Suzuki versus Volkswagen - Assignment Example

International Strategy: Suzuki vs. Volkswagen Name Instructor’s Name Date The primal objective of this paper is to explain the troubled alliance between Suzuki and Volkswagen. The paper explains the international strategy that was pursued by Volkswagen and Suzuki. The paper also explains the advantages and disadvantages of partnership form of internationalization for Suzuki and Volkswagen. The paper explains the cultural differences and similarities between Suzuki and Volkswagen. This paper also explains how Hofstede’s model of national cultural differences attracted much criticism. The paper provides a brief summary of criticism of Hofestede’s model. 1. Based on the information provided in the case, what type of international strategy is being pursued by Volkswagen and Suzuki? Suzuki and Volkswagen pursued the partnership strategy. In this type of strategy the two firms share technologies available. 2. What are the main advantages and disadvantages of this form of internationalization for Volkswagen and Suzuki? Volkswagen could have tapped the strength of Suzuki in small cars as well as its domination in the ever growing Indian market (Ussery, 2011). It would also give it a chance to pool management resources, the two companies could have shared auto parts this would help in cutting down the cost of production and aid each other by jointly developing the next generation of cars that are cost effective and have low fuel consumption. By the two firms combining it was expected that VW-Suzuki combined vehicle sale would be more than Toyota’s (Piepenburg, 2011). When the two firms partner they will maximize chances for growth. When Volkswagen partners with Suzuki they can make big steps in the compact car segment, especially in the developing markets in the Asian continent (Silverthorne, 2005). Suzuki on the other hand can gain from Volkswagen environmentally friendly and efficient vehicles. When Suzuki and Volkswagen partner eight years from now will see them become No.1 globally. When Suzuki and Volkswagen partner Volkswagen would have a wide presence in the Indian market since VW did not manufacture small cars and UP, VW’s mini vehicle was still being developed (Luger, 2009). Suzuki had minicars models that were mainly sold in India, Japan as well as Southeast Asia (Hamilton & Webster, 2012). This would been advantageous to VW since it would be in a position to get a share of Suzuki’s market by producing minicars and selling them to the wider market in India, Japan and Southeast Asia. Suzuki was the leading company in production of minicars this implies that VW would benefit from its market leadership. On the other hand Suzuki would increase its sales since it will be in a position to get some of VW market (Mente, 2012). Suzuki had about 50% share in the fast-growing Indian market as well as a gigantic network of dealers in various continents (Needle, 2010). Nonetheless Suzuki did not have electric vehicles, gas-electric hybrid as well as other fuel-efficient cars. The partnership would help Suzuki to get some of this feature that was missing from its company (Peng, 2012). The partnership between Suzuki and VW would enable the two firms to have better economies of scale so that they can be abreast with the stiff competition as well as massive sales played an instrumental role in regulating costs (Burrow, 2011). The partnership between the two auto companies would result in managerial issues, for instance, the management of Suzuki did not want to have a German CEO of their firm since it would lead to its leadership being undervalued and they would take orders from VW. Cross-border deals would be instrumental to Suzuki therefore catapulting the firm into a global small-car hub that would supply the cars through a Volkswagen strong network (Gilligan & Hird, 2012). The two firms could not agree on cooperation and technology sharing. The partnership between the two firms was not the way it was expected to be since after two years of forming the partnership the two firms had not achieved their set targets. The relationship between the two firms further degenerated when a VW executive stated that Suzuki want modern technology from Volkswagen but it is not ready to reciprocate (Melville, 2012). 3. Main similarities and differences in national culture between Germany and Japan In Japan punctuality is very essential and in most cases Japanese arrive 5 minutes early and they consider it to be good practice. On the other hand, Germany does not have a culture of being punctual. The Japanese make their decision swiftly and efficiently unlike Germany who make their decisions promptly. The slow decision-making among Japans is attributed to the mere fact that they have strong hierarchical structure in the negotiation process which starts with the executive and moves to the middle level management however decision are made by groups. Unlike Germany, this does not have this unnecessary hierarchical structure when making decisions. In Japan their culture exerts business tenet that puts more importance on gender roles, the significance of the structure and emphasizes on not putting focus on short-term objectives (Gallant, 2013). Individualism and power distance are relatively low since equity is perceived to be a way of increasing cohesion and therefore increasing productivity. Most of Japanese firms invest enormously in the training and development of their employees. New employees are trained for 6 weeks to 12 months in each firm’s major division or office so that after a short while they know all the aspects regarding the operations of the company (Gallant, 2013). Among Japanese organizations, employees and supervisors have a large egalitarian relationship in that consensus between necessary before making any decision (Burrow, 2008). In Japan top management is not just a source of authority, but a facilitator and has the task of maintaining harmony among employees so