Marketing strategy and Honda Motor Company - Case Study Example

Marketing strategy: Honda Motor Company Name Course Tutor Date Marketing strategy: Honda Motor Company Executive Summary This report is prepared to assess the marketing strategy of Honda Company. The report will include situational analysis, Customer environment, SWOT analysis and the recommended strategies which the company can pursue. Honda Motor Company is a multinational company headquartered in Tokyo, Japan. The company was established in 1946 has since grown to a wide world operation with the market share of 3.3% (HMT, 2014). The multinational company majors in motorcycles, cars, sport utility vehicle (SUVs), Scooters, Electrical generators, All-terrain vehicle (ATVs), garden equipments, Water pumps and Jet engines among others (HMT, 2014). Also, Honda Company has been rated as the major motorcycle manufacturer in then world since 1959, in addition to being the leading internal combustion engines manufacturer in terms of volume, manufacturing above 14 million internal combustion engines every year. To understand the customer and market demands, report claims that the company invests around US$ 6.8 billion of its profits equivalent to 5.7% in the research and development (HMT, 2014). Table of Contents Marketing strategy: Honda Motor Company 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 The situation analysis 5 2.1 The company analysis 5 3.0 The customer environment 6 4.0 The external environment 8 4.1 Competition 8 4.2 Political 9 4.3 Economic 10 4.4 Social and cultural 10 4.5 Technology 11 4.6 Legal 12 5.0 SWOT Analysis 12 5.1Strengths 12 5.2 Weaknesses 12 5.3 Opportunities 13 5.4 Threats 13 5.5 SWOT Matrix 14 6.0 The strategy 15 6.1 Marketing goals and objectives 15 6.2 Target Market 15 6.3 Product Strategy 15 6.4 Price Strategy 16 6.5 Distribution Strategy 16 6.6 Promotion Strategy 16 7.0 Marketing Implementation 17 8.0 Evaluation and Control 18 9.0 Recommendations 19 10.0 Conclusion 19 11.0 References 20 1.0 Introduction With increase in globalization, information technology advancement, and growing pressure from external forces, it means that managers can no longer use old marketing strategies today in their operations (Mullins, Walker & Boyd 2010). The organizations have become too complex to run because businesses now operate in culturally different environments. According to IBISworld (2013), Honda Motor Company faces stiff competition from other market players including General Motors, Totota, Volkswagen, BMW, Chevrolet, Tata and Mercedes among others. The change has prompted the companies to use their characteristic and strengths to attain market advantage. As the market leader in the motorcycle segment and the 8th largest automobile, the company needs to sustain the company and improve its market share (IBISworld, 2013). As such, this report assesses the marketing strategy of Honda Company. The report will include situational analysis, Customer environment, SWOT analysis and the recommended strategies which the company can pursue. 2.0 The situation analysis Honda Company’s capability to remain on top of motorcycle productivity competence and quality status can be attributed to its internal environment (Falloon, 2005, p.9). This involves the company’s goals and objectives, performance and position which can be linked with its competency. According to Falloon (2005, p.11), Honda’s production team has an unquenchable obsession to enhance the efficiency of its production operations. Thus, to completely recognize the situation analysis of Honda Motor Company, a company analysis, including goals and objectives, resources, performance and position is taken into consideration. 2.1 The company analysis Honda Motor Company is a global leader in the export of motorcycle and it looks like it is literally living according to their mission, which is to maintain an international stance and supply high quality products at a reasonable cost for global customer satisfaction (Falloon, 2005, p.12). The company is operating towards the building a society which is thriving by offering their customers with the automobiles which provides value for their money. Clarke, Lamoreaux & Usselman (2009) postulate that Honda considers offering the competitive prices for the customer yet still delivering cars which is at par with those of their strong competitors. This may be the basis why their products, especially motorcycles are having a positive performance in the market both in developing and developed nations. Honda is also mindful concerning sustainable development which can also observed in its various corporate social responsibilities including, its programs intended to reduce the environmental pollution (Sperling & Deborah, 2009, p.65). The firm is committed to providing of hybrid alternative vehicles for some models which are sold in the marketplace. This is intended to enable the firm to create a sale of close 1 million hybrid automobiles annually, and this objective to be attained by the 2018 (HMT, 2014). Honda has enhanced its 