RUNNING HEAD: MABUCHI MOTOR CO., LTD.

CASE ANALYSIS

Mabuchi Motor Co., Ltd. Case Analysis

International Management Assignment 3
Candidate: Emad AbouElgheit
ISM - International School of Management
Doctor of Philosophy (Ph.D.)

Presented to: Professor Peter Horn

21 March 2016
Word Count: 3,847

Abstract
This paper analyzes the case study of Mabuchi Motor Co., Ltd conducted in the year 1998. In
the year 1995, the leading small electrical motors Japanese manufacturer faced difficulties at the
beginning of implementing its NIHAO program in one of its Chinese subsidiaries. The program
aimed to train local potential Chinese staff to take over managerial positions in order to lead
local operations and reduce the expatriate Japanese managers percentage in offshore locations, a
strategic objective that Mabuchi realized it was a must to move towards true globalization and
integrating activities on a global scale. The paper analyzes reasons behind challenges that faced
the program implementation; the research proposes the key reasons behind these challenges
being the Chinese managers resistance to the program due to not being a part of the program
design, and having the fact that cultural aspects created a conflict between the ethnocentric
Japanese management approach and the local culture of potential Chinese managers. The paper
also studies Mabuchis organizational structure and leadership style that are also considered as
supporting factors that created the Chinese resistance to the NIHAO.
Keywords: Small Electric Motors, Japan, Internationalization, International Management, Case
Analysis, Mabuchi, Cross Cultural Management, Diversity, Cultural Differences, Organizational
Structure, Leadership

Mabuchi Motor Co., Ltd. Case Analysis

International Management Assignment 3
Introduction
The small electrical motors industry serves five main end user demands; motor vehicles;
appliances and other consumer durables; heating and cooling machinery; computers and office
equipment; and various industrial machines. Most growing demand found to be in computers and
office equipment, and appliances and durables.1 Mabuchi competed mostly in all of the main
categories.2 Small electrical motor makers compete primarily in product design and technological
performance aspects. The component-based industry depends on meeting the Original Equipment
Manufacturer OEM standards at the best design and the lower cost possible. In the rapidlygrowing and highly-competitive industry, the upper hand in bargaining power rests with the
OEMs.3
The industry has globalization potentials due to the possible high degree of
standardization in product features and the wide possible global base for sourcing and selling.
Forward integration can be very difficult for small electric motor makers as diversifying into
OEMs or full-product manufacturers requires a completely different investment levels and
technological knowhow. On the other hand, backward integration for raw materials supply can
achieve a competitive advantage. Accordingly, the low need for local responsiveness and the
average need for vertical integration should classify the industry as a regional industry,4 an
argument that is supported by the fact that the industry is dominated by Japanese and Asian
companies.5
The Japanese-led industry has forced Japanese companies to send their managers and
technicians overseas in order to control production quality and train local subsidiaries. However,

the number of expatriate Japanese managers across the globe has been declining.6 One of the
reasons behind these declining numbers is the relatively huge cost of sending a Japanese
manager overseas compared to its local peers cost with a ratio of 20:1 to 10:1 respectively.7
Another reason is the scarcity of supply for Japanese managers to send for expatriate missions
due to the increased number of offshore Japanese subsidiaries. Realizing the need for developing
and empowering local talents is also a key reason to achieve true globalization and efficiency.
The traditional Japanese "rice paper ceiling" practice of limiting non-Japanese employees from
managerial positions is starting to be discontinued by many Japanese companies overseas
especially in Japanese subsidiaries in the developed world such as the US.8 Approaching the
issue from a strategic perspective, it can be concluded as a natural evolution for any foreign
direct investment that the number of expatriate managers should decrease with the increase of the
market entry age and organization size. When local managers are well-educated on corporate
strategies and culture, they should be more capable of running business as planned.9 Since
Mabuchi started its international expansions as early as the 1996s,10 more numbers of local
managers in most offshore locations should be ready to take charge.
Analysis
After introducing the small electric motors industry overview and explaining reasons
behind the declining number of Japanese expatriates overseas, the paper analyzes Mabuchis key
business strategies, organizational structure and management methodology. Finally, the analysis
goes deeper into the cultural aspects, similarities and differences of the Japanese and Chinese
professionals, and how all factors can affect the implementation of the NIHAO program.

