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HONDA (A)
HONDA
Introduction:
The Japanese invasion of the world motorcycle market was spearheaded by the Honda Motor
Company. Sochiro Honda, the founder of Honda was a visionary leader and industrialist. He had
been peripherally involved in the automotive industry prior to World War II. Due to Japans post
war devastation, motorcycles were technologically manageable and economically affordable
product for the average Japanese.
Reflecting to Hondas commitment to technologically based strategy, the Honda Technical
Research Institute was established in 1946. This institute dedicated to improvements in internal
combustion engines, represented Hondas opening move in the motorcycle field. In 1947, Honda
introduced its first A-type, 2-stroke engine.
Qualitative Facts:
integrated producer of engines, frames, chains, sprockets, and other ancillary parts.
Motorcycle manufacturers in Japanese industry tended to minimize risk by investing in
HONDA
motorcyclists.
The transformation and expansion of the motorcycle market.
Honda achieved significant product advantage through a heavy R&D and advanced
manufacturing techniques.
Cold Storage designs.
Short-term losses in order to build up an adequate selling and distribution network.
Marketing Philosophy- market share and sales volume.
As overall market leader the Japanese have dominated pricing in the motorcycle industry.
Experience based price reductions clearly go a long way towards explaining the historical
competitive effectiveness of the Japanese in the marketplace in small and medium
motorcycles.
Quantitative Facts:
motorcycle industry.
1951-Honda came up with a superior 4 stroke design.
1950s-Honda offered multiproduct line, product innovation and economies of mass
production.
50cc Honda was an explosive success.
3000 units per month after six months on the market.
Investing in a highly automated 30,000 units per month manufacturing plant.
1959-Honda Motor Company entered US market.
1961- up to 125 dealers and spent $150,000 on regional advertising.
By 1996 Honda, Yamaha and Suzuki together had 85% of the US market.
By mid-1970s the Japanese were able to dominate the market shared by European and
American producers.
Interval between consumption and production was estimated to be only 18 months.
Hondas annual growth rate was 14%.
Average annual growth rate of Japan Automobile industry was 19.5%.
Kawasaki was strong in the 750cc and over class due to the Z1.
Yamaha was weak due to poor 750cc model.
126-250cc following an experience curve slope of 76%.
Real prices have declined along experience curve slopes in the region of 85%-87%.
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HONDA
Premium in US even after allowing for freight, duty and packaging is 20%.Hondas
motorcycle business showed returns of 20% as compared to 12.4% return earned by the
company.
Honda
SWOT Analysis
Strengths
integrated producer of engines, frames, chains, sprockets, and other ancillary parts.
Honda began to depart from the pattern by offering multiproduct line, product innovation
manufacturing techniques.
In terms of value per employee, Honda outperformed its competitors by as much as four
times.
Weakness
Average annual growth rate of Japan Automobile industry was 19.5% while Hondas
annual growth rate was 14%. (Table A).
Opportunities
The transformation and expansion of the motorcycle market during the early 1960s
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HONDA
High growth and scale caused total cost to drop quickly enough to support regular pay
challenged.
Honda can reduce their margins to exports to the US to levels more in line with those
Threats
Failure to achieve cost position and cost reductions over time equivalent to your
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Competitor:
1. Increase in competition will result in Loss in the Market Share
2. Profitability decline in a large scale economy and disadvantages in technology, distribution
and marketing.
Threat of Substitutes:
1. Anyone planning to buy a motorcycle only, would not be expecting a substitute. The substitute
can be assumed in forms of same type of product by different companies e.g. Harley Davidson
etc.
2. Anyone planning to buy a motorcycle as a transport medium, can find substitutes in the terms
of car, bus, subs.
designs
and
marketing strategies.
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Cost Leadership
Market Penetration
Experience Curve Effect
S and D Network
Innovation and R&D
Market Penetration
Another strategy which contributed to the success of Honda is their focus on the market volume.
Honda started to gain market share from region to region starting from west all the way east of
the US. They are keeping their prices low to gain market share in the US markets. They are not
focusing on margins instead they are focusing on volume.
Even though their prices are higher than the prices in Japan, these prices are still very low than
the US producers. So they are eliminating all dumping allegations too. As suggested by BCG
team focus of Honda on the market volume is a major contributor in their success.
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HONDA
When we look at the case it shows the Price experience curves of Honda which are having a very
high slope. These curves show that prices of Honda motorcycles are decreasing gradually
irrespective of their different products according to the engine power.
S and D Network
Sales and Distribution channels of Honda in the US are another major factor giving them
competitive edge over their US counterparts. As soon as Honda started the operations they
established a strong network of dealers to support them. Moreover incentives provided to the
dealers are substantial in amounts, which are also keeping these dealers loyal and happy. As a
result they are putting extra efforts on the function of sales.
Conclusion
Although success of Honda motorcycles seems like an overnight miracle but it is not. It is the
result of different strategic measures carved by the company to stay ahead of their competitors.
Their overall low cost strategy along with their focus on market volume helped them make
market leader in less than a decade. Their productivity and their technology is also playing an
important role in their success. Their success in the US market is a very good lesson for the
companies to how compete in a highly competitive market and more importantly how to win the
battle.
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