2008 natural gas vehicle initiative, which is carried out in line six different major areas. They are Environmental Management, Quality Air, Energy and Climate changes, and Societal Cooperation, aspects of Recycling and enhanced utilization of resources. The firm is dedicated to the reduction of carbon II oxide emissions and it is argued to take a combined action in making sure that the environment is conserved at all time by conforming to the declared values of fuel economy (Sperling & Deborah, 2009, p.169). The market is changing and the customer now wants fuel and environmentally efficient cars. To realize this dream, the company started making hybrid electric car with the first one (Honda Insight) launched in 1999 in the US one month ahead of Toyota Prius. Also in 2008, Honda manufactured the first hybrid hydrogen fuel cell vehicle (HMT, 2014). These vehicles were much more efficient compared to gas-electric hybrid vehicles. This type of car does not produce any form of pollutants and its byproducts are only water and heat. Generally, these goals convert into rising sales and profit, upholding better quality and maintaining expansion. 3.0 The customer environment Honda’s clients can be argued to be diverse and range from low-income earners to the upper social class who are very rich (Taylor Reach Group, 2012). The customers are widespread across the globe. Honda has provided for all the car needs which could emerge for any person with a wide range of automobiles. They are composed of small sports cars, and big family vehicles. According to Paton & Karunaratne (2009, p.282), the company is well known for making sports motorcycles and mountain bikes and al-terrain automobiles. These attributes sum up all the needs of its customers. The customers comprise of a diverse group of individuals, with different incomes, ages, geographical locations, and cultural and social status (Paton & Karunaratne, 2009, p.28). Low-income earners are offered with a basic method of transport which is both within the price capability and range. Customers looking for elegance, class and quality can purchase Honda motorcycles, mountain bikes and cars. Customers purchase Honda products on personal grounds are based on their particular needs and demands. The majority of the company customers are the racers. One of the outstanding endeavors Honda is recognized for is the development race cars. Specializing in production of Formula 1, Honda operates to develop an ideal performing race motorcycles and cars (Osch & Avital, 2010, p.103). They have been for a long time involved in race circuits including the French Grand Prix, Mexican Grand Prix and Italian grand prix among others. Some of the personalities who have used its racing cars include John Surtees, Ronnie Bucknum and Jenson Button just to name but a few (HMT, 2014). HMT (2014) maintains that on the racing motorcycle category, renowned racers who have used Honda products comprise of Dani Pedrosa, Valentino Rossi and Mick Doohan. In some situations, organizations purchase Honda cars for their company’s usage or just for their staffs. In such a situation, the purchaser of the product is not really the user of the product. Once people purchase the firm’s product, it increases exposure to other Honda’s products. Product awareness is conducted by means of advertisements, website information, newsletters and related other sources (Morris & Lancaster, 2005, p.210). Through research and development, Honda has been able to meet its customer’s needs. In 2013, IBISworld reported that Honda invested around US$ 6.8 billion of its profits in research and development (IBISworld, 2013). Honda also turned out to be the first Japanese car manufacturer to export 108,705 Acura models in 2013. In fact, Honda biggest market over the years has been the US, especially North America. Overall, the company had a sale of 1,525,312 in the US in 2013 compared to 1,422,000 which they in the previous year (HMT, 2014). However, there are several potential customers that would purchase at Honda Motors Company because of its quality brands, especially in Motorcycle but the company does not focus on those segments. These segments include buses and trucks. It must also be noted that customer purchase any time after acquiring Driving license. 4.0 The external environment According to Kotler & Armstrong (2010) the external environmental is a key influential aspect for any car manufacturer. Whilst there are fundamental external factors which unavoidably affect the performance and sustainability of the car sector, in general, Honda has the capability to gain from some of the effects (Lash & Wellington, 2007, p.97). The company is the market leader in the motorcycle segment, meaning if other companies want to compete with Honda, they have to lower their market prices. The external environment influences the operations of the Honda Company include Competition, political, economical, socio-cultural, technological and legal factors. 