Corporate Strategies
Mabuchi Motors adopted primarily a concentric diversification strategy selling its
products to different sectors that demand end product with similar technological knowhow to
manufacture. The company also followed a balanced market development, product development,
and market penetration strategies dominating the Asian industry with a strong regional sourcing
and global selling base. The company depended on foreign direct investment in its expansions
aiming to maximize profit margin and control over production quality.11 Mabuchi has set an
example for Japanese companies to follow in terms of production efficiency by moving
manufacturing off the Japanese borders to lower wedges countries. In fact, the 100 percent
Japanese company never builds a product in Japan.12 Operations strategy follows a mass
production strategy with a high degree of standardization. It can be concluded that Mabuchi
followed a differentiation strategy providing high quality products and customer service for
global customers who traded such qualities for relatively higher prices.
In terms of Mabuchis position in the internationalization process, the company can be
described as an international organization, where core functions are centralized in headquarters,
and the company exports its production to many global markets. Regional subsidiaries are not
yet independent or integrating activities on a global scale.13 The path to the internationalization
can be described as an accelerated geographic expansion.14
Mabuchis competitive advantages are illustrated in its core competencies and intangible
assets such as; product quality, lean production, operational excellence, timely delivery and
qualified labor.15 According to the resource-based view, the intangibles and the rich sourcing
infrastructure are the primary sources of the competitive advantage. According to Porters
strategic positioning approach, the company was successfully able to take advantage of the

macro environmental trends and opportunities, as well as its continuous attempts to minimize
threats by having a less dependence on China as a prime manufacturing location and trying to
open new offshore manufacturing locations.16
Mabuchis diversification strategies held great advantages for the companys growth and
prosperity. The company successfully covered a wide range of product categories for different
industries. However, this diversification strategy can put difficulties on the implementation of the
NIHAO program by having the need to integrate local managers activities on both the regional
and the product division dimensions which can be more challenging at the beginning of the
implementation. Moving operations out of the Japanese border by foreign direct investment has
helped the company to decrease cost of sales significantly and lead the global market. This can
also help the implementation of NIHAO as the potential new local managers will be exposed to
all aspects of operations with a freedom to experiment new methods and strategies. As for the
differentiation strategy and the adoption of strict quality standards; it can be a double edged
weapon in the NIHAO implementation by exposing local managers to tough quality measures
that forces them to either succeed in implementing, save huge costs which can help the
companys globalization, or to fail which can lead to additional training investments and time.
Organizational Structure and Management analysis
Taking the Chinese subsidiary of Dalain as an example, we find it an example of a pure
functional structure where a great respect to hierarchy and formal reporting lines. Yet, the
structure suites mass production industrial firms. Moving to a wider scope of Mauchis
corporation global structure, we find it mostly a functional structure with some elements of the
product division and the international division organizational structures.17 It can be concluded
that this mix is the result of the attempts to globalize the traditional functional structure by

assigning general managers to control product division and country managers to control overseas
locations. The new Mabuchi 21 steering committee is found to be extremely distant from
overseas operational and divisional managers in terms of hierarchy and reporting line. The local
affiliates run by Japanese expatriate managers are working under the global structure and
implementing strategies set by the headquarters,18 a strategy that is found to be mostly adopted
by corporations that face both high pressures of globalization and low local affiliate capabilities19
which is not the case of Mabuchis Japanese managers. A 100 percent of the manufacturing
general managers are expatriates, while around only 10 percent of all factory managers are local.
The two local factory managers are in Chinese locations. In the section chiefs category, there is
an obvious inconsistent ratios of local versus expatriate numbers across different locations.
However, the average number for all locations shows a higher percentage for locals. Below the
section chiefs level, no expatriates are found.20
The implementation of the NIHAO program assigned local Chinese managers to handle
separate activities that dont overlap or interrelate assuming such strategy can minimize internal
conflicts.21 In terms of leadership and decision-making styles, the company adopted a
transactional leadership style where contingent rewards based on performance are applied,22 a
management strategy that is mostly found in multinational corporations.23 The ethnocentric
Japanese management style put great power to its proved-successful management philosophy24
which is applied across all global locations with the minimal local adjustments to meet each local
need.
Looking at the strengths and weaknesses of Mabuchis organizational structure and
management style, we find that the functional structure is suitable for industrial organizations
seeking a great degree of standardization and operational efficiency.25 The structure also helps

