Introduction
Takezo Takada was a visionary man who started the company in 1933, which only became Takata Corporation in the 1980s. It first ventured on textiles at the Shiga Prefecture in Japan but later shifted to automotive safety items in the 1950s. Today, Takata is the world’s leading manufacturer of automotive safety systems, with a capitalization of ¥41,862 million and 50,539 employees spread throughout the major cities of the world, operating 58 manufacturing plants in about 21 countries (Takata Corporation, 2015). Its corporate governance involves a centrally integrated system, with regional and international offices. It has regional headquarters in Auburn Hills, Michigan an in Aschaffenburg, Germany. Research and Development (R&D) headquarters for Asia are in China, India and Thailand.
For more than 80 years in the business, Takata experienced challenges, particularly in integrating into the world market. Research and development of original products introduced to the world include seat belt (1960), public safety crash test (1962), “a commercialized child restraint system” (1977), airbags (1980), and “force limiter seat belts” (1996) (Takata Corporation, 2015, p. 2). Takata uses high technology to research on the most advanced safety systems and products, and recover its tarnished reputation as a result of the defective airbags and the unavoidable millions of recall.
As a company, it is centrally organized, as can be understood from its corporate motto, “One World, One Takata,” with the ultimate aim of providing the best in product innovation for transportation safety systems. Its vision for the world is “zero fatalities from traffic accidents” (Takata, n.d.).
The external environment
There is great demand for automotive safety systems, and this is the reason the company has blossomed into an international company, manufacturing what the world needs in terms of safety and comfort. Takata is a large international company, manufacturing seat belts and other innovative safety systems for transportation. Its products are in strong demand in the Americas, Europe, Asia and many parts of the world (Takata Corporation, 2015).
Market structure
The company has a monopoly in the manufacture of “child restraint systems,” a safety belt for children inside a car. It can also be that Takata is involved in oligopoly as there are only a few companies in the world manufacturing and supplying automotive safety systems.
As a monopolist, Takata is earning economic profits. However, this is difficult for the company because it has to keep new entrants out of the industry. With internationalization, there are always new companies trying to cross the line of barriers to entry. Economies of scale provide natural barrier to entry (Amacher & Ulbrich, 1991). Takata is able to undersell the rest because it is an existing firm in the industry and it has large capitalization.
On the other hand, oligopoly is a market structure in an imperfect competition; meaning there are only a few competitors in the industry. Takata manufactures automotive safety systems where most of the competitors come from the United States and Europe. Oligopoly is almost the same with monopoly; in fact, Galbraith (1956 as cited in Amacher & Ulbrich, 1991) regarded oligopoly as “shared monopoly”. In an oligopoly, firms control the price but have to follow the law of supply and demand.
Oligopolies are classified according to the type of product they create: homogeneous or differentiated (Amacher & Ulbrich, 1991). An oligopolistic industry that produces a homogeneous product is termed a “pure oligopoly,” or a standardized oligopoly. This feature is significant because in pure oligopolies a single price is charged for the output of all the firms. However, Takata does not belong to this type. We can consider this company between oligopoly and monopoly, or what Galbraith termed a “shared monopoly” (Amacher & Ulbrich, 1991). In Japan, Takata has the monopoly of automobile safety systems. There are few entrants to the industry, but being an existing firm Takata controls price.
Conclusion
Takata needs to strengthen its R&D on automotive safety systems to prevent similar incidence of airbag safety recall involving millions of items worldwide. It can be concluded here that the cause of the airbag problem was due to low quality and management. This could have been prevented if the company has dealt with the issue of a strongly centralized or vertical system. The company could have introduced quality management teams to provide quality products; but there was no such thing. The outcome was very detrimental to company growth, as it had to recall millions of airbags throughout the world. This is a big lesson for an international company like Takata.
References
Amacher, R., & Ulbrich, H. (1991). Principles of microeconomics. Richmond, Texas: South-Western Publication.
Takata Corporation: Corporate Brochure. (2015). Retrieved from http://www.takata.com/ir/pdf/material06/2015company_profile-ENG.pdf
Takata: What kind of company is Takata?. (n.d.). Retrieved from http://www.takata.com/en/about/what.html
