Honda's Core Competence

Table of Content

1.  Introduction  1

1.1.  Background Information  1

1.2.  Aim of the Paper  1

2.  Analysis of Honda’s Success Story  2

2.1.  Organizational structure  2

2.2.  Corporate Culture  3

2.3.  Leadership  4

2.3.1.  Lead In  4

2.3.2.  Strategic Vision  4

2.3.1.  Strategic Implementation  5

3.  Future at Honda  5

3.1.  Lead in  5

3.2.  Future problems  6

3.3  Future Recommendations  7

4.  Conclusion  7

  Reference List  8

1. Introduction

1.1. Background Information

The company Honda started very small and gradually developed into the size of a multinational cooperation. Today it has developed a big network of subsidiaries worldwide. ¹ Through relying on core competence they were able to develop into the company we see today.

In the long run, a company’s core competence comes from its ability to build at lower cost and more speedily than competitors competitive advantages. ² Usually, it takes innovative acts to build this and the goal of a company should therefore be competitive innovation instead of competitive imitation. 3

Honda has a two to three years cycle from development to production compared to a four years average in the auto-industry. Also, products such as the Super Cup created great enthusiasm in America because it was offered at a very small price. Next, Honda often develops its own equipment and finds solution to specific problems. To be the largest motorcycle producer in 1959 is only one evidence for striking success. It’s major influence in revolutionizing products worldwide seems mysterious considering the general background of the poor entrepreneur Soichiro Honda in the 40 ^th and the small size of Research and Development expenditures today in front of fierce competition from other larger firms.

1.2. Aim of the Paper

The aim of the paper is to analyse the secret of Honda’s success in building core competencies through innovation using organization, corporate culture and leadership as evidence for Honda’s successful surroundings.

¹ http://www.honda.de/ah/index.html

² Hamel/Prahalad (989). p. 81

³ H/P Strategic Intent , 69

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2. Analysis of Honda’s Success Story

2.1. Organizational structure

An organizational structure should help to build Core Competence. Honda created an organisational architecture that lead towards innovation, resource allocation and sharing through cross functional links and teamwork.

While production is managed with tight control, Honda’s organization for research is flat. This makes innovation possible. Core competence in a firm should start with the creation of “new space… on a clean sheet of paper” ⁴ . At Honda, nobody has an own office and ideas of one employee are naturally furthered by others as they are able to talk about them right on the spot. Also idea contests are being held were everyone can express and is awarded for ideas. At Honda, innovation can also take place bottom to top the way that the Processual school suggests it. Innovation is the creation of something new and leads towards uniqueness. Honda is able to drive towards uniqueness through its flat organization.

Prahalad and Hamel demand a strategic architecture that makes resource allocation throughout the company transparent and efficient. ⁵ One essential and complex resource is knowledge. At Honda, engineers are lined up sideways instead of top to bottom and form a web of expertise. Job formalization in the work environment is low and the acquisition of appropriate skills and knowledge by employees is furthered. Projects are managed across research, design, product engineering, and early production stages. This helps to integrate different tasks and acknowledges that the fit between activities is essential for core competence building. ⁶ Honda’s project- and teamwork is based on identified experts that determine the future of a product.

Core competence can be defined as “the collective learning in the organisation [where] … skills integrate multiple streams of technology” ⁷ . Competencies are enhanced as they are applied and shared. ⁸ Honda’s employees work together side by side. Social links develop naturally from this and bring trust and order into economic life. 9

⁴ Prahalad / Harnel (1989), p. 73, 71

⁵ Hamel/Prahald (1990), 89

⁶ Porter,Does strategy matter 75

⁷ Harnel / Prahalad (1989), p. 82

⁸ Harnel / Prahalad (1989), p. 82

⁹ Granovetter (1985), p.501

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