Essay on Honda Motor Company
Number of words: 2571
Honda Motor is a Japanese public company which deals with the manufacturing and selling of automobiles such as motorcycles and power equipment. The company has extended its services to most parts of the world including United States, Asia, and India. Due to its nature of the operation, it has been affected by both internal and external environments of the business, but even then, the company has managed to survive in the market. It is currently ranked by Forbes as the best automobile company in the world. This paper analyzes how the internal and external business environments have affected the operations of Honda Motor Company, and the steps that it has taken to survive in the automobile market.
Honda relies on external suppliers for the provision of specific raw materials and motor vehicles parts (“Honda Motor,” 2017). The company’s ability to obtain the required supplies cost-effectively is subject to a number of factors, most of which are behold the Company’s control. Consequently, any increase in the price of the raw materials results to an increase in the total production cost of Honda Motors. Moreover, the ability of the suppliers to provide a steady flow of raw materials plays a significant role in determining the company’s production. As a result, any loss made by the suppliers increases the overall cost of production in the Honda Motor Company.
Honda has extended its operation to different parts of the world. The company purchases material and sells products and components to various countries. Currency fluctuations in any of its operating country affect the pricing of the material purchased and the products sold (“Honda Motor,” 2017). Different countries have various rules and regulations governing the emission of fuel gases and noise. Currently, the company is in the process of making zero-emission vehicles to be able to operate in countries where fuel emission is prohibited (“Honda Motor,” 2017).
Wars, terrorism, political uncertainty, and labor strikes witnessed in different nations has seen the company’s operations slowed down or closed altogether. Moreover, business policies keep changing in different countries. These policies include taxation and government quotas. The company has no control over these policies and in cases where the rules become unbearable, they are forced to cease their operations in the affected areas.
Forces of competition
Bargaining power of the customers
Honda conducts business in highly competitive conditions in an industry with inherent risks. Customers always demand quality products at reasonable prices. For any business to succeed in a competitive market, it has to make a good relationship with the customers. Honda Company responds well to the bargaining power of the customers by assuring them of safety and security of the products that they manufacture and sell to them.
The company works hard to strengthen the trust of the customers by encouraging timely, decisive, and risk-considered decision making. In addition, Honda pursues various social activities while communicating with their customers and residents (“Honda Motor,” 2017). Since the company was founded, it has always strived to contribute to the community by manufacturing quality products and technologies.
Bargaining power of suppliers
In business, suppliers of raw materials increase pressure on companies by raising their prices, lowering their quality, and reducing the availability of raw materials. Honda purchases raw materials from different external suppliers (“Honda Motor,” 2017). This is advantageous to the company in that even if one supplier decides to lower the quality of their supplies. Honda will efficiently get the same products from an alternate supplier.
The company keeps close ties with their long-term suppliers to the extent that they are willing to share their environment statement with them (“Honda Motor,” 2017). Moreover, they rely on certain suppliers for some specific raw materials. This helps the company to maintain a constant flow of supplies. Most importantly, if one of the suppliers increases the prices of the raw materials, then Honda can turn to other suppliers from different regions who will offer the same product at a lower price. Such a move ensures that the remaining supplier has little or no bargaining power.
What the Company Should Do To Improve Its Ability to Address the Forces of Competition
Bargaining power of customers
It is important for every business organization to assess the extent to which its customers have the bargaining power. In cases where the buyers have a strong position, they can exert maximum pressure on the market and demand high, quality, and cheaper products (“Porters Five Forces,” 2013). Honda Motor should consider establishing their markets in different parts of the world. This will reduce the concentration of customers in one place and reduce or do away with their bargaining power.
In addition, the company should ensure that their products are classy, unique, and appealing to the customers. Consumers will have less to bargain about if they believe that they are getting value for their money. In markets where customers can easily differentiate products, brand loyalty is high. Customers will be motivated to make purchases based on quality rather than the price and loyalty.
