Honda Motor Co Ltd (ADR) (HMC) Globalization Model is One that Other Companies Should Emulate

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Honda Motor Co Ltd (ADR) (NYSE:HMC)’s method of globalization is one that other multinational companies should take cues from according to author Jeffery Rothfeder, who discussed today on CNBC his book “Driving Honda: Inside the World’s Most Innovative Car Company”, and the practices that Honda Motor Co Ltd (ADR) (NYSE:HMC) employs which bring them more success globally than most other multinational companies.

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“[…]in every market it goes into, whether it’s Europe, the United States, China for example, they set up localized operations. They end up being run by local people, managed by local people, designs are done by local people, and so in the end, even though they struggle like a lot of companies do globally, they end up getting the best profit margins of anybody in their industry, and so that’s the main reason for their global record of success I think,” Rothfeder said.

Decentralization is one of the key elements of Honda Motor Co Ltd (ADR) (NYSE:HMC)’s foreign success according to Rothfeder, and something other companies struggle with. Though they often make the claims to each market they go into that they’ll be delivering a product and service uniquely tailored to them and their culture, ultimately all decisions end up still being made by the centralized power structure in the company’s home territory, including research and design of products.

Rothfeder contrasts Honda Motor Co Ltd (ADR) (NYSE:HMC)’s operational style sharply with that of Toyota Motor Corp (ADR) (NYSE:TM), whose production systems are often held up as a model to emulate, but whose centralized structure proved catastrophic during their massive recall process from late 2009 to early 2010, when foreign chapters of the Japanese automaker were unprepared to handle the crises unfolding in their own backyard.

Jim Simons’ Renaissance Technologies fund is the largest shareholder in Honda Motor Co Ltd (ADR) (NYSE:HMC) with 984,400 shares as of their last 13F filing on June 30.

Disclosure: none

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