Running Head: Honda Motor Company Comprehensive Overview
Honda Motor Company Comprehensive Overview
Eric Christopher Tingson Garcia
BUSN 520 Marketing and Management
Professor Phil Shaps
April 12, 2015
Table of Content
Description of the organization history, all subsidiaries and score of services provided…………4
Scope of market distribution – are they global or regional etc…………………………………….6
Overview of the leadership and management structure and individuals………………………….7
Current issues that may affect the future of the organization…………………………………..…8
Strengths and Weaknesses…………………………………………………………………………9
Opportunities and Threats……………………………………………………………………..…12
External factors impacting decisions……………………………………………………………..14
Possible future scenarios…………………………………………………………………………15
Primary and Secondary Market………………………………………………………………….15
Recommendations for Leadership……………………………………………….………………21
Recommendations for Promotions………………………………………………………..…..…23
“’Respect for the Individual’ and ‘The Three Joys’-expressed as ‘The Joy of Buying,’ ‘The Joy of Selling’ and ‘The Joy of Creating’” are the four basic principles Honda Motors Company is embodied with, that influences its decision on its journey to continuous growth (Honda Worldwide, 2011). Respecting individuality base on their own customers’ unique characters, while providing direct enjoyment through their product has been the concept that Honda has expressed their belief in. In line with these principles ever since its establishment in 1948, Honda has remained a leading company in the market, through creation of new innovative technologies, products of higher quality at reasonable prices, world wide customer satisfaction, and commitment to environment protection and enhancement of safety in a mobile society.
Honda Motors Company being the third largest automaker in Japan is perhaps known best as an automaker giant in the industry. Although the company has had its roots in motorcycles, and is even currently the world’s top motorcycle manufacturer, Honda’s automobile product line still accounts for approximately 90 percents of its sales, especially in the United States where the majority of its sales are generated. Honda has manufactured and sold many top-sellers, such as Accord, Civic, Prelude as well as its luxury line within Acura. Such popularity having positive effect on the success of the company has also generated negative publicity, with the Civic having rank first in the United States’ list of most stolen, and thus “in demand”, vehicles. Other products within the Honda’s vast divisions include other times that bolster annual sale, such as agricultural and industrial use machinery, generators, engines, and all terrain vehicles (Minami & Minato, 2009).
As with any other companies, Honda has its shares of internal and external factors, dictating its success and growth. Where strengths and opportunities is a favorable outcome for the company, it is also shadowed with internal weakness and threats from external sources and competitors. In order to determine Honda’s future growth and its susceptibilities, a company analysis is therefore needed to establish its weak points, to highlight its strong areas, and to determine possible recommendations for future success of the company.
Description of the organization history, all subsidiaries and score of services provided
The Honda Motor Company is a multinational based company in Japan that deals with manufacturing power equipments, automobiles and motorcycles. The company has been the biggest seller of motorcycles for years and has also been the biggest manufacturer of internal combustion engines in the world, selling more than 14 million engines per year. Today the company is among the 8 biggest manufacturers of automobiles in the world. Although the aforementioned items are amongst its biggest offerings, they are not the only ones. The company also manufactures and sells marine engines, garden equipments, generators and watercrafts. Furthermore, there have also been steps in commercializing artificial intelligence, robotics, aerospace technology and aero engines, an interest which the company has been having recently. “Honda also has an excellent record of financial health, never once falling into the red since its inception” (Mie, 2015).
In the automobile market, the company has had tremendous success thanks to the different customer oriented vehicles they have come up with. The automobiles are also manufactured with consideration to the different regions that forms their market. For instance, a car in North America might not look like the international car of the same model. Motorcycles are also among the company’s highest revenue earners. Although the company reduced its production from 3 million every year to just over 500000 every year from 2006, it is still among the highest manufacturers of these vehicles. From there the company is again interested in engines in general, robots, aircraft solar cells, mountain bikes and ATV in that order.
Honda happens to have a number of subsidiaries that are responsible for the different interests that the company has in new fields. One of the first subsidiaries from the company was its dedicated luxury brand which was known as Acura. This brand was released in the year 1986 and as the first of its kind in Japanese automobiles. Another subsidiary of the company is known as the Honda Aircraft Company which is concerned with aerospace and the related aircraft technologies. The subsidiary is responsible for the new technology in aero-dynamics and fuel efficiency. In the solar cells market the company has a subsidiary known as Honda Soltec which was the first to sell the thin-film solar cells for both industrial and public use. Honda also has a Brazilian subsidiary known as “Moto Honda da amaonia” which is responsible of launching versions of Honda brands that are fuel-flexible. There are also a number of other subsidiaries which are grouped in accordance to what a particular purpose (Sakiya, 1982).
