Leadership and Management of the Dealer Gemba in a Shrinking Japanese Auto Market

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Abstract:

After reaching a peak of 7.77 million vehicles sales in 1990, the Japanese auto market gradually declined until it plateaued around 5 million vehicles per year in the 2010s. The market showed resilience in its rapid return to the 5 million level after the global financial crisis, which was followed by the Great East Japan earthquake, caused sales to fall to 4.21 million in 2011. This achievement is particularly notable given a social background marked by a rapidly aging society and declining population.

The COVID-19 pandemic, however, caused new vehicle sales in Japan to fall to 4.60 million vehicle sales in 2020 (-11.5% yoy) and 4.45 million (-3.3%) in 2021. The Japanese market decrease in 2020 was less severe than that seen in markets such as the U.S. (-15.8%), Germany (-19%), and the UK (-29.4%), though much worse that China (-1.9%). On the other hand, the continued decline in the Japanese market in 2021 contrasts with the increases seen in the U.S. (+1.72%), the UK (+11.5%) and China (+3.8%), although it is much better than the continued steep drop seen in Germany (-10.1%).

To understand how new car dealers in Japan are coping with the severe market conditions caused by these pandemic-induced declines, at the end of 2021 we distributed a survey to 3,600 vehicle sales outlets (showrooms) in Tokyo and surrounding areas. 659 sales outlets returned the questionnaire representing a response rate of around 16%.

The survey results show a wide range in the sales performance by brand and segment. We measured sales performance by new vehicle sales per employee, per salesperson, and service jobs per mechanic. We defined segments as full-line (Toyota, Nissan, Honda), niche (Mazda, Subaru), micro vehicle (Suzuki, Daihatsu), and luxury (Lexus and imported brands).

We created a model with hypotheses on various factors affecting sales performance, while controlling for urban/rural locations and other variable. Building on past research, we focus on (1) leadership style of the head of the sales outlet, (2) organizational capability of the sales outlet including inter-department coordination, and (3) the level of work standardization.

Preliminary analysis of the data shows that the factors that a strong positive correlation with performance across segments were: Standardization of work that supports sales activities, Inter-department cooperation, Busy service department, Supportive leadership, High number of Part-time employees, and Capability to maintain customer relationships. The factors that most commonly showed a strong negative correlation across segments and performance types were: Fixed job assignments, Capability to attract new customers, Older showroom (>20 years), and Standardization that is perceived to be shackling.

As of the time of submission of this abstract, we have only been able to conduct correlation analysis and descriptive analysis of the data. However, we plan to have completed regression analysis and structural equation modeling by the time of the paper submission in May.