberate and managed, but at the same time they reject BCG’s view » the Honda effect » Honda with long-term vision of global leadership, building competences in design and manufacturing and competing » through innovations summary » discussion
- 19. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 19 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 20. »the last debate« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 summary A. Schwarzinger Boris Morgounovski Page 20 main » All views agree to a number of key points: message » » Honda had a superior competence at engine design research questions & purpose » Honda had success in Japan before entering the US market » » Honda was successful with smaller bikes in the US market and extended deliberate & emergent that success to larger bikes strategies » But which strategy if any did Honda use? Different views, different » 8 types opinions, not possible to prove or disprove writers’ assumptions of strategy » Rumelt’s view: “process/ emergent” school is right to be non-linear: » Generate new knowldege, quickly reactions Vision and swift summary adaptation » » “Design” school is right about the reality of forces discussion » Strategic thinking is overrated
- 21. »What it‘s all about?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 Agenda. A. Schwarzinger Boris Morgounovski Page 21 » main message of the paper » research question(s) & purpose » what is Honda? » the Honda effect » summary » discussion
- 22. »any questions?« presentation of scientific papers seminar: strategy-as-pratice University of Zurich 23rd of September, 2010 discussion A. Schwarzinger Boris Morgounovski Page 22 main message » Which approach of strategic planning did Honda use according to your opinion? » research questions » In your opinion, which of the introduced 8 types & purpose » deliberate & emergent of strategy was Honda following when entering strategies the US market? » 8 types of strategy » Was it more of an induced or more of an » autonomous strategy process Honda was summary following when entering the US market? » discussion
Notas del editor
- Last point: many opinions in the debate; Mintzberg, Pascal, Rumelt, Goold. Everybody has different view. Somebody argues, that Honda used a coherent strategy, another it was a deliberate process. So, what?? Everybody should think about it and in the end we will discuss, how companies should deal with such situation, Honda could also easily fail.
- Also: short-term orientation over the last 15 years, only short-term view!! As we will see, one of the success factors in Japan was long-term orientation, that means i.e investments in low-cost production methods British withdraw from the smaller bike, only large bikes, where the Japanese were not represented (p.104 down)
- Also: short-term orientation over the last 15 years, only short-term view!! As we will see, one of the success factors in Japan was long-term orientation, that means i.e investments in low-cost production methods British withdraw from the smaller bike, only large bikes, where the Japanese were not represented (p.104 down)
- Japan was in need for transformation Lots of motorcycle manufacturers doing the same type of motorcycle: clipon engines, which were used to redesign a byke to a moped Fujasawa provided financial support and markeiting strenghts 247 manufacturers, Honda: not finanicial motivation, there was no end to his pursuit of technology Fujasawa presses Honda There was no organization at this moment
- They saw the competitors not the motorbykes, but normal byke drivers the japanese wife resisted to buy heavy and dangerous motorcycle; trains and buses were inconvenient Afer introduction of honda 50cc Supercub: new plant with a capacity of 30 000 units per monthM plant was built in 1965, till this point: subcontractors 168 000 of 285 000 were Supercubs Distribution system: Honda was a late entry and had been carried as secondary line by distributors
- Poor English, bad treatment in the shops; poor after.sales service,… Impression: everybody drives a car But the registration numbers were ok: 450,000 motorcycles, 60 000 of them are from Europe, 10% is ours Currency allocation from a ministery of finances-> Toyota failed; only 11 000 cash of 250 000 Dollars Los Angeles: second and thord generation of japanese cimmunity, climate suitable for motorcycle use and growing population potential market Appartment fpr 80 $ a month, 2 of 3 slept on the floor, New model after testing: redesigned head gasket and clutch spring To see who is your competitor and which products do u take for the comparison?!
- Region by region: started in LA, West coast moved eastward over a period of 4 years Advertisement: Young families, “You meet the nicest people in Honda” Target group: members of general public, everyday Americans; who had never before though of buying a motorcycle Product Launch: Easy to handle, motorcycle as an attraction, fun! R&D: Experience from Japan; technology and production methods; 700 designers and engineers; competitors in average: 100; 1962: production per man was 159 units, Harley Davidson reached this number in 1974 high volumens per model, potential for high productivity, highly automotive techniques; impact on price Price is attractive, distributors want it so stronger bargaining position of Honda! Ditribution: direct through retailers, later pattern for the industry British: 14 mot/ worker and year, honda: 200, costs 1/10 of british manufacturers, honda paid 45% higher wage, costs ¼ of Uk manufacturer Scale effect: as not a decision, it’s a learning process
- Strategy: “all the things necessary for the successful functioning of org. as an adaptive mechanism” Debate between Mintzberg and Goold: Mintzberg: non-strarter, believed to be small motorcycle; Creative process, no formal techniques BCG left out: main period how emergent learning impacted the deliberate planning and vice versa Goold tries to defend his position, he argues that BCG report didn’t come up with a strategy which defends the market share Goold as a co-author of the report, explains the goal of the report: report was written for a commission and it was not the aim to explain how the company developed their strategy Such advice would not help for the manager, either the time nor the money to experiment with non-starters BCG report helps to understand which strategies made Honda successful, focus not on HOW but which strategies led to success… What is managerial? Does it abstract from history? Implication lock in the office and do an competetietve analysis?different ton of the report. We didn’t have choice, events took a suprising turn Honda people avoided being too rational; BCG: skipts necessary period of learning
- Main point: how could british motorcycle industry be saved if we look on the approaches, authors suggest Rumelt. Best alternative, but a lot of risks, and lack of ideas for new models; strategy is good only if u have the products which are needed on the market But alltogher situation was bad, and very weak position in the market, so finding a new strategy which could save the situation would be difficult; Mintzberg/pascal needs time, how to choose what to try….errors and trial: money and time
- Strategic intent: “Companies that have risen to global leadership over the past 20 years invariably began with ambitions that were out of all proportion to their resources and capabilities” Usage that territory and use the base to launch new products; Many oversee that honda while selling motorcycles was already selling larger bikes in europe, strategic intent and its growing competence in engines and power trains BCGs view: scale, cost advantage, market share are in the center of the story
- Success in Japan: better product, design skills Success in US. Ability to experiment, to learn quickly from mistakes, rapidly revise design problems and discover opportunities Reality of forces: scale economy, accumulated experience, cumulative development You can have a Phd but don’t have know how about design!