Honda - Global Company With a Local Viewpoint
Mr. Yoshihide Munekuni
Chairman, Honda Motor Co., Ltd.
Thank you, Mr. Chairman. Distinguished guests, ladies and gentlemen. It is a great honor for me to have this opportunity to speak to you today. I hope I can not only deepen your understanding of Honda's approach to global business, but also contribute to the discussion in this session.
It is ironic for Honda that we meet in Hawaii. Here, in 1969, Honda sold its first automobile in the United States. Since that time, conducting business on a global scale hasn't simply changed Honda's structure, but the ideas we will pursue in the future.
Outline of business
But let me begin by providing you with a brief outline of Honda's business operations. We produce products in three basic categories: motorcycles, automobiles, and power products. Combining these three business lines, we sell more than 10 million products per year, in more than 160 countries -- including 2.4 million automobiles. Now, we have 110 factories in 32 countries, producing a variety of products and parts.
Company principle
We established our Company Principle less than a decade after the founding of Honda in 1948 -- and it continues to guide the company. Our goal is to achieve worldwide customer satisfaction by supplying the highest quality products at a reasonable price. Our founders asked the company to look beyond the borders of Japan. They said "quality products have no international boundaries."
To forge our own original technologies and engineers, we have boldly sought out new challenges. This includes world class racing activities such as the Isle of Man TT Race and Formula One. These "challenging spirit" is the driving force of the company.
To realize our company principle, there are two basic approaches. One is the "product." We must keep strengthening the value of our products in concept, quality and cost. Another is "marketing." We must execute "the best marketing strategy" as a communication tool to "keep our customers satisfied."
Operation of organization, focusing on the local area
To realize our company principle through these two approaches, in the early 1990s, we established a matrix organization. This strategy overlaps Honda's product operations - composed of our three major business lines and functions - with the regional operations that represent different local markets around the world.
To supply products of the highest quality at a reasonable price, the mission of the product operations is to maximize the competitiveness of our products. To achieve this, we must adopt a market oriented development system. We also must increase the efficiency of both product development activities and the manufacturing process.
At the same time, to accomplish worldwide customer satisfaction, the mission of Honda's regional operations is to establish the best-fitting system of sales and service to provide products that are tailored to meet the specific needs of customers in each local market.
This matrix structure enables us to achieve the highest efficiency by making adjustments and offering support simultaneously between the regional operations and the three business division function. But, final decision-making authority is given to the chief operating officers of each region because they are closest to the customer.
This strategy was new for Honda, but our basic business policy - the recognition that the customer is the final decision-maker - will not change. Because we believe that Honda can exist only when our customer is satisfied and grows to depend on us. In other words, the customer is our king.
We know customer by CSI
But customers need many things to experience true satisfaction. Providing high quality products soon will be only the basic price of admission to the marketplace. To achieve complete customer satisfaction, we must offer an outstanding level of service and an efficient parts supply system, together with various communication tools. To exceed the customer's expectations, first we must discover their needs and then decide how to improve based on an accurate measurement of the customer's viewpoint.
To gain such a measure, in the early 1970s, Honda helped establish the CSI - a scientific method to analyze how customers feel about our products and service. We learned that a customer's mind will change with factors including age and the growth of the local economy. Today, Honda has the ability to measure the customer's viewpoint continuously in every region of the world.
Glocalization
Now, our goal is to be valued as a local enterprise by promoting the development and production of products in the local market that focus on the needs of those local customers. Thus, while Honda began life as a local company with a global viewpoint, we have become a global company, with a local viewpoint. That is why we call our strategy "glocalization."
Two years ago, when we introduced an all-new Accord -- one of our key automobile models -- we did not offer the same product to each local market around the world. Rather our engineers developed a unique flexible platform that made it possible to efficiently create models with different styling. Each is tailored to the specific needs of customers in Japan, America, Europe and Asia. And in each region we have examples of successful products that were designed for the unique needs of local customers. This gives us the efficiency of a large, global company, but the flexibility and customer-first focus of a small, local company.
Change in market structure
As many of our competitors pursue strategies based on size, mergers have become common in the automobile industry.
We do not disagree with the potential benefits of economies of scale, but feel this represents the logic of the past. We believe that the future requires more rapid evolution toward "glocalization" -- a concept that respects the differences of customers in each region around the world, and uses "speed" and "flexibility" to meet their varied needs. In this way, we hope to create a higher value for our customers and society that defines the next generation.
We believe this decentralized management approach is suited to the 21st Century where the speed of change is expected to further increase. The 20th Century was the age of "product out" - the mass-production of standardized products at low costs. We expect the 21st century to be the age of "market in." We must seek ways to balance a variety of needs in mature markets, promote the evolution of information technology systems and meet specific regional needs.
In the future, we will need the ability to develop new products quickly to respond to customer needs and changes in market conditions. This means that the characteristics of "speed" and "flexibility" will be more important to global success than size and economies of scale.
Honda's regional business operations are key to this strategy. Through this structure, we are now implementing changes to our global production system that will shorten product development lead times. These modifications will also achieve flexible production of a variety of products. With the new system we will be able to produce eight models on one production line, to help us match changes in the market. And we will have a greater ability to make a profit from highly efficient small volume production based on a smaller investment.
Together with the community
Finally, we believe that our value to society begins with our business activities -- but it does not end there. We also are active in developing and supporting community activities that add to the quality of life in each region.
As a global company entering the 21st Century, Honda believes that environmental issues are the most important facing society. We are committed that both our products and our operations in each region minimize any impact on the environment.
Honda also has long promoted motor sports because we believe it symbolizes the fun and excitement of motorcycles and automobiles. We actively promote the safe use of our products. And we support unique programs in each region that contribute to the communities where our customers, business partners and associates live and work.
In the end, all of these activities work together to create not only the "glocalization" of our organization - but the glocalization of our ideas. And it is this dynamic environment that ultimately will help Honda continue to pursue our dreams in the future.
Thank you for your attention.