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The automobile industry is changing its momentum very fast as per the needs and demands of the market. A number of players are ruling the market over many years with the class of strategic planning and its implementation to provide value to the end users. Honda is one of the best as well as a leading company in the market, which is producing well with the help of all the latest and innovative technologies. Apart from automobile, Honda is one of the best and the largest producer of engine. Honda was the one, which compete with Nissan and achieved the highest productivity. Honda was the first Japanese automobile-based manufacturer, which produced the luxury-based brand. This company is thus working well and generating effective outcomes. Apart from this, numerous threats as well as weaknesses are there which plays an important role in weakening this company. Therefore, in order to analyze the weak areas and to highlight the strong areas of a company, SWOT analysis done which results in better and productive outcome.
Globalization had certainly left its blow on the automobile business. Now, overseas auto dealers were facing smaller boundaries to function in overseas markets.
GLOBAL AUTOMOBILE INDUSTRY:
The worldwide automobile industry had covered an outstanding drive spanning through centuries covering craft production, mass production and lean production techniques, setting different milestones for manufacturing sector. The universal automobile industry, observed robust expansion in the face of increased global requirement with major contributions by Asian & European countries. The major players who contributed to the growth of global automobile industry as well as to the global economy are GM, FORD, BMW, HONDA, NISSAN, PEUGEOT and TOYOTA etc. In the automobile industry, operation cost economics, and technology changes determined the structure. The major players focused on commercial management of technological improvements with the aim of contributing more competent automobile to consumers.
Globalization covered the path for deregulation opening up the markets to overseas competition. The consumers stood to grow with more diversity to prefer from at competitive charges.
The global automotive industry received a major hit during the financial crisis of 2008. With the increased prices of automotive fuel, the demand for sport utility vehicles (SUVs) along with other low fuel economy vehicles dropped down. The Asian and European market received the major negative impact on its demand for vehicles. Car companies from all over the world implemented creative marketing strategies for cost and work force cutting techniques to minimize the associated risk related to cost. The consumers turned to smaller, cheaper and more fuel-efficient cars imported from cheaper sources and assembled in their own area.
Honda Motors in 2008 publicize it would be downsizing due to the 2008 financial disaster and predicted that the may be work force reductions at all levels of management in the beginning of next year probably.
De Wit, B. and Meyer, R. (2004) - Strategy Process, Content, and Context: An International Perspective, 3rd Edition, Thomson Learning
www.honda.com HONDA MOTORS
Porter's Five Forces (Industry Analysis):
Bargaining Power of Suppliers:
The automobile supply corporations have restricted bargaining power. Â There are so many supply firms and there are numerous parts that are require constructing an automobile, requiring numerous suppliers, one would believe that the automakers would be at the supplier's pity. However, the suppliers actually have very small power. Â With the JIT (Just in Time) manufacturing tactic Honda utilizes, there is a push-pull system.
Bargaining Power of Buyers:
The automotive industry is extremely competitive, hence buyers have some measure of power, as there are numerous automobiles from which to chose. Â Consumers have the maximum power in the connection in the standardized nature of the automotive commodity and the little switching costs coupled with choosing from challenging brands. Â Honda has the past of delivering elevated quality and fuel proficient vehicles. Â With the boost in fuel price and the state of the financial system, the customers are seeking the excellent product for a superior price. Â Honda has been a leader in manufacturing fuel competent and low emissions vehicles. Â As the world has a superior awareness of the requirement to shield the atmosphere and to go green, Honda continues to improve the vehicles created with this focal point. Â
Threat of New Entrants:
The presented loyalty to major brands, enticement for using a particular buyer, high fixed costs, shortage of resources, high costs of switching companies, and government regulations constitute the barriers to entry, which in turn reduced the competition in an industry.
The triumph of foreign car producers like those that the Honda Motor Co. had controverts the general conviction that the Big Three were unbeatable.
Availability of Substitutes:
If substitutes were accessible offering similar services, the likelihood of buyers switching over to another competitor depended primarily on the cost. The price of the automobiles along with their in service costs was driving customers to gaze for another transportation options. The rising gasoline cost was bound to manipulate the buyers.
The existence of many players of approximately the same size, small differentiation between competitors, and a very adult industry with very minute growth were the features of a extremely competitive industry. Higher the competition in the industry lesser would be the income margin. To remain to the front in competition, automakers were tempted to present value additional services to the customers incurring additional costs. Easy finance alternatives and long-term warranties offered to lure the customers.
De Wit, B. and Meyer, R. (2004) - Strategy Process, Content, and Context: An International Perspective, 3rd Edition, Thomson Learning
a) In the context of the process of strategic analysis, outline what PEST and SWOT techniques are, and explain their practical relevance to strategic planners at Honda Motors. (10 marks)
Strategic analysis pertains to the analysis of the potency of business' stand and understanding the vital external factors that may manipulate that position. A number of tools assist the processes of strategic analysis are:
It is a technique to understand and analyze the environment where the business operates.
