Yasmin Mgment

Abstract This paper analyzes the Honda Motor company through a SWOT analysis, an acronym for "strengths, weaknesses, opportunities and threats." Each of these areas is explored and detailed. The author finds that Honda has many more strengths than weaknesses, which is partly based on the company's outlook.Honda's goal has been to make high efficiency cars at a low cost. The paper further details how Honda has gained advantage over its competitors. The paper also cites some of Honda's weaknesses. The writer also considers future opportunities for Honda and discusses threats to the company's long-term success. Despite these threats, the author considers Honda one of the most lucrative and best managed companies in the world. From the Paper "While Honda has much strength to their name, they also suffer from some major weaknesses. The primary weakness of Honda is oftentimes one of their major strengths as well. By sticking to their guns as the technology innovator within their industry, Honda divests much of its resources in exploring new methods to enhance their products. However, they often conduct research and innovation in fields that have no practical application until long into the future (CorporateInfo, npg). Take for example their fuel efficiency research; Honda was the industry leader in fuel efficiency from 1985 to present (InvestorGuide, npg). However, only until recently did gas prices raise high enough to warrant the fuel economy as a significant advantage. Had Honda divested more of their resources to other high end upgrades such as competing within the SUV market, they might have made much more profits. Thus, finding the balance between future research and current profits is one of the major weaknesses with Honda. Another one of its weaknesses is that Honda relies on its "entry first, organizes later" strategy for new market penetration (Wright Report, npg). Its corporate strategy appears to be to enter established markets with their innovative products and develop an infrastructure and organization after they observe how the market reacts. Although this strategy has worked well in some cases such as Honda's entry into the light truck division, where its Ridgeline won Truck of the Year, however in other cases such as the launch of Acura success was met first by years of trial and error. Acura was launched in the mid 1980s, and it was the first Japanese produced luxury car, however it lacked many of the features that customers were looking for in high end vehicles and Acura went through almost five years of net losses before Honda finally figured out their design and distribution methods. Honda depends too much on their ingenuity and ability to adjust once a product enters the market, and as a result, they often make hasty and faulty decisions that they must then spend millions and years to fix. Abstract Using Honda Motor Company as a case analysis, this paper examines why the company's entrance into the United States market was successful. It looks at the strategic issues which facedHonda in the early nineties and compares how this strategy was different from their strategy for European markets. The paper continues with how the economic trends of the mid 90's affected the company and predicts what the future might hold. From the Paper "Honda's entry into the United States was successful for a plethora of reasons. What makes Honda's success particularly remarkable is the fact that Honda managed to survive and prosper in a relatively quick frame of time in an automobile industry that is known for its massive capital requirements. One of the most important factors that contributed to Honda's success in entering the United States market was its willingness to be aggressive and take risks, both in terms of its design, marketing, pricing, and production operations. Another fact that bolstered Honda's success in the United States market was its willingness to adapt to change, as evidenced by the fact that Honda commonly revamps its models every 4-5 years.

In the wake of the financial crisis that began in the second half of 2008 and the surge in value of the yen, Honda has faced a sharp decline in demand in the US, the company's largest market for automobiles and power products. Meanwhile, demand for motorcycles in key markets like Brazil, India and

Thailand

has

leveled

off,

with

sales

results

matching

those

of

the

previous

year.

To address these challenging circumstances and meet the needs of customers and society, Honda is moving to focus resources even more sharply. We're reevaluating all investment and development plans to ensure our strengths are fully deployed in realizing goals of the highest priority. In reducing production and purchasing levels worldwide, Honda has to an extent burdened employment, local communities and stakeholders. We believe, however, that the actions we have taken in reassessing our plans and minimizing negative impact on company performance have been necessary

to

reinforce

a

foundation

for

sustainable

growth

going

forward.

However tough the times may be and however hard it may be to predict the future, we are prepared. Honda defines itself by its determination to face new challenges, acting on the basis of the Honda philosophy and never forgetting our social responsibility to pursue technological innovation and create products that offer new value to customers. We have overcome obstacles many times before and continued to grow by believing in the dream of mobility. We have made our customers' joy our own, setting

ambitious

targets

as

we

evolve

to

meet

the

future.

In December 2008, Honda withdrew from Formula One competition. Some, including many Honda associates, expressed their disappointment with this decision. To ensure, however, that Honda emerges from this unprecedented downturn strong and ready to lead the industry for the next century, we found it necessary to focus all of our passion, energy, people and resources on the development of new environmental technologies and alternative energy. Enhancing the fuel efficiency of our products while reducing their need for the fossil fuels that lead to greenhouse gas emissions and climate change is how we will further spread the Three Joys of buying, selling and creating and fulfill our social responsibility as a manufacturer of mobility products. Based on this understanding of our path, we intend to put forth an even greater effort to take our advanced environmental technologies

to

the

next

level.