Bargaining power of suppliers
The need for raw materials by organizations creates a relationship between the market and the suppliers. In circumstances where the distribution power lies with the supplier, they use it to dictate the prices and availability of the materials (“Porters Five Forces,” 2013). In extreme cases, suppliers work together to increase their bargaining power. To suppress this, Honda Motor need to consider global access to numerous suppliers. This will provide the company with options in cases where a specific segment of suppliers decides to increase their prices or reduce the material supply.
Additionally, Honda Motor should embark on finding substitutes of the raw materials that they currently purchase from their existing suppliers. This will be helpful in cases where the existing supplier becomes non-cooperative. The company will find it convenient switching to other willing suppliers with the substitutes of the motor vehicle parts, thus making their previous suppliers re-consider their stance.
Threats and Opportunities of Honda Motor
The company is faced with the ever-increasing competition from the traditional automobile companies and the new entrants in the industry. In China and India for instance, new entrants are offering similar motorcycles and cars that were being offered by Honda, and unfortunately for the company, the new entrants are selling these products at lower prices (Jurevicius, 2016).
In countries like Japan and Thailand where Honda’s manufacturing facilities are based, natural disasters most of the time, ends up disrupting the manufacturing process. As a result, the company reports low production and profits in these countries. For instance in 2016, Honda’s production plant in Kumamoto, Japan was destroyed by earthquake. They had to reconstruct the factory again (“Securities and exchange commission,” 2016). Natural disaster being the most serious threat, Honda should consider relocating its manufacturing locations to countries where there are minimal chances of natural disasters happening.
It would be wise to incur the cost of relocation and save the business from natural calamities than to wait until the calamity happens and reconstruct the premise again. Disasters like earthquakes may wipe out the premises completely. There are numerous opportunities available for Honda. Reduction in fuel prices has increased the demand for pickup and trucks (Jurevicius, 2016). Initially, Honda’s main focus was on smaller cars like Honda Accord. Another important opportunity for the company is the timing and frequency of the new model releases. This affects the market share of the automotive companies.
Honda is in a better position to release the upgraded automobile products models more frequently. Having witnessed the reduction in fuel prices, the company should quickly grab this opportunities to manufacture and sell as many automobiles as possible. Due to the irregular changes in inflation in most countries, it would be advisable to take the available opportunity as the fuel prices may change later. Such a situation will lead to a fall in demand for the automobiles.
Strengths and Weaknesses of the Company
One of the most notable strengths of Honda Motor is its unrivalled competence in engine manufacturing (Jurevicius, 2016). Their first engines were designed for motorcycles and power equipment. Later, they started manufacturing engines for cars and marine vehicles. Currently, the company is the number one engine manufacturer in the world and produces approximately twenty-seven million units of engine motorcycle, marine, and power equipment products (Jurevicius, 2016).
Additionally, Honda has succeeded in maintaining dominance in motorcycle and engine industries. This has led to high brand awareness of the company. Its complete dominance in the engine and motorcycles manufacturing has increased its brand reputation and attracted world recognition. The company can make the most of it unrivalled competence by diversifying its products. They can do this by manufacturing goods that they were not manufacturing before such as generators.
Since their brands are trusted and well known throughout the world, their new products will always be purchased as long as they have their name. The company’s greatest weakness is its dependence on North America for revenue generation (Jurevicius, 2016). North America is currently the major driver behind Hondas growth. The danger here is that the United States and Canada are already saturated markets. This will make it hard for the company to maintain the same level of growth in these countries.
The other weakness is its failure to invest more in research and development. This has led to fewer innovative products from the company. To fix this, Honda should start funding and sponsor research projects on the different types of products required in their established markets. The research will reveal the product gaps in the market, and the company can then capitalize on such opportunities.
Honda Motor Resources, Capabilities, and Core Competencies
Honda Motor resources include capital, land and human resources. The company possesses land in Japan, Thailand, United States, and Asia. According to the Securities and exchange (2016), the company owns approximately 214,000 m2 piece of land in Rojana Industrial Part, Thailand. For the fiscal year ended 2017, the total capital surplus of Honda Motor was 171,118 million yen (“Honda Motor,” 2017). In addition, they keep increasing their human resources each year. By 2016, the total number of employees was 208, 399 (Jurevicius, 2016).
