Honda Motor Corporation, Inc.
Business Strategy and Policy (BUS451)
Professor: Manuel Correa
Term Project By: Andreia Amerio
Submission Date: July 2018
The Honda Motor Company was established by Soichiro Honda in October 1946. He was exceptionally inspired by cars from a little age so he used to tune autos and enter them into races utilizing his companion’s carport. As he grew up he chose to be in the vehicle business. Before long his endeavors paid off and he got an agreement for providing cylinder rings for significant auto creator Toyota. In any case, tragically, he lost the agreement as his items did not coordinate the required quality. So he went to different production lines in Japan searching for approaches to enhance the nature of the motors by making proficient cylinder rings.
Before long he could discover a profoundly robotized process that could utilize untalented workers to create fantastic cylinder rings. Toyota was awed by his item and got it in 1941. Next, he began an organization called Tokai Seiki so as to deliver his items on a bigger scale. Before long Toyota purchased 40% of the organization and subsequently Soichiro and the authorities at Toyota could fabricate an enduring business relationship. In any case, a progression of disasters harmed huge bits of his organization and this constrained Soichiro to pitch the rest of the parts of his organization to Toyota. In the year of 1946, he created Honda Technical Research Institute to offer redid bikes with connected engines. He had just 12 people who worked in a 170 sq ft. region.
In 1949, following quite a while of determination Honda and his group could discharge the Model D which was the main finish bike they had made with their own parts. Before long the interest for this low estimated vehicle expanded and by 1964 the Honda Company was the World’s biggest producer of cruisers. They didn’t stop there however experimented with various conceivable outcomes in that era. In 1963, they could discharge their first since forever four-wheel vehicle as the T360 little get truck.
Before long they went ahead to grow their scope of vehicles and they created their first auto called the S500 Sports Car. In 1986 they wandered into extravagance auto portion and discharged the exceptionally fruitful Acura. In 1991 they discharged the Honda NSX Supercar which was the principal vehicle to consolidate the V6 motor with the most recent variable-valve timing. Their prosperity had no restrictions from now on as they continued advancing and began creating bikes, motors, generators, engines, and pumps effectively.
Honda has the notoriety of being the biggest maker of interior burning motors achieving a great figure of 15 million of every 2012. It likewise is the eighth greatest vehicle producer on the planet, an industry into which it had a late passage. In 2012, Honda had more than $99 billion in incomes out of which $3 was the yearly benefit. It has in excess of 175,000 representatives situated in different parts of the World. Starting in 2013, it has discharged in excess of thirty models of autos bettering its execution for quite a long time.
From delivering boisterous bikes to making the best autos on the planet, Honda has made some amazing progress in developing as an organization. It has been very nearly offering out yet has returned firmly to bond itself as one of the greatest players in the global car showcase. It has held its notoriety for being the World’s biggest cruiser maker since it guaranteed that position in1964. Today you can’t see numerous streets without seeing a Honda influenced vehicle to cruise by. Honda has gone ahead to end up a worldwide superpower in the car business.
Honda’s Mission Statement
The worldwide home office for the Honda organization is situated in Tokyo, Japan. The U.S. home office for American Honda Motor Co, Inc. is situated in Torrance, California. The Honda Company Mission Statement is authoritatively alluded to as the Company Principle, and it apparently is the same than the mission of each organization that produces and offers autos on the planet. The Honda Company Mission Statement is “Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction.” Bigger than this organization guideline, Honda is guided by a foundational mission, which it alludes to as its Fundamental Principles which are “Respect for the individual. The Three Joys (buying, selling and creating).” Furthermore, to rouse its administration group as they lead the Honda vehicle organization into the future, Honda has a reasonable arrangement of Management Policies, which make its Basic Principles and Mission Statement a genuine piece of its everyday activities are:
Continue dependably with aspiration and energy.
Regard sound hypothesis, grow crisp thoughts and make the best utilization of time.
Appreciate work and energize open correspondence.
Endeavor continually for an agreeable stream of work.
Be ever aware of the estimation of research and try.
