Strategies of gaining competitive advantage at the generic and business unit level: A study comparing American, Japanese and German companies operating in the United States

Multinational Business Review, Spring 2000 by Shah, Abhay, Zeis, Charles, Ahmadian, Ahmad, Regassa, Hailu

In a recent survey regarding the relationships of corporate management and the board of directors, it was found that boards of directors are not concerned about quality issues (Quality Progress, 1993). Many U.S. firms have initiated quality programs, but they also report that they are not being implemented properly. Some use quality audits to assess the results of their programs.

Germany has the highest labor cost in the world. However, despite this shortcoming, Germany consistently earns high praise for the quality of its products and services (Bowles, 1993). Consumers typically regard goods made in Germany to be better than those from the U.S. or Japan (Mussey, 1992). The International Quality Study by Ernst & Young (1992), examined firms in the automotive, banking, computer, and health care industries in Canada, Germany, Japan and the United States. The results of their study exhibit that German corporations are twice as likely as their North American counterparts to turn consumer requirements into their products and services and Japanese companies are three times more likely to do so.

Furthermore, studies reveal that Japanese managers emphasize the systematic application of process simplification and cycle-time reduction to improve quality more than managers of other countries. European and Japanese multinationals also evaluate information regarding the business consequences of quality performance more than U.S. companies (Ernst & Young, 1992).

Marketing Issues

Marketing has typically been considered as part of the strategic business unit level strategy, and has been defined as "customer orientation, competitor orientation and inter-functional coordination". Japanese companies are becoming more customer oriented in comparison to American or European companies (Deshpande, Farley, and Webster, 1993), and have thus been very successful in the countries they have ventured into.

Japanese companies rely quite heavily on marketing for their success overseas. Even though Japanese companies possess production efficiencies, for marketing purposes they adapt their marketing to differences in customer tastes, competitors, product specifications, etc. (Doyle, Saunders and Wong, 1986).

The study by Doyle, Saunders, and Wong (1986) found that Japanese companies focused on quality and product extension, and spent more on promotion deals in order to achieve their objectives of high market share and ultimately dominating the market. Similarly, Kotabe (1990) found that Japanese corporations think that strategies relating to product are more successful than those employing price, promotion or organizational synergy.

RESEARCH METHODOLOGY

The Sample

Questionnaires were mailed to 860 CEOs of American, Japanese and German companies with operations in the US. Names of companies were randomly selected from the Directory of Foreign Owned Companies Operating in the U.S. and from the American Manufacturers' Association.

The Questionnaire

The first section of the questionnaire contained six items relating to company background. The second part of the questionnaire contained three items relating to strategic goals. The third part of the questionnaire contained thirteen items on what firms did in order to gain competitive advantage. Finally, in the fourth part, respondents had to identify key problem areas. The mailer contained the questionnaire, a short letter explaining the purpose of the study, and a self addressed stamped envelope. To encourage response, if respondents desired, they were promised a brief summary of the findings of the study.