This analysis considers the issues related to political/Legal, Economic, Social, and Technological issues.
Political/Legal: it includes Environmental regulation & protection, corporate & consumer taxation, internal trade regulation, consumer protection, competition regulation etc.
Economic: It includes economic growth, monetary policy, taxation, inflation, policy towards unemployment and stages of business cycle etc.
Social: It includes demographics, lifestyle changes, labor & social mobility, education, living conditions, health and welfare.
Technological: It includes government paying out on research, new discoveries & developments, speed of technology transfer as well as the impact of changes in information technology.
PEST analysis in the context of Honda Motors:
Honda motor has a good political record all over the globe, follows norms of the government, and maintains customer safety.
The marketing and manufacturing process considers society.
Honda motor came out with various models in the market with technological enhancement and efficiency.
It is another technique to review the key concerns arising from an evaluation of a business internal stand and exterior environmental influences.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
Strengths and weaknesses are internal factors. Â .
Opportunities and threats are external factors.Â
The strength factors helps to discover new opportunities and weaknesses helps to determine that what may pose threat to the existing scenario.
SWOT analysis in the context of Honda Motors:
â€¢ soaring and influential R&D
â€¢ finest market share control
â€¢ sturdy and powerful brand equity
â€¢ Revolutionary locomotive technology with the help of which Honda is gaining success
â€¢ Popularity is another strength that the company receives.
â€¢Different and unique products
â€¢Cost structure of Honda is tall as compare to other automobile producers.
â€¢ Apart from Nissan & Toyota, Honda wants privileged buy deposit
â€¢Honda spotlights more on worldwide deposits as compare to domestic deposits.
â€¢ Civic model considered as the main weakness for Honda Company.
â€¢ Honda products are termed as inoffensive in terms of style and design
â€¢ costs for non-luxury vehicles are far elevated as compare to other manufacturers
â€¢ In truck column, Honda Company is not offering sturdy products and proposals
â€¢ Honda has the best prospect to utilize its R&D in producing cars according to the desires and demands of their consumer.
â€¢ Honda is gaining popularity in the market with the kind of vehicles they have; they could maximize the profit potential.
â€¢Honda may face tough price competition from competitors
â€¢ Costs for automobiles, motorcycles and power products can be unstable
â€¢ Honda may face low consumer attention as it lacks the stylish look in this dynamic and trendy era
b) Critically evaluate the process of 'reconciling dichotomies' at Honda Motors' with reference to the 'product-related core competencies versus process-related core capabilities' dichotomy. (20 marks)
Product-related core competencies:
In response to increasing customer requirement, Honda will advance its quality control through increasing the functions of and harmonization among the development, purchasing, production, sales and service departments.
Honda is planning to launch new stylish models along with all other inherited features like robustness, durability and efficiency from its existing models.
Honda is working to build up safety technologies that improve accident reckoning and prevention, technologies to help decrease the threat of injuries to passengers and pedestrians from car accidents, and technologies that augment compatibility between bulky and small vehicles, as well as develop its lineup of products integrating such technologies.
Honda will underpin and persist to advance its contribution to traffic protection in motorized societies in Japan and abroad. Honda also intends to stay active in a variety of traffic protection programs, including sophisticated driving and motorcycling training methods provided by local dealerships.
Process-related core competencies:
Research and Development
Along with focus on effective safety and environmental technologies, Honda will enhance creativity in its advanced technology and products, and will create and swiftly introduce new value-added products that convene particular needs in various markets around the world. Honda will also maintain its efforts to carry out research on future technologies.
Honda will establish and develop efficient and flexible production systems and enlarge production capacity at its global production bases, with the mindset of increasing its ability of supplying far above the ground quality products.
Honda will stay proactive in its efforts to enlarge product lines through the innovative use of IT and to upgrade the sales and service arrangement in order to satisfy its customers.
Honda paying attention on establishing a foothold for the future, concentrating on reconciling its product and process based core competencies as well as:
â€¢ Strengthening the heart characteristics that make Honda unique
â€¢ Strengthening the groundwork for global growth
â€¢ Strengthening Honda's efforts to diminish its ecological footprint
c) Explain the main advantages of international trade and the arguments for restricting international trade in the context of the global automobile industry. (10 marks)
With increased industrialization, globalization and outsourcing, the international trade system has gone dynamic and versatile. International tradeÂ is exchange ofÂ wealth,Â merchandise, andÂ servicesÂ acrossÂ international boundariesÂ or territories.
The advantages of international trade in global automobile context:
Consumers do have various choices over products.
Vehicles with better quality and efficiency are available.
Manufacturers are bound to provide good quality due to competition.