Released in early 2009, the all-new Insight hybrid vehicle embodies Honda's direction for the future. Offering the performance customers expect of a Honda along with superior fuel economy and clean emissions, the Insight is priced to bring environmentally responsible mobility within the reach of more customers than ever before. Continuing to offer new products like the Insight, we intend to contribute to the solution of problems society is facing with advanced technology. Going forward, Honda will continue to enhance the environmental performance of our entire automobile, motorcycle and power product lineup.

Over the past five years, Honda has been focusing on strengthening its foundations for future growth. Even as we weather the storm of the recession that struck last year, we are preparing to meet the mid- and long-term growth in demand in the developing economies of the world. To compete successfully in the global market and ensure ongoing growth, Honda is further strengthening its factories in Japan to better perform their leadership role and share advanced manufacturing capabilities with Honda production facilities around the world. To better serve the individuals and communities who are our stakeholders, meeting and exceeding their expectations, we are returning once again to our origins. Honda has always existed to bring joy and excitement to people in the form of

products

and

technologies

of

the

highest

possible

quality.

The road ahead is undeniably challenging, but so long as we remember who we are and how we got here, we will act proactively and with dispatch, anticipating the needs of society, fulfilling our responsibility as a manufacturer of mobility products and leading with our strengths in people and advanced technology. We intend to fulfill the high expectations that people have of Honda. Resolute in our determination to be a company that society wants to exist, we shall continue to evaluate the full range of our activities from our stakeholders' perspective. Creating new value, expanding value creation and fulfilling our commitment to future generations, we will continue to do our part in the communities that host our operations and contribute to a sustainable society worldwide

Marketing of Honda motorcycles in the USA The American Honda Motor Company was established as a subsidiary by Honda in 1959. During the 1960's the type of motorcycles brought by Americans underwent a major change. Motorcycle registrations increased by over 800,000 in five years from 1960. In the early 60's the major competitors were Haley - Davidson of U.S.A, BSA, Triumph and Norton of the UK and Motto - Guzzi of Italy. Harley-Davidson had the largest market share with sales in 1959 totalling a6.6 million dollars. Many of the motorcycles produced were large and bulky and this led to the image of the motorcycle rider as being one who wore a leather jacket and went out to cause trouble. The Boston Consulting Group ( BCG ) report was initiated by the British government to study the decline in British motorcycle companies around the world, especially in the USA where sales had dropped from 49% in 1959 to 9% in 1973. The two key factors the report identified was the market share loss and profitability declines an the scale economy disadvantages in technology, distribution, and manufacturing. The BCG report showed that success of the Japanese manufacturers started with the growth of their own domestic markets. The high production for domestic demand led to Honda experiencing economies of scale as the cost of producing motorbikes declined with the level of output. This provided Honda to achieve a highly competitive cost position which they used to penetrate into the US market. " The basic philosophy of the Japanese manufacture is that high volumes per model provide the potential for high productivity as a result of using capital intensive and highly automated techniques. Their marketing strategies are therefore directed towards developing these high model volumes, hence the careful attention that we have observed them giving to growth and market

