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05/06/2012

Business Strategy of Honda Motors, HK


Business Strategy of Honda Motors, HK

 

Introduction

There is comprehensive discussion and analysis of industry analysis and markets of Honda Motors in Hong Kong. The economics behind Honda’s business strategy in evaluating Michael Porter’s five forces model and its relevant analysis thereunto, the relevant tenets imperative to understanding of Honda Motors and its industry market operations. The analyzing of Honda Motors business strategy position upon dealing with Porter’s five forces, and some other industry related analysis can be PESTLE analysis. Honda Motors in Hong Kong has grown to become one of the leading car manufacturers and well known automaker within the Hong Kong industry. Honda develops, manufacture and market wide variety of products ranging from small car engines in order to earn outstanding reputation from HK based customers. Honda Motors as one of the popular business firms has devoted certain substantial process oriented initiative to its manufacturing and logistics strategy and even though there were a few of its rivals have been able to capture the strategic potential of such broader order to the operation process that can be considerable, as car industries involved in Honda’s business milieu are highly dynamic with tight profit margins and demanding customers with a lot of needs with such rapid changing requirements.

Body – Discussion and Analysis

Honda’s manufacturing strategy or operations strategy support its ideal business objectives that is part of planning process that coordinates the company’s operational goals with those of competitor organizations (Chase et al., 2001), enhancing better relationship in support to Honda Motors strategy and its operations management. In global marketplace when most business firms are competing with same technology operations as well as strategies, Honda grow many times industry norms and are twice as profitable with the main competitors. There are competitive advantage to be gained from Honda Motors focus on time such as increased responsiveness to customer needs, innovations, improved return on novel products, working capitals, development and quality costs, increased prices and productivity, Honda’s strategy can be viewed as the organized development of resources in achieving detailed objectives alongside competition from rival businesses such as Toyota and many others. Honda Motors will be efficient if the management controls its interaction and wealth with desirable and amiable operations and strategic environment providing better stance at its business (Mehra et al., 2001; Brown, 1998). Honda’s unique combination of resources and capabilities for example, the internal factors are to imply such critical link to its proper management principles. Honda Motors capabilities and resources are valuable as well as rare, costly to imitate and substitute, the potential to competitive advantage realizes true value of Honda marketing base and strategic implications. The uniqueness and capabilities of the company’s strategic workforce will then depend on how easily Honda management is to obtain good business markets. Thus, knowing that strategic assumptions in operation will strengthen Honda workforce in terms of business competences in the areas of manufacturing and managing quality forces as being realistic in Honda strategies towards manufacturing, strategy formulation and customer selection base (Towill, 1996). Henceforth, developing robust business strategies, driven by clear business needs, Honda's competencies must take the lead in defining the role of time compression strategies. Furthermore, there is a need for strategic balance while driving strategy innovation and maintaining Honda Motors TQM and operation performance, will prevail in competitive environment in which the company operates (Mehra et al., 2001; Brown, 1998) into research and development formation. Honda Motors will reach its potential it needs to be practiced and managed by senior management and in particular managing directors, so that its abilities can be realized by them and extended to assist in providing information for the corporate decision making process.

PESTEL analysis

The report provide insight into Honda Motors and its analysis domain in PESTLE, five forces and so on, with emphasis on its external environment analysis and Honda's analysis of strategic competence and strategic assumptions with awareness to marketing tools.

Political Factors

Operating in a global environment around the globe Honda Motors operates in many countries; Honda's performance is highly influenced by the political and legislative conditions of these countries like in countries aside HK like, Japan, Singapore as well as Europe.  For Honda legislation, the government encourage Honda to provide mix of job opportunities from flexible paid jobs to highly skilled, higher paid jobs (Balchin, 1994). Honda Motors understand that car business has great impact on jobs and people factors being in and labor intensive sector. Honda employs large number of workers offering high level of loyalty and therefore represents desirable employees.

