Marketing Paper Essay, Research Paper
Introduction
Integrative contingency theory is based on four components. These components are the effectiveness of the organization itself, environmental variables, context or the variables related to objectives and internal characteristics of the organization. The internal characteristics are divided into three parts; first part is the characteristics of the organizational structure, the second part is the managerial behavior, and the third is the personal predisposition of the people in the companies.
According to this theory organizational effectiveness is determined by the degree of consistency achieved by the other three components. Since all companies want to be as effective as possible, they will do their best to make the first three components work at their best; and in this case best means most compatible with each other. The theory also suggests that environment reflects on both the context and the internal characteristics, and that the context reflects on the three subsets of the internal characteristics, and furthermore the three subsets reflect on each other. We will use this theory as a guide to analyze Japan and United States management processes.
Environment
Business environment of a country can be broken down into three parts: the product market, the input market, and the inter-organizational relationships.
Product markets include the following can be measured by the following: diversity of the products, heterogeneity, amount of competition, the recourses available, and variability. Americans firms have a higher degree of diversity in their products; their products and product promotional strategies have to fit people of many different cultures, races, and religions. They also face higher competition simply because of the higher number of firms in the country the relative easy of entrance into the marketplace. American is also considered to have a less resourceful environment. (Sato 33)
Japanese firms have less diversity and less competition in their product markets. This can be directly related to the fact that Japanese product markets are volatile and have high entry barriers. (Sato33) When a change is needed in the marketplace new firms don t come in with new products, the established firms just change their product. Product promotional strategies are not diverse, because for the most part, Japanese firms have to cater to only one culture group type.
The labor market is quite different in the two countries. As a result of cultural difference between Japan and US, the attitudes of employment also became different. In
Japan, after people graduate from college and find a job, once they join a company, you are guaranteed a promotion to certain level in the corporation. Workers don t think about changing their jobs easily. Company loyalty and company identity are extremely important and linked to ideas of safety and security.
On the other hand, in US, people usually link a person s job with his or her social status. People look at your occupation and associate it with your level of education, and their idea of your social status. In US people believe that education and occupation are tools that the person should use to find a good job or attempt to obtain another job. The company itself does not have the same meaning as it does in Japan; the company does not represent security; the job does not guarantee the person will be aligning on the corporate ladder or never be fired. Unlike Japanese, most Americans like to move from one company to another to look for an increase of their salaries. In US salary represents a big chunk of job satisfaction, safety and security are a lesser concern. (Ruth 23)
For the following reasons we see that the labor markets are quite different; very mobile in US, and vise versa in Japan.
Environment constraints are present in both countries; the type of constrains that most strongly effect the firm are different. The government and other regulatory entities regulate American firms. On the other hand, relationships with distributors, customers, suppliers, and competitors regulate Japanese firms. (Sato 35)
Amount of land each country has available is reflects the business environment also. Japan s basic cultural assumption is totally different from that of the western countries. Land in Japan has traditionally been a natural resource; one, which everyone was able to use; and, the right of the user were greater than that of the landowner. However, in the western world, the right of the landowner is greater than the land user and the land has no reverential meaning as ancestor- related worship. Land to most western people is basically ca commodity to be used to make profit. (Ruth 7) This idea supports that the fact that Japanese firms place great value on the relationships with users.
Context
Organizational Objectives
All firms want to be constantly increasing their profits and their net present value.
There are however other objectives that a firm can set; examples are capital gain for stockholders, increase in market share, improvement of product portfolio, efficiency of logistic activities, equity/ debt ratio, new product ratio, public image of the company, and the quality of working conditions.
Three significant organizational objective differences exist between Japanese and American firms. The main difference is the objective of profitability, or return on investment. The Japanese tend to emphasize market share rather than profit. In a Japanese company profit is perceived as a long-term goal. The company is more prefer to build a market share and eventually lead to a stable secure market with secure income. In American companies, profit is a very short-term goal. They concentrating on what profits may be gained in the present time. However, to Japanese firms the profit results are more important and it is what the companies are finally judged by. In western world, the most important idea is how the results are achieved, and the results are not what people mainly focus on. (Ruth 25) For US firms increase in market share is only 25% as important as their prime objective. New product ratio is 4 times as important in Japan as it is in America. These two facts coincide with the previously mentioned fact that the US environment is not a highly resourceful, and also a highly competitive one; a cash cow environment; an environment where you want to make your cash cow as profitable as possible. (Sato 36)
Capital gain for stockholders was the second most important objective for American firms. Japanese firms consider it the least important of all. This fact supports the previously mentioned idea that the government or other regulatory entities control American firms; the stock market is one such entity.
The third difference is the importance each country gives to each objective. Japanese companies, unlike American companies, give more importance to all organizational objectives. On the other hand, while American firms do acknowledge the existence of objective such as public image, and new product ratio, they rate those objectives very poorly in terms of importance. (Sato 37)
Production Technology
Production technologies are broken down into five categories. The categories are: custom technology, small batch technology, large batch technology, mass production technology, and continuous process technology. (Woodward) In Japan custom technology produces about 20% of the output, in US custom technology produces only 12%. Mass production produces 24 % of production in Japan, and 35% of output in US. Other technologies produce fairly equal amounts of output. (Sato 38) We see from this that Japanese companies use more flexible equipment to adopt to their volatile environment, and US companies use more mass production technology to reduce costs.
Strategy
Strategy is defined as a plan of action that prescribes resource allocation and other activities for dealing with the environment and helping organization attain its goals. Three levels of strategy exist: corporate, business, and functional. Corporate strategy answers the question of what business the company is in. Business strategy answers the question of how we should compete. Function level strategy is designed to answer the question of how we support the business function. (Daft 242) We will examine the corporate strategy.
