POSSIBILITIES & LIMITATIONS OF HONDA’S PASSENGER CAR BUSINESS
Honda is an excellent company in terms of its remarkable ability in entering the automobile market and becoming one major player in the industry. Honda started its business in motorcycle business before entered the automobile industry in 1962. Japan automobile industry at that time has a high entry barrier especially in the form of competition and economies of scale. Honda was a new comer and there were two strong players in the Market; Toyota and Nissan. Moreover, the exit barrier of the Industry was also high since automotive industry involves a large investment. Overall, the industry had a high risk but also had high potential profit. Despite these conditions, Honda succeeded entering the market.
Honda success is supported by its strengths. Its first major strength is its core value of extreme aggressiveness to make impossible thing come true. This value encouraged product development through intensive R&D. The same value also encouraged Honda in building factory in US, and also faced competition against Yamaha in motorcycle business and competition against big player in automotive industry. The second major strength is Honda’s core competence cumulative development in the engine technology (nurtured in the motorcycle business) is especially usable in automobiles industry. This aspect made the company entered the automobile industry very successfully.
Despite its strength, Honda’s major weakness is there were no balance between future research and current profits. Honda did not focus on marketable cars but was always trying to look for speed. Honda often entered established markets with their immature technology and developed later after the market reacts. As a result, they often made faulty decisions and then spent millions and years to fix them. This weakness hit Honda heavily in terms of profitability.
The diversification from motorcycles into automobile is a natural extension...
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