SWOT

Honda SWOT analysis 2013

Strengths Weaknesses
1. Diversified product portfolio
2. Huge investments in R&D
3. Strong brand image
4. Motorcycle market share in Asia
1. Product recalls
2. Weak position in Europe automotive market
3. Decreasing sales
Opportunities Threats
1. Increasing fuel prices
2. Positive outlook for global motorcycle industry
3. Growing global demand for environmentally
friendly vehicles
4. Growth through acquisitions
1. Intense competition
2. Decreasing fuel prices
3. Rising raw material prices
4. Natural disasters
5. Strong yen
Strengths
1. Diversified product portfolio. Honda unlike many other automotive companies does
not focus only on selling vehicles. It is the largest producer of the engines and
motorcycles as well. Therefore, the company is not as susceptible as its competitors are
to market cycles or technology disruptions.
2. Huge investments in R&D. Hondas investments in R&D reach as much as 5% of
revenue. The business relies on these investments to achieve competitive advantage
through various technologies, such as improved vehicle painting process, new hydrogen
and hybrid engines or new welding technologies. In 2012, the company owned 42,000
patents and had pending applications for 29,000 more patents.
3. Strong brand image. Honda has a reputation for producing the best quality engines
around the world. The companys brand was the 21st most valuable brand in the world
valued at $17 billion and was only behind Toyota, Mercedes-Benz and BMW, according
to Interbrand.
4. Motorcycle market share in Asia. In 2012, Honda sold 80.5% of its motorcycles in
Asia, the market that has greatest growth potential. Having the largest motorcycle
market share, Honda is well positioned to compete with other companies for the sales
and profits.
Weaknesses
1. Product recalls. Over 2011 and 2012, Honda recalled more than 1,000,000 vehicles to
fix various faulty parts and manufacturing defects. Car recalls severely damages firms
brand reputation and future sales.
2. Weak position in Europe automotive market. Honda holds a very weak position in
the Europes automotive market and has maintained only 1.1% market share in 2012.
Although, Europes market share is declining at the moment and many companies
experience losses, the market is huge and firms can benefit from the economies of
scale.
3. Decreasing sales. In 2012, Hondas revenue hit the lowest point in 4 years to 7.948
trillion. Honda sales were down by 11.2% in North America, which represents more than
40% of total Honda revenues. Revenue from Asia and Europe also declined by 21.3%,
15.5% respectively, signaling poor firms performance globally.
Opportunities
1. Increasing fuel prices. Hondas strong emphasis on engineering fuel-efficient vehicles
(Honda Insight and Honda Civic) with flexible fuel, hybrid and hydrogen engines will pay
off due to increasing fuel prices.
2. Positive outlook for global motorcycle industry. Motorcycle industry grew by 4.2%
from 2011 to 2012 and is expected to grow by at least 6% to 2016. Honda is the worlds
leading producer and seller of the motorcycles having more than 29% of the market
share. Growing demand for the motorcycles is a great opportunity for the company to
expand its global market share and grow sales.
3. Growing global demand for environment friendly vehicles. The declining levels of
fossil fuel sources and the rising CO2 emissions became a major concern for many
people and many governments. Therefore, ecologically friendly cars, powered by
hybrid, hydrogen or flexible fuel engines became very popular. The market for such cars
was $33 billion in 2010. Hondas focus on hybrid and hydrogen fueled engines is a great
opportunity to capture the market share for this new demand.
4. Growth through acquisitions. Honda could greatly benefit from strategic partnerships
or acquisitions of smaller competitors. The business would add new brands to its
portfolio, achieve greater economies of scale and would benefit from synergies between
different firms.
Threats
1. Intense competition. Honda faces more intense competition than ever. New small
entrants are disrupting the market with their capabilities in producing electric vehicles or
alternative fuel engines. Big companies are restructuring themselves to become more
efficient. As a result, firms like Honda are suffering from competition from both big and
small players.
2. Decreasing fuel prices. Some analysts forecast that future fuel prices will drop due to
extraction of shale gas. This would negatively influence Honda because the company is
focusing on hydrogen fuel, hybrid and flexible fuel engine cars, which are not so
attractive to consumers when fuel prices are low.
3. Rising raw material prices. Metals are the main raw materials used in vehicle and
motorcycle manufacturing and the rising price of the raw metals raises overall
production costs for Honda.
4. Natural disasters. Honda has manufacturing facilities in Japan, Thailand, China and
Malaysia. These countries, including others, are often subject to natural disasters that
disrupt manufacturing in the facilities and decrease Hondas production volumes.
5. Strong yen. Honda earns most of its profits outside Japan and appreciating yen poses
a great threat to Hondas profits.