Asia-Pacific Multinationals Comparison
Organizational success is to a great extent determined by the approach taken in corporate organization, its strategy and corporate capabilities. A company’s strategy determines a company’s direction in achieving its objectives while its core capabilities denote the unique factors that differentiate it from competitors. These two aspects are directly related to the organization’s performance as they determine how well an organization can compete. This paper is a comparison of five Asia-Pacific companies to determine how they differ strategy, capabilities, role of government and organizational structure. These include Mitsubishi Corporation, Hitachi Technologies, Huawei, SECOM and Samsung.
Mitsubishi’s strategy involves creating corporate value for stakeholders in order to promote societal value and growth potential.
In terms of capabilities, Mitsubishi outperforms its competitors through its diverse businesses. The company operates in different industries including metals, energy, infrastructure, chemicals, and logistics among others. Diversity is known to promote organizational stability based on distribution of risk (Brady, Doyle Noonan, 2013). Triland Metals contributes greatly to the company’s financial performance.
Mitsubishi is considered as being among the world’s biggest multinational. The company therefore has capabilities related to its popular brand name, which makes its products attractive to customers. Mitsubishi invests heavily on research and development and this has contributed to the development of high quality products. Its financial strength also gives Mitsubishi a competitive edge.
Like most multinationals in Asia-Pacific, Mitsubishi has received considerable government backing during its rise. Based on the stable relationship between the owner and the government in its days of formation, Mitsubishi benefited from tax subsides, financial support and government contracts (Reference for Business, 2016). Connections with government officials ensured that Mitsubishi enjoyed favors that led to its rapid growth.
Mitsubishi’s corporate structure is significantly bureaucratic, given that it is a large organization with many businesses. The section heads and group CEOs of the various businesses all report to the chief executive. Each group CEO then has different division heads under his leadership. Mitsubishi’s corporate structure is presented below.
Hitachi has grown considerably over the years, becoming one of the most influential multinationals in Asia-Pacific. This is expected to improve, based on its new strategic approach which involves collaborative creation with customers. The strategy consists of a social innovation business in which the company encourages customers to get involved in the company’s innovation process.
Through the creation of regional ‘fronts’ which promote contact with customers, the company ensures that the needs of customers are met as effectively as possible. To enhance performance of the social innovation model, the company aims at spreading it to all its acquired businesses.
Hitachi’s technological innovation efficiency remains one of its major capabilities. Accordingly, Hitachi can compete well in the market and provide the best quality products for its customers. High level financial performance is a great capability for Hitachi because this means that the company is capable of investing in quality business processes, research and development and the provision of quality products. Financial reports for the company indicate that the company made sales worth 2,000 billion Yen and net income worth 172.1 billion in 2015. The company’s net income is projected to grow to over 400 billion Yen by 2018.
Hitachi’s corporate culture aims at reducing hierarchies and promoting a decentralized system. This is a unique structure compared to other Asia-Pacific organizations which tend to be highly centralized. According to JETRO, increased globalization has led to a move towards decentralization in Asia-Pacific businesses, with the objective of promoting management efficiency and enhancing business outcomes. The corporate structure is illustrated as follows:
Huawei is recognized for its rapid growth, having created a strong impact within a short period of time. In doing so, Huawei’s strategy involves research and development, which the company invests heavily on to ensure that it offers innovative solutions for its customers in terms of technology and internet solutions. Targeted innovation dominates its strategy, in a bid to satisfy its customers. To achieve this, Huawei maintains a strong research team to ensure that it maintains technological leadership in a globally competitive environment.
Huawei’s greatest capabilities lie in its innovative products, technology manufactured competence, brand strength and a global customer base. Huawei’s products are popular across the globe, based on their high quality and performance. This has also contributed to the company’s strong brand, thus enhancing its global performance to a great extent. Huawei’s manufacturing efficiency ensures that the company can produce high quality products to meet customer needs. High profitability potential helps the company effectively meet its obligations while its investment in research and development capabilities have ensured that the company produces innovative products that appeal to customers.
Huawei’s success in the United States has been hampered by its association with the Chinese government, thus raising security issues. It is alleged that the company’s policies on cyber security have been influenced by government involvement. As a result, Huawei has undergone security audits to determine its business suitability in the United States. Its future still remains unclear, given the lack of trust by the US government.
In terms of corporate structure, the company has been divided into group functions including enterprise business group, carrier, consumer, and service business groups. Each of the group leads answer directly to the CEO or rotating CEO. The rotating CEO structure is a structure in which the company has a different CEO every six months. There are three CEO: one is the founder while the other two are rotating CEOs. Depending on the CEO in office, he or she is considered the highest officer within the company. This structure is shown as below.