Economical Factors
Economic factors are of concern to
Toyota because they are likely to influence demand, costs, prices and profits. One of the most influential factors on the economy is high unemployment levels, which decreases the effective demand for many goods, adversely affecting the demand required to produce such goods. These economic factors are largely outside the control of the company, but their effects on performance and the marketing mix can be profound, expected to contribute greater amounts to Honda’s profits over the next few years. Honda Motors would be affected by any slowdown in the car industry market and be exposed to market concentration risks.

Social/Cultural Factors
Current trends indicate that
Honda customers have moved toward variety of social changes. Honda has increased the amount of car manufactured items available.  Demographic changes such as buying population, to focus on added value products and services. In addition, focus is share on the business mix, supply chain and operational improvements, which can drive costs out of Honda business (Datamonitor Report, 2003). The type of goods and services demanded by consumers is a function of Honda social conditioning and their consequent attitudes and beliefs. Consumers are becoming aware of business issues; attitude toward Honda Motors has been changing.

Technological Factors
Technology is macro based environment variable which has influenced the development of
Honda Motor products. The innovative technologies benefit Honda customers and the company, wherein customer satisfaction rises, Honda services can become personalized and convenient. Efficient Consumer Response (ECR) initiative provided the shift that is apparent in the Honda management of industry chain (Datamonitor Report, 2003). Honda Motors will be utilizing the following technologies:

-      Wireless devices

-      Intelligent scale

-      Electronic packaging and manufacturing labeling

-      Radio Frequency Identification  

The adoption of Electronic Point of Sale and electronic scanners has greatly improved the efficiency of distribution and Honda activities, with needs being communicated almost in real time to Honda suppliers (Finch, 2004).

Environmental Factors
In 2003, there has been increased pressure on many companies and managers to acknowledge their responsibility to society, and act in a way which benefits society overall (Lindgreen and Hingley, 2003). The societal issue threatening
Honda Motors has been environmental issues, a key area for companies to act in social manner, by recognizing this trend within the broad ethical stance, Honda's corporate social responsibility is concerned with ways in which there exceed to obligation of Honda stakeholders specified through regulation and corporate governance (Johnson and Scholes, 2003). Honda intended to launch innovative business strategy for sustainable consumption and production to cut down certain wastes, reduce consumption of Honda resources and minimize environment problems and harm.

Legislative Factors
Various government legislations and policies have direct impact on the performance of
Honda, such as demanding payments from suppliers and changing agreed prices retrospectively or without notice (Mintel Report, 2004). The presence of powerful competitors with established brands creates a threat of intense price wars and strong requirements for product differentiation. The government's policies for monopoly controls and reduction of buyers' power can limit entry to this sector with such controls as license requirements and limits on access to raw materials (Mintel Report, 2004; Myers, 2004). In order to implement politically correct pricing policies, Honda offers consumer price reduction on fuel purchases based on the amount spent on groceries at its stores.

Porter’s Five Forces
Threat of New Entrants
Nowadays, there possess strong barrier for
Honda Motors who desire to enter innovative market. For instance, it become rather difficult for Honda Motors to raise sufficient capital because of large fixed costs and highly developed supply chains. This is evident in huge investments done by large chains, Honda Motors in advanced technology for checkouts and stock control systems that impact new entrants and the existing ones. Other barriers include economies of scale and differentiation provision of products or services with perceived value than the competition, promotional activity and better distribution.

Bargaining Power of Suppliers
The power of suppliers that can be influenced by
Honda chains and that fear of losing their business to the large car markets in negotiating better promotional prices from suppliers that small individual chains are unable to match Ritz (2005). Honda Motors suppliers are also threatened by the growing ability of large retailers to source their products from abroad at cheaper deals. The relationship with sellers can have similar effects in constraining the strategic freedom of the company and in influencing its margins. The forces of competitive rivalry have reduced the profit margins for supermarket chains and suppliers.

