A Comparative Research Of Toyota And PSA Peugeot Citroen Essay Sample For College

The home bias in the automotive industry, a comparative research of Toyota and PSA Peugeot Citroen.

Introduction

The last decade has been characterized by an increasing focus on the globalization within the various departments of multinational businesses.

The urge of firms to adopt a global business strategy in order to sustain its competitiveness in the current markets is also visible in the R&D area, as many have launched globalization initiatives motivated by the opportunities to attract foreign talent, create competitive cost structures, and create market proximities. Mergers and acquisitions further stimulate the adaptation and integration of R&D activities. The automotive industry, however, is showing a somewhat distinguished picture.

As scientific knowledge and technological expertise are becoming increasingly regionalized, and technologies are changing more rapidly than ever, automotive manufacturers are forced to keep a tight eye on their R&D efforts (Calabrese, 2001). This relates to the argument that R&D projects should sometimes be kept within the home base for security reasons. In fact, R&D globalization in the car industry appears to be somewhat limited compared to that of other industries in terms of international duplication and diversification of technology (Calabrese, 2001).

This trend, also known as the home bias, is described by Cohen et al. (2009) as applying especially to more important R&D processes. This paper examines the major R&D activities of Toyota and PSA Peugeot Citroen by comparing several indicators and relating these to institutional differences.

Research Design

Numerous reasons could explain why an automotive manufacturer may not globalize its R&D activities. One problem may relate to corporate inertia; sometimes a gravitational pull can be seen towards the accumulated assets and capabilities (Cohen et al, 2009).

Especially when dealing with incremental shifts R&D projects may be biased towards the old knowledge base. Another issue is maturation, since foreign R&D subsidiaries are likely to encounter a certain learning curve, which prevents them from initiating in any core strategic R&D projects until they have gained sufficient experience. Additionally, complexity plays a role because a car consists of over 30. 000 parts which need to be put together somehow. Other reasons relate to the requirement for multidisciplinary inputs (design, technology, ICT etc), and the need for prototyping and testing.

In order to provide an insight into the home bias and highlight constraining effects caused by national differences, this paper compares the major research and innovation processes of Toyota and PSA Peugeot Citroen, and will discuss the following research question:

To What Extent Do Geographical Constraints Characterize the R&D Projects of Toyota and PSA Peugeot Citroen and What Explains Them?

Toyota and PSA Peugeot Citroen provide an interesting comparison because they have different countries of origin, and differ greatly in size.

Toyota being the largest car manufacturer in the world, and Peugeot still mainly operating in Europe (few numbers are sold in South-America and a new R&D center was set up in Shanghai in 2008), both two firms are both claiming to strive or globally integrated R&D facilities, but do they really act accordingly? In order to answer this research question, several helpful indicators are examined which all provide information about the true location of their major R&D projects.

The indicators are:

• Patent filing; which percentage of patents filed originates from which R&D facility?

What information can be derived from this?

• Functions and locations of R&D centers;
• Which R&D facility is responsible for which developments/projects?
• What causes this specific allocation of functions?

The information derived from these indicators will enable the formulation of statements concerning the existence of geographical constraint in automotive R&D in general and for Toyota and PSA Peugeot Citroen in particular. Various sources are used for this paper; academic articles, newspaper articles, company websites and publications, and case studies to name a few.

All were found through academic databases, online journals, search engines (such as LexisNexis Newsportal and GoogleScholar) and the internet.

Background of Toyota

The company After becoming an independent and separate company in 1937, Toyota now has become the world’s largest car manufacturer (history of Toyota and New York times 2008) It has its headquarters in Japan and 552 subsidiaries and also manufacturing plants all over the world. Toyota includes several car brands, which are Toyota, Lexus, Hino and Daihatsu.

Besides this core activity car manufacturing, it is involved in several other business like housing, financial services, communications, marine vehicles, biotechnology etc. (Official website Toyota) Lately sales and profit went down for Toyota, while in 2008 they still made profits, in the first 6 months of this year the company made a loss of 437 billion yen (2,99 billion euro). Therefore, several plans concerning improving sales and cutting cost are made for the upcoming time (financial results 2009, Toyota) Strategy

Toyota is aiming to become a true global company and to achieve sustained, long-term growth. They are trying to achieve this by providing high-quality vehicles globally and also by awareness of the society. The way Toyota works is quite specific, in the development phase lean manufacturing and Just in time production were really important for the company. The company’s ‘the Toyota way’ has four different elements ·Long-term thinking as a basis for management decisions.

• A process for problem-solving.
• Adding value to the organization by developing its people.

Recognizing that continuously solving root problems drives organizational learning. Furthermore it is very important for Toyota to take environmental awareness into account, therefore they continue to develop more environmental friendly cars and works on the development of hybrid and alternative energy solutions. Furthermore it tries to take economic development into account through the expansion of regional operations. As it sees itself as a true global company, they have stepped up human resource development efforts around the world.

Finally they are trying to be a company in which employees are support to be individually creative but also provide good teamwork and also communication and dialogue are important aspects (annual report 2008) R&D Since its founding, Toyota has been aiming to enrich society through car making. The main goal is to be a “good corporate citizen,” constantly winning the trust and respect of the international community. Continuing in the 21st century, Toyota aims for stable long-term growth, while striving for harmony with people, society and the environment.