4.1 Competition Currently, Honda Motor Company is undergoing an increasing competition from established and upcoming car and motorcycle manufacturers (Lash & Wellington, 2007, p.102). In automobile segment, the firm faces strong competition from companies such as Toyota, Volkswagen, General Motors, Ford, Tata and Nissan among others (IBISworld, 2013). IBISworld (2013) argues that in the motorcycle market, the competition is coming from Suzuki, Yamaha and Sym among others. In various market environments across the world, such as Asia, competition has become stiff, because local firms have evidently segmented their products and market. 4.2 Political Honda enjoys political patronage from the Japanese government respectively (Falloon, 2005, p.11). This shows how the government protects and supports its companies so as to compete with the world market. This support it enjoys has made it the leader in the motorcycle segment global since it inception (Falloon, 2005, p.11). Honda are sometimes granted a hefty “aid” by Japanese government and constantly gets tax breaks, R&D grants and loans from the government to improve its operations (IBISworld, 2013). However, away from support from political protection from its home country, Honda faces low sales in other countries which restrict the number to be sold there. For instance, recently the UK made a proposal to limit the number of automobiles sold in that country (IBISworld, 2013). Honda sales has been affected by the issue and had to compensate by increasing their sales in new market in developing nations. Another advantage that Honda had to this effect is that they have diversified their products. According to HMT (2014), the company manufactures motorcycle, mountain bikes, Electrical generators and garden equipments. 4.3 Economic Analysts predict a growth in car and motorcycle sales in the next five years due to increase in customer purchasing power in developing economies like China, India, Singapore and South Africa among others (IBISworld, 2013). Low-cost, fuel and environment cars are on the rise and companies must diverse to these segments to continue maximizing their profits. IBISworld (2013) contends that Honda has continued to introduce new models which are cheap, fuel conserving and environmental efficient cars such as and Honda Civic Hybrid and Honda Jazz; a situation which will help them sustain competition. The cost of diesel and gas increased from 2003 up to 2008 which made the consumers to change preferences from the large vehicle and trucks to fuel-efficient automobiles (IBISworld. (2013). This condition was to the advantage of Honda Company, which focuses on the small cars which are fuel economical. According to IBISWorld report (2013), crude-oil costs are projected to go down in 2014/2015; however, fuel cost remains high, posing a possible threat for this sector. Currency exchange rates have kept changing. This will always affect Honda’s prices if other countries do not intervene. 4.4 Social and cultural The environmental awareness and rising costs of fuel of the international economy has made several companies to rethink their marketing (Paton & McCalman, 2008). This has led Honda to venture into eco-friendly and fuel economical cars and motorcycles. The company also manufactures low cost cars which have made it to reduce labor wages during financial crisis so as to sustain the wage bill (Paton & McCalman, 2008). In some countries Honda has registered low sales because the local believes in locally manufactured automobiles. For instance, in European countries, some prefer Bentley, Mercedes Benz and Range Rovers over Honda cars. Shaw (2012, p.32) posits that in some cultures such as the United States, success is determined by the type of cars or motorcycle one drives. As such, social class dictates that they must drive big cars or class sports motor cycles. Honda makes high quality and classy for not only races but for also leisure drives. 4.5 Technology With the new technology advancement, Honda is investing heavily in different strategies which will make it to achieve its set objectives and goals within its time framework (Sperling & Deborah, 2009, p.172). The application of the supercomputers and internet technologies has enabled Honda to design engines, interior, and the whole vehicle and even motorcycles within a short period of time. The Honda Motor Company stated interest in reducing delivery time to the market. Honda now uses technology in designing, testing, producing and marketing vehicle. This facilitates the production of high-tech designs and makes the designs to continue being on cutting-edge even in the market. Honda operates worldwide, and internet enables the engineering teams in across the globe to operate and observe three-dimensional blueprints concurrently over the computer networks (Clarke, Lamoreaux & Usselman, 2009). It has also facilitated for 24-hour work as assignments are allocated from one shift to another in different countries and continents. Clarke, Lamoreaux, & Usselman (2009) assert that the application of computer-aided design eventually should result to more consistent product cycles since major design questions can now be solved in a few days as opposed to months. Equally, parts can be prototyped and modeled in hours. 