having faster decision-making processes due to the centralization and the legitimate power of
line managers. Having Mabuchi 21 committee on the top levels of corporate structure can
empower the strategic initiative and helps a faster implementation of the NIHAO program. The
high level of expatriate managers in global locations should help transferring the corporate
strategies and culture to offshore subsidiaries. The transactional leadership can motivate
employees to work harder and achieve greater efficiency and effectiveness in operations.
However, these strategies also hold many weaknesses such as; the difficulty to transfer and
execute corporate level strategies to local operations due to a great power distance between both.
The functional structure doesnt empower local managers to innovate with an entrepreneurial
spirit in order to compete in developing their own business units and take creative approaches
and decisions, as well as it can prevent them from integrating and sharing knowledge with their
peers overseas. The increased level of expatriate managers especially in top positions can
demotivate ambitious local individuals who are capable and holding a non-utilized valuable local
market knowledge. Such structure and strategy can also create a natural resistance to the NIHAO
program as it can be perceived as an outsiders agenda to be applied disregarding individual local
location needs. Separating local managers activities in the NIHAO program isnt utilizing a
valuable team spirit and sharing knowledge among local Chinese managers that is an integral
part of their culture.
Cultural Aspects Analysis
The Japanese culture is a unique one among its regional similar Asian cultures as it
represents a mix between the authentic collective Asian cultures from one hand, and the
masculine and individualistic Western cultures on the other hand. The parochial approach in
implementing the NIHAO program indicated cultural conflicts between the enforced Japanese

management system and the Chinese managers. In order to spot the real cultural conflicts points
and the degree of which each conflict can impact the implementation of NIHAO, the paper puts a
conceptual framework to analyze the Japanese-Chinese cultural differences through selected 13
key cultural aspects of; individualism, informality, materialism, time orientation, power distance,
uncertainty avoidance, masculine/feminine, how hierarchy and managers role is
perceived,26economic and political Philosophy and religion and education.27 (See Exhibit 2)
Gap analysis finds higher gaps in power distance, masculinity/femininity, hierarchy and
managers role, and religion and political philosophy, while the two cultures are found to be
close in terms of time orientation and uncertainty avoidance. Looking deeper into the cultural
differences, we find that the two cultures perceive ones relationship to the universe differently.
In the Japanese culture, events and circumstances are under ones control, planned activities
should simply happen if resources to accomplish are available. On the other hand, Chinese
employees may tend to believe that future events are previously-determined by a higher force
that is out of individuals control. Ones responsibility and space in the Chinese culture are
extended to include colleagues, family and community unlike the individualistic Japanese
culture. Chinese put higher values to the actual process or journey to achieve something than the
actual results. Managers and power distance are primarily people-oriented and not results or
objectives-oriented. Informality in the Chinese manager-subordinates relationship is highly
contrasting with the strict Japanese relationships in that matter, team achievements are praised
more than individual achievements, room for innovation and individual initiatives and
compensations are uncommon. In terms of higher education and professional training quality,
Japan is found to be a long way ahead of China in that matter. Quality of the Japanese education
system does not stop at primary education, but also to the higher education and training unlike

the Chinese education system. These academic qualities are intensively-needed in managerial
positions. Having a pool of Chinese local managers that have the necessary education and
training can be challenging. On the other hand, the two cultures are similar in terms of their longterm view of time. Both cultures do not feel the typical Western tense time pressure in
accomplishing activities, instead, they tend to give enough time to consider and implement
business activities, an approach that matches another cultural aspect with a low gap between both
cultures which is the level of uncertainty avoidance. Both cultures are hesitate to do things
differently or to test new initiatives. Both prefer to do things the way proved successful before
and take lower risk levels in business activities.28
In a general look we find that differences between the two cultures are more than their
similarities. Adding to the problem, most differences do not present a challenge in the lowerlevel or workers class in Mabuchis operations in China, but they do present huge challenges
among senior-level and management Chinese staff and accordingly the implementation on the
NIHAO program. Chinese managers cultural norms and values would be naturally-resistant to a
system that doesnt give enough credit to team accomplishments and promotes individual
contributions instead. The Chinese perceived responsibility for the wellbeing and
accomplishments of their staff and the casual relationships can conflict with having the necessary
strict and disciplined Japanese management system. In addition to that, the enforced Japanese
system is perceived as a materialistic and capitalistic system that is imposed on them and doesnt
promote highly-rated spiritual and idealistic values of the Chinese staff, but only aims to achieve
more profits.

Conclusions
The unsuccessful implementation of the NIHAO program in China is primarily due to a
strong resistance by the Chinese staff. This resistance is due to culture-related aspects whether
these aspects are illustrated in the differences between the Japanese and Chinese business
cultures or due to the management and corporate structure aspects that resulted from the
ethnocentric Japanese culture and derived Mabuchi to enforce its parochial system in China.
Mabuchi didnt take advantage or plan to avoid threats of cultural diversity in the design and the
implementation of the NIHAO program.
Mabuchis international exporter behavior doesnt empower offshore subsidiaries to
manage their business units based on what is suitable for each local talent, culture, and needs.
Instead, all offshore subsidiaries only implement centralized strategies comes from the
headquarters which creates a natural resistance to the NIHAO program implementation having
the fact they didnt participate or had an input in designing it, while believing they know their
own home countries better, and having the fact that they shouldve already gained a lot of
experience in Mabuchis business considering the older age and size of the Chinese operations.
The resistance to the program is also empowered by the natural uncertainty avoidance in the
Chinese culture and their negative perception to the materialistic values and capitalistic
approaches. The separate assignments designed for local managers did not plan to take advantage
of the collective culture and lack of individuality among Chinese starting managers. The strict
contingency policies to compensate individual high performers and penalize low performers did
not take into consideration the strong people orientation among Chinese managers who perceive
themselves as socially-responsible for their subordinates. Having a 100 percent of
manufacturing activities out of the Japanese borders helps cost savings but also represents a