The first step that Toyota can take toward a sustainable society for the future is to conduct research and development related to its primary business, mobility technology. Toyota will realize sustainable mobility, which targets an automotive society where people and the earth live in harmony. To do so, Toyota is moving ahead with research and development that at all times takes into consideration the integrated whole of urban spaces and infrastructure, people, and mobility. Toyota’s fundamental stance with regard to technological development is embodied by the terms “Zeronize” and “Maximize. “Zeronize” symbolizes the vision and philosophy of its persistent efforts in minimizing the negative aspects of vehicles, such as environmental impact, traffic congestion and traffic accidents, while “Maximize” symbolizes efforts to maximize the positive aspects of vehicles, such as fun, comfort and convenience, which are desirable in automobiles. In R&D, Toyota focused its efforts on three key areas: environment, safety and energy. It made a special effort in the area of the environment by expanding its line-up of hybrid vehicles, and has worked on R&D relating to plug-in hybrid.

In addition, as part of Toyota’s efforts to respond to the diversification of energy, Toyota plans to introduce a flex fuel vehicle in the Brazilian market that will run on 100% bio-ethanol fuel. From this point on, based on the philosophy of providing “the right car, in the right place, at the right time,” and in accordance with the infrastructure and customer needs of each region, Toyota will continue to promote efforts to develop environmentally friendly technology and vehicles.

Toyota places a great deal of effort and resources in Research & Development. Toyota’s philosophy is all about continuous innovation in order to promote a more and more sustainable mobility. The R&D figures concerning Toyota definitely back this view, since the Japanese car manufacturer ranks 6th in the world classification in terms of aggregate R&D spending, with a total investment of € 5423. 93 million in 2005, with an increase of 10. 7% compared with the previous year. It also scores above the automobile sector average, whose increase was only 5. 7%.

Toyota Motor Corporation is the third car manufacturer worldwide in terms of amount of resources invested in R&D activities, although the gap between the first top 3 companies is not significant, especially if the profitability of each of them in relation to sales is not taken into account. Toyota has 11 different research and development centers at different locations. The R&D headquarters are located in Toyota city, Japan. Furthermore, three of the other R&D departments are also located in Japan, two in the United States, three in Europe, one in Australia and one in Thailand.

The centers have different activities they perform like design, technical research, testing and evaluating etc. The type of cars Toyota tries to develop in its R&D centers is one that is attractive, affordable and of high quality, but which is also clean and safe and can be used worldwide. A big role in the development is given to the reduction of the negative aspects of cars, such as environmental harm and dangers related to accidents In the year 2008, total R&D expenditures were 958. billion yen, which was higher compared to the previous year and 3,6% of their net revenues. The company believes these expenditures are crucial in order to remain competitive. (annual report 2008).

Background of Psa Peugeot Citroen

The company Originally started by Armand Peugeot, Societe Anonyme des Automobiles Peugeot, as it was named, began producing and selling automobiles with an internal combustion engine in 1896. In 1976 Citroen SA and Peugeot SA merged, and the holding company PSA Peugeot Citroen was created. PSA Peugeot Citroen; one group, two marques explore their history, 2008) Today, PSA Peugeot Citroen is present in 150 countries and has a global market share of 5%. They main markets in which they sell their products are: Western Europe, Central and Eastern Europe, Latin America, Russia and China. Besides car manufacturing the group also involves in other types of businesses; it includes Faurecia which manufactures automotive equipment, Gefco which furnishes transportation and logistics services, Banque PSA Finance, which federates the group’s finance companies and Peugeot Motocycles which is a scooter manufacturer.

Most cars are manufactured in France, although more and more is being produced abroad, several other production plants are located in other parts of Europe and also in Argentina, Brazil and China manufacturing plants can be found. Nonetheless, the headquarters are mainly located in France In 2008 sales declined for PSA, compared 58. 7 billion euro in 2007 and in 2008 sales only became 54. 4 Billion, which of course can be caused by the economic crisis. Almost 80% of these sales come from automobiles, while the other 20% stems from other businesses as discussed above.

Also, the company made a loss in 2008 of 343 million euro. Nonetheless, the company maintained its market share and the current economic situation has to be taken into account. (official website PSA) Strategy One of PSA’s ambitions in to become the most competitive carmaker in Europe, they try to achieve this by improvements in products and services quality, launching new cars and trying to keep the costs low. Furthermore, they are trying to become more international by improving in their major markets besides Europe; Argentina, Brazil and China and is looking for new opportunities like Russia.

Part of their strategy to become more international is the strengthened geographical coverage in China, where they opened new factories, styling centers and a new R&D centre, which will be discusses in more detail below. (Official website PSA) Their product strategy consists out of two aspects: Competitive premium (Create distinctive cars in each segment) and core models (A strengthened presence in growth segments) Also veryi important in the strategy of PSA is producing and developing environmentally friendly cars.

They want to combine these types of cars which do not amount high amounts of CO2 in combination with cost-effectiveness so that everyone can be offered an environmentally friendly car. Furthermore, they are performing research in order to develop cars with alternative solutions for fuel. (Registration document 2008, p 36) The attitude towards their employees is also an important part of their strategy. They believe it is very important that there is an intense social dialogue and participation from employees, which should enable lasting innovation. registration document p. 156-159) Finally, in order to remain competitive their ambition is stated to move towards a culture of speed, action and results (PSA strategy and ambition 2010-2015) R&D Today, over 18. 000 engineers and technicians are employed in the four R&D centers that PSA Peugeot Citroen currently has. In addition to these four R&D centers, which are located in La Garenne-Colombes, Velizy, Belchamp, and Carrieres, the Velizy plant has been proclaimed center of design, or ADN, and includes so-called styling and innovation teams.

Equipped with a Virtual Reality Center providing in depth simulation possibilities, this Automotive Design Network steers PSA’s R&D efforts. In addition, PSA opened a R&D center in China in order to be better able to serve the Chinese market. (Gasgoo, 2008) There are three main areas on which PSA focuses its R&D approach, the first one being new vehicle development. This area especially focuses on developing new hybrid technologies. The second pointer is the area relating to the greenhouse effect, and Peugeot’s attempts to develop cars that produce less carbon dioxide.