4.6 Legal Automobile manufacturers are needed to conform to government regulations concerning safety, control of emissions and pollution and fuel economy (IBISworld, 2013). Standards differ from country to country, region to region, but international standards are emerging. IBISworld (2013) claims that in Japan, national government and local government in Tokyo region have adopted measures to tackle air quality concerns resulted by the automobiles. Honda has had to adhere to these laws and now developing eco-friendly cars to that effect. In the US, the federal law necessitates that producers recall defective automobiles, which poses risk to safety (IBISworld, 2013). 5.0 SWOT Analysis 5.1Strengths According to HMT (2014) Honda Company is a market leader in Motorcycle segment making it a strong brand known all over the world. The company also diversifies its products, manufacturing automobiles, motorcycles, mountain bikes, aircraft jets and garden equipments among others (HMT, 2014). In this way the company has spread the risk in that if one product fails, another one will compensate. The company spends a lot of funds in research and development so as to be able to produce products which satisfies consumer needs. HMT (2014) affirms that Honda boosts their image as eco-friendly Company by introducing cars with fewer emissions. 5.2 Weaknesses In the recent times the company image has been dealt a blow due to a massive recall of its faulty vehicles. In the period of 2011/2012, Honda Company recalled over 54,000 automobiles to fix different faulty parts (Shaw, 2012, p.45). The company sale has continued to go down especially in Europe due to strong competition. The company maintained just 1.1% share of the market in 2012 in that region (Taylor Reach Group, 2012). 5.3 Opportunities Paton & Karunaratne (2009, p.285) states that the rising fuel prices have compelled Honda to venture into fuel-efficient automobiles such as the Honda Civic and Honda Insight, and the hybrid and hydrogen cars engines. There is a positive stance for the future of the global motorcycle sector. Motorcycle sector expanded by 4.2% 2012 and is projected to rise by 6% in 2016 (IBISworld, 2013). Honda Company is the leading manufacturer and distributor of motorcycles in the world having over 29 percent of the share of the market. Increasing demand for motorcycles has become a big opportunity for Honda to improve its international market share (Paton & Karunaratne, 2009, p.287). There is an opportunity in growth by means of acquisitions. The company could significantly gain from the strategic acquisitions or partnerships with smaller competitors and realize greater economies of scale. 5.4 Threats The Honda Company faces more strong competition from other market players such as Toyota and Volkswagen among others (Paton & Karunaratne, 2009, p.291). Also upcoming entrants are scrambling for the marketplace with their abilities in manufacturing electric vehicles. Big firms are restructuring to be more efficient and effective. In that way, Honda is suffering from the competition from both established and young players. Rising cost of raw material is another concern for the company. Steel and plastics are the major raw materials utilized in automobile and motorcycle production, and the increasing cost of raw metals increases general manufacturing cost for Honda (HMT, 2014). Honda has production plants in Japan, China, Malaysia and Thailand. These nations are frequently prone to the natural disasters which disrupt production and decreases production volumes of Honda. 5.5 SWOT Matrix Honda Company does not necessarily pursue lucrative opportunities, but rather use its strengths from the SWOT Analysis to create a competitive advantage (HMT, 2014). In introducing new products into the market, Honda is using S-O strategies to improve its strength as a highly diversified restaurant. According to Kotler & Armstrong (2010) diversification strategy helps an organization not only improves opportunity for growth, but also to spread the risks, especially in automobile market where top companies are offering the same products. Paton & Karunaratne (2009, p.283) argue that introducing eco-friendly cars depict a positive image of Honda which tries to maximize its opportunity bearing mind the fuel and environmental efficient market segment is growing rapidly. 6.0 The strategy 6.1 Marketing goals and objectives Honda’s massive capacity and size are a strong advantage in fuelling the sector growth (Paton, & Karunaratne, 2009, p.293). The number of customers who needs cars is continually growing, therefore building a larger market for Honda and demanding more products. Therefore, the marketing objectives for Honda are to conduct a market research and manufacture products that can satisfy customer needs. The company also aims at creating brand awareness through massive campaigns through televisions, billboard websites, and other social media sites (Osch & Avital, 2010). 