Capability in engine manufacturing – organization’s center item
Every one of Honda’s organizations is worked around the engine – its center item. The organization’s first engine was worked for cruisers and power hardware yet was later delivered for autos and marine vehicles. Honda is the world’s biggest engine maker, which delivered more than 27 million units of engines for car, cruiser, marine, and power hardware items, in 2015.
The organization has bunches of involvement in manufacturing quality and well-performing engines. Its engines are adulated for their solidness, effortlessness to begin, quietness, fuel proficiency, and unwavering quality. As per the Reliability Index, Honda’s auto engines are some the most dependable in the business. Engines are the way to motor items and the organization’s ability in assembling motors is an upper hand few opponents can coordinate.
Enhanced item portfolio
Honda works 4 unique divisions:
Honda offers numerous items to customers including engines, autos, cruisers, planes, robots, generators, lawnmowers, water pumps, and in addition numerous other power hardware items. While the autos create the most income for Honda, its general item portfolio is genuinely differentiated, when contrasted with Volkswagen, Toyota, General Motors, or Briggs and Stratton in an engineering industry.
Strength in cruiser and engine enterprises prompting a high brand mindfulness
Honda is a tremendous organization ruling in a large portion of the business sectors it works in, including engines and bikes. The organization is the main producer of little, universally useful engines for business, rental industry, and purchaser applications. Honda is likewise the main worldwide maker of bikes having 22.1% of the aggregate piece of the pie in the principal half of 2016. Organization’s predominance in both of these business sectors has expanded its image acknowledgment and notoriety.
As indicated by Interbrand and Forbes, Honda is the 21st and 23rd most significant brand on the planet, worth US$22.1 billion and US$25.2 billion, separately. Brand esteem is firmly identified with mark mindfulness and its notoriety and just a couple of different organizations, for example, Toyota, BMW, and Mercedes-Benz can contrast and Honda as far as a brand esteem.
Solid position in Asia’s cruiser markets
Cruiser business creates 12.3% of aggregate Honda’s deals and is the third biggest income assembles for the organization. The organization has sold 17,592 units of cruisers and off-road vehicles in 2016 alone and caught 22.1% of the world’s bike showcase in the principal half of 2016.
Asia is the fundamental geographic fragment for Honda’s bike business, where the organization has sold 15.1 million units or more than 88.7% of its aggregate bikes, producing $1,107.6 billion in income. Asia-Pacific area, which incorporates such nations as China, India, Vietnam, Thailand, the Philippines, Malaysia, Indonesia, Australia, and Japan, is the biggest bike locale on the planet and Honda’s solid position in it is a great upper hand.
Reliance on North America to create a large portion of the revenue
Honda relies upon the North America area, which primarily incorporates the U.S. also, Canada, to produce 55.6% of the organization’s aggregate revenue. Honda’s dependence on North America developed from 49.3% of the aggregate deals in 2014 to 55.6% of the aggregate deals in 2016. Right now, North America is the principal driver behind an organization’s development where the cruiser revenue grew 20% and the vehicle income developed by 19%.
In any case, the U.S. what’s more, Canada is soaked markets and Honda will think that it’s difficult to keep up a similar level of development in these business sectors. The organization is likewise ending up more helpless against general negative changes in North America’s business sectors.
Low interests in innovative work (R&D) prompting less creative items
Honda has burned through US$5.4 billion for R&D in 2015. This added up to 4.5% of the organization’s aggregate revenue.
Company 2015 R;D As a % of revenues 2014 R;D As a % of revenues
Honda 5.4 4.5 5 4.5
Toyota 8.4 3.7 7.6 3.5
Volkswagen 14 6.9 14 7.1
General Motors 7.5 4.9 7.4 4.7
Low interests in R;D prompt less creative items and essentially undermine the organization’s capacities to contend later on. The organization should center its US$5.4 billion R&D ventures to specific territories like Hyundai does which would eradicate an organization’s low R;D spending hindrance and would bring about creative items.
