CASE STUDY : HONDA

Presented by :Tan Tai Seng M061130005Lim Mei Chin M061210001

History & Background

• Founder : Soichiro Honda

• 1946 – Honda Technical Research Institute in Hamamatsu, Japan to develop small motorbike engines

• 1948 – Establish Honda Motor Company, Ltd

• 1959 – Opened its 1st store front at Los Angeles with 6 industrial employees

History & Background

• 1986 – 1st released brand luxury car, Acura - Also manufactured garden equipment, marine engines, power generators & pumps.

• 2000 – Released ASIMO robot

• 2004 – GE Honda Aero engines for aerospace

• 2012 – Honda Jet

Slogan & Philosophy

• Basic Principles Respect for the Individual The Three Joys (the joy of buying, the joy of selling, and the joy of creating) • Company Principles (Mission) Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality yet at a reasonable price for worldwide customer satisfaction • Management Policies Proceed always with ambition and youthfulness Respect sound theory, develop fresh ideas, and make the most effective use of time Enjoy your work and encourage open communication Strive constantly for a harmonious flow of work Be ever mindful of the value of research and endeavor

Products• Automobiles

• Motorcycles

Products

• Scooters

• Electrical Generators

• Water Pumps

Products

• Lawn & Garden Equipments

Products

• Tillers

• Outboard Motors

Products• Robotics

• Jets & Engines

• Thin Films Solar Cells

Porter’s Five Forces Model

• Threat of substitute products - Customer may switch to better performance with more economical prices compared to Honda - Eg : Yamaha

• Threat of entry of new competitors - Honda unable to gain maximum profit in American market because of American government policies to protect domestic companies, such as Ford - Spend money in American distribution market

• Rivalry among existing competitors - To compete with Toyota, Ford & General Motor - Keep on innovating, improving, researching & developing to compete effectively in auto industry - Eg : Honda Accord 1982 vs Toyota Camry 1982

Porter’s Five Forces Model

• Bargaining power of customers - April 2007 in Vietnam, Honda Air Blade Scooter was highly attracted to the youth, the supply is not enough for demand & pushed to higher price.

- July 2007, Suzuki introduced ready stock Hayate scooters which has same function with Air Blade with 23% lower price, customers changed their mind & move to Suzuki.

Honda Air Blade Suzuki Hayate

Porter’s Five Forces Model

• Bargaining power of suppliers

- Honda key’s suppliers (Metal Stamping Parts) : Hongo Co.,Ltd Kikuchi Co.,Ltd Takao Kinzoku Kogyo Co.,Ltd Technical Co.,Ltd

- Kikuchi Co., Ltd also deal with Nissan & if Nissan offer higher price & better promotion of than Honda, capacity of Honda would be affected & increased its cost to sustain.

The External Environment

• Natural environment - Honda puts endeavor to create better, cleaner and more fuel-efficient engine technologies, and to further improve recyclables throughout its product lines. - To make further progress with fuel cells and solar cells, and to promote commercialization of solar cells

• Cultural environment - Men and women have different style in vehicle of demand & their needs for scooter differed too - Eg : Honda Active > 100cc (men) & Honda Scoot Pep <100cc & with ABS (women)

The External Environment

• Economic environment - Increases in fuel price & economic crisis could triggers decline in demand for automobiles

• Political / Legal environment - Regulations regarding vehicle emission levels, fuel economy, noise, safety and noxious substances, as well as levels of pollutants from production plants, are extensive within the automobile, motorcycle and power product industries. - These regulations are subject to change, and are often made more restrictive. - Costs to comply with these regulations can be significant to Honda‘s operations.

• Technological environment - Honda can build an information system to approach their customer effectively. - Not only attract intention of the ones who need car but also the ones have not plans to buy it.

SWOT Analysis

Enterprise Strategy

The Mission Statement of Honda is try to maintain a global point of view, with the dedication to supply the highest quality products at a reasonable price for worldwide customer satisfaction .

Moreover, taking new challenges with the pursuit of Initiative, Technology and Quality, Honda is pursuing their vision: Striving to be a company society wants to exist through creating new value, globalization, and commitment for the future

Corporate Strategy

Honda‘s portfolio includes three businesses: Automobiles business, Motorcycles business, Power business.

Honda has devoted in one basic rule: build products close to the customer.