6.2 Target Market Falloon (2005, p.10) postulates that Every Honda’s products are developed to target a particular market. The designs range from sport and speed, exterior and capacity appearance, such as shape and color. The primary target of Honda Company the smaller families consisting of 4-5 people, racing sports people and people use small cars to go to work (Falloon, 2005, p.9). On the other hand the secondary customers of Honda are the companies who buy them for company of for their employees to use while working for them. 6.3 Product Strategy Honda is moving towards a strategy of the mass production, which will enable it to sell extensively in global markets especially in the developing ones (Osch, & Avital, 2010, p.107). The company has also incorporated a strategy of developing hybrid cars in which it can increase maximize its profits due to the rising demands of eco-friendly cars. The company is highly diversified so as to spread the business risks. 6.4 Price Strategy According to HMT (2014) the status of Honda has been created by manufacturing high quality automobiles and motorcycles which can be purchased at competitive prices. The firm is using tactful strategies in terms of pricing. In new markets they use penetrating pricing which is low pricing to attract buyers. In the established markets, Honda uses differentiation pricing strategy so as to counter competition from other market players (Paton & Karunaratne, 2009, p.289). 6.5 Distribution Strategy Honda Company being an international manufacturer and a supplier of Honda vehicles and motorcycles and their parts, the firm is positioned across the globe giving it an apparent cut in the marketplace (Paton & Karunaratne, 2009, p.290). Honda has built or acquired plants in different countries which it uses to assemble cars for easy access. The strategy has improved its delivery time in different markets. 6.6 Promotion Strategy Drummond & Ensor (2005) argue that promotional strategy is one of the essential factors of building an effective product positioning. Four key promotional strategies used by Honda to increase customer awareness wishes include public relations, advertising, online marketing and business and product development. Since Honda Motor operates on a global scope, its promotional strategy considers external environmental facet like economic, political structures, technological developments, culture and demographic factors (IBISworld, 2013). 7.0 Marketing Implementation According to IBISworld’s report (2013), Honda’s major focus is to reach out the existing markets where the product has post series of bad performances, particularly in Europe. The company also intends to build more plants in the developing countries with an aim to improve the market delivery and also to lower the cost of production rather than exporting (HMT, 2014). However, the company is aware of the competition from Mercedes, range rover and land rovers; therefore it will implement its plans tactically in need to achieve the market advantage. Human resource also plays a vital role in the implementation of this marketing plan Drummond & Ensor (2005). The firm intends to employ qualified and motivated workforce who can conduct the market research and come up with a tangible solution to their target markets. Morris & Lancaster (2005, p.17) maintain that with globalization and scramble for new markets, the new employees must be multicultural to help the company understand the culture and the needs of the people. In a bid to motivate their employees, Honda has a rewarding scheme where members own cars at subsidized rates. The strategy also helps in marketing the company products. Tactically, the Honda Company normally participates in formular1 races, an opportunity which enables them to market their products (Paton & Karunaratne, 2009, p.287). In these races their products are driven by Key personalities such as Jenson Button and Valentino Rossi. Honda will also sponsor Valencia Football Club in 2014/ 2015 season (HMT, 2014). This marketing activity is carried out to market Honda in Spain during a period of one year. Honda has assumed a bold step to become a leader in eco-friendly cars and sustainable development. This situation will need innovations that convert to expenditure. The Company intends to generate a sale of one million hybrid automobiles annually and this objective that it has set to achieve by 2018 (HMT, 2014). 