Strategic Management of Honda Company - Case Study Example

? Strategic management al affiliation Strategic management Honda’s competitive advantage is due to its ability to produce quality products at a reasonable price. This statement can be correctly explained by the success story behind the launch and operation of Honda motor company. This paper will evaluate the history of Honda and the steps the company underwent to gain a massive competitive advantage over its competitors. As far as automobiles and motorcycles are concerned, Honda has been on the top list of best quality and reasonable pricing. This can be attributed to its marketing strategies which are mainly aimed at satisfaction of consumers. In the global business culture and environment, there exists a very wide range of competition. Competition mainly involves between organisations with related activities and producing related commodities. According to Grant (2005) another form of competition is the fight to gain financial superiority. In the matter of financial superiority and growth, all forms of organisations are ranked under the same scale. Under this evaluation, organisations and companies seek to gain a competitive advantage. Gaining competitive advantage in the global market is not an easy task. To gain competitive advantage globally requires an impression and satisfaction of the global consumer needs and wants (Porter, 2004). Over the years, the battle of competitive advantage has seen great improvements of produced goods. Additionally, innovation levels have also increased significantly. However, as much there is a rise in the number of companies in the global market, there are companies which have established their brand in the market. Humans find it difficult replace their current commodity preferences if they are satisfied. This gives an advantage to companies which have stayed in the market for a long time. However, the old companies should have outstanding innovations in order to satisfy their consumers and compete favourably with other companies (Johnson & Scholes, 2007). The background and the solution to a competitive advantage is the existence of a proper competitive strategy. A competitive strategy usually entails the evaluation of your competitors’ position in the market then coming up with a plan to give the organisation an upper hand in the market. Additionally, strategic decisions also play a vital role in gaining the competitive advantage. The strategic decision making is aimed at putting the organisation in a long term competitive decision making. This involves a consideration of the all factors affecting the operations and activities of the organisation (Porter, 2004). According to Lynch (2009), factors should include both environmental factors: both internal and external factors. Internal factors comprise of adoption of new technology, human resource development and the advancement of the improvement of managerial activities. External factors comprise political, legal, technological and sociological factors. A consideration of all environmental factors is the best strategy in gaining a competitive advantage in the market. Most important of all is the evaluation of the company’s target market preferences. Preferences may include the change in taste, price, accessibility and technological preferences. With the consumers being satisfied, the organisation may then focus on how to keep them satisfied (Grant, 2005). Taking Honda into perspective, it has covered its consumer’s needs and requirements. Honda Motor Company has established itself as one of the most successful business empires in the world. It is also an exhibit of a successful business competitive strategy. In an argument presented by Honda the Power of Dreams (2010), Honda has presented researchers and students with the best research tool. Many researchers and business students use Honda as they research option due to its development and success. The growth of the Honda Motor Company is attributed to the company’s urge to fulfil and satisfy the motor market wants and preferences. To achieve this Honda has an effective evaluation strategy which is aimed at conducting an analysis of the preferences needed in the market. Apart from suitable products, the pricing of Honda company commodities is reasonable. Founded in 1946, Honda was aimed at developing small combustion engines. Its founder was one Honda Soichiro. Two years later after is establishment, it was than incorporated as Honda motor company. The name coincided with its first make of a motorcycle. Its first production was the Honda C-100 which was a small engine motorcycle (Honda power of dreams, 2010). It was first introduced to the market in 1953. Six years later, Honda C-100 was the biggest selling motorcycle in the world. It was after the global success of Honda C-100 that Honda launched an American branch. The American Honda company was launched in 1959. In 1979 it began its production of motorcycles in the United States. Three years later the American branch started the production of automobiles (Johnson & Scholes, 2007). From this first business expansion strategy, Honda had placed itself in a very comfortable position to compete globally. After the first production was a great success, Honda took the advantage and spread its wings much wider. The selection of the United States as their next centre of their expansion was also strategic (Grant, 2005). After their first production, America was its best market base. Even with the launching of the American branch, the United States is still Honda’s leading importer. In the global market, the United States provides the best centre of trade. Capturing the United States’ market and gaining a competitive advantage in it is a success. To date, Honda is still the leading motorcycle producer in the world. Additionally, American market also generates its most sales. Apart from the motorcycle angle of production, automobiles from Honda have gained a major competitive advantage in the global