Ashley gates

SWOT Analysis Honda Motor Company

Davenport University

BUSN 520

March 22, 2015

Table of Content

Introduction and Overview…………………………………………………………….....……….3

Strengths……………………………………………………..………………………………..…..3

Weaknesses………………………………………………………………………………………..6

Opportunities…………………………………………………………………...….….……..…....7

Threats………………………………………………………………………………………..……8

External Factors Impacting Decisions…………………………………...…………………..……9

Recommendations for Changes in Leadership and Structure……………………………………10

Possible Future Scenarios…………………………………………………………………..……11

Conclusion…………………………………………………………....……………………....….12

Appendix……………………………………………………….…...……………………...…….12

References……………………………………………………….……...…………...…..……….14

Introduction and Overview

“’Respect for the Individual’ and ‘The Three Joys’-expressed as ‘The Joy of Buying,’ ‘The Joy of Selling’ and ‘The Joy of Creating’” are the four basic principles Honda Motors Company is embodied with, that influences its decision on its journey to continuous growth (Honda Worldwide, 2011). Respecting individuality base on their own customers’ unique characters, while providing direct enjoyment through their product has been the concept that Honda has expressed their belief in. In line with these principles ever since its establishment in 1948, Honda has remained a leading company in the market, through creation of new innovative technologies, products of higher quality at reasonable prices, world wide customer satisfaction, and commitment to environment protection and enhancement of safety in a mobile society.

As with any other companies, Honda has its shares of internal and external factors, dictating its success and growth. Where strengths and opportunities is a favorable outcome for the company, it is also shadowed with internal weakness and threats from external sources and competitors. In order to determine Honda’s future growth and its susceptibilities, a SWOT analysis is therefore needed to establish its weak points and to highlight its strong areas, which should determine better results for productive outcome.

Strengths

In order to be able to portray the strengths of the company, while avoiding redundancy or turning into a disorganize mess, one must categories the company’s shining moments through its portfolio, success, and popularity. The portfolio of the company encompasses it’s the strength of its diversified products, as well as its strong brand image that it portrays around the world. First of all, having the 21st most valuable brand in the world, valued at $17 million dollars, Honda is one of the very well known companies which thrives on its dependability and best quality made engines in the automotive industry (Honda Corporate, 2011). Furthermore, Honda, unlike many other automotive companies, has a multi-focal approach. It does not only focus on selling of automotive vehicles alone, but has various sectors and departments which focus on technological advancements as well. It is the largest producer of engines and motorcycles as well as multitude of equipments ranging from garden equipments, scooters, ATVs, generators, robotics, jets and solar cells (Honda Corporate, 2011). The company thrives with this dual form of decentralize and divisional organization. Wherein lower management focuses on their specific areas of expertise, with the development of the various examples aforementioned above, Honda also follows “Departmentalization that groups units around products, customers, or geographic regions” which is made evident by various factories in different part of worlds, selling region-specific goods (Bateman & Snell, 2013). Therefore, this form of organization structure that Honda follows protects the company against susceptibility to market cycles and technological disruptions. Since the company has multiple investments in different sectors, a disruption in the automotive field for example, will not debilitate the company as strongly as others (Honda Corporate, 2011).

The success of the company also portrays the over all strength of the company. Honda is one of the largest vehicle manufacturer in the world, encompassing cars, trucks, and motorcycles. Although there are stiff competitions in the automotive industry, its motorcycle market share in Asia, as of 2012 has dominated compared to other companies. In fact, Honda has sold 80.5 percent of its motorcycle in the Asian market, which presumably has the greatest growth potential for any company. Having the largest motorcycle market share, Honda has one of the best positions to compete with other companies for overall shares and profits. Furthermore, Honda’s success is evident also due to its advancements in technology through means of research and development. Their involvement and success in motorsport program, has proven their capabilities to compete with other automotive companies, in the further advancement of engine function and fuel utilization. Although labeled as sports, the importance of these event aids in the development of new powerful engines and technology, which often finds its way into the mass produce cars sold in the future. Honda’s investments in research and development has gained them 5% in revenue, and lead to improved vehicle paintings, hydrogen hybrid engines, and new welding technologies capable of strengthening vehicles and its safety. In fact, the company owns over 42,000 patents with another 29,000 pending (Honda Corporate, 2011).