The company came to be as a result of the founder, Soichiro Honda who supplied Toyota with Piston Rings, and learnt about engines under a company known as Tokai Seiki. Following World War two, the company was bought by Toyota, and Soichiro Honda went on to open the Honda Research Center. From this point, they started researching and developing engines that could be attached to bicycles and motorcycles. In 1949, the company produced a full motorcycle that was known as Model D. This led to the success of the company and within the year 1964, it became the biggest seller of motorcycles in the world. However, they did not indulge in the development of automobiles until 1963 when they put up the T360 mini pick-up truck for both public and industrial use. Its s500 sports car was then developed and had a chain linking the vehicle’s engine and its back wheels. This is the possible origin of the design that motorcycles went on to acquire. The company then went on to expand and sell the two developed vehicles to different markets for the next decade. It is during this time that the company opened a subsidiary in America that was known as the Honda of America.
Due to the design of the vehicles, the company became successful as it opened branches throughout the entire world. The company went on to unveil their Acura brand which was successfully launched as a luxury brand in the American market. The sports utility vehicle and truck boom that took place in the globe, as well as the death of Honda’s founder, led Honda to become outpaced by other Japanese automakers. At this time, the company had a lot of financial woes and was on the brink of a hostile takeover by Mitsubishi Motors. However, the former CEO of the company back then, decided to change their working culture so as to meet the requirements of the buyers, instead of making vehicles that only the engineers will love to see. This gave birth to recreational vehicles such as the CR-V and the odyssey (Kato, Omae, & Nagao, 2005). Also, in the year 1995 the company officially birthed the Honda Aircraft Company which had the aim of producing aircraft bearing Honda’s name.
Scope of market distribution – are they global or regional etc
The company is an international company and has its market spread across different countries. The company has divided its market segments into three main ones; Japan, international market and sports. The Japanese market was the first one for the company and was competitive between Nissan and Toyota. As a matter of fact it is as a result from the competition between these two that Honda was forced to spread into an international market. Apart from Japan the company has also advertised and opened a number of stores and manufacturing plants all over the world. The UK, New Zealand and Argentina were the first countries where the vehicle company first advertised their products. In the year 2007 the company was a significant sponsor in the ITV’s coverage of the Formula one race in the UK.
Furthermore the company specifies some of their vehicles to ensure that they fit the particular segment of the market. This and the numerous stores the company has strategically show the attention the company is giving its international market. Another market segmentation that the company has is related to sports. This is one of the most important marketing segments to the company as it forms a significant target of the clientele. Ever since its initial years the company has took part in racing activities such as the Indy racing league where it was directly involved and also in other events that it sponsors in one way or another.
Overview of the leadership and management structure and individuals
The company was founded by one Soichiro Honda and is today being headed by Takahiro Hachigo. In the philosophy that guided the company was ideas that were not only innovative but also imaginative; this is the condition that the top management strived to create in the organization. The combination of both innovation and imagination ensured that the company experienced a number of benefits such as being able to analyze things from more than one perspective. This helps one look at the problem from multiple dimensions that give the individual the best strategy to approach the issue at hand. This strategy also puts into essential consideration the horizontal decision making mechanism in the organizations which are also important. It was also able to operate in a flexible state since the task forces and the teams can be put to different tasks regardless to serve the needs. Lastly, the structure of the company is optimized in such a way that both the individual and the organizational freedoms are in coherence. The top executives of the company form a matrix that promote complimentary relationships and promote both individual initiative and team strategy (Mito, 2012).
Current issues that may affect the future of the organization
There are a number of things that are currently happening in the news today that might affect the future of the company. One major situation is that Honda Motor Company is planning to manufacture and export more than 100000 motorbikes manufactured in Vietnam by this year of 2015. The company is trying to double its current Vietnamese export in an ambitious plan that seeks to become the biggest shareholder of motorbike in Asian countries. Furthermore, the company is also seeking to revamp its customer offerings, by introducing high end bikes where the old ones were purchased before. This will increase the number of sales than the company would have expected in such a short amount of time. The company is expected to push for and find new clients, informing them of new available motorbikes. If there are no clients, the company will be forced into a loss considering their input in the different strategy that has been used.
