Honda
Honda (A) Case Analysis
Submitted By:
GROUP 11 | SECTION 2
Rachit Bhatnagar
|DM 15244
Sarvagya Nayak
|DM 15250
Seerat Ghuman
|DM 15251
Vaibhav Agnihotri
|DM 15262
Keerthi P.
|DM 15267
Case Background
• Success factors for Honda:
– 1950:
• Offered a multiproduct line
• Leadership in product innovation
• Exploited opportunities for economies of mass production
– 1958: Market researched revealed an untapped market for small motorcycles to be used for local deliveries
– 1959: Entered US market and set up American Honda Motor Company
– 1961: Huge advertising spend to change the image of motorcycles “You meet the nicest people on a Honda” U.S. sales rose from $500,000 in 1960 to $77 million in 1965
– Largest dealership network in US
– Heavy commitment to R&D and manufacturing techniques
US Market
• US competitors:
– Sears, BSA Ltd, Harley Davidson
– Believed that motor cycle market was not for light weight vehicles, and was more suitable for sports rather than transportation
• Honda’s US entrant: small lightweight motorcycles (51-125 cc)
• Sold at a very high premium compared to the price of same products in the domestic market: – For CB750, the US price to distributor was $1373 whereas the Japanese equivalent was $986. Even after taking into consideration the packing and freight charges, the prescribed price is $1149.
– Thus, it was selling at a 20% premium
• By 1974 Honda had reached a formidable position in the market:
– Highest advertising expenditure: $8.1 mn
– 43% market share
– 1,974 dealers selling 220 units each
– Sales and distribution expense to the tune of $90-100 mn
• Harley-Davidson’s sales increased from $16.6 million in 1959 to $29.6 million in 1965
• Honda in 1965: Sales of $129.56 million
Japanese Motorcycle Industry: Price Experience Curves, 1959–1974 Average
Price in Yen
(1,000s)
51-125 cc Class
100
Value of
Experience=
80
80000*10mn=
800 billion yen appox. 60
= $2.75 billion
40
20
1
10
Volume in Millions
BCG Report
Submitted By:
GROUP 11 | SECTION 2
Rachit Bhatnagar
|DM 15244
Sarvagya Nayak
|DM 15250
Seerat Ghuman
|DM 15251
Vaibhav Agnihotri
|DM 15262
Keerthi P.
|DM 15267
Case Background
• Success factors for Honda:
– 1950:
• Offered a multiproduct line
• Leadership in product innovation
• Exploited opportunities for economies of mass production
– 1958: Market researched revealed an untapped market for small motorcycles to be used for local deliveries
– 1959: Entered US market and set up American Honda Motor Company
– 1961: Huge advertising spend to change the image of motorcycles “You meet the nicest people on a Honda” U.S. sales rose from $500,000 in 1960 to $77 million in 1965
– Largest dealership network in US
– Heavy commitment to R&D and manufacturing techniques
US Market
• US competitors:
– Sears, BSA Ltd, Harley Davidson
– Believed that motor cycle market was not for light weight vehicles, and was more suitable for sports rather than transportation
• Honda’s US entrant: small lightweight motorcycles (51-125 cc)
• Sold at a very high premium compared to the price of same products in the domestic market: – For CB750, the US price to distributor was $1373 whereas the Japanese equivalent was $986. Even after taking into consideration the packing and freight charges, the prescribed price is $1149.
– Thus, it was selling at a 20% premium
• By 1974 Honda had reached a formidable position in the market:
– Highest advertising expenditure: $8.1 mn
– 43% market share
– 1,974 dealers selling 220 units each
– Sales and distribution expense to the tune of $90-100 mn
• Harley-Davidson’s sales increased from $16.6 million in 1959 to $29.6 million in 1965
• Honda in 1965: Sales of $129.56 million
Japanese Motorcycle Industry: Price Experience Curves, 1959–1974 Average
Price in Yen
(1,000s)
51-125 cc Class
100
Value of
Experience=
80
80000*10mn=
800 billion yen appox. 60
= $2.75 billion
40
20
1
10
Volume in Millions
BCG Report