Last but not least, the strength of a company is highly dictated based on its popularity. There are a lot of different factors that determines the overall reputation of the company and its product. The main factor is the quality of customer experience, which is often dependent on the reliability and durability of the goods. Consumers of Honda products, being one myself, have enjoyed the experience with Honda goods, often being durable and reliable for a lengthy period of time. Having appreciated the longevity of Honda products; the company has won numerous awards for quality and customer satisfaction. With a strong distribution network and continuous refining of its production system over the years, have yield more innovative and fuel efficient, low emission products for Honda. Saving the planet and keeping the cash inside the wallet has yield Honda with greater popularity in recent years (Honda Worldwide, 2011).

Weakness

No company is devoid of or immune to any weaknesses. Some of Honda’s strength is also its weakness. Having branched out into different sectors such ATV, generators, garden equipments, and with a fairly strong automotive production line and a complete dominance over motorcycles sales, Honda is still particularly weak in the truck industry compared to other manufacturers. This sole factor inhibits their full grasp within automotive industry. Furthermore, as of late, the modern style of their car line has been deemed “boring and bland” compared to its predecessors in the past. Although each new vehicle acquired new technologies, this in turn drove up the price and drove away new consumers. The availability of these technologies has been questioned by consumers whether Honda’s vehicles are worth the steeper price. Furthermore, their popularity amongst young adults has dwindled ever since companies such as Nissan have release far more powerful and exotic looking cars such as the Nissan GT-R. Honda, on the other hand, continues to suffer from underpowered products, less roomy, and often annoyingly loud engine sounds during operation. This is quite disturbing considering this goes against their basic principles, aforementioned in the introduction (Honda Corporate, 2011).

Honda Motor Company is also suffering from recent bouts of recalls which is now beginning to take a toll on their brand reputation and future sales. Honda has recalled more than 1,000,00 vehicles to fix various faulty parts and manufacturing defects. Although, in Honda’s defense, it is their company’s affiliates that and manufactured and provided the faulty parts. However, as a decentralize organization, a fault of one branch or affiliates will always lead back to the head branch in times of mistakes. Always will and always has been. Speaking of branches, Honda’s weak position in Europe automotive market has cost the company to lose valuable profits and decreased sales. Honda has maintained only 1.1 percent market shares in Europe since 2012. Although, European market share is in decline at the moment, it does not justify Honda’s extremely low share on the continent, especially since Honda deems itself as a global automotive manufacturer (Car Complaints, 2011).

The accumulation of all these problems has lead to greatest weakness for the company; decrease sales and profit. With the rising price of raw materials, and demand for lower cost vehicles, Honda’s revenue has hit the lowest point in 4 years, to 7.948 trillion yen. Sales were down by up to 11.2% in North America, which is troubling considering the continent represents more than 40% of total Honda revenues. Furthermore, revenues from Asia, has also declined by 21.3 percent, signaling a poor global performance (Honda Corporate, 2011).

Opportunities

With increasing fuel prices, a wonderful opportunity for growth can be found within the hybrid models and emphasis on engineering fuel-efficient vehicles. The decline of levels of fossil fuel sources and the rising emissions of C02 has lead to change of perspective towards vehicles, and a major concern from people and many governments. As such, ecological cars, powered by hybrid systems of gas and electricity, hydrogen or flexible fuel engines have become extremely popular, a shadow of the past of what once was; where gas guzzlers were highly sought after. Having a new demand for these types of vehicles is a 33 billion dollar market and a great opportunity for Honda to capture (Honda Engines, 2011).

Furthermore, Honda has an ability to develop more aviation products as well as expands its grasp in the automotive industry by furthering and developing their truck line to compete with the other larger automotive manufacturers.