Perhaps the biggest issue right now for Honda is its recent bouts of recalls, most notably due to faulty airbags, made by its Japanese supplier Takata. These recalls have forced the company to replace its president. “Mr. Ito will be replaced by Takahiro Hachigo, 55, whose recent duties have included overseeing the automaker’s European and Chinese operations. The change will take effect after Honda’s annual shareholders meeting in June, Honda said. Mr. Ito will remain on the board, with the title of senior adviser” (Soble 2015). Although little is known about Mr. Hachigo outside of the company, many deemed him as similar to previous presidents that Honda have had, which is a complete opposite of Mr. Ito. How would he lead in the face quality problems Honda has been having in the following years, will dictate the direction the company is heading into.
Strengths and Weaknesses
In order to be able to portray the strengths of the company, while avoiding redundancy or turning into a disorganize mess, one must categories the company’s shining moments through its portfolio, success, and popularity. The portfolio of the company encompasses it’s the strength of its diversified products, as well as its strong brand image that it portrays around the world. First of all, having the 21st most valuable brand in the world, valued at $17 million dollars, Honda is one of the very well known companies which thrives on its dependability and best quality made engines in the automotive industry (Honda Corporate, 2011). Furthermore, Honda, unlike many other automotive companies, has a multi-focal approach. It does not only focus on selling of automotive vehicles alone, but has various sectors and departments which focus on technological advancements as well. It is the largest producer of engines and motorcycles as well as multitude of equipments ranging from garden equipments, scooters, ATVs, generators, robotics, jets and solar cells (Honda Corporate, 2011). The company thrives with this dual form of decentralize and divisional organization. Wherein lower management focuses on their specific areas of expertise, with the development of the various examples aforementioned above, Honda also follows “Departmentalization that groups units around products, customers, or geographic regions” which is made evident by various factories in different part of worlds, selling region-specific goods (Bateman & Snell, 2013). Therefore, this form of organization structure that Honda follows protects the company against susceptibility to market cycles and technological disruptions. Since the company has multiple investments in different sectors, a disruption in the automotive field for example, will not debilitate the company as strongly as others (Honda Corporate, 2011).
The success of the company also portrays the over all strength of the company. Honda is one of the largest vehicle manufacturer in the world, encompassing cars, trucks, and motorcycles. Although there are stiff competitions in the automotive industry, its motorcycle market share in Asia, as of 2012 has dominated compared to other companies. In fact, Honda has sold 80.5 percent of its motorcycle in the Asian market, which presumably has the greatest growth potential for any company. Having the largest motorcycle market share, Honda has one of the best positions to compete with other companies for overall shares and profits. Furthermore, Honda’s success is evident also due to its advancements in technology through means of research and development. Their involvement and success in motorsport program, has proven their capabilities to compete with other automotive companies, in the further advancement of engine function and fuel utilization. Although labeled as sports, the importance of these event aids in the development of new powerful engines and technology, which often finds its way into the mass produce cars sold in the future. Honda’s investments in research and development has gained them 5% in revenue, and lead to improved vehicle paintings, hydrogen hybrid engines, and new welding technologies capable of strengthening vehicles and its safety. In fact, the company owns over 42,000 patents with another 29,000 pending (Honda Corporate, 2011).
Last but not least, the strength of a company is highly dictated based on its popularity. There are a lot of different factors that determines the overall reputation of the company and its product. The main factor is the quality of customer experience, which is often dependent on the reliability and durability of the goods. Consumers of Honda products, being one myself, have enjoyed the experience with Honda goods, often being durable and reliable for a lengthy period of time. Having appreciated the longevity of Honda products; the company has won numerous awards for quality and customer satisfaction. With a strong distribution network and continuous refining of its production system over the years, have yield more innovative and fuel efficient, low emission products for Honda. Saving the planet and keeping the cash inside the wallet has yield Honda with greater popularity in recent years (Honda Worldwide, 2011).
No company is devoid of or immune to any weaknesses. Some of Honda’s strength is also its weakness. Having branched out into different sectors such ATV, generators, garden equipments, and with a fairly strong automotive production line and a complete dominance over motorcycles sales, Honda is still particularly weak in the truck industry compared to other manufacturers. This sole factor inhibits their full grasp within automotive industry. Furthermore, as of late, the modern style of their car line has been deemed “boring and bland” compared to its predecessors in the past. Although each new vehicle acquired new technologies, this in turn drove up the price and drove away new consumers. The availability of these technologies has been questioned by consumers whether Honda’s vehicles are worth the steeper price. Furthermore, their popularity amongst young adults has dwindled ever since companies such as Nissan have release far more powerful and exotic looking cars such as the Nissan GT-R. Honda, on the other hand, continues to suffer from underpowered products, less roomy, and often annoyingly loud engine sounds during operation. This is quite disturbing considering this goes against their basic principles, aforementioned in the introduction (Honda Corporate, 2011).