Bargaining Power of Customers
Porter theorized that the more products that become standardized or undifferentiated, the lower the switching cost, and hence, more power is yielded to buyers Porter (1980). In meeting customer needs,
Honda customizing service, ensure low prices, better choices, and constant flow of car product promotions enable Honda to control and retain effective customer base. Honda Motors customers have become aware of issues surrounding fairer trade and the influence Honda top management.

Threat of Substitutes
General substitution is able to reduce demand for particular product, as there is a threat of consumers switching to the alternatives Porter (1980).
Honda Motors can be seen in the form of car product or the substitute of need and is further weakened by new car trends emerging in the industry. Honda will acquire small scale operations and opening business (Ritz, 2005).

Bargaining Power of Competitors
The purchasing power of
Honda Motors manufacturing industry is concentrated in the hand of small number of buyers. Operating in a mature, flat market where growth is difficult and Toyota is increasingly demanding and sophisticated, Honda can be accruing large amounts of consumer information that can be used to communicate with the consumer Ritz (2005). Honda competitive market has fostered an accelerated level of development, resulting in situation in which Toyota had to be innovative to maintain and build market share. The innovation can be within service development format, in response to changes in Honda Motors customer behavior. The dominant market leaders at Honda have responded by refocusing on price and value, whilst reinforcing the added value elements of their service.

Conclusion

Therefore, innovation has to be major driver for Honda Motors product development and can develop portfolio of different car production formats as designed to provide customer satisfaction experience. The management of technological innovation is increasingly involved in business strategies and decision making. Honda Motors have to exploit internal strengths and minimize internal weaknesses in order to achieve sustained competitive advantage, the ability to create effectiveness depending on how Honda could manage innovation. The success of Honda Motors show how far the branding and effective service delivery can come in moving beyond logo, fostered powerful identities by making Honda Motors concept into culture led experience and industry expansion. Honda Motors have to adopt expansion strategies or diversified the existing in order to sustain its leading market position in an already established retailing market. Thus, adhere to the fast changing circumstances. Honda strategy formulation should be regarded as process of continuous learning.  Entering innovative markets with new Honda brand requires heavy investment and marketing, as well as land prices and extra distribution and operation expense.  The production element of Honda Motors activities are service orientated. In order to obtain future competitive advantage, Honda Motors has to consider expanding further in terms of operating hours in those places. However, there might be restriction to the law and or planning councils, which takes away competitive advantage.

References

Balchin A. (1994) Part-time workers in multiple car sector: small change from employment protection legislation?, Employee Relations, Vol. 16 Issue 7, pp.43-57

Brown, S. (1998), "Manufacturing strategy, manufacturing seniority and plant performance in quality", International Journal of Operations & Production Management, Vol. 18 No.6, pp.565-87.

Chase, B.R., Aquilano, J.N., Jacobs, R.F. (2001), Operations Management for Competitive Advantage, McGraw-Hill, Boston, MA, Vol. Vol. 9.

Datamonitor Report (2003) Company Profile: Toyota Analysis, October

Finch P. (2004) Supply chain risk management, Supply Chain Management: An International Journal, Vol. 9 Issue 2, pp.183-196;

Johnson G. and Scholes K. (2003) Exploring Corporate Strategy, 6th ed., Prentice Hill: London;

Mehra, S., Hoffman, J., Sirias, D. (2001), "TQM as a management strategy for the next millennium", International Journal of Operations & Production Management, Vol. 21 No.5, pp.855-76.

Mintel Report (2004) Car Retailing, Retail Intelligence, Nobember;

Myers H. (2004) Trends in retail sector across Europe, European Retail Digest, Spring, Issue 41, pp.1-3;

Porter M. (1980) How Competitive Forces Shape Strategy, The McKinsey Quartely, Spring 1980, pp.34-50;

Ritz (2005) Store wars, Business Review, Vol. 11, April, pp.22-23;

Towill, D.R. (1996), "Time compression and supply chain management – a guided tour", Logistics Information Management, Vol. 9 No.6, pp.41-53.

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