share." (BCG p.59 ). The report goes on to show how Honda built up engineering competencies through the innovation of Mr Honda. The company also moved away from other companies who relied upon distributors to sell their bikes when the company set up its headquarters in the west coast of America. The BCG found that the motorcycles available before Honda entered the market were for limited group of people such as the police, army etc. But Honda had a "policy of selling, not primarily to confirmed motorcyclists but rather to members of the general public who had never before given a second thought to a motorcycle"( SP p.116 ). The small, lightweight Honda Supercub sold at under 250 dollars compared to the bigger American or British machines which were retailing at around 1000 to 1500 dollars. In 1960 Honda's research team comprised of around 700 designer and engineer staff compared to the 100 or so employed by their competitors showing the value which the company placed on innovation. Production per man-year was 159 units in 1962, a figure not reached by Harley-Davidson until 1974. Honda was following a strategy of developing region by region. Over a period of four to five years they moved from the west coast of America to the east coast. The report showed the emphasis which Honda paid to advertising when the company spent heavily on the advertising theme " you meet the nicest people on a Honda" thereby disassociating themselves from the rowdy, hell's angels type of people. Essentially the BCG is portraying Honda as a firm dedicated to being a low cost producer, utilising its dominant position in Japan to force entry into the U.S market, redefining that market by putting up the nicest people image and exploiting its comparative advantage via aggressive advertising and pricing. Pascale tends to disagree on many points of the BCG report. The report suggests that there was a smooth entry into the U.S market which led to an instant success. Pascale argues that Honda entered the American market at the end of the motorcycle trade season showing their impotence to carry out research in the new market. As they entered the market at the wrong time sales were not as good as they should have been and any success was not going to be instantaneous. Pascale also criticises the assumption that Honda was superior to other competitors in productivity. He says that Honda was successful in Japan with productivity but circumstances indicate that the company was not superior. The lack of funding from the ministry of finance and the ploughing back of profits into inventory meant they had a tight budget to follow. The BCG report shows that Honda had a smooth policy of developing region by region, moving from the west to the east. Pascale response is that this is partly true but reminds that Hondas advertising was still in Los Angeles in 1963, four years after setting up their subsidiary. The report to the British government showed that Honda had a deliberate strategy of disassociating themselves from the hells angels type of people by following the nicest people advertisement policy. Pascale shows that this was not an intentional move since there were disputes within the company with the director of sales eventually persuading to management against their better judgement. The BCG report found Honda pushed into the U.S market with small lightweight motorbikes. However Pascale says this is again not true. He argues the intended strategy was one of promoting the larger 250cc and 350cc as Honda felt that this was what the market wanted since Americans liked all things large. The bikes were unreliable which led to the promotion of the supercubs. These bikes salvaged the reputation of the company. An

idea which hardly came from an inspired idea but one of desperation. Overall Pascale gives the impression that it was through an incidental sequence of events which led to Honda gaining a strong hold in the U.S market, mainly through the unexpected discovery of a large untapped segment of the market while at the same time trying to retain the interest of the current market. The criticism made by Pascale can be further analysed by looking at the strengths of the Honda company. The strengths of Honda start with the roles which the founders played. Honda was an inventive genius with a large ego and a volatile temperament. His main concerns were not about the profitability of the company or its products, but rather to show his innovative ability by producing better engines. Fujisawa on the other hand thought about the financial section of the company and how to market the ideas. He often challenged Honda to come up with better engines. By specialising in their own abilities the two of them were able to pool together resources and function effectively as a team. Another strength was the way the company utilised its market position. Strengths in design advantages and production methods meant they were able to increases sales in Japan even though there was no organisation within the company. Once there was a large enough demand for its products, mainly the supercub, Honda both in Japan and in America, moved from a sale on consignment basis to one that required cash on delivery. This seemed a very risky decision to make at the time but within three years they had changed the pattern within the motorcycle industry by shifting the power relationship from the dealer to the manufacturer. Mr Honda had cultivated a "success against all odds" culture into the company. This was tested when he sent two executives to the U.S with no strategy other than to see if they could sell something. The weaknesses within an organisation can become irrelevant if the strategy is strong and there is good leadership. An element of luck also helped Honda follow an emerging strategy. Restrictions placed on funds by the government for the U.S venture forced Honda to take an alternative route. If they had all the funds necessary they may well have gone through the normal distribution channels. Honda entered the us market right at the end of the motorcycle trade season. When leaking oil and clutch problems occurred on their bikes it did not affect Honda as hard as it would have had they entered in the beginning of the season. Also people noticing the Supercubs led the company to produce a bike which was not at first supported by senior management. The success of Honda was not the result of senior management coming up with all the answers. In fact senior executives in most Japanese manufacturing companies do not take their strategic positions too seriously. Salesman, cleaners and those working on the manufacturing floor all contribute to the company is run and thereby influence its strategic position. It is this ability of an organisation to move ideas from the tom to the bottom and back again in continuos dialogue that the company values the greatest. As a conclusion it is necessary to consider the theoretical side of Hondas strategy and see whether the company was in fact following a model. The first model is the Andrew's model. Andrew came up with the idea that there were two stages to corporate strategy, formulation and implementation. Formulation involved looking at the market, competitors

and resources and formulating a corporate strategy which would be implemented throughout each process of the organisational structure. This model was also supported by Porter. This is how the BCG saw Honda, as a corporation, who had looked at the market, formulated a strategy to cope with the environment and competition pressures and implemented it, making all Hondas plans and activities deliberate. The second model known as the emergent strategy portrays a different image to the Andrews model and shows how Pascale viewed Honda. The model shows a realised strategy made up from a an intended strategy together with an emergent strategy which is not planned but emerges in relation to activities within the environment. Pascale seemed to think that in Hondas case a substantial proportion or the companies corporate strategy was emergent and less was actually intended strategy. The actual strategy followed by Honda is likely to be a combination of both. BIBLIOGRAPH