Honda Motor Corporation in China - Case Study Example

Name Unit Date Honda Motor Corporation New ACCURA Program Charter Business Case The program is intended to produce a new model of Acura in China that will put Honda at the same level with other luxury car producers in order to tap the high end market in China and the rest of the world. Honda Motors Corporation has remained profitable as a whole, mainly due to its many divisions include production of motorcycles, an area in which the company has remained a world leader. Competition in the motor vehicle sector is extremely stiff and new strategies are required to ensure that the motor vehicle division remains profitable and in tune with the current trends. The desired outcome of this project is to give Honda a future in which the market share of their motor vehicle division is not only secure but also expanding at all levels. The expected outcome of this program is a situation whereby the company produces a new Acura model which will be genuinely high end in terms of quality, design, and the attendant after sales services, also the messaging and packaging surrounding it (Cattani et al., 2011). The program will cost a total of $91 million, $85 million will go towards the development of newAcura, $5 Million towards the building and equipping a new after sales service workshop while the remaining $1 million will go towards the recruitment of a celebrity ambassador for marketing (Cova& Salle2005). In a market where new vehicles are being developed at an extremely rapid pace, the new Acura will run into the obvious risk of being introduced into the market at alongside many other similar models from other companies. The lack of a marketing honeymoon period might lead the new Acura to lack proper visibility. This risk could be mitigated by having a carefully timed release period and also an elaborate marketing plan. Unfortunately, the $1 million set aside for marketing may not be sufficient for the kind of marketing required in order to cushion the program from the mentioned risk (Cova& Salle2005).All the projects in the Honda portfolio are geared towards increasing revenues, to increase market share and increase customer satisfaction. There are three projects under the ACURA program which include the creation of a new ACURA model, engagement of a celebrity brand ambassador for the new ACURA and offering free maintenance services to the customers who buy the vehicle for the life of the purchased ACURA. This program is a perfect strategic fit since the projects individually and collectively meet the strategic objectives of the portfolio (Kerzner, 2003; BOK, 2006). The new ACURA brand is projected to increase the market share of the Honda portfolio by 3% while at the same time enhancing the company’s profits by between $100 and $200 Million, the new brand is also expected to bolster customer confidence in the company and its products, particularly the improved ACURA (Honda, 2015). Engaging a celebrity to market the product will also have the effect of increasing the product market share by an estimated 4% while considerably increasing customer satisfaction to make it high among the target customers who are in the high end of the market. Part of the perks that will come with the purchase of the new vehicle will be the provision of maintenance services for free to all customers, this will be an extra incentive to buyers and it is expected to increase the company’s market price by an additional 2%, this is also expected to considerably increase satisfaction of the customers in the new project (Feyie et al., 2015; Taylor, 2013) Outcomes It is expected that after this redesigning and marketing of ACURA the high end niche will start considering Honda Acura as a true luxury car in the same vein as Ferrari, McLaren among others, this will ensure that Honda brand will increase in visibility and name recognition. The domino effect in this will be the increase in demand of Honda products across the portfolio. This is because while the vast majority of customers may not be in a position to afford the ACURA, they will have the desire to be associated with the company that produces ACURA. It is expected that the endorsement of the product by a celebrity, possibly a sports personality from an elite sport will work towards the realization of the above outcome. Owners of the new ACURA will feel like they are members of a certain privileged class since their vehicles will be eligible to receive servicing for free. This is expected to draw more people who can afford the new ACURA to buy it since the cost of maintenance will be low and the prestige associated with the ACURA club. Scope This program is expected to cover the redesign and development of the New Honda Acura with assistance of the Research and Development department. This means that the program will require a period of research into the inadequacies of the current ACURA model in terms of both substance and style. The research will include the study of the current luxury vehicles in the market and also interviews with current and potential customers on their experience and proposals for improvements and their expectations respectively. The process of getting a celebrity brand ambassador will also be important and it will be handled carefully, this will require a person who has a following in Asia and also the rest of the world especially in the United States. The individual in question will play an important role in getting potential customers all over the world interested in the product. The scope of their involvement in the product, will involve their physical presence during promotion of the product. Television commercials and advertisement in print media, the appointed celebrity will also feature in billboards promoting ACURA. Free repair of ACURA will be on defects that are as a result of wear and tear, routine maintenance will also be at the expense of the company. Should an accident occur, the vehicle will be repaired at a subsidized rate. In order for this to be possible, it will be necessary for a facility where this work can be done to be built in China, technical staff will also be trained on how to do the repairs and also handle the high end customers. This preparation is going to be part of the program (PMI, 2013). Benefits Strategy Assumptions and Constraints The design of this program assumes that the Chinese upper class can be persuaded to purchase a luxury model