market and also the American market. Automobile sales generate about 90% of Honda’s income (Mintzberg & Porter, 2008). Honda’s automobile market is graced by Luxury Acura, Prelude, Civic, Legend and the Accord. To date, the Accord is ranked the second most procured vehicle in the United States. Consequently, it is ranked as the world’s most stolen cars. This is evidence enough that the demand of the car is at very high levels. This is because of the consideration of the consumers’ preferences in the market. Apart from the United States, Honda has gained a global consumer appreciation for its automobile manufacturing excellence (Rowland, 2007). Globally, the most imported motorcycles and automobiles from Japan are products of Honda. Back to its roots, Honda is ranked as the third largest automobile firm in Japan. The demand of motorcycles sky rocketed in years. Consumers leading in the demand cycle were the middle level earning consumers. Due to the state of the majority of consumers, money lending institutions started funding the purchasing of motorcycles. The money lending institution invested in motorcycle whole selling business. According to Porter (2008) the involvement of the banking institutions enabled a shift from the traditional way of procurement. Traditionally, buyers acquired motor cycles on a credit basis. A shift from this system consumers were enabled to acquire motorcycles on cash on sale basis. With these developments, Honda decided to embrace a big risk. They decide to stop shipping of motorcycles on a consignment basis and they embraced the cash on delivery basis. Honda geared up for a number of a global revolt (Grant, 2005). Additionally, Honda started manufacturing of outboard motors, lawn mowers, generators, tillers and pumps. In the late sixties the company launched two light weight cars in Japan and the United States market. The two models of cars were not a success as they were a flop in both markets. Honda had to wait until 1973 to gain success in car production. At the time, the globe was facing an oil crisis and what the market needed was a product to save energy. Honda took advantage of the preference and launched the Honda Civic. The car gained a massive competitive advantage in the worldwide automobile market. With this strategy Honda was again in a good competitive position. At the time, it was an obvious assumption that the automobile market needed something classy and also energy saving. With a proper market research, Honda was able to see the opportunity and they took it. This is one of the strategies that keep Honda in the driving seat as the automobile market is concerned (Porter, 2004). In 1976, three years later, as sales of the Honda Civic reached the one million score, Honda launched an upscale, a model with a higher price known as the Accord. Accord was followed up by a rapid growth in sales apart from Japan; the accord also showed a good performance in the United States market. In the early eighties, Honda realized that the demand of Japanese cars in the United States had grown significantly. They launched an accord manufacturing plant in Marysville, Ohio. At the time, motorcycles sales in the company had struck the 3.5 million mark per year which was an equivalent of a one third of the whole production sold outside produced and sold outside Japan (Porter & Mintzberg, 2008). According to Johnson & Scholes (2008), the success of Honda’s automobiles was a realization of the potential of the company’s abilities. To be able to maintain a competitive advantage the market, an organization needs to launch more luxurious and financial friendly products. This is only achievable if the company carries out a proper market consumer research. Apart from the consumer research, competitors should also be considered. Loopholes in your competitor’s productions may provide a window of opportunities. In Honda’s case, the success of the Accord in the middle level market created the opportunity and confidence of launching a luxury car. With the proper market preference research, Honda launched the Acura. This was an immediate success as it garnered massive sales in both the United States and Japan. After this, Honda had shown its maturity and had developed into the global leading car manufacturers. The auto-mobile industry was slowly beginning to attract more companies. Consequently, the number of competitors also increased. To ensure their survival in the environment, Honda shifted most of its attention to on research and development. This was positively followed by a good press feedback. Additionally, the research enabled the company to be the first company to meet the California emissions regulations in their production of power product engines. To add on its achievements, the company also earned the award of the world’s largest solar car race (Lynch, 2009). In subsequent years, Honda commenced the establishment and production of a 360 degree globally inclinable very small four stroke engine. Additionally, the company also aimed the production of automobiles with low emissions levels and characteristics. In 1997, Honda struck a milestone in its production of motorcycle and power products. The motorcycle line of production hit the 100 million mark in measure of units while the power product line struck the 30 million mark (Grant, 2005). Honda’s competitive advantage has a few critics. Some rival companies claim that the way the company gained its competitive advantage is by manipulation of consumers (Lynch, 2009). The manipulation was done by the provision of much lower prices than those already existing in the market. For the past years, Honda has provided the market with the cheapest automobiles. This is said to have captured the mind and economic position of the consumers. In some instances, there have been claims that Honda operates on losses just to keep its competitive advantage. According to Honda power of dreams (2010), the pricing of Honda’s products does not affect negatively the profits gained in