SECOM’S strategy involves the use of diversity and innovation in providing the most reliable security solutions. The company is known for its high quality security systems and tools that they provide for all sectors, ranging from simple security cameras to high level security infrastructure. High product quality and customer satisfaction drive the company’s strategy.
In terms of capabilities, SECOM PLC prides itself as a strong force in security technology. This signifies strong expertise in developing security solutions, installations and maintenance. Accordingly, SECOM has a large market share and this has a significant role in promoting performance.
SECOM has a team of highly qualified engineers, with the ability to develop, install and maintain security devices and systems. The company’s innovative model of national accounts plays an imperative role in enhancing customer service. Customers are provided with service accounts and provided with support from the company based on where they are located.
SECOM’s organizational structure takes on a centralized strategy in management, where the management regional office functions report directly to the head office. The section heads respond to the managing director and have several levels under them, making the system highly bureaucratic. The corporate structure is provided by SECOM as below.
Samsung follows the vertical integration strategy, which involves owning the production line, from the supply of raw material to final production. Samsung has developed strong capabilities in terms of its supply chain. The company manufactures its own parts including chips, processors and screens using specialized manufacturing innovations that it has mastered over the years.
Samsung owns extensive factories in which it produces mass quantities of phone and TV parts, some of which are sold to competitors in the market. Vertical integration ensures that a company can benefit from low production costs and also enhances efficiency. This strategy gives Samsung a competitive advantage in that by controlling the manufacture of the chips, Samsung is confident that the quality of the parts will be high and consequently the quality of their products.
Samsung has numerous capabilities and core competencies. The first capability is its financial capacity, which has been built over the years to make Samsung a highly profitable company. This ensures that the company has adequate financial resources to manage operations, invest in research and development and to promote business continuity. The second capability is its strong brand which is known across the world. Samsung’s phones and TVs are highly popular, with over one third of Europe owning a Samsung TV (Samsung Profile, 2016).
The third capability is its innovation capacity, fueled by a persistent culture of research and development. Samsung invests heavily in R&D in order to ensure that the quality of its products is maintained at the best possible standards. Another capability is its ability to undertake mass production through its massive plants. Samsung is also well endowed in human resource capabilities, employing approximately 14,000 employees in Europe (Samsung Profile, 2016).
The influence of the government on Samsung’s growth is evident. South Korea invested highly in Samsung during its initial days of international expansion through providing the company with financial support, waiver of tax rebates and promoting a friendly business environment. As a result, Samsung grew to become one of South Korea’s largest corporations, contributing over 20% of the country’s gross domestic product. Therefore, the influence of Samsung on the government is immense and Samsung is known to receive protection from the government (Harlan, 2012). This may promote its future performance business continuity.
The corporate structure at Samsung is considerably horizontal and subdivided in terms of divisions within the company. Each division head answers direct to the CEO as seen below.
The companies discussed above portray strong dedication to customer satisfaction, mostly achieved through the development of innovative products resulting from research and development investment. Each company maintains a dedicated R&D department aimed at developing quality products and new innovations to promote success. However, the companies differ in terms of how they approach sustainability and thus ensure business survival in the face of increasing competition.
Mitsubishi’s approach involves investing in diversity, which according to Johnson et al (2014), ensures that a company can manage its risks more effectively. When a company uses diversity as a strategy, successful business segments can effectively complement others when they are not performing well due to various factors in the business environment (Grant, 2016).
Hitachi’s approach towards sustainability is exemplified in the company’s quest to identify future needs of customers in order to ensure that they are effectively met. The social innovation model presents a unique strategy towards promoting customer satisfaction and consequently increased profitability (Weber, Weggeman & Van Aken, 2012). SECOM, Samsung and Huawei’s approaches are closely related because they focus on customer satisfaction through innovation.
Notably, customers are drawn to companies that provide them with unique products and constant research and development is needed to ensure that this is achieved (Woojung & Taylor, 2016). These companies invest considerable amounts in research and development in order to develop innovative products for their customers. As far as Samsung is concerned, vertical integration stands out in its strategy, being the only company that has a considerable influence on its supply chain.
By owning and controlling manufacturing bases in which phone and TV components are manufactured, Samsung can quickly develop innovative ideas into new products ahead of its competitors (Kambara, 2013). Furthermore the company saves on costs for buying the components and gains revenue from supplying other companies in the sector. While each company takes its own approach to strategy, the ultimate goal is to enhance customer satisfaction and hence improve on profitability and market growth (Fitzgerald & Jiangfeng, 2015).