The brand is capable of bringing new engine options that will come with their revamped Honda Accord including a pair of powerful turbo units(Derose, 2017). Additionally, Honda brand is finding ways and means of improving the technological features in their vehicles. Top of the priority is the new Head-Up Display which will be able to show every essential information right in front of the driver (Derose, 2017). Most importantly, the company has added the installation of a strong sensing system to their priority list. The system will be designed to help the driver in avoiding accidents.
Accompanying features like autonomous emergency breaking will be able to detect an impending car collision or crash and adapt the brakes to reduce or prevent the impact (Derose, 2017). Comparing Honda with the other automobile companies, it is clear that Honda enjoys a great competitive advantage than any of its rival businesses. Honda is famous for its quality engines. When they plan a car design and the marketing mix, the first thing that Honda decides is the engine.
Customers are well aware that the quality of the engine matters more than everything else in the car. Hence any car with Honda’s engine can easily sell. Moreover, the company uses a computer-aided control system to monitor the quality performance of their products. This has made it difficult for other automobile companies to imitate Honda’s automobile designs.
Areas Where the Company Can Create Value Using the Available Resources, Capabilities, and Core Competencies
Honda should create value in logistics, production, distribution, and after-sale services. The company can take advantage of its core competitiveness to establish a strong relationship between it and the suppliers. This will ensure that they are not affected in cases where the suppliers want to annex their bargaining power to other automobile companies. In addition, the company can use the available human resources to diversify its production process.
People can be assigned duties depending on their skills and technical abilities. This will ensure a smooth production process and quality production. They can automate the production process using their vast resources. Honda has its market in most parts of the world. The customers need to be regularly updated with the products and their new changes. Consequently, the company can use its resources to conduct product promotion processes around the world.
They should concentrate more on marketing their products and popularizing their brand. More often, customers demand after sale services. Honda should allocate resources for such a demand. The resources can be used to for example fuel cars for the customers after they make a purchase or deliver the purchased products to the customer’s premises.
As highlighted above, economics and global environments greatly influence the operations of Honda Motor Company. The bargaining powers of customers and suppliers have resulted in the company adopting various ways of surviving in the ever competitive environment that they operate in. They include manufacturing high-quality products and diversifying their suppliers. Some of the strengths of Honda include unrivalled competence and dominance of the automobile industry.
Its weaknesses are the failure to invest in research and dependence on North America for generating revenue. Some of the threats it faces are the competitive dangers posed by new entrants and natural disasters. However, the company boasts of good opportunities such as the good timing and the frequency of releasing new models, as well the general reduction of the fuel prices which has increased demand for automobiles. The company possesses adequate resources, capabilities, and core competencies which have enabled it to survive in the market. The numerous initiatives undertaken by the Honda Motor Company have ensured its unrivalled competence and a deserved survival in the automobile industry.
Derose, J. (2017). Four New Features/Capabilities You Can Expect from the 2018 Honda Accord – Car Life Nation. Car Life Nation. Retrieved 2018, Jan 23from http://www.carlifenation.com/four-new-featurescapabilities-you-can-expect-from-the-2018-honda-accord/
Honda Motor. (2017). Annual Report. Retrieved 2018, Jan 23, from http://world.honda.com/content/dam/site/world/investors/cq_img/library/annual_report/FY201703_annual_report_e.pdf
Jurevicius, O. (2016). Honda SWOT analysis. Strategic management insight. Retrieved 2018, Jan 23, from https://www.strategicmanagementinsight.com/swot-analyses/honda-swot-analysis.html
Porters Five Forces. (2013). Strategy skills. Retrieved 2018, Jan 23, from http://www.free-management-ebooks.com/dldebk-pdf/fme-five-forces-framework.pdf
Securities and exchange commission. (2016). Report of foreign private issuer. Retrieved 2018, Jan 23, from https://www.sec.gov/Archives/edgar/data/715153/000119312516733207/d208840d6k.htm#toc