Honda Motor Company is also suffering from recent bouts of recalls which is now beginning to take a toll on their brand reputation and future sales. Honda has recalled more than 1,000,00 vehicles to fix various faulty parts and manufacturing defects. Although, in Honda’s defense, it is their company’s affiliates that and manufactured and provided the faulty parts. However, as a decentralize organization, a fault of one branch or affiliates will always lead back to the head branch in times of mistakes. Always will and always has been. Speaking of branches, Honda’s weak position in Europe automotive market has cost the company to lose valuable profits and decreased sales. Honda has maintained only 1.1 percent market shares in Europe since 2012. Although, European market share is in decline at the moment, it does not justify Honda’s extremely low share on the continent, especially since Honda deems itself as a global automotive manufacturer (Car Complaints, 2011).
The accumulation of all these problems has lead to greatest weakness for the company; decrease sales and profit. With the rising price of raw materials, and demand for lower cost vehicles, Honda’s revenue has hit the lowest point in 4 years, to 7.948 trillion yen. Sales were down by up to 11.2% in North America, which is troubling considering the continent represents more than 40% of total Honda revenues. Furthermore, revenues from Asia, has also declined by 21.3 percent, signaling a poor global performance (Honda Corporate, 2011).
Opportunities and Threats
With increasing fuel prices, a wonderful opportunity for growth can be found within the hybrid models and emphasis on engineering fuel-efficient vehicles. The decline of levels of fossil fuel sources and the rising emissions of C02 has lead to change of perspective towards vehicles, and a major concern from people and many governments. As such, ecological cars, powered by hybrid systems of gas and electricity, hydrogen or flexible fuel engines have become extremely popular, a shadow of the past of what once was; where gas guzzlers were highly sought after. Having a new demand for these types of vehicles is a 33 billion dollar market and a great opportunity for Honda to capture (Honda Engines, 2011).
Furthermore, Honda has an ability to develop more aviation products as well as expands its grasp in the automotive industry by furthering and developing their truck line to compete with the other larger automotive manufacturers.
Honda can even capitalize on a couple of its strength already and make it even stronger. The motorcycle industry has grown by 4.2 percent from 2011 to 2012 and is expected to grow by at least 6 percent by 2016. Being one of the world’s leading producer and seller of motorcycles in Asia, the company can further expand its global market share and sales by targeting other continents. Honda can also grow through acquisitions of smaller competitors and benefit from strategic partnerships, especially in the motorcycle industry. New brands will be added to Honda’s portfolio, and achieve greater economic scale between the synergies of the two companies. There is extreme need for cheap dependable transportations, as within Honda’s grasp to take the opportunity for further growth a return to profitable stature (Honda Corporate, 2011).
The life of a company is of course never without threats as it can be seen from every angle and perspective. The fickle economy can change ever so slightly, causing death to or success for a company. The rising raw material prices for instance are a huge threat for Honda. Metals which are the main raw materials used for automotive manufacturing as well as research and development has raised the overall production cost for the company. The depreciating dollar and appreciating Yen alongside with higher cause of raw materials is a massive threat. On top of that, the much recent drop in fuel prices due to extraction of shale gas, evident of recent times, will have negative influence on Honda’s share. Considering that the company has invested immense amount of money into research and development on hydrogen fuel, hybrid and flexible fuel engine cars, will lose its demand since the fuel prices are low. Furthermore, natural disasters which, occurs yearly, are always looming around every corner. Honda manufacturing factories in Japan, Thailand and Malaysia are subject to natural disasters that disrupt manufacturing productions, thereby decreasing production volumes (Honda Worldwide, 2011).
Perhaps the biggest threat for a company, especially Honda is its competitions. Now for consumers, competition is a wonderful thing, since it avoids monopoly, and forces the company to decrease prices and increase quality of goods to “one-up” the other competitors. However in a business perspective, this is a huge threat for growth, success, and profit. In fact Honda is facing more intense competition as of late, especially since small new entrants are disputing the market having capabilities of producing electric vehicles and alternative fuels. Furthermore, big companies are restructuring themselves to become more efficient, and targeting a variety of areas that consumers are in demand of. Honda is taking hits in both small and big players (Honda Corporate, 2011).
External factors impacting decisions
Without becoming redundant, the positive and negative external factors for Honda, were aforementioned earlier, as opportunities and threats as part of the SWOT analysis. These two external factors have the greatest impact in the direction of Honda Motor Company’s path to success and reaffirmation as a global automotive power. However, it is the negative external factor of threat that may very well have the greatest impact on the decision and direction of where the company is going. The economic slowdown, competition in global automotive market, tightening emission standards, the bouts of recall and appreciating Yen against US Dollar had lead a to sudden restructuring of the Honda’s leaders and overall business approach.