Expanding government directions
Numerous governments around the globe are focused on decreasing the greenhouse substance outflows and are empowering fuel effectiveness activities. Such natural activities may build creation costs for the auto producers and these expenses will be either passed to value touchy customers or will diminish the organization’s benefits. Honda may exploit this by presenting more auto models running just Hydrogen energy components and bypassing all the administration controls related to the greenhouse substance emanations.
Enhancing U.S. economy
Indications of an enhancing economy and rising buyer certainty have been reflected in the most grounded increment in new vehicle deals for over 10 years in the U.S. advertise. 17.5 million New units were sold in 2015, a 5.7% expansion more than 2014. Interest rates in the U.S. have been low for quite a while and are conjecture to remain that path for years to come. In such economic conditions, Honda has a chance to catch the higher piece of the pie and increment deals in the U.S. car advertise.
Timing and recurrence of new model discharges
The Market of the overall industry of the car organizations is fundamentally affected by the planning and recurrence of new model discharges. Verifiably, new models have had a tendency to have significant updates every 4 or 5 years with just minor changes in the middle. Nonetheless, because of the rising purchaser desires in connection to in-auto technology and the focused idea of the business, there is a contention to discharge overhauled models all the more much of the time. Honda is all around situated to have the capacity to do this.
Low fuel costs are expanding the interest for pickup trucks and SUVs
Right now, fuel costs are the most minimal in 10 years. Such a circumstance has urged shoppers to purchase enormous fuel-wasteful vehicles, for example, SUVs and pickup trucks. Customarily, Honda’s principal center was around littler autos like Honda Civic and cars, for example, Honda Accord, however in the present circumstance, where fuel costs are low, the company has presented its cutting edge pickup truck Ridgeline and upgraded its CR-V sports utility vehicle to take care of the demand for the greater vehicles.
The pattern of low fuel costs is probably going to stay and Honda ought to present more models of pickup trucks and SUVs to take a favorable position of the developing business sector for these vehicles and to expand company’s productivity.
Honda is faced with an ever expanded competition from the conventional car companies, the new players, and immersion of its primary markets. In Asia, the businesses key cruiser locale, markets are almost soaked. In 2016, Honda’s cruiser revenue developed by just 5.4% in Asia, contrasted with 20.3% development in the North America locale. The business faces numerous new contestants in India and China, which offer comparable quality bikes and bikes at the lower cost than Honda.
Honda’s car business is likewise encountering the abating development of the car markets and the expanded competition from the new Chinese producers. The businesses universal opponents, for example, Toyota, Ford, General Motors, Volkswagen and Hyundai, all have bigger spending plans and could utilize them to forcefully take market of the pie from Honda.
New businesses, for example, like Tesla and even Google, which attempts to manufacture self-driving autos are additionally undermining the customary car industry. The opposition is additionally filled by the way that the worldwide car creation limit far surpasses the request. In 2015, there was an expected worldwide overabundance generation limit of 31 million units.
Rising Japanese Yen trade rates
Over 88% of Honda’s revenue originates from global markets, which implies that the business needs to change over remote monetary standards to Japanese Yen so as to ascertain its revenue and send the benefits back to Japan. Cash rates are unpredictable and the businesses benefits and income exceedingly rely upon the fluctuating trade rates. The organization can’t control the money trade rates, in this manner; it is in danger if Japanese Yen trade rates would begin to rise. In such a case, the organization’s benefits would diminish altogether. The business itself recognizes this as a key danger that will adversely influence the business throughout the following couple of years.
Honda has producing offices in Japan, Thailand, China and Indonesia. These nations, including others, are frequently subject to natural events that disturb fabricating procedures and result in bringing down generation volumes and profits.
Honda is one of the main automakers on the planet today. They give quality and value that is appropriate for the regular person. With their unwavering quality and great notoriety, Honda keeps on flourishing in an exceptionally fragile market. Utilizing the Five Forces Model, made by Michael Porter, Honda can examine their remaining in their industry and try to improve their ways.
