HONDA SUCCESS STORY

Honda 50cc Motorcycles

Story back in 15
The company is credited with
identifying and targeting
untapped market of small 50cc
bikes in the US, enabling to
expand, overwhelm European
competition dominated by
!ritish motorcycles" and
severely damage US bike
manufactures# !y the late
$0%s, &onda had more than
$0' of the US market# !ut this
occurred by accident#
(n entering this market,
&onda wanted to compete
with the larger European and
)merican bikes of *50ccs and
above# These bikes had a
defined market, and were sold
through dedicated motorbike
dealerships# +isaster struck
when &onda,s machines
developed faults# &onda had
to recall them all#
Up until then &onda had made
little effort to sell their small
50cc motorbikes - their staff
rode on errands around .os
)ngeles# Sport goods shops
and ordinary bicycle and
department stores had
expressed interest, but &onda
did not want to confuse its
images for its ,target, market
which were men who bought
the larger bikes# The fault in
&onda,s larger machines
meant that reluctantly, &onda
had to sell the small 50cc
bikes /ust to raise money#
They proved to be 0uite
popular with the people who
would never have bought
motorbikes before# Eventually
the company adopted their
new market with enthusiasm
with the slogan1 "You meet the
nicest people on Honda.
The strategy had emerged,
against managers conscious
intentions, but they eventually
responded to the new
situation#
T!e Real Story "e!ind Honda#s S$ccess %Accordin& to Honda Mana&ers'
2n truth we had no strategy other than the idea of seeing if we could sell
something in the United States# 34e had5 to obtain a currency allocation from the
6inistry of 7inance# They were extraordinary sceptical# Toyota had launched the
Toyopet in the U#S# in 895: and had failed miserably# ;&ow could &onda
succeed<= they asked# 6onths went by# 4e put the pro/ect on hold# Suddenly, five
month after our application, we were give the go-ahead, but at only a fraction of
our expected level of commitment# ;>ou can invest ?*50,000 in the U#S market,=
they said, ;but only ?880,000 in cash#= The remainder of our assets had to be in
parts and motorcycle inventory#
(ur focus was to compete with the European exports# 4e @new our products at
the time were good but not far superior# 6r#&onda was especially confident of the
*50cc and A05 cc machines# The shape of the handlebar on these larger machine
looked like eyebrow of !hudda, which he felt was a strong selling point# Thus,
after some discussion and with no compelling criteria for selection, we configured
our start-up inventory with *5 percent of each of our four products B the 50cc
Supercub, and the 8*5cc, *50cc and A05cc# 2n dollar value terms, of course, the
inventory was heavily weighted toward the larger bikes#
The stringent monetary controls of the Capanese government together with
unfriendly reception we had received during our 895: visit caused us to start
small# 4e chose .os )ngeles where there was a large second and third
generation Capanese community, a climate suitable for motorcycle use, and a
growing population# 4e were so strapped for cash that the three of us shared of
furnished apartment that we rented for ?:0 per month# Two of us slept on the
floor# 4e obtained a warehouse in a run-down section of the city and waited for
the ship to arrive# Dot daring to spare our funds for e0uipment, the three of us
stacked the motorcycle crates three high B by hand B swept the floors and built
and maintained the part bin#
4e were entirely in the dark the first year# 4e were not aware that the motorcycle
business in the )merica occurs during a seasonal )pril-to-)ugust window-and our
timing coincided with the closing of the 8959 season# (ur hard-learned
experiences with distributorships in Capan convinced us to try to go to retailers
direct# 4e ran ads in the motorcycle trade magaEine for dealers# ) few
responded# !y spring of 89$0, we had forty dealers and some of our inventory in
their stores B mostly larger bikes# ) few of the *50cc and A05 cc bikes began to
sell# Then disaster struck# !y the first week of )pril 89$0, reports were coming in
that our machines were leaking oil and encountering clutch failure# This was our
lowest moment# &onda%s fragile reputation was being destroyed before it could be
established# )s it turned out, 6otorcycles in the United States are driven much
farther and much faster than in Capan# !ut not knowing that, we had to dig deeply
into our precious cash reserve air freight our motorcycles to the &onda testing lab
in Capan#
Throughout the dark month of )pril, Fan )m was the only enterprise in the U#S#
that was nice to us# (ur testing lab worked twenty-four-hour days bench testing
the bikes to try to replicate the failure# 4ithin a month, a redesigned head gasket
and clutch spring solved the problem# !ut in the meantime, events had taken a
surprising turn# Throughout our first eight months, following 6r# &onda%s and our
own instincts, we had not attempted to move the 50cc Supercubs# 4hile they
were a smash success in Capan and manufacturing couldn%t keep up with
demand there", they seemed wholly unsuitable for the U#S# market where
everything was bigger and more luxurious# )s a clincher, we had our sights on the
import market, like the )merican manufacturers, we emphasiEed on the larger
machines#
4e used the &onda 50%s ourselves to ride around .os )ngeles on errands# They
attracted a lot of attention# (ne day we had a call from a Sears buyer# 4hile
persisting in our refusal to sell through an intermediary, we took note of Sears%
interest# !ut we still hesitate to push 50cc bikes out of fear they might harm !ut
when the larger bikes started breaking, we had no choice# 4e let the 50cc bikes
move#
Source1 )rticle entitled ;Ferspective on Strategy1 The Geal Story !ehind &onda%s Success= 899$" The Gegents of the University of Halifornia#