One can infer that they have lost their way from their original basic principles of quality, individuality, and joy; and much more similar to survivability instead. Perhaps Honda may have notice this recently since, much of the surprise by company insiders, have suddenly replace its current CEO Takanobou with Takahiro Hachigo as well as other senior management with an entirely new, younger group of people. With poor global profits, bouts of recall, and bland styling, the company is trying to redirect its path into a much fresher direction (Levin, 2015).
Possible future scenarios
The reconstruction of Honda’s leaders will definitely have a drastic change in the direction of the company and its products. More of its vehicles will probably be updated, especially in aesthetics to combat the bland styling that everyone associated Honda recently with. This is evident with the new release of the Acura NSX, an enthusiast’s exotic car which was once retired by Honda due to increasing price of fuel. The reintroduction of this vehicle should pave a way for new exciting looking cars in the future, capable of bringing joy their consumers. Combined with new technologies, from their research and development department, Honda will once again have products desired by young adults.
Furthermore, by hiring leaders, especially a CEO with global-based experience, the company will be able to expand its growth and grasp as made evident with opportunities that Honda has on its plate. With China’s booming population, a massive market share in motorcycle in the country will bolster the company’s success and alleviate many of the threats the company has had for the past decade (Levin, 2015).
Primary and Secondary Market
Perhaps, Honda Motor Corporation is much more complicated than just assigning one main primary target group. Since Honda has multiple product types, their primary targets are usually of greater criteria. Product Segmentation usually narrows the target market based on the product type. This approach is rather tough because of its inability to satisfy each customer due to unique differences and exposure. In order to generate higher sales record, Honda Motor utilizes target markets that have been clustered precisely which groups customers that are similar on their segmenting dimensions into a homogeneous segments. Honda’s approach with their products, are usually geared towards the economic standing of their customers and their age, which both have the highest tendency for behavioral influences. Geographic locations also place a part, but not as specific as the other two groups aforementioned above (Minami & Minato, 2009).
First of all, geographic influence on Honda’s product, simply defers on their products’ accessories, safety requirements, and aesthetic looks, preferred by that area served. Certain countries may have specific requirements for safety, as well cultural preferences and or necessities. For example, cars sold in the US are usually required to undergo a specific amount of crash testing in order to be sold in the entire 50 states. As such, cars sold in the US may be end up being bigger, heavier and a lot less powerful than their Asian counterparts in order to meet the demands for safety. Although important for advertising and rapport, geographic criteria alone is not enough to determine its target market since automobile market is too broad and encompasses all population. However, this statement should not take geographic location lightly as it has a huge determining potential for profit, sales, and the direction of where the company is heading (Bateman & Snell, 2013).
Honda as previously mentioned, manufactures a form of transportation, whether it’s a car or a motorcycle, and as such, age and economic standing is a huge determinant for its target market. Age and socioeconomic level are both intertwined and have linear relationships. The greater the age of the customer, the higher spending power he or she may have and on the other hand, the lesser the age, the weaker the spending power. However, younger group tends to have higher spending tendencies than that of their elder counterparts.
Honda Motor has dramatically changed its approach over the years and is more evident with this era. Although the company started with a much younger target group in the past, especially since the company originally began as a motorcycle manufacturer, they have gradually evolved and their vehicles are a great example of that. During the 90’s era, Honda created cars that were light, powerful, and fast which had tendency to sell pretty well with the younger crowd. However, overtime, also due to the increasing gas prices and safety concerns, Honda become primarily focus on a more refined age group of around 30 to 50 years old. Factoring age as well as gender, Honda sells vehicles that are more luxurious than before, providing increased convenience, above average fuel efficiency, a good and comfortable ride, and an image booster. It also provided advance safety technologies at an affordable price, for that age group. This primary target group has determined the recent line up of all vehicles Honda is producing. Many of the population within the age group, are considered financially stable, and are looking for a vehicle that satisfies their needs to protect their family. Even, if the price of Honda vehicles are a bit higher than the other competitors, their vehicles are made specifically for that age group, and with consideration of their socioeconomic standing at the time of a person’s age, affordability is never an issue. However, their secondary target group, the younger crowd, have taken a slight hit considering, they are beginning to deem Honda as a boring vehicle manufacturer (Ibarra, 2010).