The final area concerns the development of car communication capabilities and safety measures. Regarding the financial priority the R&D department has for PSA Peugeot Citroen, the amount spent per year has been rising for some time now, even thought it was expected differently due the financial crisis; vehicle sales have fallen severely and are not expected to rise until 2010. However, according to former CEO Cristian Streiff (Automotive Engineer, March 2009), this expenditure is necessary in order to be prepared for the future.

Compared to past years, R&D priorities will shift more towards developments in hybrids and electric drive trains. The reasoning behind this is that affordable vehicles using such technology will enable sustainable and profitable growth in the future, and that one needs to look beyond the current situation. Additionally, PSA Peugeot Citroen requested financial support of 400 million euro from the European Investment Bank. The EIB has initiated this large scale support program, for which only far-reaching R&D programs will qualify, in order to help European car manufacturers cope with the financial crisis (Automotive Engineer, 2009).

PSA Peugeot Citroen emphasizes its long tradition of partnerships with other car manufacturers, including Fiat, Toyota, Mitsubishi, Tofas, Ford and BMW, particularly in the field of research and development. Particular attention has been paid to strengthening its co-development projects with parts suppliers such as Michelin, Bosch, Valeo, Treves, Pechiney and Delphi. Worth mentioning is the agreement with the Toyota Motor Corporation that has enabled the joint development and manufacturing of a series of city cars under the name of TPCA (Toyota Peugeot Citroen Automobile). It produces the Citroen C1, the Peugeot 107, and the Toyota Aygo.

Research Results

This section presents the results obtained during the research. Each indicator is discussed separately before Toyota and PSA Peugeot Citroen are compared for their results. The first indicator concerned the two companies’ patent filing behavior. Indicator 1: Patent filing The following overview of Toyota and PSA Peugeot Citroen’s patent filing pattern supports the assumption of a decisive home bias for important R&D activities. The case of Toyota Over 6,000 patents were filed by Toyota in 2008.

In the so-called age of the Greening of the Auto Industry (APA-Intel Report, 2009), Toyota takes on a leading role with 29% of its patent applications referring to Green Technology patents. To illustrate this number: The Toyota Prius, world’s best selling hybrid vehicle and currently in its third incarnation, has accounted for over 2,000 patents by itself, of which over 1,000 for the third-generation, which was launched last January. The following chart shows the distribution of patent registrations, based on 500 patents registered consecutively in 2007.

Figure 2: (source: Ciccone & Hauschildt, 2007, p 18) The chart shows that less than 3 percent of all registered patents originated from the USA and less than 1 percent from Europe. The overwhelming majority of registrations (96,6%) stems from Japanese R&D sites. The following figure shows the diversification of Toyota’s patent portfolio from 1990 until 2005 (EVB= Electric Vehicles, HV=Hybrid Vehicles, FCV=Fuel Cell Vehicles, DE= Diesel Engines, ICEV= Internal Combustion Engine Vehicles). Figure 3: (source: Olstra & Saint Jean, 2008, p 211)

The figure shows that ICEVs and diesel engines have since long dominated the patent portfolio. The number of diesel engine related patents has been declining for some years now, however. The other noticeable trend is an increase in the patenting of Hybrid vehicles developments (such as the Prius). Although the figure does not extend beyond the year 2005, related information such as press releases reinforces the assumption that these trends have continued, especially as far as the developments of Green Technologies are concerned.

The next figure shows the 20 technologies most patented by Toyota. Figure 4: (source: APA-Intel Report, 2009, p 47) This figure shows that the number one technology patented by Toyota is related to Spark Combustion. The Spark Combustion technology cluster is heavily weighted towards Green Tech (APA-Intel Report, 2009, p 25). To conclude, less than 4 percent of Toyota’s patent applications appear to originate from outside Japanese borders, and the majority of these patents relate to Green Technology related developments.

The case of PSA Peugeot Citroen

With a total of 961 patents registered in 2008, PSA Peugeot Citroen has been designated by France’s National Institute for Industrial Property as the country’s leading patent filer for the second year in a row (PSA Press release, March 2009). Although this number does not compare to Toyota’s staggering 6,086 patents, the data referring to FCV- and HV-patenting in the following figure makes clear that despite its smaller size, PSA Peugeot Citroen still significantly attributes to the developments in Green Technology (e. g. compared to the much bigger General Motors). Figure 5: (source: Oltra & Saint Jean, 2008, p 210)

A figure similar to the one describing Toyota’s patent portfolio is available for PSA Peugeot Citroen. Figure 6: (source: Olstra & Saint Jean, 2008, p 212) While small differences are visible, again the emphasis seems to be on ICEVs and diesel engines, with an increasing number of patents registered on HVs. The particularly large part attributed to diesel engine related patents is confirmed by press releases of the past year, underlining the developments in diesel hybrid technologies.

According to PSA reports, patents iled in 2008 were mainly related to four main areas:

• Improving petrol and diesel internal combustion engines.
• Deploying second-generation Stop & Start technology by 2010.
• Deploying a full HDi hybrid by 2011.
• Stepping up the development of technologies for electric vehicles, plug-in hybrids, and zero-       emission vehicles.

Although no precise data is available on the percentage of patents registered within France, the fact that the two foreign R&D subsidiaries (located in Brazil and Shanghai) are responsible for developing and evaluating localized vehicles and that all other R&D facilities are located in France, it is probably safe to say that close to all patent registrations come from within French borders.

The fact that the majority of recent patents concern Green Technology related developments supports this assumption. Indicator 2: Functions and locations of R&D centers The following overview of the specific responsibilities of all the R&D centers operating under Toyota and PSA Peugeot Citroen provides equal support for a home bias for important R&D activities. The case of Toyota Toyota has eleven R&D labs operating around the globe, four of which are in Japan, one in Thailand, one in Australia, two in the USA, and three in Europe.

