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Case Study Analysis :

Honda (A)
Section 3 Group 8
- Anjali Chandra
FT173012
- Devang Singh
FT173026
- P I Isaac
FT173040
- Mrinal
FT173054
- Rajalakshmi M
FT173068
-

World Motorcycle Industry

Prior to 1960, US was world leader in motorcycle industry.


By the end of two decade from 1960 to 1980, US
manufacturers had been dislodged by Japanese competitors.
Japanese motor company, Honda invaded the world
motorcycle market.
Honda was into Automobile industry prior to WW 2.
Honda started producing 2-stroke engine in 1947 and then
moved onto 4 stroke engine.
Honda engine were reliable than competitors and had a
superior stamped metal frame.
Hondas competitor responded to its 4 stroke engine with
superior 4 stroke design which were both quieter and more
powerful than Hondas.
Honda diverged from the strategy of utilizing a single design
until obsolescence and introduced multiproduct taking
leadership in product innovation.

About Honda (A)

Honda began to depart from the pattern of investing in one


design and milking that project till it become technologically
obsolescent.
Honda offered multiproduct line and exploit opportunities by
mass production
With their market research, they tapped market segment
seeking small motorcycle that could be used by businesses for
local deliveries.
In 1959 Honda Motor Company entered American Market and
offered small lightweight motorcycle.
Honda Motorcycle were superior to the sears lightweight and
easier to handle and were sold for less than $250 as compared
to American motorcycle which sold at $1000-$1500.
Honda followed a policy of penetrating market from region to
region.
Honda advertised extensively to change the negative image of
motorcycle and claimed You meet the nicest people on a
Honda.

Hondas strategy in US
Honda followed a strategy of penetrating market region by
region and lined by 125 dealers across.
Honda used productivity based cost advantage and R&D
capability to introduce new models at lower prices than their
competitors.
Hondas primary objectives are set in terms of sales volume
rather than profitability.
Annual targets were based on market share & strategy was
to grow sales volume faster than any of the competitors.
Products are redesigned whenever market threat or
opportunity is perceived.
Prices are set to achieve market share targets.
Effective marketing systems were set up in all markets.

Price & cost performance

Price performance in the large bikes has been consistent


with the small bikes of Honda.
Hondas price premiums were high across almost the entire
rage of bikes and there was no possibility that Honda was
dumping the products in U.S. markets
The real price decline has not been accounted by reduction
in margins, it was because of cost reduction that has taken
place parallel with the real prices.
The existence of experience curve effect in motorcycle
industry has important strategy implications.
In 1974, Honda showed returns of 20% from motorcycle
business as compared to 12.4% earned by company
overall.
It shows that Honda had achieved an experience curve
effect on cost in parallel with price.

SWOT Analysis of
Honda
Strengths
- Offer multiproduct line
- Leadership in product
innovation
- Exploit opportunities for
economies of mass production
-- Relatively inexpensive
Japanese labour.
- Exploit the capability of
domestic as well as
international markets.
- Proper use of sales and
distribution channels.
- Quick response to any market
threats.

Opportunities
- Designing products to
meet domestic demand.
- Opportunities to explore
new product designs
(Cruiser).

Weakness

- More investment in R&D


- Lack of presence in the
high end segment

Threats
- Easily replicable
technology developments.
- Threat of foreign players.
Less focus on domestic
market- 59% decrease in
domestic sales

Porter 5 Forces
Supplier Power (low)

Thre
at of
Plenty of suppliers in
New
the market. Honda
buys from multiple
Entry
Competitive
suppliers
Rivalry
Competitive
Rivalry
Suppliers
Need constant
Power
innovation,
research
Substitution (low)
(High)
Threa
People can move from
t of
two wheelers to cars ,
Subst
trains and buses but they
itutio
are less convenient and
n
do not serve the purpose.

Threat of New
Entry (Low)
Huge initial
Investment
needed. Not
possible to easily
disrupt the
market.
Brand loyalty
Buyers Power
amongst
customers
Buyers Power (High)
No. of respected
brands in market
ranging from
American and
European to Japanese
manufacturers

Recommendations

Hondas premium bike design can be made more robust to


attract more Americans.
Honda should invest heavily in market research before
taking big risks in entering or tapping a new market.
Motorcycle industry constantly requires innovation and
hence Honda should focus more on R&D and NPD.
Honda should invest in advertisement to tap more market
segment.

Thank You !!!!

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