The core capabilities of the organizations differ widely across a myriad of factors as established in the various company profiles. It is notable that all the companies have managed to create a strong brand name internationally, which is critical in promoting their survival in the industry. Secondly, their financial performance is a major strength for all the companies, with each aiming at providing the best quality products to promote profitability.
Manufacturing capabilities are demonstrated in each of the companies and so is the human resource capacity as a core capability in promoting innovation. Unique models applied by each company also stand out in the analysis of capabilities as follows: Diversity for Mitsubishi, innovation efficiency for Hitachi and Huawei, expertise in security solutions for SECOM and a strong brand name and manufacturing efficiency for Samsung. Based on their unique capabilities, these companies have managed to be successful in the market and make considerable profits based on their activities.
The nature of the organization’s corporate structure determines its performance to a great extent as it influences power distribution and organizational efficiency (Hitt, Ireland & Hoskisson, 2012). The rise in decentralization as evidenced in the companies discussed is an illustration of what is put forth by Sheldon & Malcom (2011), that Japanese companies are increasingly discovering the impact of decentralization on performance efficiency on international firms.
SECOM PLC however maintains a centralized system unlike other organizations which have separate functions for each regional office. At SECOM, various departments report to the corresponding department at the head office. The sales department for example reports directly to the marketing department at the head office, as opposed to reporting to the regional head. A centralized structure insinuates that the management of the organization is done centrally (Wong, Ormiston & Tetlock, 2011).
This may impact the organization through slow decision making and bureaucracy, thus reducing performance potential (Musibau, 2016). On the same note, the use of a vertical corporate structure which consists of lengthy reporting lines as evidenced by SECOM, Mitsubishi and Samsung is evident. This raises the question on whether decisions are harder to make in these organizations, compared to horizontal corporate structures where fewer reporting lines exist as in the case of Hitachi and Huawei.
The role of the government in Japanese and Chinese governments in supporting multinational companies to expand internationally is inevitable. Pearce (notes establishes that in the initial years, organizations received support from the government in expanding their operations, in a bid to encourage international expansion. In the case of Hitachi, Samsung and Mitsubishi, the government was particularly influential in their international expansion.
Samsung’s consequent control of the government is an indication that government influence can contribute significantly to organizational performance. The corporation is considered untouchable because its contribution to the country’s income is high enough to render the country disoriented if withdrawn, hence the notable protection. The Korean government has in many instances been accused of favourism towards Samsung, letting the company get away with regulation issues (Marlow, 2015)
The companies compared in this paper effectively illustrate why an effective strategy is instrumental in an organization’s performance. Based on their innovative and dedicated strategies, each of the five organizations has managed to surpass expectations, by being among Asia-Pacific organizations that are leading in global performance.
Secondly, core capabilities play the role of driving business based on a company’s major competencies. This is evidenced in the discussion, where all the companies compared have a unique set of characteristics that have contributed to their growth internationally.
Thirdly, the corporate structure of an organization to a great extent influences performance and a decentralized structure is considered more desirable in managing modern day organizations compared to centralized structures (Malaurent, Yan & Avison, 2016). It is also notable that government control has been influential in the expansion of a majority of the firms discussed. Accordingly, the government continues to influence these organizations, thus impacting their performance.
The discussion brings out unique observations for each company discussed. These can be summarized as follows.
Mitsubishi emerges as an example of global leadership based on diversity. Literature on diversity suggests that diverse companies tend to survive better in the competitive world and are more resilient to harsh economic conditions.
Hitachi establishes that customer centrism is the modern approach to enhancing competitiveness. Through adopting the social innovation model to increasingly focus on involving customers in the innovation process, Hitachi demonstrates that customers are key contributors to strategy.
Huawei demonstrates that targeted innovation could be useful in high technology organizations where new trends keep emerging. Through investing heavily in research and development, Huawei has successfully identified opportunities for growth by providing solutions for contemporary technology users. This has contributed greatly to its rapid growth.
SECOM’s value in expertise emerges as a strong factor in driving success. SECOM is not only innovative but it also strives to promote sustainability through ensuring that the solutions they provide to clients serve them effectively, through setting up a customer support system.
Samsung’s success in the global arena and consequent classification as an ‘untouchable’ is a clear demonstration that government influence can have a significant impact on an organization’s success. Samsung has a form of ‘insurance’ in government backing and its survival is largely assured based on government support. Samsung also provides a valuable lesson on vertical integration and could be an ideal example of how companies could save on costs by managing their supply chains.
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