of Asian origin; this is because the normal trend is the purchase of European models and specifically German models like Volkswagen and Mercedes. It is also assumed that China will afford the company sufficiently skilled staff to work on this project, it will also be necessary for certain key engineering staff to come from the company headquarters in Minato- Japan, while there has not been major issues in the mobility of workers between China and Japan, it is assumed that the status quo will be maintained for the duration of the program and beyond. It is also assumed that a celebrity willing to promote the product within budget will be found, one who will meet the requirements to have influence in China and beyond. This program may go into some budgetary constraints; a budget of $85 million is relatively low when compared with the expected task. There is also the challenge of the fact that it is a redesign. Redesigning a product may limit the room available to innovative workers since certain elements of the original ACURA have to remain. The amounts of additional revenues that will come from this program are relatively low at $100-$200 million, from this amount will be reduced the cost of maintain the vehicles for free, should the repairs consume too much of the increased revenue, the company might have to rethink its strategy on the high end ACURA (Honda, 2014). There is also the problem of getting a celebrity to endorse ACURA. A celebrity who commands a following in Asia and the rest of the world expensive to get especially when they are required to be physically present during promotional activities. Components Risks and Issues The program consists of redesign of the new ACURA, procurement of the services of a celebrity ambassador and also there is the component of building capacity to enable the company to handle and influx of repair requests which will be necessitated by the new offer for free repairs. There are risks in the execution of the program in that, despite market research showing the possibility of a good response to the commissioning of the new ACURA, the reality in the uptake may be different leading to losses and bad PR. The risk of the selected celebrity not living up to the billing is also high due to the above mentioned budgetary constraints. The cost of training technical staff for the offering of free repair services may strain the budget further to the extent of making it impossible for the set targets to be achieved. Time Scale The design of the new ACURA is expected to take a period of eighteen months from the first quarter of 2015 to the second quarter of 2016, while development of the requisite capacity for the provision of free maintenance services will take one year from the beginning to the end of 2016. The celebrity ambassador will be engaged for one year from the beginning to the end of 2016. In total, the preparatory project activities will take a period of two years with there being an overlap of activities from the first half of 2016 where development of new ACURA will be done alongside development of capacity to offer after sales service and the engagement of a celebrity ambassador. Resources Needed, Stakeholder Consideration The program requires human resources, most of which will be co-opted from Honda Motor Corporation. It is also important, however, to employ Chinese staffers in order to ensure that the work done is to the acceptable standard in China in terms of the law. The growing class of wealthy Chinese will also be some of the target market for the new ACURA which will be of great interest to the shareholders (Tasmanian Government, 2008). The marketing firm to be hired should be Chinese, as much as possible and the celebrity too should be a Chinese icon with global appeal, probably Yao Ming. Program Management Plan 1. Introduction This document outlines the approach that will be used in the management of all programs relating to the management of development of new ACURA in china, it will gives a description of the overall structure it deliverables expected and the plans put in place to run management. It also gives an outline of the of the methods that will be used in the development of the mentioned procedures while at the same time updating the lessons learnt in the course of management. The document is therefore not static and will be updated from time to time to reflect on the changes in direction as lessons get accumulated (PMI, 2013; Kousholt, 2007). 1.1 Project Information Project Name The official project name is New Acura Model which will be undertaken under the auspices of Honda China. It is expected to be undertaken within a period of two and a half years from the beginning to the completion of the entire project components, from the first quarter of 2015 to the last quarter of 2016. The program has three components namely New Acura with a budget of 85 million dollars, developing the capacity to offer free after sales services to all who purchase the new Acura at a budget of 5 million dollars. The other project component is the recruitment of a celebrity who would be the program ambassador by being the face of all the car’s marketing campaigns. Owing to the diverse nature of the project, the program will have different sets of people steering it and leading but the top leadership will be the same in order to ensure that the program objectives are not discarded along the way (Feyie et al., 2015). All the constituent projects will be managed by Mr. Takahiro Hachigo. 1.2 Deliverables 1.2.1 System Description In order for the system to be effective, the program manager, will work with key staff in all the program components in the case of building the new Acura and establishing the requisite organization for offering free after sales service, work will be done in consultation with the Research and Development department. Recruitment of a celebrity for the promotion of the new creation will be done in conjunction with the marketing department (PMI, 2013). 1.3 Key Project Events The main events will be the launching of each of the program components and their launching once complete. In between the project, however, there will be media briefings on the progress of the project in order to keep interest alive among the public. The briefings will be coupled with demonstrations of progress whenever possible. 