Professional Documents
Culture Documents
442-450, 1996
Pergamon
S02 63-2 3 73(96)0003 7-0
0263-2373/96$I5.00+ 0.00
Introduction
Mass customization as a viable approach to competitive
strategy is capturing the imagination of both managers
and business academics. The term 'mass customization'
has been described as 'a world of paradox with very
practical implications' (Davis, I987). The concept is
based on the notion of 'economies of scope' where
advances in manufacturing and information technology,
as well as new management methods (e.g. JIT and lean
production), enable firms to provide product variety and
customization through flexibility and quick responsiveness in many industries.
Employing mass
442,
Not an
'Either/Or' A p p r o a c h
National Panasonic
Osaka Plant
Bicycle:
"
~------]~
~[U
ru. c~.,,~
,
I
II I~,~.~ 2 II
Order
sheet
POS shop
compa y
Distributr
Ream*
..............
/
As$Qrnbly t~slrucllons
444
A.~embly
L..
co,,,p,,,.,
Figure 1
=_ ILL"'IIII
I LI
Customer
c~p,,..
Paln(l~ I n s ~ r u c l ~
ii!il !iiii
~
~?i~!~ ~~ii??~
Designs
(Transfer of ideas fromcustom
f a c t o rbased
y on emerging
~ trends)
7Z AI
u'rs I I Dept. I
........
7
Mass Production
Factory
(Hikari, National&
~i~i~
~ ~
iiiiiili
,,,,
~i~i~~ii ~
Designand Process
EngineeringGroup
CustomFactoryworke
used for training
iji,
I
Panasonicbtands)
...
Mass Custom
FactoryThe POS System
(P. . . . nic~randonly
Rotatinnof best/
of workers
Sharingof
"-'---- processideas
/ '
Segment
for customized
bicycles
.,.
producedbicycles
Source: Kotha (1995)
Figure 2
T h e I n t e r a c t i o n B e t w e e n M a s s - c u s t o m i z a t i o n a n d Mass-prodution S y s t e m s at N B I C
Performance Implications
NBIC's customized bicycles manufactured under the
POS system only accounted for two per cent of total
production. Prior to POS, NBIC's market share was
languishing behind its two major competitors in the
high-end segment, but within a few years of introducing
POS, the firm's total high-end (Panasonic) market share
increased dramatically. For the first time in its history,
NBIC became the industry's second largest manufacturer
of high-end bicycles. Furthermore, the contribution of
the high-end Panasonic brand has more than doubled to
27 per cent of total revenues (Kotha and Fried, 1993).
Despite repeated attempts by competitors to offer
customized bicycles, the 'Panasonic' name is increasingly
viewed as the only 'truly' mass customized bicycle in
Japan. According to industry experts, the firm is
currently viewed as the leader and innovator in the
industry. The 'halo effect', resulting mostly from the
European ManagementJournalVo114 No 5 October 1996
Having discussed the dynamics of pursuing massproduction and mass-customization approaches at NBIC,
I now address the question posed earlier: What are the
important external (industry-level) and internal (firm-level)
conditions necessary for successfully pursuing mass
customization?
External Conditions
447
Internal Conditions
The strategy of mass-customization requires long-term
investments in advanced-manufacturing technologies and
human resource development
The NBIC example makes clear the importance of
advanced manufacturing technologies for the pursuit of
mass customization. The recent attempts by Levi Strauss
& Company to offer 'custom fit' blue jeans for women in
the United States was made possible due to a computer
information network system (Rifkin, 1994). Also, Pine et
al. (1993), in their discussions of Bally Engineered
Structures Inc., a mass customizer for refrigeration
products, points out that a sophisticated informationmanagement system called a 'computer-driven intelligence network' was at the heart of this firm's approach
to mass customization.
However, NBIC's managers clearly recognize that
human resource development is also critical. At NBIC
it is humans, in conjunction with advanced technology,
who create the new knowledge required for refining
existing skills and developing manufacturing capabilities
essential for the pursuit of their approach to
customization. It is another example of how Japanese
firms leverage the manufacturing capabilities that result
from a blending of advanced computer-based
technologies and human expertise. The firm recognizes
that information technology and computer-integrated
manufacturing are necessary, but not sufficient, for
achieving the flexibility and responsiveness critical to
mass customization (Garud and Kotha, 1994).
Conclusion
In highlighting NBIC's unique approach to mass
customization, this paper provides a useful framework
for a mass-production firm contemplating entry into the
era of mass customization. It illustrates the dynamics of
pursuing both mass-production and mass-customization
approaches simultaneously and highlights many
industry- and firm-level conditions that are necessary
for successfully exploiting mass customization. In
today's competitive landscape, the issue is not whether
the 'mass market' is dead, but finding unique ways of
fulfilling changing customer demands. In that sense, the
emerging concept of mass customization is an important
option, among many, available to a firm seeking a
competitive advantage.
Acknowledgement
I thank Mr. Hitori Hata, Managing Director of the National
Bicycle Industrial Company for providing me with access
to important information about the firm's mass
production and mass customization strategies. I also
thank Andrew Fried of Andersen Consulting, Tokyo
Office, for his participation and assistance in researching
this topic in Japan. I have also benefited greatly from
discussions with students at both the Stem School of
Business and the International University of Japan. Last, but
not
least,
I thank
Gabrielle Gerhard, Arun
Kumaraswamy, and Anil Nair for their thoughtful
comments on an earlier version of the paper.
Notes
1.
has made long-term investment in advanced manufacturing technologies and information technologies
and human resource d e v e l o p m e n t
2.
References
Davis, S. (1987). Future Perfect. Reading Ma: Addison Wesley.
EconomisL The (1995). The Outing of Outsourcing. November 25,
pp. 57-58.
Florida, R. and Kenney, M. (1990). Break Through Illusion. New
York: Basic Books.
Garud, R. and Kotha, S. (1994). Using the Brain as a Metaphor to
Model Flexible Productive Units. Academy of Management
Review, 19, 4, pp. 671-698.
Kotha, S. (1994). A Book Review of Mass Customization: The New
Frontier in Business Competition by B. J. Pine II, Academy of
Management Review, 19, 3, 1994.
Kotha, S. (I995). Mass Customization: Implementing the
449
4.50
SURESH KOTHA,
Leonard R. Stern School
of Business, New York
University, 40 West 4th
Street, Room 7-10, New
York, New York State,
10012-II26, USA.
Suresh Kotha is an
Assistant Professor of
Business Policy and
Operations Management
at the Stern School of Business, New York
University. He has also taught at the International
University of Japan, Graduate School of
Management. His teaching and research interests are
in the areas of business strategy, manufacturing
strategy, and US~Japan comparative practices. Dr.
Kotha serves on the editorial board of the A c a d e m y
of M a n a g e m e n t Journal and the Strategic
Management Journal and is an Associate Editor of
the Journal of Operations Management. He is
currently conducting a study, with colleagues from
many different universities, that focuses on
determining the environment and strategic correlates
of performance in the Japanese automobile, steel and
machine tool industries.