Honda Motors decision to focus primarily on customers with the age group of 30 years old and older has hurt the image of the company, especially since the company advertises that they manufacturer and sell vehicles for “respect for individuality and the joy driving”. They are anything but their former glory, considering many people have perceived their vehicles to be boring and generic. They are no longer selling vehicles for joy, but rather to satisfy a target group that would make the best profit. It is understandable considering, this age group, is no longer Honda’s primary customer base, and may have less money and fewer demands for their product. Since it is a business after all, the direction of the company is often determined where their products will most likely sell. However, secondary target audiences are still just as important (Honda Worldwide, 2011).
With the abysmal global profits that Honda suffered in recent years, the company has decided to shuffle and replace it’s head executives to change its approach. In fact, in recent declaration of lineups and concept cars during the 2015 auto conventions, the company seems to have developed and financed, new powerful vehicles, with exotic looks, worthy of gear heads, and rich men suffering mid-life crisis. These new vehicles such as the new Acura NSX, has capabilities, equivalent to the likes of Ferraris, Lotus and Lamborghinis. Furthermore, new models of their current line up were unmasked recently and featured, an edgier style, faster engine, whilst retaining the previous quality, safety and comfort of the older models. Honda also will also introduce more model varieties to accommodate the levels of different customer economic status. For example, Civic will be sold in different trims, with the base model being the cheapest, and the SI and Mugen, being more powerful and aggressive, at the cost of an increased price. Honda Motors has taken steps to accommodate both its primary target group and the secondary target group, taking into perspective the customers age and economic status in their product. This change of approach is creating new opportunities by capitalizing, on a much younger and growing secondary target group, whilst maintaining the habitual decision making in the much older primary group. A success that Honda has established where “consumers engage little conscious effort” when deciding in the purchase of their product (Bateman & Snell, 2013).
Regardless of the change of direction for such company like Honda, or any other company regarding this matter, one will never let go of their most established and most profitable group of customers. In this case, North American baby boomers, a suitable name for a target group, are of the greatest profitable group for Honda Motor Company. Although it is not limited to North America alone, but with 90% Honda vehicular purchases are transacted in this continent, it is no wonder that the company has spent millions of dollars for advertisement and development of vehicles, made for American specificity and of that primary target age group.
Honda’s specific target group’s demographic, putting geographic locations aside, are usually people of age 30 years old to 50 years old, married or single, with no gender preferences, and at a mid to high middle class status. Although there has been a change in the pricing of their vehicles to accommodate all levels of socioeconomic background, the main bulk of their target are still of those of the middle class. To further expand on these criteria, aside from the demographics and location, customer lifestyle is also greatly considered. Honda’s primarily targets working class population with established work and buying power, fairly successful, desires value for money and prestige in what they drive in. Furthermore, within this target group Honda also aims for behavior patterns of customers who has a habit of replacing cars every 5 to 7 years, a monthly amortization of 15 to 20 thousand and has a desire for a good ride and efficient fuel consumption. Combined all this, Honda is able to influence their customer’s behavior following the Maslow’s theory of needs to their own advantage and thus gaining profit. The North American Baby Boomers target group is at an age, when the physiologic, safety, social, esteem, and self actualization needs are of greatest importance, and combined with an ability to purchase vehicles, establish a profitable target group for Honda Motor Company (Thompson, 2009).
How strong is Honda Motor Corporation compared to its competitions? Based in Figure 1, out of the big five automobile market company share in U.S., Honda is in deed last, with an exception of around 2009 when it took the fourth spot from Toyota, then lost it again ever since. Currently as of March 2015, shown in Figure 4, Honda’s share percentage is at constant 8.4%. Although Honda is not the main leading automobile manufacturer in the states, evident with the fact that it is still a foreign company in a domestic US market, it can be seen that the company has been stable and maintained it shares steadily. Where as the other big companies, have huge fluctuation in their share percentage, Honda Motor Corporation has maintained a consistent percentage since 2005.
Possible reasons for this pattern can be seen in how Honda has played it safe ever since. Since their target group has always been stable as aforementioned above, Honda maintained its strategy and is quite evident as shown with their consistency. To further this idea, considering that Honda is not solely an automobile manufacturer, it is safe to assume that, all of its profits are not entirely from vehicle industries and therefore, the company does not seek glory of being number 1, but being stable and consistent. However, this approach has made Honda boring and with change in demands, due to gas prices decreasing as shown in figure 2, it will be interesting as to what the company will do in response to this sudden change. Furthermore, Honda’s grasp in the motorcycle industry has been threatened, especially after the termination of the partnership between HeroMotoCorp took place, which resulted in the lost of almost 40% of sales for the company (Cain, 2015).