Bargaining Power of Customers
The bartering power of Honda’s clients is set to be medium. It can end up confused since the client is normally searching for a particular make and display and are at the Honda for a particular reason. Immediately, the client is at a slight detriment on the grounds that Honda has something that very few others have. The main reason the bartering power of the client is medium and not low is that the client has the reward of having the capacity to buy from a private merchant. The main bartering they may have is undermining to run with the private dealer rather than the Honda retailer in Pompton Plains.
Bargaining Power of Suppliers
The bartering power of Honda as a supplier is high since they are offering an item that individuals look for. The client is searching for something particular and very few different places or individuals have the correct item the client is searching for. Along these lines, Honda has a large portion of the control when offering a vehicle. They have something the client needs and relatively few different spots have it. Along these lines, their bargaining power is high.
Threat of Substitution
The threat of substitution for Honda is low in light of the fact that, at the present minute, there are constrained methods of transportation. Since individuals will keep on driving autos for a long time to come, Honda does not have to stress over a substitution for their market for autos. Luckily for Honda, autos appear to be the main individual method of transportation right now and in light of the fact that it doesn’t appear as though that is changing at any point in the near future, the threat of substitution for Honda is low.
Threat of New Entrants
The threat of new entrants for Honda is low. The reason is that the auto market is exceptionally hard to get into and be fruitful. In addition to the fact that it is hard to get in the market, it is additionally exceptionally hard to be fruitful reliably. Since individuals require autos and it appears the providers appear to be an unchangeable reality right now and the way the market is, Honda ought not to be debilitated by the threats of new participants at any point in the near future. Honda’s solitary stress ought to be other auto manufacturers.
Honda’s competition is extremely serious and can be severe on occasion. Therefore, the rivalry rating for Honda is high. Their industry is exceptionally one of a kind and truly there are relatively few decisions for an auto producer. Since there are not a huge amount of auto company and the interest in autos is so high, the competition and rivalry if extraordinary. There are sure levels of nature of autos and certain classes that the makers split their organizations into. For instance, Honda contends with Toyota, Ford, and Nissan. They are in a similar classification of value and cost. Since there are relatively few alternatives yet the request is through the rooftop, the rivalry is high.
Alongside the Five Forces, Porter built up four competitive strategies to truly separate the game plan of the business.
The competitive strategy that Honda takes after its Industry-Wide Differentiation since they are hoping to make the most elevated quality auto in the auto business. In spite of the fact that they are fetched cognizant, they are for the most part centered on making the most secure and the best working vehicle in the auto market.
HMC Income StatementGross margin TTM21.88%
Operating margin TTM5.43%
Net Profit margin TTM7.35%
Return on Investment TTM8.46%
Total Revenue Net Income
Jun 17Sep 17Dec 17Mar 180T1T2T3T4T5T
Period Ending: Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
Total Revenue 3914728 3957123 3776199 3713096
Gross Profit 840795 894118 787345 838307
Operating Income 126826 284576 152945 269211
Net Income 107745 570251 174006 207335
HMC Balance SheetQuick Ratio MRQ0.96
Current Ratio MRQ1.23
LT Debt to Equity MRQ49.68%
Total Debt to Equity MRQ87.91%
Total Assets Total Liabilities
Jun 17Sep 17Dec 17Mar 180T5T10T15T20T25T
Period Ending: Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
Total Assets 19349164 19761465 19527079 19044311
Total Liabilities 11415626 11610373 11833610 11572417
Total Equity 7933538 8151092 7693469 7471894
HMC Cash Flow StatementCash Flow/Share TTM9.3
Operating Cash Flow 17.56%
Cash Net Change in Cash
Jun 17Sep 17Dec 17Mar 18-1T0T1T2T3T
Period Ending: Mar 31, 2018 Dec 31, 2017 Sep 30, 2017 Jun 30, 2017
Period Length: 12 Months 9 Months 6 Months 3 Months
Cash From Operating Activities 987671 622652 491104 176637
Cash From Investing Activities -615113 -431312 -308659 -178790
Cash From Financing Activities -174334 -130365 -114399 -88548
Net Change in Cash 150512 104509 101849 -86558
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