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The Honda Effect document is critical to understand. It questions the success of the organisation. Hondas survival in the American market was explained in both the BCG Report and Pascals observation and analysis report. Both reports reflect on the strengths, weaknesses, opportunities and threats Honda encountered when it entered the American market. The document is critical for people to know because it offers insight to what companies need to do to survive in the global market.
What are the key differences between these two accounts of Honda's entry in the US motorcycle?
Case 1 (a): The BCG Report
The BCG report focuses on the handling and the development of Hondas strategy in entering the American motorcycle market in 1959. The purpose of the strategy is to differentiate on what accounted for Hondas success. The report puts emphasis on the patters used to reach decisions thus identifying what worked and didn't. This created room for actions to be taken. One disadvantage about the report is the fact that it puts a lot of emphasis on Hondas success leaving out critical factors.
The critical factors are:
Managers reasons for what they did
Statement of beliefs
Desires and what lead to the actions
What lead to the success of Honda?
It has come to my attention that Hondas mission statement was not included in the BCG report. Hondas success came from its one organisation three level strategy and a well documented vision and mission statement. The report does not include this. It is important to know that in order for an organisation to exist, it will require an organisational strategy, business strategy and a marketing strategy.
The organisational strategy focuses on:
Organisations overall purpose
Long range direction and goals
Range of businesses to compete
Shapes value creation for customers and stakeholders and shareholders
The business strategy indicates:
Scope of each unit
How it will compete
Markets to serve
Resources to be allocated
Create customer value
Market strategy is used for:
Determine market mix tools (product, place, price and promotion)
Internal marketing strategies (Delener 1999, p.48).
It would be impossible to manage a company that does not have a vision or a mission statement. In most instances the statements will not change but in this instance the vision stayed the same but Hondas mission statement was forced to change. Why? Honda place of origin is Japan but in 1959, Honda established an American subsidy. What does this mean and how does it affect the mission statement? This means that Honda will have to adapt to change thus forcing the mission statement to change. Now operating in a foreign country Honda had to clarify its priorities and set a new tone in the country taking account the five vital elements of the mission statement which are:
Customer focus: who the organisation will serve
Value creation: how the organisation create value
Market scope: where and what the organisation will serve
Guiding values: what values will guide managers and employees
Core competencies: what employees, process and technological capabilities will give the organisation competitive edge (Scarborough. 2009, p 173)?
There is a reason why I decided to touch on the vision and mission statement and the organisations three level strategy. As previously mentioned, the BCG Report puts great emphasis on the Hondas success. How did the success arise? Hondas success definitely came from its marketing planning process which is:
Analyse the current internal and external situation: Honda entered the USA knowing that there was great competition. Motorcycle registration increased from 575000 in 1960 to 1382000 in 1965. The competitors which Honda had to go against were Harley Davidson, BSA, Triumph, Norton of UK and Motto-Guzzi of Italy. At that point in time Harley Davidson had the leader in motorcycle sales. After the Second World War there was a decline in motorcycle sales. The reason is that the environment went through a series of changes namely politics, economy, socio-culture, technology, ecological and legislature. This created a limited group of motorcycle users. Police, army officials were the target market or we can say the customer focus. The rowdies came into the picture giving motorcycle industries a bad image caused by names such as "Hells Angels".
Research and analyze markets and customer: Honda was good at analyzing the markets and customers by focusing on its 5 W's which are who, what, why, when and where. Who? General public, what? Smaller light weight motorcycles, why? There was a large demand for them, when? 1959 and where? America West Coast.
Determine segmentation, targeting and positioning: Hondas segmentation focused on West Coast then lined up 125 distributors. Honda targeted on the general market and small families. Hondas positioning was created by their theme "meet the nicest people on a Honda".
Set Marketing plan objectives and direction: Honda achieved this based from their mission statement and their higher level goals. Hondas success came from the use of its growth strategies. The growth strategies it used was market penetration, product development and diversification
Plan marketing strategies, programs and support: Honda was able to differentiate itself and gain competitive advantage with the products it produced, the channels and logistics, price, and an intergraded marketing communication.
Plan to measure progress and performance: Honda was able to achieve this trough the use of its 700 designers or engineers which helped with its research and development.