In the Sato/Hoshino research study corporate strategy was compared by ten characteristics: relatedness of product/market, international orientation, strategic mobility of resource deployment, long-tern resource accumulation, head-on competition, risk taking of new product/market development, cost efficiency, analytical strategy formulation, extensiveness of information, and orientation toward social responsibility.
Four noticeable differences were found. First, American firms were showed to be more concerned with all their goals; Japanese were more focused on few of the above ten strategies. Second, American firms are willing to focus on short-term resource allocation. This is very consistent with the view that American firms like to focus on cost efficiency and short-run returns, in an environment with few resources; short-run returns are a better option. Japanese firms were exact opposite in terms of resource allocation; their focus was long term. This finding was consistent for the same reasons as mentioned above.
Third difference was the importance firms in each country placed on the objectives. American firms most important strategies were head-on competition and cost efficiency. Japanese firms emphasis was on product differentiation in order to gain a competitive advantage. (Sato 41)
Fourth is the difference of how the firms in each country formulate the strategies. Japanese firms typically use all available and useful information; while American firms usually really on their top executives for the strategies. We will see more on this issue when we discuss decision-making.
Organizational Structure
By answering three questions we can compare and understand organizational structure. What is the pattern of distribution of power of the people? What is the pattern of influence of each department? And, how are people grouped within a given structure. (Berkley)
Sato and Yasuo compared distribution of power by examining the formalization, standardization, centralization and interdepartmental distribution of influence. American companies usually have high amount of formalization and standardization. US firms place more power in their top management and much less in their lower management.
(Sato 45) Japanese firms space out influential power. This characteristic coincides with the previously mentioned fact about the way Japanese workers feel about their company; if you have more influence you are likely to feel more a part of the company. We can deduct from this that majority of American firms have a mechanistic structure, and majority of Japanese firms have an organic structure.
Mechanistic structure is better if the environment you are in is stable; and you are looking for short-term gain, profitability and efficient use of resources. Organic structure is better for a changing environment. (Berkley)
A notable difference in the influence of different departments is the place of the financial department in each country. In US firm the financial department has the 2nd most amount of influence, in Japan this department is placed 5th. (Sato 48) Since the financial department is responsible for profitability, equity and allocation of short-term resources it is very clear why each country would rate the financial department the way they did.
Americans firms have high degree of divisionalized firms. The divisions are self contained and the managers of the divisions are urged to make vital decisions. Since divisions don t represent the whole firm, short-run decisions are bound to come from each division manager. Japanese firms, on the other hand, make the decisions come from higher management that take more things into account; this characteristic leads to more
Long-term decisions.
Communication is vertical in most US firms, and horizontal in most Japanese firms. This is in agreement with the type of structures both countries have, mechanistic and organic, respectfully.
American firms also have more complicated performance evaluation systems. The goal of the system is to increase efficiency and reduce costs; one of the main organizational objectives for US firms. (Sato 49)
Organizational Processes
Organizational processes are the actions that managers take to make sure that the given organizational structure is running according to plan. We will examine the processes in terms of leadership, decision-making, and control process characteristics.
Ohio state study determined four dimensions of leader: relation-oriented leadership, task-oriented leadership, information-oriented leadership, and value-oriented leadership. (Berkley) American executives and managers were found to be more task-oriented, and their Japanese counterparts were found to be more information oriented. (Sato 52)
Decision making process in both countries is quite different. Japanese decision-making method takes a longer amount of time and often involves a corporate group process that eventually leads to an action. Western decision-making method is a quick decision method, one that usually involves very few people.
The Japanese method can be broken down into three stages: Nemawahi, Uchiawase, and Ringi. Decisions tend to be made between employer and employees. The approach itself is both top to bottom, and bottom to top. Once a company comes up with a plan, discussion about the plan will take place on all levels of the organization (usually it is an informal discussion. This is the Nemawahi.) Managers will then take feedback about the plan and make a decision based on it (the Uchiawase.) The final approval, the Ringi; it stamps the seal on the official documents. (Ruth 60)
In Western companies, strong leadership is expected from the top managers and the decision that comes from then will not always agrees with the bottom of the company. Top managers like to be independent and make their own decisions; however if opinion of others is needed a formal meeting will take place. (Ruth 33)
Control process was also different in the two countries. Japanese firms practice control process, which is based on value information and self-discipline. US firms control process is based on output control. (Sato 52) The control process characteristics coincide with the type of organizational structure that each country has.
Personal Predisposition of Members
Personal predisposition can be examined by two main characteristics: individualism, and uncertainty avoidance. Uncertainty avoidance is the measurement of how well people tolerate uncertainty; individualism is the measurement of how much people believe in the power of one versus the power of many. Japan is ranked high in uncertainty avoidance and low in individualism, US is that other way around. (Daft115)
It is now pretty easy to see why. Japanese decision-making process involves as many people possible, uncertainty is reduced; and, the structure and methods for following the structure are both designed to work with the Japanese people s predispositions. US decision usually come from one person, and individual, and the structure and methods for following the structure are also designed to work with US people s predispositions. We learn from this analysis that all parts that are responsible for the way a company behaves, try to work with each other. They do so because they want to make a company that works at its best. The environment sets context, context sets goals, and those goals are attempted to be achieved by the methods that fit the given environment, context, and the goals themselves.
Ruth Taplin. Decision-Making And Japan: A Study of Japanese Decision-Making and its Relevance to Western Companies. New York: 1995
Toyohiro Kono. Long-Range Planning of Japanese Corporation. Berlin: 1992
Willard I. Zangwill. Meeting the Japanese Challenge. Corporate Strategy & Structure: Japan and the USA. Ed. John Vandenbrink. Chicago: 1983