Figure 7 gives a good overview of all the R&D departments of the company. It shows several important aspects; the location, establishment and what activities it is involved in. As can be seen in the figure, the most important locations of Toyota’s research and development are established in Japan, which seems quite logical regarding the fact that the company originated from that country. The main location of the R&D of the company; the head office technological center and the central research and development laboratories are located in the home country.

The Head office technological center is located in Toyota City, as is the main head office of the corporation. Therefore, the city is also called the main city of the automotive industry in Japan (Toyota city guidebook). The head office technological center is the only plant which performs product planning, design and prototype development which makes it a very important part of the R&D of Toyota. Furthermore, R&D efforts are led by the Toyota Central Research and Development laboratories, this department also collaborates with other Toyota group companies like Daihatsu Motor CO, Hino Motors and others.

The main function of the technical centers located outside of Japan is to enhance the company with global R&D capabilities. Most of the R&D centers located in the U. S. A, Asia (which are not in Japan) and Europe have the main function of adapting the products. Therefore the company is able to be present with a locally adapted product in the different regions and meet customers’ needs in each of them. (Annual report 2008) In addition, two of the design centers are located outside of Japan, of which one is located in the U. S. A and the other one in France.

Also, the Toyota motorsport GmgH, the R&D plant which develops and designs formula One race cars, has its base outside of the home country of the company, it is located in Germany and has their own formula One team. (Toyota’s Formula One official website) In short, the main locations and the most important functions of the research and development are performed in the plant in Japan. Nonetheless, the other centers have important responsibilities concerning the company’s ability to adapt locally.

The case of PSA Peugeot Citroen

The six main research and development locations of PSA are located in France. In addition, two facilities exist (In Porto Real, Brazil and Shanghai, China) that adapt vehicles to local markets. Figure 8 shows an overview of the locations and main functions of the French R&D locations. As the figure shows, the main R&D locations are located in France, each with their specific function in developing cars. The biggest plant is located in Velizy and has a workforce of 6600 employees. The other ones are smaller, varying from 190 to nearly 3000 employees.

The Velizy plant plays a central role in the design process as it is termed “Automotive Design Network” and contains the innovation and vehicle architecture teams. It was finished in 2004. The ADN is located near Paris and has two key missions that aim to bring together various technical and design aspects of vehicle development:

• Bringing together the styles of both marques in order to underline their differences in terms of aesthetics and architecture.
• Leveraging common technical resources for the advance phase production of vehicles, prior to industrial development.

While the engineering of the various mechanical assemblies, such as engines, transmissions or suspension systems, will still take place in La Garenne-Colombes, alternative concepts will be developed into a complete vehicle in Velizy and Sochaux. Designers will create the new Peugeot and Citroen models by drawing upon the assembly and platform databases used by PSA Group engineers. In Velizy, the three pillars of creativity – style, technology and product – come together based on principles that have guided the layout of the ADN.

Throughout the development of the project, an important consideration was that PSA Peugeot Citroen is one of the few global groups composed of two volume brands. From a teamwork perspective, the design centre brings the benefits of a new meeting place that allows the mixing of several teams, which can cross-fertilize and “work better together. ” In all, more than twenty nationalities come together at the ADN, sharing their skills and ideas. The ADN aims to bring together and reap the benefits of a multinational workforce with wide ranging experiences and cultural inputs.

PSA hopes that the centre will be a melting pot of ideas that positions it well in a truly  global business environment. Mercosur, China, Eastern Europe and Russia are priority regions and growth levers for the Group. To adapt its vehicle offering to local demand in these regions, the PSA Group has strengthened its production capacities, R&D and brand sales networks. Destined to become the world’s largest automotive market, China is one of PSA Peugeot Citroen’s three priority growth regions.

The Group aims to become a major player in the country, doubling its market share in the long term. PSA Peugeot Citroen is present in China through Dongfeng Peugeot Citroen Automobiles (DPCA), a 50-50 joint venture with Dongfeng Motors. PSA Peugeot Citroen plans to build an automotive research and development center in China to help tailor its products better to local consumer tastes. The new R&D facility will is located in Shanghai, and cost $143 million. PSA claims the new China tech center has gone into operation in September and will have more than 500 engineers by 2010.

By teaming up with PSA’s global engineering center and an existing local center run by its Chinese venture with Dongfeng, the establishment of the new technical center, part of the French carmaker’s CAP 2010 blueprint, aims to strengthen its engineering capability for faster expansion on the Chinese mainland. In Eastern Europe and Russia, PSA Peugeot Citroen’s sales are increasing, making them one of the group’s three priority growth regions. To take advantage of the growth in these markets, the Group is developing vehicles adapted to local needs (compact entry-level cars, small one-litre engine, etc. and setting up new production capacity in the heart of these countries. To meet its objectives, the group has also set up local presence in Mercosur by developing locally models adapted to the market and gradually building an R centre in Brazil (source: company website). Although the locations in Shanghai and Porto Real have hundreds of employees, the function of these R centers is only to serve the local market, as it adapts vehicles’ software, exterior and interior.

The Shanghai facility is possibly not even producing real technological developments yet, as it only exists since 2008, and it may still be in the stage of market research, though not  much information is  available. To conclude, almost all, and most important R developments of PSA are born in France, lead by the location in Velizy. The departments located outside the home country almost exclusively devote themselves to local market adaptation. Figure 8: http://www. psa-peugeot-citroen. com/en/psa_group/technical_centers_b3. hp, made by Leendert Jan Onnes Comparison of Toyota and PSA Peugeot Citroen A corporation’s patent filing behavior is a useful indicator of the geographical characteristics of its R activities. Since patents indicate important technological developments, their origin provides information on where these developments occur, and thus allow estimation of the degree of geographical constraint. Looking at the patent registration distribution of Toyota, it immediately shows the overwhelming dominance of the Japanese R centers.