Implement, evaluate and control the plan: Honda was able to differentiate from its estimated and actual forecasts by the profits or loses it gained and by the increase or decline in its market share (Wood 2004, p. 17).
The Honda effect based on Pascale's observation and analysis
Richard Pascale interviewed the Honda management in charge of the US market and discovered a rather different story from what was stated in the BCG report. The decision to enter the US was based on a little of analysis and no clear plan on how the company would build a market positioning (McKenzie and Tullock.1978). It is important to note that the BCG does not focus on how Hondas strategy evolved and the sort of learning that took place. The report was drafted because at that time Honda was in a crisis thus the report identified alternatives that Honda could use to bring success to the business.
The difference between the BCG and Pascale's observation analysis is the fact that the BCG puts a lot of emphasis on the external environment and Pascale's observation analysis focuses on the internal environment of the organisation. The external environment focuses on the opportunities and threats of the business thus the internal environment focuses on the strengths and weaknesses (McKenzie and Tullock.1978). It is clearly stated in Pascale's observation and analysis report states that "there was no strategy other than the idea of seeing if we could sell something in the United States". Another problem that arouse was the fact that there was no Resource Based View that Honda possessed when establishing an American subsidiary. The Resource Based View focuses on:
Physical resources: plant, equipment, location technology act
Human resources : employees, training, experience and intelligence
Organisational resources: firms' structure, planning processes and information systems (McKenzie and Tullock.1978).
Unlike the BCG, Pascale's observation and analysis report includes the actions that were decided on, the reasons for what the managers did, and the statement describing their beliefs and desires that lead to the undertaking of the actions. The fact that Honda didn't have a resource based view created a lot of problems within the company (Scarborough. 2009, p 263). The major problem was the fact that the company did not have an effective and efficient organisational structure. Companies need organisational structure for information to flow from top to bottom management (Wood 2004, p. 78). This allows managers and employees to know their roles, duties and responsibilities' within the firm. The question of communication is important for the success of any organisation. Honda did not have good international communication networks. There was a communication breakdown with Honda from Japan and Honda in America.
The difference between the BCG and Pascale's report is management. Unlike Pascale's report the BCG touched on management and some management functions. The management functions included planning, organizing, motivating, staffing and controlling (Zook, 2000, p.134). The report also included marketing. The marketing spoke about customer analysis, the selling of products and services, product service and planning, pricing, distribution, marketing research and opportunity analysis. The BCG further touches on critical factors such as research and development.
It is understandable that Honda produced good products but where not as superior as their competitors products. The productions of good but not superior products lead to bigger problems. Honda users filled complains about the motorcycles were leaking oil and encountered clutch failures. This was bad for Honda because they did not receive the budget which they had initially asked for. It was clear that in this point in time profits were going to decline due to the fact that the products had to get retested in order to find solution to the problem. Honda found solution to the gasket and the clutch; it is obvious that they did not forecast on the additional costs that would arise out of nowhere. Honda was not able to adapt to change at that particular point in time (Bove'e and Thill 2008). Establishing their business in a Japanese community was not going to increase the sales of Honda motorcycles. As mentioned before there was no planning and Honda was sailing on a sinking ship. The 250cc and the 350cc was not a smash in America. The managers at Honda didn't shift their attention to the consumers demands thus proves that Honda was suffering from marketing myopia.
The split of Hondas five executives in 1963 shows a clear indication that the organisation did not have a very clear vision and mission statement. The organisation lacked the authority, flow of communication and a solid constitution that all members of the organisation would abide to. Hondas existence in the United States of America is an experiment gone well (Bove'e and Thill 2008).
In conclusion the BCG report gives more quantitative and qualitative insights to the success of Honda. Pascale's report tells us more about the historic phases Honda went through to be where it is today. Honda learned from its mistakes and survived the corporate world in America.
To what extent was Hondas apparent strategy deliberate and or emergent?
