Honda Company Analysis - Paper Example

1. Progress of The Company

Honda company has recently made tremendous efforts in the automotive industry. The firm has put some extra efforts in competing with well-known automobile manufacturers such as Toyota, Nissan, Ford, and Hyundai. The company in 2012 invested in aerospace through the establishment of GE Honda Aero Engines and also recently began production of Honda HA-420 Honda Jet. To boost its production, the company recently increased manufacture the of small cars and hybrids especially in the US and other upcoming markets globally. The firm is currently growing the sales of hybrid models in Japan by over 22% of its total sales because of increasing demand for the product.

Strategically, the company has put tremendous efforts in developing high-quality products and engaging in development the of effective marketing strategies. Cost leadership has been the primary mechanism the company utilizes in the promotion of its products. This plan essentially involves producing quality products at a lower cost than the opponents. Additionally, the firm avoids unnecessary costs through the recent launch of good process engineering skill. This mainly encompasses using highly tested and reliable technology that the workers are well conversant with. Lastly, the firm gets massive profit due to low-cost distribution strategy. This is achieved through direct sales, mail order, in-house sales and selling over the internet.

Nevertheless, the company has recently been performing well in the industry. Honda makes significant sales in the market because it prides itself on producing excellent petrol engines. Most cars have the powerful speed that claims about 0-60 mph times in only 8 seconds. The safety systems in the vehicles are outstanding although it does not outperform safety standards of Mercedes and BMW. Moreover, the performance is attributed to the establishment of automobile plants in various parts of the world such as Brazil, India, and China. However, Honda performed poorly in 2014 due to Takata airbag scandal that forced the company to recall over five million cars.

2. Current Situation

Strengths

Good Product Portfolio

Honda company has a massive product portfolio. They have produced over 120 types of vehicles and other forms of automobiles. These include Honda Civic, Honda CRV, Honda Fit and Honda Accord. These products are technologically advanced and or of high quality compared to their competitors products. Moreover, they have brand appeal in the market.

Brand Equity

The Honda products have been receiving massive sales in the market recently. The two most loved models that have huge demand are Honda CRV and Honda Accord. This is mainly because of high engineering that has made them have a competitive edge over their competitors. Additionally, Honda was the 18th most valuable brand globally in 2015 with a brand value of 23 billion dollars.

Market Share

Honda enjoys enormous a market share in the automotive industry. The company was in 2015 among the top 10 automobile manufacturers all over the world. Regarding cars, the company has over 100 types of vehicles operating in the market. The reason behind the significant market share is manufacturing advantage due to effective strategies employed. Furthermore, the products are quality and mechanically advanced.

Excellent Research and Development

Honda company has invested extensively in research and development. These efforts have made the company reach great heights because of more superior knowledge of consumer preferences and technology. Likewise, the company manufactures products with appealing and elegant designs that instantly becomes a hit in the market. These efforts are aided by many analysis of the industry and market at large.

Weakness

High Costs and Prices

The investment in human resource, technology, and research and development costs the company heavily. This forces the firm to increase the price of the products to conform with the costs of production. Ultimately, the sales reduce because of less demand from the customers due to expensive nature of the product.

Separation of Honda And Hero

The separation of Hero and Honda in India significantly affected the company. The separation negatively impacted the sales, marketing strategies and reputation of Honda in the market. As a result, the company was forced to replan itself in the Indian market to regain the lost sales that had been experienced.

Target Market

The company has recently been accused of manufacturing cars that only targets upper-middle-class customers. The products are expensive for lower-middle-class customers thus attracting lower demand compared to Hyundai and Maruti products. The company can, however, mitigate this by producing more automobile portfolio that fits large masses.

Focus and Luxury

The company has focused much on international deposits rather than domestic deposits. This has resulted in low sales in the local markets below their target. In addition to that, the firm has few luxurious products which are typically expensive compared to other manufacturers.

Opportunities

Product Expansion

The company is increasing the product line by adding more products to the portfolio. The new models are launched after more considerable research in the market to determine what products fit the consumer preferences. The product expansion helps the company to have a competitive edge in the market.

Global Market

There is increasing the buying power of automobiles, especially in developing countries. This is aided by automobile loads provided by banks which makes a purchase of a car easier. Thus, Honda needs to move swiftly and capture the rising demand for the products in the market. Honda should, however, develop cheap and quality models.