With less than four percent of the 500 sample patents being registered outside of Japan, they account for 96,6 percent of the patents filed. Additionally, 29 percent of Toyota’s patents concerns Green Technology (Prius accounted for 2,000 patents alone) and such technologies are developed solely in Japan. The remaining 3,4 percent of registrations originate from the USA and, to an even lesser extent, Germany and Sweden. PSA Peugeot Citroen shows a somewhat different, but comparable picture. While he number of patents registered is less than one sixth of that of Toyota, the fact that the majority of patents is related to areas that fall under the responsibility of French R(improving petrol and diesel internal combustion engines, deploying second generation Stop  2010, deploying a full HDi hybrid by 2011, stepping up the development of technologies for electric vehicles, plug-in hybrids, and zero-emission vehicles) allows for the assumption that here too the dominant part of essential patents is filed solely in France.

If we look at the second indicator, functions and locations of R centers, the information found supports and explains the behavior described above. Toyota owns a total of twelve R centers, located in Japan, Thailand, Australia, the USA, France, Belgium, and Germany.

While this seems like a fairly global spread of R facilities (after all, the main markets of the world are represented), a closer look shows that the locations outside of Japan have but a few responsibilities, namely vehicle development (implying local market adaptation), software development and evaluation (also implying local market adaptation), collection of technical information (a result and necessity of local market adaptation), and interior/exterior/color design (again implying local market adaptation).

In fact, the functions of the Japanese locations (product planning ; design, prototype development, vehicle evaluation, vehicle testing, new technology research, fundamental group research, and advanced electronics research) explain why all the important technological innovation (including Green Technologies) stems from Japan (the German F1 facility not taken into account).

The case of PSA Peugeot Citroen is less complicated, as there are only two R centers outside France. The Brazilian and Chinese R locations serve solely as local market adaptors, and are still very much under development themselves (Porto Real increased its number of employees to 1000 in 2006 and Shanghai was set up just one year ago). All other R processes take place in France, at six different R centers, three of which serve only as test centers.

Since no new technologies are actually developed here, the facilities in Velizy (containing the Automotive Design Network), Carrieres-sous-Poissy (developing projects with outside partners and dedicated to fuel cell research), and Sochaux (developing platform 2 (mid-range) Peugeots and Citroens) enable all the actual innovation of PSA Peugeot Citroen. Concluding, it can be said that both corporations produce the vast majority of their patents within the home country.

This supports the assumption of a home country bias in the automotive industry. The analysis of the two companies’ patent filing behavior does not lead to any noticeable differences regarding geographical constraints, as both display a similar tendency. The locations and functions of their R centers support this result. While both corporations own several overseas R labs, these labs do not have any real autonomy or independence. Decisions are made in central offices in the home country.

While these results very much indicate the existence of a home bias for these two companies, the question remains whether this is a general characteristic of all car manufacturers or whether the extent of such a bias depends on internal factors such as corporate strategy, managerial style, or external factors like institutions or national culture.

Discussion ; Conclusion

First of all, the results of this research should be linked to literature in the field of managing international business organizations.

The Research and Design departments can be classified according to structure, degree of internationalization, institutional linkages, and to a certain degree according to the perceived culture of the country where the departments or head company is located. The structure of Toyota’s R can be characterized as head-quarter centered and functional. The central database is in Japan and relevant information about R is send from this central database to foreign lab undertakings.

As discussed before, these foreign labs themselves have little to no responsibility, they are mainly used to adapt the products to the different regional markets. The culture of Japan is characterized by the Keiretsu system (David C. Thomas, book) and as pointed out by Hofstede’s culture studies (Hofstede, 1980) is mainly characterized by a hierarchical vision. This typical approach can be seen in the way headquarter R is organized and furthermore concerning the responsibilities attributed for the foreign labs.

A consequence, and maybe a point of consideration for the future, is the struggle from the foreign labs for more autonomy and independence, also mentionable as the home and host country conflicts that can exist when the focus of a company is either too ethnocentric or too polycentric (Perlmutter, 1969). Internationalization is not a phenomenon occurring in high range in the R of Toyota and can therefore be classified as a typical example of the path dependency theory of Hutzschenreuter (Hutzschenreuter et al, 2007). For PSA, actually the same phenomena can be observed.

PSA also has a functional structure for its R departments, mainly focusing on French-based R centers. Another issue in the structure of the R of PSA is the level of protectionism preferred by the French government. Lately, in an issue concerning the take-over Danone, French president Sarkozy said French companies should not be taken over or give too much power into the hands of foreigners. PSA furthermore has little internationalization in its R. The R labs outside France itself are merely adapting the products, instead of developing new technologies or products.

Due to a combination of high-tech information and a nationalistic culture in both countries, Toyota and PSA seem to follow the management ideas of path dependency (Hutzschenreuter et al, 2007). Furthermore both companies have implemented only limited internationalization processes concerning their R departments. A future problem that has to be taken into consideration is the bias between home and host country policies as observed by Perlmutter (Perlmutter 1969). The managerial consequences can be a strong need for more independence and less authority at the international R departments.

Another issue, especially for PSA important, is the implementation of European Law, which implements certain regulations concerning protection of technology and is opposed to the nationalistic protection that has at least until now occurred in France. Limitations and avenues for future research Limitations of our research include the fact that we only had access to written sources that are either found on the websites of the companies themselves, which are somewhat reliable but often one sided, and a number of researches conducted by individuals.