Increase in Environmental policy adherence
The company involved in trade is a part of monetary gains to maximum as well.
The trade provides a competitive edge and recognition at local and international level
Better communication and sharing of technical expertise gathered over globe
Closer knots between nations helps to maintain political stability
The arguments for confining international trade in the perspective of the global automobile industry lie in the disadvantages of international trade in global automobile context:
Native production may get affected
Local small companies may be outshined by their international competitors
Rich countries may manipulate political matters and get control over negotiating terms.
Ideological differences may appear between nation and company with regard to the procedures in trade practices.
Explain your understanding of Whittington's 'Evolutional' and 'Systemic' Schools of Thought in the context of strategy development at Honda Motors. (10 marks)
Evolutionary Approach on Strategy
Evolutionary approaches do not depend on top management's ability to plan and take action rationally. Instead of depending on managers, they trust that markets will resolve profit maximization and not the managers. Whatever schemes the managers will adopt, the best performance will be the one that survive.
In evolutionary perspectives, competition is not `handled by isolated calculation such as in classical viewpoint but by regular struggle for endurance in the jungle. The biological principle of natural choice is at the core of evolutionary theory. The weaker performer has to drive out of the market.
Systemic Approach on Strategy
Systemic theorists believe that the group is proficient of planning and acting efficiently. According to them fiscal activity cannot be divided from social relations such as family, state or belief. These social issues influence the means and ends of a universal approach and define what the suitable behavior is for their members.
In a systemic approach, the organization comprises of social groups with interests. The variables that Systemic contend through are class and professions, nations and states, families and gender. The policy then depends on the societal surroundings of the firm.
Critically evaluate how you might apply the two Schools of Thought to Honda Motors. Explain and explore which school of thought you prefer, and why? (15 marks)
The two schools of thoughts applied in the context of Honda motors as the company remains alert of the marketing changes and strategies imposed by competitors in the market. They follow evolutionary approach because they trust market and just their managers. The strategic decisions are dependent on both viewpoints taking top management as well as market conditions into consideration.
Honda motor carries its strategies forward with a mix of evolutionary as well as systematic approach on strategy. The company involves the interest of its employers as well as consumers. The company has survived the recessionary period and is again growing well because its moving ahead innovatively to cut throat the competition. Honda models are `known for comfort, durability and efficiency. It does value the sentiments of social values and beliefs into consideration.
However, I prefer evolutionary approach as it gives more focus to the market and profit maximization and not the strategic decisions taken by management. In this approach, the risk seems more calculated and handled effectively.
"Stacey's (1996) integrated model of decision-making and control comprises of four loops: the rational; the overt politics; the covert politics; and the culture and cognition." (Stacey, R. D. (1996) Strategic Management and Organizational Dynamics, Second Edition, Pitman, London; cited in SIM336 Module Workbook, 2010, Unit 6, page 156)
Using your understanding of Whittington's (2000) 'Processual School of Thought', critically evaluate the implications for strategic management of each of the four loops. (25 marks)
Processual Approach to Strategy
Processual approaches do not agree with the evolutionary viewpoint either of send off the profit-maximizing outcomes to the market. To them, organizations and markets are filling with uncertainty and mess. The best Processual method is not to struggle for the superlative but to work with what the veracity offers.
The Processual Approaches believe that rational monetary man is not possible because we cannot oversee all factors at the same time. Human character is simply flawed.
Micro-political view implies that firms are not uniting towards a sole goal such as profit. As an alternative, it is made of a number of persons with different wellbeing and brings them to the organization. The members of the organization negotiate between themselves to appear at a set of goals that is suitable to them all. The main approach for this approach is to make simpler complex processes.
Available from: (http://www.academon.com/Essay-Whittington's-Four-Approaches-to-Strategy/)
Stacey's (1996) integrated model of decision-making and control:
The model comprises of four loops:
This loop focuses on the rational materials to reach a rational outcome.
the overt politics:
The company shares it strategies and regulations widely to focus on consumer transparency and ensure that consumers should be conscious about the brand.
It focuses on adherence to the government rules and regulations as well as quality standards.
the covert politics:
Honda motors do focuses on its structure and policies to ensure satisfaction of its employees and keep on improving its processes to gain efficiency.
Culture and cognition:
It does believe in social values and standards considered according to the traditions of the society.
Honda Motors co. Ltd Annual Report(2008) Honda
Honda Company chooses physically defined divisions as the procedure units for local marketing, because of their expert local knowledge of consumers. At the same time, it may still desire global product division liable for the worldwide management of product development and manufacturing, taking benefit of economies of scale and specialization.
The main reserve in the company is people. The company viewpoint is Respect for the Individual, The Three Joys (the joy of buying, the joy of selling, and the joy of creating). For this two main goal in the Company, the company recruit member of staff with the marketing expertise to help the company accomplish the joy of buying, and joy of selling.