Electric and Alternative Fuel Vehicles

The world is slowly changing towards the demand of clean energy because of adverse impacts of petrol and diesel on the environment. Hence, the order of electric cars is tremendously increasing in the automotive industry. Therefore, Honda is currently expanding production of electric vehicles to meet the market demand.

Sales and Research

Honda is increasingly focusing on sales and research to increase its production. The firm has the best opportunity of using already available R&D to produce cars that meet customers demands. Honda will make huge sales if they produce fewer pollution cars in large amount.

Threats

Competition

Honda faces massive competition from well-established companies like Mercedes, BMW, and Toyota. Both local and international competitors dent the revenue of Honda. Although they have invested heavily in market research, Honda needs more efforts to counter competitors efforts. Honda needs to develop competitive products that fit the modern market.

Rising Logistics Costs

Distribution costs have grown enormously over the last few years. Transporting charges dramatically affects Hondas revenue globally. Other than transport costs, labor and manufacturing costs are other obstacles facing the firm. These have increased the cost of production which results to expensive cars in the market. Costa creates a point of concern for the company.

Fuel Prices

Fuel prices are rising all over the world. Despite people having more money to buy Hondas cars, they are troubled by high prices of diesel and petrol. Lower middle-class customers find it hard to refuel their cars on a daily basis hence prefer using public transport rather than purchasing personal vehicles. This has affected Honda cars sales globally.

D. Government Policies

Honda is affected by government policies regarding taxes. The government heavily taxes the products by imposing colossal import and export duties. This changes the price of the cars because the company is forced to sell the product at higher price. Other than taxes, political instabilities within a country can be a considerable threat to the company.

3. Future of The Company

Honda company has well-detailed plans for the future progress of the company. Firstly, the company is planning to release a plug-in-hybrid by 2018 in North America. This is under the firms vision of manufacturing new-energy cars which would account for over two-thirds of entire vehicles by 2030. The company is taking this direction in compliance with global emissions regulations that require car manufacturers to produce greener cars. Furthermore, in 12 years time, Honda plans to improve production of fuel cell vehicles, gas-battery hybrid, and plug-in-hybrid. These modifications aim at producing cars that can be recharged through house wall sockets.

Secondly, the firm plans to revitalize research and development to enhance the production of high demand and competitive cars. To achieve this, the company recently appointed a new director of R & D center who will be responsible for positioning research and development at the heart of all development of products and improvement of performance and design of existing vehicles. Additionally, the new strategy aims at shifting the production to standardized car platforms with the objective of increasing manufacture flexibility. Furthermore, the move will result to focusing on the production of international models such Accord Sedans, Civic, and Fit Compact.

Due to the Takata scandal that led to recall of many vehicles due to damage of airbags, the board of directors decided not to offer them further financial support. The global recall caused a substantial financial crisis for the company hence they firm agreed to divert finances to manufacture of global models. Global models are beneficial to the firms brand thus developing appealing models in many parts of the world will ultimately result in increased sales. Lastly, Honda is planning to enter the African market in few months time by beginning local production of Honda Accord in Nigeria. The firm has a target of the annual output of 1000 units in the country and further expansion to other African nations shortly.

4. Ethical, Legal, And Social Challenges

Despite having remarkable progress in the market, the company is facing enormous social, ethical and legal challenges in the industry. Ethically, the company was in 2015 accused of disregarding reporting safety issues for the vehicles in the last ten years. This arose from the computer programming, and data errors and over 1,800 issues were not reported since 2006. Other ethical issues include deceiving and harming the public concerning airbag issue, concealing crucial information, and not efficiently responding to safety issues. However, Honda has cooperated with NHTSA to mitigate those ethical matters by correcting errors that may cause safety issues. They also have recalled almost all vehicles affected by airbag explosions.

Moreover, the company has faced numerous legal issues in recent years. The airbag issue led to various lawsuits filed against Honda company because of over 1,800 issues that had not been amicably solved. Due to this neglect, the company was fined over 70 million dollars hence causing the huge financial crisis and loss of valuable customers. Other than fine, the company was forced to pay medical bills for drivers who became injured by the explosions. The firm has however paid the fines and recalled large number the cars worldwide with the aim of rectifying them and repaying the customers. They have also put on hold production of the damaged car to avoid further damage to the brand.

Socially, various Honda plants, especially in North America, faces imminent closure due to labor disputes between the group representing terminal workers and shippers and the dockworkers. This affects the transportation of Honda products to several parts of Asia and Europe. CR-V, Acura, Civic, and Accord is expected to m...