Furthermore, due to the fact our two chosen companies are both countries that have a protectionist approach to their national industries, we could not observe the phenomenon of home country bias in countries where globalization is more promoted and cultural and institutional systems are more reaching towards a transnational approach. This would also be an interesting avenue for further research. Furthermore it would be interesting to observe whether this home country bias is a result of the specificities of the automotive industry or is related to a certain direction of corporate strategy.

Another issue concerning the limits of this research is the fact that with a limited number of information and time available, it is hard to determine whether a country of origin truly has influence on this bias. As a final pointer, we encourage researchers to analyze whether a home country bias as observed in this research leads to visible positive or negative results for the company (e. g. financial restrains, sourcing problems etc). Conclusion As indicated in the introduction of this research, the purpose of the research was to determine whether or not the companies PSA and Toyota suffer from a home country bias.

Regarding the indicators used in this research, namely the filing of patents and the distribution of R centers, it can be concluded that a home country bias does definitely exist, at least for the R departments in these two specific companies. Reasons for this home country bias point towards protection of core competences; technologies that are important for the company’s survival and a structure evolving from past decisions, culture and institutional relations that led to this type of connection between R and the headquarters.

Additional factors are the complexity of the product at hand (cars) and the time and proximity issues related to it. Questions such as whether or not the origin of this home country bias lies solely within the R of these companies within other departments as well, or if the observed phenomena can be generalized to other companies or even industries go beyond the scope of this research.

References

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Case Study Of Jacobs Kronung German Coffee

Jacobs Kronung Case study: „Jacobs Kronung“ Jacobs Kronung-brand In Germany coffee has become the beverage, which is drunk the most, even more than bier and mineral-water. And beside lots of famous brands like Nescafe, Illy, German has also already created their own coffee brand “Jacobs Kronung”. For more than 40 years this brand has appeared as the most favored coffee of German. In 1895, Johann Jacobs opened in Bremen, Germany, his special shop with coffee, cacao, chocolates, biscuits.

Then they developed their business with own roastfactory and until now they have been succeed to build the most popular German “Jacobs Kronung”- Jacobs coronation. Jacobs has provided coffee with the slogan “Verwohnaroma” – “indulge aroma”. So the coffee aroma plays an essential role in the coffee producing process of Jacobs. It can be estimated, that Jacobs Kronung stand in Germany for the best coffee consumption with the “indulge aroma”, to young just as older coffee consumers.

In 2000, they came up with a new technology, which makes the coffee aroma be able to be indulged in the cup even more. On the market, there is a Jacobs coffee variety for every taste and mood. The famous Kronung family of coffees provides everything from the deepest rich roast to the mildest blends. Whole bean, ground or instant; caffeinated or decaffeinated; enriched with European chocolate, cream and sugar, Jacobs coffee varieties are a coffee-drinker’s delight.

Communication strategy for the product launching Now the producer Jacobs has decided to extend its business in the new markets of northern Europe (Scandinavian). To bring the Germany coffee into these Northern Europe countries, at first they are supposed to research these market, namely the coffee culture and coffee consumption. In some countries, notably in northern Europe, coffee parties are a popular form of entertainment. Many people like holding coffee parties, where homemade cakes and pastries are served beside coffee.

And link to one of the famous tradition in Germany “Kaffee und Kuchen”, it may be considered as one point for communication strategy. “Kaffee und Kuchen“ or „Kaffeetrinken“ is a traditional meal between lunch and dinner in Germany. And it has also represented the coffee culture in Germany. It may be used for this product launching. In my mind, when the Jacobs coffee is introduced and advertised in Northern Europe, its image can attach to the story about this Phuong Thao Nguyen 1897598 Seite 1 Jacobs Kronung traditional specialty from Germany.

It will help the “made in Germany” coffee to come closer to the northern consumers. With this shared feature in coffee culture Jacobs Kronung products are possible to communicate easier with the consumers in the northern markets. Coffee consumption is also an important aspect for the product launch. It must be research, which kind of coffee is favored in the new market? Which groups are the most coffee consumers? Is there any competitive coffee brand? Slogan and graphic design Firstly I want to describe an original Jacobs coffee package.

As I can see, Coffee is packed with the paper bag, which has a fairly “angular” form. On the package it is printed name of the brand “Jacobs Kronung”. And lower it is the picture of lots of coffee beans with the bigger symbol of “Kronung” – coronation thereupon. Secondly for a new graphic design, I have some ideas to change the old: ? Instead of the picture of the monotone yellow on the coffee beans, it should be designed by being directly made of coffee beans. German are oft seen as the less spontaneous and rigid people, that may be a negative attitude in this case.

And after noticing two separate image of “coffee beans “and “diadem “ on the design the buyer seem be impressed, that German is selling a product, which is “rigid” like them. I think the combination and mixing of these symbols can create a small better changing of image for a Germany product. ? The name “Jacobs” sounds like a typical name of German. Besides the word “Kronung” is a German word, which is written with “o”. With all the experiences, people may percept, that “Jacobs Kronung” is a very German brand’s name.

And there is also the stereotype, German always attaches special importance to the quality of product and the “made in Germany” products are trusted. Therefore this name should be kept on the package, but I have an idea, that the small diadem (above “Kronung”) should be omitted. Because there is already the bigger one, which is made of coffee beans. ? Besides we can change the color of the coffee bag to every country. Because color can has also influence on decide of the buyer. People percept each color differently. It may depend on the culture of each country or the memories of each person.

So the color of the package may be changed to match with the culture of the northern countries. Phuong Thao Nguyen 1897598 Seite 2 Jacobs Kronung ? Ultimately I suggest two slogans ? One of them is “Enjoy Jacobs Kronung – crowned even higher than bier”. Base on the famousness of Germany bier, I want to lay stress on the quality of Jacobs coffee in comparing with bier. Germany has been famous for bier and its quality, but now people should pay attention at another beverage else, which has The other one is “Jacobs aroma – beside your cake”.