greater management challenge of forcing Japanese managers to manage operations outside of

their comfort zone. Even having Japanese expatriates at a higher cost did not leave them to
autonomously plan and manager their locations. Accordingly, the high investment did not
leverage their experience and capabilities, but assigned them to just execute strategies from the
headquarters.
The Mabuchi 21committes location in the functional organizational structure holds a
great challenge to study and exchange information with local people on the ground to take their
input, interact and brainstorm in designing the program. In other words, local teams are not
represented at all in the committee planning to introduce a new program for them to implement.
Since local affiliates are mostly run by Japanese expatriate qualified managers, a great deal of
local innovation on the country level is lost, as well as causing to bare a greater cost of the
Japanese expatriates.
The NIHAO program design didnt take into consideration how to leverage the huge
potentials of the Chinese collective and spiritual culture and the strong community and family
orientation in order to achieve greater cost savings and a higher employee morale. The program
also didnt take advantage of the similarities between the two cultures in terms of uncertainty
avoidance and time orientation to achieve greater mutual understanding and communication. It
can also be easily concluded that Mabuchi didnt invest in developing a strong global corporate
culture that can minimize the cultural differences between nations.29
Recommendations
At this point, Mabuchi has the option to continue the implementation of the NIHAO
program with more strict policies to enforce the corporate headquarters management style and
culture on the Chinese managers, a process that is expected to face more resistance, time and

costs investments. But using this alternative can achieve Mabuchis strategic objective eventually
to start depending on local managers in China. Another option is to abort the NIHAO program
and leave Japanese expatriates to run Chinese operations, an option that continues to drain the
companys financial and personnel resources, as well as creating a strong demotivation for
ambitious Chinese potential managers. This alternative can put Mabuchis strategists at a position
of failure to achieve one of the companys strategic objectives. A third alternative is to pilot the
program in another less-strategic global location such as India or Taiwan instead of China, study
outcomes, tweak and fine-tune the program and reintroduce it in China. Using this alternative
can also help achieving the desired strategy with a time delay to implement in Mabuchis main
operations location.
However, the above alternatives treat the problem from a tactical perspective and dont
help the companys way into true globalization by starting its first offshore management program
based on a tangible and quantifiable understanding of global management approaches.
In September 1995, Mabuchi should pause the implementation of the NIHAO program
for a period of three months. This period should aim to redesign and tweak the NIHAO program
towards more tolerance and understanding to local culture and needs. The organization should
also study a change to its global organizational structure. Mabuchi 21 committee should add to
its team local Chinese country managers. These local elements should be one of the primary
inputs in the design of the NIHAO program. The management should explain thoroughly the
importance of this program to local staff in a form of clear and defined objectives that can
directly relate to them. For example; we want to have a 50 percent of our management team in
China of local staff by the end of the year 1997, we want to raise the overall labor productivity
and wedges by 20 percent at the same time. The company should also communicate and address

possible limitations as well as potentials of labor, budgets and resources to local staff clearly. The
management should adopt a friendly and open communication style with local staff to spot
specific issues and resolve real problems, with the notion of mutual respect and partnership
spirit.30 Mabuchi should allow local staff to address their key diversity issues to be taken into
consideration and promote open and constructive discussions about diversity.31 The NIHAO
program should be communicated and positioned internally as a way to raise the Chinese career
aspiration and community overall in a positive way by providing training programs and career
development plans.
Regarding the organizational structure, Mabuchi should abort its rigid organizational
restructure into a new global product division structure mixed with a regional and country
management matrix to suite its current capabilities of having low local affiliates capabilities,
high product standardization and product specialization (See Exhibit 1).32 The new structure
should have vice presidents to oversee each product categorys global operations, R&D, sales,
marketing and sourcing, where these functions are responsible for business development, sales
and overall product performance. The new global structure should also include country managers
to act as liaisons between local functions and global product management; these managers are
compensated based on cost reduction and production efficiency. Regional centralized research
and development centers should be in Japan, Europe and North America and should be
responsible for the global and regional product innovation and design. Regional directors will
have a dotted reporting to global product VPs, and Mabuchi 21 committee will coordinate
between the executive level and the country management level (See Exhibit 1).
Aspatial career assignments should be held for Chinese managers to travel to the
headquarters and accomplish global missions in order to get exposed to different cultures and

