The Honda Effect Case Study

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Introduction

Honda is a Japan based company and is the world’s largest manufacturer of motorcycles as well as the world’s manufacturer of motor vehicles, producing more than 14 million internal motor vehicles each year. The Honda Motor Company was founded by Soichiro Honda in 1948. In 1959, he opened the American Honda Motor Company, so he could fulfil his dream of building a high performance motorcycle and marketing it globally. The discussion below briefly emphasises on the strategy used by Honda to gain entry into the US motorcycle market. The key differences between the two accounts of Honda’s entry into the US motorcycle market The two accounts of how Honda entered into US motorcycle market differ in numerous ways. There are two approaches to strategies were used by Honda to enter the US market, the Boston Consulting Group (BCG) report clearly shows a deliberate approach to Honda’s strategy in entering the US motorcycle market, while the report Documented by Richard Pascale shows a clearly defined emergent strategy (Mintzberg et al. 2003:152-165). -The deliberate approach which was emphasised by BCG enabled the Japanese manufactures to succeed in many ways. The BCG report showed that the success of the Japanese manufactures began with the growth of their own domestic market. The high production for domestic demand led Honda to experience economies of scale proportion as the cost of producing motorcycles declined with the level of output. This allowed Honda to achieve a highly competitive cost position which they used to enter into the US market. The Japanese manufactures believed that high volumes per model provide the potential for high productivity. They also believe in putting capital back into production and making use of highly automated techniques. Thus, their marketing strategies are directed towards developing these high volumes, hence the careful attention that we have observed them giving to growth and market share. The BCG asserted that the motorcycles available before Honda penetrated in the US market were designed and marketed toward a limited group of people such as the police, army, etc. (Mintzberg et al. 2003:152-165). However, because Honda had a policy of selling, they marketed their product toward the everyday members of the public, rather than the typical confirmed motorcyclists. The bike designed for this target market was a small, lightweight bike that sold less than its leading competitors, which were Harley-Davidson of the USA and Triumph and Norton of UK. Another distinguished characteristic that helped Honda become the leading competitor in its field was the addition of staff members. Honda’s willingness to hire more employees shows how strongly they valued innovation, as they had about 700 engineer and design members, whereas its competitors staffed only about 100 employees. Besides the increased level of hiring, Honda also implemented other strategies such as the developing region by region. Over a period of years they relocated from the west coast of America to the east coast. Along with expanding their market, they also began to focus more on their advertising. A huge investment was spent in on their advertising theme “you meet the nicest people on a Honda”. This theme in particular disassociated Honda motorcycles from other stereotype motorcycles that had a rowdy image. Richard Pascale (1996) however, disagrees with the BCG report. He emphasises on how Honda used the emergent approach to strategise on entering the US motorcycle market. His report suggests that Honda’s entry in the US market was much smoother and it is what led to their instant success. Pascale (1996) argues that Honda entered the US market at the end of the motorcycle trade season showing their inability to carry out research in the new market. Pascale (1996) also criticizes the assumption that Honda was superior to other competitors in productivity. He states that Honda was successful in Japan with productivity...
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