As I mentioned, “Kaffee und Kuchen” is not only a tradition in Germany, but it appears also in the coffee culture of the northern Europe. From this Tradition this slogan occur me. It recalls one in common cultural feature between Germany and the northern Europe. Besides it also stresses the aroma of Jacobs coffee, that this brand is famous for. ? With some new own ideas, one day I will perhaps try to design a new graphic for Jacobs Kronung. And it may become a good suggest to change the design and slogan of this major coffee brand. Phuong Thao Nguyen 1897598 Seite 3

Ambient Advertising

Ambient Advertising is often described as advertising that utilizes “outdoor non-regular media” and does not rely on traditional mediums like television, radio, or print. Instead of using billboards, for instance, Ambient Advertising may utilize elements of the environment, such as sidewalks. In essence, Ambient Advertising is an advertisement that seamlessly integrates into its surroundings and becomes part of the ambiance.

When it comes to effectiveness, ambient advertising goes beyond being a part of the environment and seamlessly blending in with the media. It must be noticeable yet fit into the background, demonstrating its creativity. It is covered by non-traditional media and found in unexpected places or objects, making it innovative and attention-grabbing. Ambient advertising merges with the environment while still capturing viewers’ attention, relying on word-of-mouth publicity and standing out from traditional advertising.

In the Indian context, there have been ongoing debates about the effectiveness of traditional media in delivering advertisements. Over the past decade, the consumer has developed immunity towards advertisements appearing in newspapers and magazines. Even the once novel cable television advertising has lost its allure. The consumer’s over-exposure to advertising has resulted in a shift in preferences, causing them to selectively view or instantly skip certain advertisements.

The effectiveness of advertising has been killed by over-exposure, which is a harsh truth. So, how bad is this “over-exposure” to advertising? Let’s consider the following: on average, a regular current affairs weekly contains about 18-20 full page advertisements in a 70 page magazine, excluding pullouts, cover pages, part-page adverts, “special features,” and more. This accounts for almost 30% of the magazine space. In lifestyle/fashion magazines, this number rises to over 40%. Television advertising statistics reveal a similar situation.

The total duration of advertisements in 2007 increased by 31% compared to the previous year, reaching 4006 lakh seconds (The Marketing Whitebook 2009-10). The volume of ads has continued to grow, resulting in increased ad clutter. To understand consumer reactions to regular advertising, we conducted an online survey to gauge their attitudes towards ads. The survey results were expected as they showed that a significant portion of consumers actively avoid watching ads. Specifically, 20% of respondents always switch channels during ad breaks, while 38% switch channels eight times out of every ten breaks. Additionally, 30% change the channel five to six times out of every ten breaks.

A staggering 88% of television viewers opted to ignore advertisements rather than watch them! Furthermore, about 60% of the audience regularly switched channels. It seems that the all-powerful TV remote reigns supreme! Of those who did view the ads, a majority (62%) cited two main reasons: the creative quality of the ads and information regarding a new product release. In contrast, 25% watched an ad with future purchase intentions, while only a small fraction (15%) viewed an advertisement for a product they currently use.

Only 13% of respondents mentioned their favorite celebrity endorser, suggesting a decline in the significance of celebrity influence. People no longer desire to see a celebrity merely serving as an excuse for a poorly designed, uncreative, and dull advertisement. Consumers cannot be persuaded to purchase a product solely based on a celebrity’s endorsement. Interestingly, 11% of respondents admitted to watching an advertisement on TV out of sheer laziness to change the channel!

The findings of our survey can be summarized into two main conclusions: consumers are not interested in seeing advertisements on TV, and if they do, they prefer clever and creative ones. An excellent example of this is Vodafone’s zoo-zoo ad campaign, which captivated audiences through its creativity and unique concept. One notable advantage of Ambient Advertising over traditional advertising channels is its lower cost.

Based on our survey, marketers dedicate substantial funds to advertising and promotions, but the majority of these endeavors fail to capture attention. In India, expenditures on television advertisements amounted to Rs 80 billion in 2007 and are predicted to reach Rs 200 billion by 2012. Likewise, spending on print media (newspapers and magazines) reached Rs 94 billion in 2007 and is anticipated to rise to Rs 208 billion by 2012.

Indian advertising is spending a lot of money, but Ambient Advertising stands out by delivering results with a fraction of these budgets. This makes it a favorite tool for guerilla marketers. The power of the advertisement lies in its content, delivery, idea, and medium, rather than the size of the budget or the names involved. Ambient Advertising surpasses traditional methods in creativity as well, as creativity is an essential aspect of it. To capture people’s attention, it needs to be creative, humorous, and original.

No celebrities are available to assist. However, ambient advertising offers an extra advantage due to its creative quotient. This makes a marketer’s job more challenging but also comes with its own benefits. Our survey confirms that consumers desire creative advertisements, which is something that ambient advertising guarantees and fulfills. Additionally, we included questions in our survey regarding responses towards ambient advertising. The results are highly positive, with approximately 75% of responders giving it a good or better rating.

Guerrilla Marketing was created as an alternative approach to promotions that doesn’t rely on a large marketing budget but rather on time, energy, and imagination. It quickly became known for its unique and attention-grabbing campaigns that often go viral. Ambient advertising can be seen as a framework for Guerrilla marketing, with the term “ambient” referring to its presence in the world rather than in a confined frame.

Guerrilla marketing, which involves loud and perceived acts that can be seen as vandalism and annoying to people, is questionable. On the other hand, ambient advertising offers a better approach by creatively using space without causing annoyance. A good example of guerrilla marketing is ambush marketing, where Nike sponsors the Olympics and Adidas (or vice versa) places ads near the site to claim association with the event. In contrast, ambient advertising would involve placing ads on shop floors and supermarket trolleys. This type of marketing allows businesses to establish brand recognition without aggressively promoting their products.