Business Strategy

R&D is sharpening the business advantage of Honda

With the systematic way of approaching, focus on durability, reliability and basic performance to establish a creative and innovative technical foundation. With the wisely approach to the future, the Honda products do care about the economical, environmental, and social issues

Operational Strategy

Honda is pushing the independence of their local management and sales operations, at the same time with integrating and forward-looking plan for each region.

They operate under the conduct guidelines that help member companies and associates in evaluating and managing risks, complying with laws and regulations, keeping a high level of transparency in operational level, that‘s all to maximize the worldwide customer satisfaction.

The Individual Strategy

The Three Joys

The joy of buying – to exceed the customers‘ expectation

The joy of selling - the pride of having a positive relationship with their customers

The joy of creating - by producing quality products that satisfy customers worldwide, Honda‘s employees can experience pride in exceeding the expectation of their customers

The Firm’s Structure

Honda use matrix organization structure that combines geographic, business and functions

Advantage • Facilitates rapid response to change in two or more environments. Eg : when some changes occur in American market, the local company freely

makes decision in order to immediately adapt to the market. Instead of waiting the decision from Parents Company, it has authority to themselves decides, resulting in saving time, cost and reducing risk.

• Matrix structure is flatter and more responsive than other types of structures. • Permits Honda's associates efficiently, effectively exchange information

together. • Highly specialized employees and equipment are shared by departments

Managing People

Honda focus on 2 ways of managing people :

• Environmental Training - It has committed to environmental conservation and spent a lot of effort to contribute to human health and the preservation of the global environment

• Ensuring diversity in employment - Honda believes that diversity of workforce will provide the company with the creativity by integrating many different perspectives in a unique competitive advantage

Financial Analysis

Financial Analysis

Honda net sales has dropped from $ 2,440 billion yen to $ 2,028 billion yen (-17%) in 2012 mainly due to decreased net sales in automobile business by Japan earthquake, flood in Thailand as well as negative foreign currency translation impact.

Honda Hybrid

Honda Hybrid

• The Insight uses the first generation of Honda's Integrated Motor Assist (IMA) hybrid technology.

• During heavy acceleration, the NiMH batteries drive the electric motor, providing additional power; during deceleration, the motor acts as a generator and recharges the batteries using a process called regenerative braking.

Honda Hybrid

• 1999 – 2006 : Production of 1st generation of Hybrid Insight• 2001 : Released Hybrid Civic• 2009 : Introduced 2nd generation of Insight

Conclusion

What are Honda’s distinctive competencies? How do they play a role in its choice of technology strategy? Distinctive competencies also its strength which are :• Powerful R&D• Market leader • Strong brand equity• Innovative• Wide range of products (Unique products and diversify product line)• Better production plan With the powerful R&D, Honda choose to go solo in its choice of technology strategy. The decision was made by Hiroyuki Yoshino because he believe that “It’s better for a person to decide about his own life rather than having it decided by others”

Conclusion

Honda has chosen to develop the hybrid technology alone as opposed to collaborating with other manufacturers. What are the benefits and risks of this approach?

Benefits :• High risk comes with high profit. With the sole own technology in the market, Honda can monopoly the market with huge profits.• Delayed the competitors’ technology advancement• Raise the entry barrier for new/existing competitor• Raise its brand equity image (as well in history) for every successful product.• Possess the first mover advantage as the market leader. Thus enable Honda to set comparison bar for consumer to gauge/evaluate against competitors. • Give more over its technological direction and ensured that the accumulated learning remained in house.• Force itself to understand all aspect of strength to weakness in technology.

Conclusion

Risks : • If Honda chooses to go solo, it faces the risk that its products will branch away from standardization because most of the people (or competitors) will be using other technology. • If Honda’s products are not more superior to others, it might face difficulties in marketing the products • Waste money in R&D if products are unprofitable (all cost bare alone)• If unsuccessful, will takes time to catch up with competitors (dead or alive)• Lost the opportunities to collect licensing profits• More money needed in advertsing to educate public with new idea or promote new product

Conclusion

Can Honda reduce the risk of going solo? • Yes, there are possibilities

i. Honda must also has a strong sales team to survey the market needs (such as PESTEL Analysis) before designing a product

ii. Timing of the launch of new product also crucial which will determine the success/ failure of the product.

iii. Consider narrowing the gap of launching (but still need to ahead of competitor) so that the cost of educating share by both and the success rate will be higher.

The End

THANK YOU