management styles. These assignments should be planned and compensated properly to avoid
possible disappointments after completion. SWOT teams consisting of global and autonomous
talents should be created to minimize the cost of permanent expatriate positions towards more
flexible and cost effective global problem solving strategies.33
A global function of corporate communication should be created to build a strong
corporate culture taking into consideration all current and future aspects of cultural diversity and
inputs from each culture to come up with a documented code of conduct that carries global
values of mutual respect, quality, innovation, and team work. Each existing and new employee
should be oriented and educated about the corporate culture in all locations and positions.
Knowledge exchange between International teams should be facilitated, global recognition
programs, job rotations, corporate events and social activities should be held to help narrowing
national differences into a one global corporate culture. The corporate communications role
should be extended to reach local suppliers and partners in building a global corporate brand that
cares for community and adheres and celebrates local cultures.

Exhibit 1 Recommended New Mabuchi Global Organizational Structure

CEO

Audio & Visual

VP

Information &
Communication
VP

Automotive VP

Regional
Director Asia Pacific

Regional
Director Americas

Home &
Industrial VP

Regional
Director Europe

Mabuchi 21
Committee

Country
Managers

Opeartions

Country
Managers

Sales

Country
Managers

Marketing

Local R&D

Purchasing

Quality

Sources: Beamish, P. & Morrison, A. & Rosenzweig, P. & Inkpen, A. (2002). International Management: Text and
Cases.34

Exhibit 2: Japanese-Chinese Business Culture Gap Analysis

Cultural Aspect

Japanese

Chines Culture

Gap Analysis

Individualism

Culture
Partially-

Highly-

Medium

Informality
Materialism
Time Orientation
Power Distance
Uncertainty

Collective35
Formal37
Materialistic39
River41
Highly-Perceived43
Tolerant45

Collective36
Informal38
Low Materialistic40
River42
Lowly- Perceived44
Avoidant46

Medium
Medium
Low
High
Low

Avoidance
Masculine/Feminin

Highly-

Feminine48

High

e
Hierarchy and

Masculine47
Strict, Directive49

Loose,

High

Managers Role
Economic

Market Economy

Supportive50
Mixed Economy

Medium

Philosophy
Political

Partially-

Communist

High

Philosophy
Religion

Democratic51
Mostly No

Buddhism/Collecti

High

Higher Education

Religion52
High54

ve53
Low55

High

and Training
Quality
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Meyer, E., & Shen, E. (2010). China Myths, China Facts
Ralston, D. A., Holt, D. H., Terpstra, R. H., & Yu, K. (1995). THE IMPACT OF CULTURE AND IDEOLOGY ON
MANAGERIAL WORK VALUES: A STUDY OF THE UNITED STATES, RUSSIA, JAPAN, AND CHINA
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Accessed July 3rd 2011
Roger Darlington's World Blog. A SHORT GUIDE TO THE JAPANESE POLITICAL SYSTEM . Roger
Darlington.
WikipediaWebsite. Religion in Japan. WikipediaWebsite. Accessed July 3rd 2011
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End Notes

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33 Roberts, K. & Kossek, E. & Ozeki, C. (2003). Managing the global workforce: Challenges and
strategies. The Academy of Management Executive;, 12(4), 93.
34 Beamish, P. & Morrison, A. & Rosenzweig, P. & Inkpen, A. (2002). International Management:
Text and Cases. USA: McGraw-Hill/Irwin.
35 Miroshnik, V. (2002). Culture and international management: a review. Journal of Management
Development, 21(7/8), 521. Retrieved from EBSCOhost.
36 Miroshnik, V. (2002). Culture and international management: a review. Journal of Management
Development, 21(7/8), 521. Retrieved from EBSCOhost.
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Business Horizons, 35(6), 27. Retrieved from EBSCOhost.
38 Goerzen, A. & Beamish, P. (1998). Mabuchi Motor Co., Ltd.. Ivey Management Services.
39 Miroshnik, V. (2002). Culture and international management: a review. Journal of Management
Development, 21(7/8), 521. Retrieved from EBSCOhost.
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Development, 21(7/8), 521. Retrieved from EBSCOhost.
42 Miroshnik, V. (2002). Culture and international management: a review. Journal of Management
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