Honda can even capitalize on a couple of its strength already and make it even stronger. The motorcycle industry has grown by 4.2 percent from 2011 to 2012 and is expected to grow by at least 6 percent by 2016. Being one of the world’s leading producer and seller of motorcycles in Asia, the company can further expand its global market share and sales by targeting other continents. Honda can also grow through acquisitions of smaller competitors and benefit from strategic partnerships, especially in the motorcycle industry. New brands will be added to Honda’s portfolio, and achieve greater economic scale between the synergies of the two companies. There is extreme need for cheap dependable transportations, as within Honda’s grasp to take the opportunity for further growth a return to profitable stature (Honda Corporate, 2011).

Threats

The life of a company is of course never without threats as it can be seen from every angle and perspective. The fickle economy can change ever so slightly, causing death to or success for a company. The rising raw material prices for instance are a huge threat for Honda. Metals which are the main raw materials used for automotive manufacturing as well as research and development has raised the overall production cost for the company. The depreciating dollar and appreciating Yen alongside with higher cause of raw materials is a massive threat. On top of that, the much recent drop in fuel prices due to extraction of shale gas, evident of recent times, will have negative influence on Honda’s share. Considering that the company has invested immense amount of money into research and development on hydrogen fuel, hybrid and flexible fuel engine cars, will lose its demand since the fuel prices are low. Furthermore, natural disasters which, occurs yearly, are always looming around every corner. Honda manufacturing factories in Japan, Thailand and Malaysia are subject to natural disasters that disrupt manufacturing productions, thereby decreasing production volumes (Honda Worldwide, 2011).

Perhaps the biggest threat for a company, especially Honda is its competitions. Now for consumers, competition is a wonderful thing, since it avoids monopoly, and forces the company to decrease prices and increase quality of goods to “one-up” the other competitors. However in a business perspective, this is a huge threat for growth, success, and profit. In fact Honda is facing more intense competition as of late, especially since small new entrants are disputing the market having capabilities of producing electric vehicles and alternative fuels. Furthermore, big companies are restructuring themselves to become more efficient, and targeting a variety of areas that consumers are in demand of. Honda is taking hits in both small and big players (Honda Corporate, 2011).

External Factors Impacting Decisions

Without becoming redundant, the positive and negative external factors for Honda, were aforementioned earlier, as opportunities and threats as part of the SWOT analysis. These two external factors have the greatest impact in the direction of Honda Motor Company’s path to success and reaffirmation as a global automotive power. However, it is the negative external factor of threat that may very well have the greatest impact on the decision and direction of where the company is going. The economic slowdown, competition in global automotive market, tightening emission standards, the bouts of recall and appreciating Yen against US Dollar had lead a to sudden restructuring of the Honda’s leaders and overall business approach.

One can infer that they have lost their way from their original basic principles of quality, individuality, and joy; and much more similar to survivability instead. Perhaps Honda may have notice this recently since, much of the surprise by company insiders, have suddenly replace its current CEO Takanobou with Takahiro Hachigo as well as other senior management with an entirely new, younger group of people. With poor global profits, bouts of recall, and bland styling, the company is trying to redirect its path into a much fresher direction (Levin, 2015).

Recommendation for Change of Leadership and Structure

Honda Motor Company is well ahead of any recommendation for change in leadership and structure. As previously mentioned, many of the directors who rank higher than Mr. Hachigo has chosen to retire and be replaced with a younger group. “In a release statement by soon to be former CEO of Honda, Ito Takanobou, ‘Honda is ready to make a new leap forward. To do this, Honda needs to be led by a new, younger team’” This approach is indeed a great example of strategic planning with “major targets or end results that relate to the long-term survival, value, and growth of the organization” (Bateman & Snell, 2013).