8.0 Evaluation and Control The company has a monitoring, evaluation and control team set to check over the general progress in achieving the set strategic goals (Mullins, Walker & Boyd, 2010). The short-term goals are clearly controlled and adjustments are carried out where targets were missed which are key to meeting the long-term goals. Formal controls mandates are conducted by the top management, the middle level managers and financial officers who approve the budgets and monitor the Honda activities. Mullins, Walker & Boyd (2010) claim that in marketing activities, the marketing manager has the responsibility to take formal control and conduct market research of their target market and report to the company board. The company has a formal financial reporting system where it communicates is performances to the public (Paton & McCalman, 2008). These finances are first audited by its internal auditors and approved by the directors then communicated to the public. Informal control is ensured by the employees who have adapted to the organization culture (Osch & Avital, 2010, p.104). Honda has a rich culture and philosophy which encourages respect for individual, promoting creativity and innovation, and provide high quality. At present, Honda has a clear step in making sure that hybrid high quality automobiles are being manufactured, and up to now the marketplace has begun improving with reference to general reception of its brands of automobiles and motorcycles. On the perspective of marketing audit, Honda monitors their sales and customer reaction through the marking department to understand the effectiveness of their marketing activities (Paton & Karunaratne, 2009, p.294). In the period of 2011/2012, Honda’s marketing audit was able to realize a number of faulty vehicles which was later recalled for repairing. 9.0 Recommendations Honda ought to continue undertaking strenuous efforts in strengthening its management systems and improves its corporate value. Particularly, Honda should uphold a streamlined structure by means of cutting fixed costs and improve its operations in developed countries and established markets. As an agent tasks, Honda must promote its business and reforms in cost structure to achieve a solid management framework in order that it can react to rapidly changing market conditions. Honda must accelerate its expansion into fast growing developing economies by meticulously and thoroughly monitoring these market conditions. Marketing activities now compete on the platform of technology. As such Honda has to always update its technology so as to sustain the competition. 10.0 Conclusion Honda Motor Company may not be enjoying local and global automobile industry dominance, but the company dominates in the product innovation platforms in motorcycle segments due to its strong brand. The company has faced low sales in Europe and must embrace many strategies discussed in this report, including manufacturing eco-friendly cars, low pricing and diversification. Nevertheless, there are several opportunities which Honda can still exploit to sustain this motorcycle market dominance, mostly to partner with related companies to not only sell its motorcycles, but also to convince customers that its motor vehicles too are of higher quality. Similarly, Honda Motor Company must also reduce competition posed by Toyota, BMW, and Mercedes including other upcoming automobile manufacturers. 11.0 References Clarke, SH., Lamoreaux, N.R., & Usselman,S.W. (2009). The Challenge of Remaining Innovative: Insights from Twentieth-Century American Business. Stanford University Press Drummond, G & Ensor, J. (2005). Introduction to marketing concepts. Oxford, UK: Elsevier. Falloon, I. (2005). The Honda Story. Haynes, pp. 9–13. Honda Motor Company (HMT). (2014). Honda Motor Company Official Website. Retrieved on 27th May 2014 from http://world.honda.com/index.html IBISworld. (2013). IBISWorld Industry Report C2531-GL: Global Car & Automobile Manufacturing. Retrieved on 27th May 2014 from http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/gl/industry/default.aspx?entid=1000 Kotler, P., & Armstrong, G (2010). Principles of Marketing, 13th (Global) ed. Boston: Pearson Education, Inc. Lash, J., & Wellington, F. (2007). Competitive advantage on a warming planet. Harvard Business Review, 85, 94-102 Morris, T., & Lancaster, Z. (2005). Translating management ideas, Organization Studies, 27, 207-223 Mullins, J., Walker, J. O., & Boyd, H. W. (2010). Marketing management: a strategic decision making approach. Boston: A McGraw-Hill Irwin. Osch, W., & Avital, M, (2010). The road to Sustainable Value: The path-dependent construction of sustainable innovation as socio-material practices in the car industry. In Tojo Thatchenkery, David L. Cooperrider, Michel Avital (ed.) Positive Design and Appreciative Construction: From Sustainable Development to Sustainable Value (Advances in Appreciative Inquiry, Volume 3), Emerald Group Publishing Limited, 99-111 Paton, R., & Karunaratne, N. (2009). Engagement and innovation: the Honda case. VINE, 39, 280 - 297 Paton, R.A., & McCalman, J. (2008). Change Management: A Guide to Effective Implementations 3rd ed. Sage, London Shaw, E. (2012). Marketing strategy: From the origin of the concept to the development of a conceptual framework. Journal of Historical Research in Marketing, 4, 30-55. Sperling, D., & Deborah, G. (2009). Two billion cars: driving toward sustainability. Oxford University Press, New York. Taylor Reach Group (2012). Market size, statistics & research. Retrieved on 27th May 2014 from http://thetaylorreachgroup.com/industry-stats/market-size/ Read More