Recommendations for Leadership
Honda Motor Company has a proper working organizational structure, made evident by strong and successful varying multiple sectors, functioning almost autonomously. Hondas’ subsidiaries are functioning on their own accord, and although separate from the parent company’s main direct objectives, they are still able to provide much needed profit, and success for its main branch. The company’s diversified portfolio, ranging from automobiles and motorcycles, to generators and engines, as well as successful research program and brand name has proven time and time again that Honda is well organized and its structures working within the field. Therefore any recommendation to change the company’s organizational structure is unnecessary, as one should not change what has always worked in the first place. However, in light of the recent events that has plague Honda, a recommendation of change of leadership may be necessary to redirect the company to a proper path.
It should be known that Honda Motor Company is well ahead of any recommendation for change in leadership. In fact, just recently this year on February of 2015, Honda without any previous hints, surprised many with the news that it was changing up its leadership ranks. The company’s chief executive, Takanobu Ito, although shall remain on the board, has decided to step down to become an adviser to the company instead. A Honda insider and a much younger Takahiro Hachigo will take his place at the top as the new CEO. Furthermore, as previously mentioned, many of the upper administrative staffs have chosen to retire and be replaced with a younger group. “In a release statement by soon to be former CEO of Honda, Ito Takanobou, ‘Honda is ready to make a new leap forward. To do this, Honda needs to be led by a new, younger team’” (McGregor, 2015). This approach is indeed a great example of strategic planning, a change that would lead to “major targets or end results that relate to the long-term survival, value, and growth of the organization” (Bateman & Snell, 2013).
First of all, why a change of leadership? Honda Motor Corp’s internal and external weaknesses made evident by the SWOT analysis, has really hurt the company’s image. The shift and change of leadership is definitely crucial, especially since Honda is faltering in many fronts. It has failed to take advantage of Toyota Motor Corp’s stumbles five years ago, which allowed one of its competitors, Nissan Motor, to challenge for its top five positions in the U.S., narrowing the shares gap between the company by a critical 8.4%. Furthermore, Honda has been hurt by stumbles in the U.S., and Asia; Japan and China primarily. In fact, its recent and popular Civic sedan, redesigned in 2013 has received poor reviews in the U.S. for using cheap materials and a lack improved fuel economy. In Japan, its sales of the newly launch Honda Fit subcompact vehicle were hurt due to delays. In China, Honda completely missed its sales forecast, gaining a meager sale increase of 4.1% in a market that expanded by 7%. As a company that relied heavily on safety, Honda was most affected by the recall of millions of older vehicles equipped with the airbags from Takata Corp., that have been linked to six deaths around the world. Having account for more than half of the 25 million vehicles recalled for suspect airbags, it has been the most expensive issue that Honda has had. With the recent bout of costly recalls due to faulty airbags, a line up of boring and under powered vehicles, rising raw material prices, and economic downfall, Honda Motor Company requires a change of direction in order to survive against its competitions.
Honda is definitely in need of a change in direction it is going. Ito who was once a feisty former supercar engineer, shook up Honda’s decades-old, tightly knit supply chain, often seeking to trim cost and find more cutting technology. This approach made him an ideal target and a scapegoat for the faulty airbags, and overpriced tech-out boring vehicles. The 55 year old Hachigo, described as a broadly experience executive has jumped several levels in executive rank to his position. In a sense, Hachigo does not really fit the pattern of a typical Honda leader, and yet it’s the very same reason why he was chosen over other ideal contenders to become president. With a diverse experience in the major markets, the U.S., China and Europe, as well as a background in developing some of Honda’s most popular products, “Hachigo’s low profile could make the impression of a new direction, a fresh start and a new leap forward” for Honda Motor Company (McGregor, 2015). However, only time will tell, if he could steer the company to its former glory.
Recommendations for Product
The 4P’s are the product itself, the place it is being sold into, the price and its promotion. Marketing is the ability to make the population aware of the product via promotion. It is also accompanied, with the “ability to create product value, thereby causing the need, or the desire for the product, often determined, by the quality of the product itself, the price, as well as its location and target population” (Bateman & Snell, 2013). Honda Motor Company vehicle promotion is perfect as aforementioned above, and with manufacturing plants and markets in various continents, placement is also within the ideal objective. Therefore, would a price and product change be recommended?
Honda vehicles prices has always been higher than any of the competition and yet it has always worked and had benefited the company ever since. In fact, a change in price is definitely not recommended. It has always been part of their motto to create vehicles of slightly higher price, but in turn, at a higher quality and value. It’s even engraved well into their promotion and Honda has accepted and embraced this weakness and turned it into strength. Therefore, the issue lies not on the price, but the product itself.