1.4 Goals The main strategic goal of this project is to come up with a car for the high end market that will achieve the highest levels of name recognition. The car will also be marketed in such a way that will give the Honda brand a lot of prominence through the celebrity ambassador who will be appointed so as to have a domino effect of increasing the sales of all Honda brands. The increase of customers for Acura is also expected to allow the company a bigger profit margin per unit produced than other products in the company portfolio thus significantly increasing the company profits as uptake of the vehicle increases in the market (Cattani et al., 2011). 1.5 Vision and Charter Production of a high end car that will rival the best in the world. 2. Governance Structure The program organization will comprise of the program manager who is the designated project manager in all the constituent projects. The project manager will work with people co-opted from the R&D and marketing departments respectively as the case may be. They will all report to him about the progress of the project from time to time. 2.1 Responsibilities The program manager will oversee all activities pertaining to the program ensuring that the program is executed as per specifications, on time and within budget. He will manage the staff and resolve any conflicts that may arise in the process of project work. He will also be responsible to ensure that project work is completed within budget as well as communicating progress on a regular basis to the project top brass. Engineers and designers from the research and development department will have the responsibility of actualizing the findings of the research in which they have been involved in order to come up with a vehicle that will fulfill the desired market requirements. This will be done according to the overall project plan which will have been developed collectively by the entire project team in alignment with the company’s strategic vision. The marketers will be charged with the responsibility of ensuring that interest in the project remains alive and its progress remains in the public domain for as long as possible and to the extent that it is tenable in order to build anticipation for the coming project. 3. Management Plans 3.1 Statement of Work The Honda Motor Corporation can expect the project management team to regularly update them on the project progress. There will be a daily report on the progress of the project in all areas and the core project team will meet at the end of every day to review progress against the current plan, to plan for the next phase of the project with a view of making changes as may be deemed necessary. The focus, however, will be to deliver as per the requirements of the company in order to drive its strategic agenda (Honda, 2015). 3.2 Cost Management A comprehensive budget has been developed for this project thus arriving at the figures provided for each project in the program. It is the responsibility of the program finance director to ensure that the funds are managed prudently. In order to minimize the cost of making purchases, all purchases of materials pertaining to this project will be purchased through the normal procurement channels of Honda Motor Corporation. The managers of finances in this project will be co-opted from the company finance department to ensure compliance (BOK, 2006). 3.3 Technical Management The project manager, alongside the staff co-opted from the research and development department will be charged with ensuring that the project technical plan is adhered to. This will be done by the use of blueprints developed for the project. The Systems Engineering Management Plan will be managed together with the Software Development plan since the both of them are critical dependencies on each other. The bottom line in this instance is to ensure that everything is done according to the laid down specifications which will be done as per the standard Honda Motor Corporation standards which have been tried and tested over time. 3.4 Subcontract Management It is expected that the issue of hiring a celebrity to manage the project will be handled by a marketing consultancy as a sub-contract. The consultancy will be managed by the company marketing department which has been brought in for assistance regarding the marketing aspects of this project. 3.5 Quality Management The company quality assurance department will have a key role to play in ensuring that the quality of the new Acura will be everything the customers will expect it to be. This will be ensured through the development of every component that will be used in the car to ensure the highest standards of quality. The plant in China will also be developed to the highest possible standard befitting a high end automobile. Monitoring and control will also be maintained by ensuring the physical presence of monitoring and control specialists at the premises at all time. These will monitor the program from its inception through all stages of the program to ensure quality and also to ensure that the program remains on course as the laid down plan. Quality will also be ensured by engaging regular independent reviews in the course of the project. These reviews will not involve regular company staff but professional companies hired to review progress against the IBR. In terms of technical milestones and also the other aspects of management. Performance of key staff will also be reviewed through PARs quarterly by firms that have worked closely with Honda Motor Corporation. Using companies used by Honda before will ensure that they deliver quality.Risk Management Logs will be kept carefully by the project management team in order to ensure management of change avoids the pitfalls presented by the attendant risks. 3.6 Change Management & Communications The program as a whole will involve a fair share of change in the organization as a whole in terms of portfolio and operations. It is important for the expected change should the program be successful to be tracked in terms of the benefits it accruing to the company as a whole and to Honda Motors China. Change management will ensure that the new Acura and the appendage activities included for the promotion of the model, are taken up by the rest of Honda staff who will, in one way or another inevitably involved in service to customers this is in line with the fact that much more customer defections are as a result of poor customer care activities than as a result of product quality. It has also been established that approximately 80% of workers who leave their work places leave as a result of disagreements with the management. This shows that change management has to be a core component of the program in order for the program to be successful. Communication will be circulated from the program manager to the company management through their monthly reports and other scheduled communications and then the top management will relay the information downwards to the company staff. This information will be used to develop a strategy for the handling of new Acura customers (Taylor, 2013). 