that they can work together effectively (Delios, 2012). In Japan the top management takes cues from the middle management who base the policies on information forwarded to them by the subordinates (Gallant, 2013). “Hourensou” and “genchi genbutsu” are at the center of Japanese management (Gallant, 2013). Often, the term is referred to in Jeffrey K. Liker’s book The Toyota Way that illustrates 14 principles which underlie Toyota’s managerial approach as well as production system. Toyota Production System is one of the most successful and famous examples of Continuous Improvement culture. “Hourensou” which stands for hou=report, ren = inform, and sou =feedback) it means to report to others often and keep those necessary aware regarding your work and being open to direction and feedback from peers (Gallant, 2013). “Genchi genbutsu” implies “getting your hands dirty, to solve or identify immediate issues and leaders are not exempted from this. In Japan employees are supposed to stay in one company throughout their working careers. On the other hand, Germany companies, mainly concentrate on product quality as well as product, service, for instance, Porsche, Mercedes-Benz, and BMW among others. German managers consider this as Leistungswettbewerb, that is, competition on grounds of excellence in their services and products (Gallant, 2013). In German the working environments allows managers and his employees to be close to each other. In Germany industries have a tendency of working closely with the government, sticking to government standard, regulations as well as policies. All products from Germany subject to norms developed through consultation between government and industry, with input from chamber of commerce, trade unions and management associations. Unlike in Japan individualism is considerably higher in Germany and has a higher regarding people’s freedom and time (Gallant, 2013). Difference in national culture between Japan and Germany resulted in issues in their partnership. The Japanese make their decision swiftly and efficiently unlike Germany who make their decisions promptly (Carroll & Buchholtz, 2009). The slow decision-making among Japans is attributed to the mere fact that they have strong hierarchical structure in the negotiation process which starts with the executive and moves to the middle level management however decision are made by groups. Unlike Germany, this does not have this unnecessary hierarchical structure when making decisions. Issues between Volkswagen and Suzuki were augmented by the Suzuki’s slow decision making process on important issues. Germanys believe in formal communication and adhering to the developed protocol, so that a business relationship can be maintained (Condon & Masumoto, 2011). Both have efficient decision-making; however they could not make effective decisions when they were coming up with the partnership and even after the partnership became operational. 4. Hofstede’s model of national cultural differences has attracted much criticism Hofstede’s data were gathered from an attitude survey carried out at IBM in 66 countries for two periods between 1968 – 1969 and 1971 – 1973. The goal of the survey was a project that was company-based (Silverthorne, 2005; Peng, 2012). The data collected is about 40 years old and many individuals question the relevance of the data today considering that cultures change and the present economic and political state of the world is different from what existed in the late 1960s (Luger, 2009). The differences that Hofstede is attributed to cultural could have been the result of other causes. Hofstede has limited variables. Hofstede conclusion was drawn from a sample from one company and Hofstede uses the data to put forward a whole theory that explains cultural differences, not in a work setting but the society as a whole. Large samples from countries such as the UK, Japan and USA, refers to samples that have less than in 200 in 15 countries and less than 100 in 4 countries. Such small numbers cannot represent the entire culture. Hofstede overstated the similarities in cultural as well as practices of IBM in various nations and the answer to questionnaires can reflect differences rather than those that have been ascribed to the national culture (Needle, 2010; Piepenburg, 2011). Hofstede model can be used in the analysis of this case. The model has four value dimensions this are power distance, uncertainity avoidance, individualism and masculinity. In the case of Volkswagen and Suzuki the model could be used in determing whether the partnership between Volkswagen and Suzuki will survive owing to their different cultural backgound. Individualism is what prompted the two companies to form a partnership and at the same time individuliasm is what led them to end the partneship since none of the two auto firms was ready to honor what they had discussed when they were entering into the partnership deal. Conclusion The paper has achieved its objectives since it has explained factors that prompted Suzuki and Volkswagen to partner. The paper has explained factors that prompted the two firms to end their partnership. Some of the factors that contributed to the collapse of the partnership include cultural differences which greatly affected their mode of operations. There were also managerial issues that were not agreed upon by the two firms. It was also evident that the two firms did not make an agree on a number of issues that would affect their mode of operations. This paper also explains how Hofstede’s model of national cultural differences attracted much criticism Bibliography Burrow, J (2008) Introduction to business: Finance, marketing, operations Sydney: Cengage Learning Burrow, J (2011) Marketing, 3rd ed. Sydney: Cengage Learning Carroll, A., & Buchholtz, A (2009) Business & society: Ethics and stakeholder management, 7th ed. London: Cengage Learning Condon, J., & Masumoto, T. 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