This approach is a response to the bland styling that plague Honda during the previous decade. Mr. Hachigo’s experience in product design, operations and procurement, is a new trend that Honda is going for involving executives with “product and supply chain management prowess” (Levin, 2015). Furthermore, the fact that Hachigo’s roles as a Vice-President of Honda Motor Technology –China, will add a greater hold in Asia’s booming economy. This is evidence of the importance of global-based experience that Honda is seeking as a cure for its poor global display in previous years.

Possible Future Scenarios

The reconstruction of Honda’s leaders will definitely have a drastic change in the direction of the company and its products. More of its vehicles will probably be updated, especially in aesthetics to combat the bland styling that everyone associated Honda recently with. This is evident with the new release of the Acura NSX, an enthusiast’s exotic car which was once retired by Honda due to increasing price of fuel. The reintroduction of this vehicle should pave a way for new exciting looking cars in the future, capable of bringing joy their consumers. Combined with new technologies, from their research and development department, Honda will once again have products desired by young adults.

Furthermore, by hiring leaders, especially a CEO with global-based experience, the company will be able to expand its growth and grasp as made evident with opportunities that Honda has on its plate. With China’s booming population, a massive market share in motorcycle in the country will bolster the company’s success and alleviate many of the threats the company has had for the past decade (Levin, 2015).

Conclusions

Honda Motor Company is not solely an automotive company as everyone may perceive it to be. Its many manufacturing and technological fields make Honda amongst the few versatile companies globally. Since self limitation will lead inhibition of growth, Honda has avoided that by procuring various sectors in different fields. However, the change of economic times will always dictate the direction the company is going, and in business, there is no such thing as 100 percent safety net. It will be interesting to see how Honda’s new CEO will change the company’s SWOT analysis in the future. Will he remove some threats? Take some opportunities? Turn weaknesses into strengths or vice versa? So far, only time will tell.

Appendix

	Valuable in Achieving Objectives	Detrimental to achieving Objectives
Internal Factors	Strengths 1. Diversified Product Portfolio 2. Strong Brand Images 3. Largest Vehicle Manufacturer 4. Successful Motorsport Program 5. Powerful Research & Development 6. Popular Company 7. Refined Production System 8. Innovation 9. Highly Experience 10. Well Known Reputation 11. Engines with high durability 12. HighCredibility 13. High Customer Satisfaction	Weakness 1. High End cost structure 2. Boring and Bland Style 3. Economic Down Fall 4. Underpowered Vehicle 5. Lack of strong truck line 6. Recent Bout of Recalls
External Factors	Opportunities 1. Increasing Fuel Prices 2. Positive Outlook for Global Motorcycle Industry 3. Growing Demand for environmental firnedly vehicles 4. Growth through acquisitions 5. Offering of low emission vehicles	Threats 1. Economic Slow Down 2. Intense Competition 3. Rising raw material prices 4. Natural disaster 5. Appreciation of Yen vs Depreciation of US Dollar 6. Decrease of fuel prices

References

Bateman, T. S., & Snell, S. A. (2013). M: Management. New York, NY, USA: McGraw-Hill Higher Education.

Levin Doron, (2015). Honda: This will be our year. Retrieved from http://fortune.com/2015/01/15/honda-2015/

Honda Worldwide (2011). Philosophy Honda Worldwide : Honda Motor Co.,Ltd. Web. Retrieved on Nov 13, 2011, from website http://world.honda.com/profile/philosophy/

Honda Corporate (2011). Historic Timeline Honda Corporate - Vision, Offices, Headquarters, Corporate History. Web. Retrieved on Nov. 13 2011. http://corporate.honda.com/america/timeline.aspx

Honda Corporate (2011). Vision, Offices, Headquarters, Corporate History. Web. Retrieved on Nov 13, 2011, from website http://corporate.honda.com/

Car Complaints (2011). Car Problems, Car Complaints, & Repair/Recall Information. Retrieved on Nov 13, 2011, from website http://www.carcomplaints.com/Honda/

Honda Engines (2011). Why Choose a Honda Engine?" Honda Engines - Small Engine Models, Manuals, Parts, & Resources. Retrieved on Nov 15, 2011, from website http://engines.honda.com/why/