3.6 Benefits Management The management of benefits accruing from the project is meant to ensure that there is sufficient information on whether the project achieved the intended end. The first point is the benchmark set during the design of the project then there is the target and there is the actual benefits which may be below the target, above the target or above the target as the case may be. Benefits management will be in this program as it is in all other programs the best way to establish whether the program has been a success. In order for benefits to be properly managed, it will be necessary for a benefits management team to be established, specifically for this purpose towards the end of project implementation process and parameters under which the realization of benefits will be assessed. This will ensure that the benefits will be monitored effectively from the very beginning. The team will meet on a regular basis to monitor and see what is working and what needs to be improved in the process of the project implementation. The interval of the meetings will be between three and six months while there will be a benefit review by the same team every six months to establish whether the benefits should continue being monitored the same way or some benefits need to be dropped from the list while others are included at the lapse of time and change of circumstances. During their regular monitoring meetings, the team will track benefits according the business case to see whether the market share has increased since introduction of the new Acura to the market. The team will also monitor whether there is any significant increase in sales of the Acura as a result of the engagement the celebrity ambassador. The team will also monitor the activity in the free after sales service garages for the new Acura. It is expected that this together, sales figures and market research will give the clearest indication of the market pulse since customers will get an opportunity to express themselves on their level of satisfaction with their newly developed product. Program Closure In this as in all other programs it is important for the program to be terminated in an organized manner in order to enable the company to bring to a close all systems introduced specifically for the purpose of the project are closed and resources demobilized or redeployed as necessary. Activities The regular program documents including reports, minutes and logs will be archived for future reference for development of knowledge management with regard to this program. This will also ensure that the information is available for future use in future benchmarking and use as a knowledge base in similar activities.The program management financial team together with the rest of the core team will together close the financial accounts. This will be done from records and also by ensuring that any contractors hired in the course of the program have terminated their contracts and all obligations settled on both sides, in order for this to be achieved, all stakeholders at all levels will need to be informed about the pending program closure. Documents acknowledging receipt of the agreed deliverables are documented. Closure through the annulment of contracts will require involvement of the legal teams to ensure that no pending contractual issues remain at the close of the project. The lessons learnt from the program will be logged and a project closure meeting held by the program top brass involved in the three constituent projects including the development of new Acura, management of the celebrity ambassador and also the setting up of structures for the new, free after sales service for the new Acura. The meeting proceedings will be documented in minutes and a terminal report compiled. The minutes for closure and the terminal reports for all projects in the program will bepart of the annexes in the program terminal report. Information on the timing of the program closure will be as per the program plan which in this case provides that closure will begin in the last quarter of the program implementation. The benefit reports concerning the current ROI vis a vis projections for the duration. The reports on the current ROI will be instrumental in the development of the terminal report. Meticulous keeping of risk logs will ensure that closure of the project will form an important guide to the process of project closure. References BjarneKousholt (2007). Project Management –. Theory and practice.NytTekniskForlag. ISBN 87-571-2603-8. p.59. Body of Knowledge 5th edition (2006), Association for Project Management, ISBN 1-903494-13-3 Cattani, G., Ferriani, S., Frederiksen, L. and Florian, T. (2011) Project-Based Organizing and Strategic Management, Advances in Strategic Management, Vol 28, Emerald, ISBN 1780521936. [1] Cova, B & Salle, R (2005) Six key points to merge project marketing into project management International Journal of Project Management 23 (2005) 354–359 Feyie et al., 2015 Portfolio Management of HONDA. The University of Adelaide Kerzner, H 2003 Project Management: A Systems Approach to Planning, Scheduling, and Controlling (8th Ed.). Wiley. ISBN 0-471-22577-0. Honda, 2014Honda 2014 Financial Report, Honda Motor Company, viewed 12 September 2015, 'Honda Motor Co., Ltd', 2015, Honda Motor Co., Ltd. SWOT Analysis, pp. 1-10. Project Management Institute, 2013.The Standard for Portfolio. Management. Library of Congress Project Management Institute, 2013 The Standard for Program Management. Library of Congresshttp://world.honda.com/investors/library/annual_report/2014/honda2014ar-all-e.pdf>. Tasmanian Government2008 Project Management Framework Project Management Fact Sheet: Developing a Business Case, Version: 1.2, November 2008 Taylor, I 2013, 'HONDA Gets Its Mojo Back', Fortune International (Europe), vol. 168, No. 3, p. 68. Read More