Honda Case Study

Question 1:

a) Why do you think Honda has chosen the strategy of simultaneously developing hybrids, diesel, natural gas and fuel cell cars?

Being one of the largest automobile companies in the world, Honda is a well known, globalised brand which steadfastly maintained its independence with its innovativeness. Having a long history of developing environmental friendly automobiles it was awarded for its excellence in environmental engineering reminding the preservation of the environment as a core management responsibility.

Honda's ultimate goal is to be the World's number one, cleanest, most efficient, innovative automobile manufacturer and to be the most respected global brand. In this competitive, trendy, time to time business world, to be the market leader Honda uses different strategies. Thinking out of the box, being different Honda has chosen the strategy of simultaneously developing hybrids, diesel, natural gas, and fuel cell cars focusing on different technologies and different management practices simultaneously.

According to Michael Porter's competitive strategy, it is all about being different by deliberately choosing a different set of methods and activities to deliver a unique mix of value to the market. Therefore it justifies that there are several reasons behind Honda's strategy of simultaneously developing multiple technologies.

1. To strengthen its customer base and to satisfy the customer

Nowadays the biggest challenge most of the companies face is to build a strong customer base. But having a long track record over decades of its innovative products through multiple technologies, catering different market segments through different products, fulfilling different customer expectations and needs Honda has strengthened its customer base by selling over 17.75 million products in 2010(Honda Digital FactBook, July 2011). Therefore through multiple technologies by producing different products Honda has achieved its strategy by strengthening its customer base as well as satisfying its customer. The American Honda reports of its January 2012 sales increase as follows:

Table 1.1

2. To be present in all market segments and increase its market share

By simultaneously developing multiple technologies through different products with applicable techniques Honda serves different market segments globally. By presenting in all market segments Honda,

* Generates more revenue

* Increases its brand value globally

* Increases its market share

* Increase its customer satisfaction through fulfilling different customer requirements

* Provides a good product mix to the market

* Continues development of different competencies

As Honda's official statistical 2011 digital FactBook states the total production around the globe is illustrated below:

Table 1.2

3. Honda's policy of doing in house Research and Development

Honda's strategy is going solo and not collaborating with anyone else. Honda is having one of the largest R&D centers in Japan, costing over 7.4 billion Yen in its in-house research and developments and as well as in other countries with numbers of laboratories, experienced highly skilled engineers and in-house capability and technology over decades. Therefore it is important to continue its multiple technologies simultaneously. Otherwise the technologies built over years with so much research and investment will be redundant. Thus if Honda stops doing research and development on multiple technologies and focus only on one,

* The researches carried out over years will be redundant

* Competencies over decades will be redundant and wasted

* Will deny future competencies

* Will loose its customer base

* Resources will be idling

These factors complement Honda to develop multiple technologies rather than proceeding with just one technology at a time. The below graph taken from the Honda corporate website justifies that Honda has maintained a local auto production rate of 75% or higher for more than a decade:

Figure 1.1

4. To utilize recourses worldwide and to utilize their developed resource and knowledge base

Honda is globalised brand and one of the largest automobile companies in the world which is not limited to a specific region. It currently comprises of more than 100 factories in 33 countries selling different kinds of products using multiple technologies around the world (Schilling 2010, p. 43). The resource allocations and availability around the world is different. Honda has identified this fact and by utilizing their resource base- process, knowledge, technology, machinery, and people they have explored different resources and different competencies around the globe. By developing multiple technologies such as hybrid, natural and fuel cell cars and therefore engaging with multiple technologies Honda has supported the natural resource depletion. This is another reason behind Honda's strategy of developing multiple technologies and improving them simultaneously.

News releases of Honda's official website states as per 2011 Honda's sales and production results around the globe illustrates well how effectively Honda has utilize resources worldwide through multiple technologies :

Corporate January 27, 2012

2011 Honda SALES & PRODUCTION RESULTS

<Automobiles>

Unit (thousands)

2010 2011

Jan.-Dec.

Result Jan.-Dec.

Result % Change

Global Sales 3,555 3,095 87%

Japan 647 503 78%

Registrations

(including import models) 486 378 78%

Mini vehicles 160 125 78%

Overseas 2,908 2,592 89%