After reading both reports, it was clear to me that Hondas strategy was deliberate in the BCG report. The BCG outlines Hondas strategy in penetrating the market. The strategy was formulated using an array of strategies for the planning process. Honda decided on implementing strategies that realized the organisations goals. It is important to understand that the top management of the company does not formulate a deliberate strategy but mixes it with the emergent strategy. The top management of the company focuses on defining the emergent strategy. We have to realise that the switch from an emergent strategy to a deliberate strategy is critical for the organisations disruptive business. The aim of the strategy is to launch a new wave of successful disruptive growth (Boddy 2005, p. 206). The BCG report reflects the use of alternative strategies. In this instance Honda used the horizontal strategy. The horizontal strategy was used to seek ownership and control the firm's competitors. The effectiveness of the strategy was to compete in a growing industry. The increase economics of scale provided major competitive advantage for the firm. Honda had both capital and a talented work force; this again helped the company gain its competitive advantage in the market. Competitors like Harley were faltering due to the lack of management and the decline of motorcycle sales. The BCG report reflects that there were intensive strategies used that lead to the success of Honda. The first critical strategy was the market penetration; this showed the Increase market share for present and product or service (Boddy 2005, p. 231).The five guidelines that Honda considered for market penetration were:
Current markets not saturated
Market share of major companies declined and sales increased
Increase of economics of scale provides major advantages (Wood 2004, p. 126).
Honda again used the market development strategy which was concerned with the introduction of present products into new geographic areas. The guidelines that Honda used were:
New channels of distribution used
Organisation successful at what it does
Organisation has excess production capacity
When the basic industry is rapidly becoming global in scope (Wood 2004, p. 126).
The BCG report reflected on the fact that Honda used product development for the motorcycles. The purpose was to increase sales by improving and modifying present products and services. The guidelines that Honda considered are:
Organisation competes in an industry that is characterized by rapid technological change
Organisation competes in a high growth industry
Organisation has strong research and development capabilities (Wood 2004, p. 126).
The emergent strategy
When Hondas executives decided to market small motorcycles. They had no idea that the product would be successful in the American market. There was a notion that the motorcycles would not sell very well. Sales expanded and increased in marketing, they captured a third of the American motorcycle industry. Honda produced good products but they were not superior and Honda in Japan had the notion that Honda will not survive in the American market (Tanner et al. 2009).Honda did not have a clear strategy; their aim was to compete in the global market. We can say that this statement is deliberate because they had a plan but didn't have a strategy to enter the market. Another deliberate strategy was achieved when they entered the Japanese community, this is clear that Honda already had a customer focus. The problem that Honda did not forecast on was the fact that they didn't properly test their products thus receiving complaints from their customers. Honda failed when it came to the structure of the company. There was a problem with the flow of communication thus the executives did not reach a consensus. This lead them to splitting from the company, this is a clear indication that they didn't plan for this to happen (Tanner et al. 2009).
What key lessons can be learned from any comparison of these two quite different accounts of the same strategic decisions?
The BCG Report shows us that Hondas cost advantage development strategy. The Michal Porters five generic strategy shows us the three different bases that Honda used. These strategies were the cost leadership, differentiation and customer focus. The cost leadership and focus strategies were segmented by the approach of low cost and best value. Honda used these strategies to gain competitive advantage and these differentiated Honda from its competitors. Pascales report offers us the opportunity to observe and analyze the background of Honda. The further explains the internal environment of Honda. This helps the normal reader to understand how the success of Honda came about in the market (Paley 2000, p.108).
The key lesson learned from both articles is that the success of any business requires a revised strategy in entering the global market. Companies require a basis of environmental analysis competing firms. Pascale stated that Honda did not have strategy or a plan. The key lesson taught is that companies need to devise key strategies that will lead to the success of the business. The BCG report shows that Honda had a deliberate strategy to sort out the problems it had encountered when it first entered the American market. Honda was able to turn disadvantages to its advantages and the fact that its survival was a mistake. Mistakes lead to advantages but the success of any business requires a formulated and the most important strategies for any organisation come from the vision and the mission statement.
To conclude Hondas survival in the American market came from the deliberate and emergent strategies. The deliberate strategies were critically explained in the BCG Report and the emergent strategy was explained in the Pascales analysis and observation report. The two strategies help us understand what occurs in both the internal and external environment of any organisation and Honda in particular. It is clear that the survival of any organisation requires a set of strategies which first come from the company's vision and mission statement.