One great example is the Dancing Grass Vans of London, which are owned by renegade smoothie makers (and brilliant marketers), Innocent. These vans are covered in real, growing grass and can often be spotted around the city, delivering smoothies and catching people’s attention. Despite serving a practical purpose, the vans don’t resemble typical advertisements. However, who could ever forget the name of a company with vans covered in grass? In anticipation of the release of the Simpson’s Movie, 7-11 transformed several of their stores to resemble the fictional (yet legendary) Kwik-E-Marts, complete with peculiar products reminiscent of Springfield.

This ambient marketing campaign proved to be incredibly successful. It is a form of captive audience advertising that utilizes innovative and creative formats placed within the target audience’s living and working spaces. It can be an effective means of engaging people on the social front. However, there are two challenges commonly faced in social marketing: effectively conveying the message and capturing people’s attention for long enough to ensure understanding. Additionally, cost is another obstacle, similarly encountered in guerilla marketing.

NGOs engaged in social marketing often lack the financial resources that corporate companies have. However, ambient advertising comes to the rescue and proves to be a savior. This is evident in the following instances, where teaser boards are used to convey the message “Grass is Dumb.” This message aims to stimulate thoughts about water conservation among regular joggers in a park. The idea behind the message is that your lawn won’t complain if you water it for slightly less time, so only use what you truly need. Ambient advertising always has the potential to inspire a sense of social responsibility, and it can best be described as an actionable act.

KFC has found a solution to the costly problem of potholes on Chicago roadways after winter. They are offering to repair the potholes and then stencil “Refreshed by KFC” in white paint over the repairs. In a similar effort, during lunchtime on Wednesday, Moving Boards were spotted in Sydney CBD. These boards carried flyers and were manned by individuals with big smiles, their goal being to raise awareness for “GOLD WEEK” and show support for the Sydney Children’s Hospital’s biggest fundraising event of the year.

The immense feedback received demonstrated that advertising can be utilized for positive purposes rather than negative ones. The future of Ambient Advertising is a significant concern: will it continue to flourish or be forgotten in the annals of advertising? Numerous experts argue that ambient advertising functions as a self-destructive mechanism. As unconventional, one-of-a-kind media channels increasingly become ordinary and mainstream, the “WOW” factor of these advertisements diminishes rapidly, ultimately leading to their demise.

It is true to some extent that buses and taxis are being used for advertising, which was a unique idea around a decade ago but is now a mainstream advertising medium. However, this may not be the case with other ambient media. How can egg cartons, bathroom stalls, or painted sidewalks ever become mainstream? Even if a medium becomes regular and commonplace, the idea, content, and delivery of advertisements will still keep ambient advertising alive. While ambient advertising has limitations and can never replace mainstream forms of advertising, it continues to thrive.

Ambient advertising is not as effective in rural areas due to its reliance on static media and the need for a constantly moving target audience. The best locations for these advertisements are urban areas with high human traffic, such as busy streets and shopping malls. In contrast, displaying them in rural areas with low population densities would be a waste of money and render ambient advertising ineffective. This presents a challenge in countries like India where the majority of the population resides in rural or semi-urban areas.

One of the main limitations of ambient advertising is its potential reach in a single instance. Placing an advertisement on national television allows you to reach the entire country, whereas painting a sidewalk in a busy city street may only reach around 4000-5000 individuals per day. The numbers clearly show this difference. Moreover, there is a chance that an excessive amount of these advertisements may cause consumers to view them as annoying, which is a commonly observed phenomenon in traditional advertising mediums. Nevertheless, it would be incorrect to assume that ambient advertising is completely ineffective.

While Ambient Advertising cannot fully replace traditional advertising, its true power lies in its ability to enhance mainstream advertising. It can generate excitement within the public about a product or service, initiating conversations, capturing attention, and sparking interest. As a pre-promotional tool, it can generate anticipation for an upcoming product launch through teaser campaigns. All these benefits come at an incredibly cost-effective advantage.

All that needs to be done is to open the minds and let the creativity speak for itself. Digital technology has already become an integral part of lives and it increasingly permeates newer avenues and Ambient Advertising can use it as a perfect ally. A future where ambient advertising uses new technology for wider and farther reaches to tap into greater areas and bigger populace. People want creative advertising (which can also be gathered from our survey) and creativity is a staple for Ambient advertising, so as long as people get what they want, they will keep coming.

“Out of sight, out of mind” is a frequently used phrase that reflects the human tendency to desire what we see repetitively. Ambient Advertising takes advantage of this psychological principle by repeatedly exposing consumers to the same messages. Conditioning consumers through repetition is a powerful tool in marketing. For example, in a mall restroom, there is often nothing else for a person to look at but the advertisement placed directly in front of them. Additionally, effective advertising aims to connect with the subconscious mind, and Ambient Advertising excels at achieving this goal.

Ambient Advertising has the potential to effectively communicate impactful messages in a subtle manner, especially within social marketing. However, it is vital to meticulously create these messages to prevent any unfavorable associations among consumers. Ultimately, despite varying expert opinions, evidence indicates that Ambient Advertising still has a significant journey ahead before becoming outdated.

In emerging markets like India, ambient advertising is especially important and has great potential. The busy cities of India and China offer excellent opportunities for advertisers to display their creativity in this field. With major companies such as Nike, Coca-Cola, Vodafone, Kellogg’s, and others investing substantial amounts in this type of advertising, it can be concluded that ambient advertising is a lasting trend.

References

1. The Marketing Whitebook 2009-10
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