the company. With the development of the Acura consumers were able to access the vehicle at a lower price than expected. Honda’s strategy worked very efficiently in ensuring they gain their desired competitive advantage. Even with claims on its simplicity, the company has both profits and consumer support to show for their investment in the strategy (Porter, 2008). The growth of Honda was significant so as its sales levels (Porter, 2004). The growth led to the launching of production facilities all over the world. For example, the year 1997 saw the establishment of new production lines in Indonesia, Vietnam, Turkey and Brazil. Additionally, Honda ventured into an agreement with china which was aimed at producing and selling cars. In the year 1999, Honda braced itself for the production of a low emission, energy efficient car which was made out of a mix of aluminum and plastic. The new model was intended for the United States’ market. Additionally, the new automobile was powered by both electricity and gasoline. The insight, as is was branded, was estimated to consume a gallon of gasoline in 84 miles. However, Honda was not the first company to come up with this model of a car. Toyota had initially introduced a same model of automobile in the market in Japan which was known as Prius, but the insight was set to beat Toyota’s innovation in the American market (Porter & Mintzberg, 2008). With the accomplishment of Honda during the 20th century, the company had also some weaknesses it needed to suppress. According to Lynch (2009), Honda had established and branded itself as the most efficient automobile companies in the world. Evidently, its success was due to its efficient research and development. Additionally, its technological advances and its global reach were also factors that led to its massive sales away from home. However the success was not without its fair share of ills. Firstly, there was an over reliance on America for sales. The United States accounted for about 85 percent of Honda’s profits. Furthermore, the over reliance of the Civic and Accord model could not be down played. If something wrong was to happen to the two models, the company would be staring at a brink of massive losses. In tackling the market in the 21st century, Honda needed to find solutions to their over reliance weakness on America and its two famous models (Rowland, 2007). Japanese automobile and electronic companies have been the centre of research on many western theorists. This was due to their success prior to their entry in the market in the 1970s and 1980s. According to strategic management theorists, Honda has played a major role in their studies and findings. In words of Porter & Mintzberg (2008) Honda strategic managements have been used as the preferred strategies in many big organisations. This is even more promoted by the frequent literature on the company’s strategic management. The frequent literature citations have enabled professors, students and managers familiarized themselves with Honda’s management strategies. From the citations Honda has been able to be ranked in popularity with companies like General Motors (Porter, 2004). It is evident that a good market research and development of consumer friendly goods is the best form of advertisement. Honda General Motors has been doing proper market research and that has leaded to a massive increase in their number of sales. An attribute of Honda’s success is the fact that its worldwide branches share the same tools of production as the mother branch (Porter & Mintzberg, 2008). In porter’s and Mitzberg argument, this accelerates the global production and supply network. Additionally, this makes it cheaper for other plants to add new automobile models to their plants since they have similar production capacity as any other plant. Major researchers and strategists attributed Honda’s success to their master plan of success and not luck. However some critics argue that there was not a dream to begin with, only the forecast of a competition in the American market. Porter (2004) supported the argument by saying that Honda needed not an expert to take on the market opportunities presented to them. Success based on opportunities is also success. The success of Honda may be development of many opportunities and market openings. However, the company should be credited for the success in 20th century. Understanding the consumers wants and understanding their purchasing abilities is the key to a success in market with plenty of competitors (Honda power of dreams, 2010). Honda has clearly proven that success lies in a proper market satisfaction. Considering its time of its first market debut, the success of Honda can be attributed to proper market research. Pricing and quality are keys to successful business operations (Lynch, 2009). Honda has incorporated these two factors and its success has been visible on the global map. Even with the emergence of more automobile companies, Honda’s success is still recognized by consumers. Additionally, its success story has seen other car manufacturing companies taking and considering its management and marketing strategies. References Grant, R., 2005. Contemporary Strategy Analysis. (5th ed). Oxford: Blackwell. Groucutt, J., Leadler, P., & Forsyth, P., 2004. Marketing: Essential Principles, New Realities. (1st ed). London: Kogan-Page. YouTube video Honda the Power of Dreams, 2010.[online] Available from: http://www.Honda.co.uk [accessed 12/04/12]. Johnson, G., Scholes, K. &Whittington, R., 2008. Exploring Corporate Strategy: Case and Text. (8th ed). Harlow: Prentice Hall. Lynch, R., 2009. Corporate Strategy. (5th ed). Harlow: Financial Times Press.  Porter, M., 2004. Competitive Strategy Techniques for Analyzing Industries and Competitors, New York: Free Press. Porter, Mitzberg. 2008. On Competition. (11th ed.), Boston: Harvard Business Press. Rowland, H., 2007. Organizational development: the new buzz word. Strategic Direction; Vol. 23 Issue: 1, pp.3 - 4 Read More