A product change or revamping is definitely recommended, especially since Honda’s recent product line up as of late, does not match the price point they are asking for. People would often shell out more money, for a higher quality product, that they will find exciting and be proud to use. However, the issues with Honda are that most of their current products are underpowered, of cheap interior quality, bland in design, and are not worth the expensive price tag. Courtesy of Honda’s successful research and development division, each vehicle that Honda sells are equip with the latest advance vehicular technology often found in luxury lines from other companies. This may very well be the reason why the prices are so high. Just like you cannot add pepper to make a failed recipe taste any better, addition of advance technology into a boring cheap looking vehicle will not justify the increase in price. What I recommend for Honda to do, would be to change their vehicle line up to make it more exciting by listening to what their customers needs and wants. This will create further value to their vehicle line up. Designing sexier cars, and sportier aggressive look, will recreate their image. As it stands, the creation of the Acura NSX, which is aggressive, beautifully design, and overpowered is a great start for Honda this year.
Furthermore, having multiple class of the same vehicle will target customers at multiple economic level. Multiple trims of varying degrees of technology placement will make the vehicles more affordable since, the customers has more options to choose what accessories they would like to have in their vehicle, thereby managing the direction of where they want their money to go directly into, rather than being force to purchase a tech out car. Honda’s product needs to change to accommodate its customer’s wants, and return to its root and motto about selling vehicles, for an individual, not for the profit of the company.
Honda Motor Company has always be an organization dedicated to the advancement of mobility, targeting leading-edge technologies in various sectors. From racing spirit, to their dedication in environmental leadership, the company’s mission has always been to develop forward thinking technologies that anticipate and satisfy the needs of a future society. Honda Motor is not solely an automotive company as everyone may perceive it to be. Its many manufacturing and technological fields make Honda amongst the few versatile companies globally. Since self limitation will lead to inhibition of growth, Honda has avoided that by procuring various sectors in different fields. Market stability and continuation of technological advancement is its main purpose as a company. Although success and profit is definitely required to continue this goal and objective, set forth by its original founder, Soichiro Honda, it is still quite evident based on the charts and graphs that Honda does not aim for the number one spot in the global auto industry, but rather stability and consistency. Base on their practices, Honda have maintained stability by aiming for stable consumers and avoiding drastic financial risk by avoidance of venturing into new territories. However, the change of economic times will always dictate the direction the company is going, and in business, there is no such thing as 100 percent safety net. With the recent situations that’s been plaguing Honda such as the recall, the company’s lost of self, and their lost of the hold in the motorcycle industry, the company may very well venture out of their comfort zone.
The troubled times that Honda is in right now is reflective of their deviation to their original perspective and motto, and not necessarily due the failures of their current CEO. Ito, was appointed CEO during global recession, and as such, he started at a financial disadvantage already. In fact, if one were to look at his track record as a CEO Honda, he actually doubled the net profit of Honda, and had a steady growth under his watch. Furthermore, the company continued to lead development projects toward commercialization, including business jet aircraft Honda jet and Honda fuel cell vehicles. Nevertheless, there were strains that appeared in Honda’s rapid globalization and development structure reforms, which caused a lot of issues for Ito as aforementioned above. However, with the upcoming new CEO and refreshed administration, Honda is venturing back to its root, to what made it once was. It will be interesting to see how Honda’s new CEO will change the company’s direction. Will he remove some threats? Take some opportunities? Turn weaknesses into strengths or vice versa? So far, only time will tell.
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|Valuable in Achieving Objectives||Detrimental to achieving Objectives|
|Internal Factors||Strengths1. Diversified Product Portfolio2. Strong Brand Images3. Largest Vehicle Manufacturer4. Successful Motorsport Program5. Powerful Research & Development6. Popular Company7. Refined Production System8. Innovation9. Highly Experience10. Well Known Reputation11. Engines with high durability12. HighCredibility13. High Customer Satisfaction||Weakness1. High End cost structure2. Boring and Bland Style3. Economic Down Fall4. Underpowered Vehicle5. Lack of strong truck line6. Recent Bout of Recalls|
|External Factors||Opportunities1. Increasing Fuel Prices2. Positive Outlook for Global Motorcycle Industry3. Growing Demand for environmental firnedly vehicles4. Growth through acquisitions5. Offering of low emission vehicles||Threats1. Economic Slow Down2. Intense Competition3. Rising raw material prices4. Natural disaster5. Appreciation of Yen vs Depreciation of US Dollar6. Decrease of fuel prices|
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