Honda Case Study

Topics: Automotive industry, Japan, Honda Pages: 11 (3077 words) Published: August 24, 2013
1.0 Introduction
Honda is the second-largest automaker in Japan, after Toyota, and the world’s biggest motorcycle manufacturer. (Vault – Honda Motor Company Limited) Honda has four separate business units as listed in Table 1.0. | SBU| Revenue (Yen Millions)| COGS and operating expenses (Yen Millions)| Operating Margin| 1| Automotive Products| 5,822,742| 5,899,948| -1.3%|

2| Motor Cycles| 1,348,828| 1,206,226| 10.6%|
3| Power Products| 289,374| 293,772| -1.4%|
4| Financial Services Business| 526,576| 356,576| 32.3%| Table 1.0Revenue, Costs and Operating Margin for Honda Motors 2012 With almost 73% of Honda’s global revenue generated through the sales of their automotive products but with an operating loss of 1.3% in 2012, this report will focus on the automotive business of Honda. Using the Boston Consulting Group Matric (BCG Matrix) Honda’s automotive products are positioned as a ‘cash cow’, but edging close to being a ‘star’. With a brand value of $17.3 billion, Honda is the 21st most valuable brand globally and 4th most valuable automotive brand (Interbrand, 2012). Honda also retains 62% of its owners which is one of highest brand loyalty values in the automobile industry (J.D. Power & Associates, 2010). These contribute to Honda being a ‘cash cow’. The automotive industry however is highly competitive and at no time can any manufacturer rest on their laurels. For this reason in particular Honda’s automotive SBU sits on the cusp of being a star. | | | | | | | | | | | | | | |

Business Growth Rate| High| |  |  |  |  | |  |  |  | ? | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | Low| |  |  |  |  | |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | |  |  |  |  |  |  |  |  |  |  | | | | | | High| Low| | | |

| | Market Share| | | |

2.0 Automotive Industry Analysis

3.1 PESTLE Analysis

2.1.1Political
The USA Government has increased security to control borders in relation to transport importation (CIA, USA) making it more difficult for Honda to import/ export. Future expansion into China may be hindered by an ongoing Government dispute over the islands of Senkaku-shoto (CIA, Japan). These tensions resulted in Japanese automotive manufacturers losing market share (Honda 3.1%) to foreign brands through consumer boycott. (The Star Online, 2013)

2.1.2Economic
Long term concerns for USA include stagnation of wages for lower income families, inadequate investment infrastructure, costs of an aging population, energy shortages, and sizable budget deficits (CIA, USA). The Japanese economy is persisting with deflation, “reliance on exports to drive growth, and an aging and shrinking population” longer term, as well as a debt 200% above GDP (CIA, Japan). Future growth in China may be unlikely due to a concern about the future of the Chinese economy (The Star Online, 2013).

2.1.3Social
Both America and Japan have almost 40% of their populations in the 25-54 age brackets, resulting in an aging population (CIA, USA and Japan). Ernst and Young suggested that the growth of social media was redefining marketing and consumers have more information when buying a vehicle. (Ernst and Young).

2.1.4Technological
Consumers are moving to new technologies in the automotive industry. Electric and hybrid cars recorded a 164% increase in June 2012 from 2011 (Clean Technica). China may look at increasing their subsidies for consumers purchasing hybrid vehicles to increase sales (Bloomberg News)

2.1.5Legal
Manufacturers must adhere to emission standards for...

References: Bloomberg News (March 9th 2013) - China may increase subsidies for Hybrid Vehicles, Minster Says.
http://www.bloomberg.com/news/2013-03-08/china-may-increase-subsidies-for-hybrid-vehicles-minister-says.html- Viewed 19th March
Clean Technica (2012)- Electric Car & Hybrid Car Sales up 164% in June. Viewed 19th March
http://cleantechnica.com/2012/07/23/electric-car-hybrid-car-sales-up-june-2012/
De Wit, B. And Meyer, R. (2010) Strategy process, content, context. Cengage Learning, Andover, UK.
DieselNet – Emissions Standards for USA, Cars and Light Duty Trucks
Hanssens, Dominique M; Johansson, Johny K. Rivalry as Synergy? The Japanese Automobile Companies ' Export Expansion. Journal of International Business Studies; Third Quarter 1991; 22, 3; ProQuest Central. pg. 503
Interbrand, 2012 – viewed March 16th 2013
http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2010238
The Star Online (Tuesday 8th January, 2013)
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