STRATEGIC MANAGEMENT

Honda Motors Corporation Limited

Submitted by:
Salman Ali

Table of Contents
Table of Contents.2
Corporation 3
Product and Services 4
Honda Product Portfolio

Honda Service
Portfolio.. 5
Business Unit 6
Revenue

External Environment 8
PESTAL analysis.9
Sustainable competitive advantage
Strategic Direction

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13

Recommendation...............................14
References

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CORPORATION
An entity that functions separately from its owner is called a company. A company or
any body-corporate that under the law of its place of origin, may sue or be sued, or may hold
property in the name of its secretary or of an office bearer of the body duly appointed for this
purpose is called a corporation (Commonwealth Corporation Act 2001). In other words, a
legal entity with its specific name, considered as a natural person, where individuals work
and they succeed each other and in this way the corporation continues to function regardless
of the change in its members. There are certain rules and laws under which a corporation
conducts its operation. It can execute plans on its own as long as they are not against the law.
Generally, a board called board of directors oversee the operations of the management who
are responsible for the running of the corporation. A corporation may have a single field of
operations or it may have a diversified business consisting of different business units working
independently, executing plans and carrying out operations. But essentially they all work
under the name the parent corporation (Prahalad & Hamel, 1990).
Honda Motors Co., Ltd founded in September 1948, is a Japanese multinational
company, manufacturing and selling automobile, motorcycles and power products. It is the
second largest Automobile manufacturing company in Japan after Toyota. It is operating in
Automobile, Motorcycle, Power Product, Financial services (Insurance services) and other
business segment of the global market (Forbes, 2016). According to the 2016 corporate
profile its revenue was US$108 billion with the largest part coming from the Automobile
business which was 72.8% of the total. Followed by almost equal parts from Motorcycle and
Financial services business with 12.3% and 12.6%, respectively (Honda Motors Co. Ltd.,
2016). Acura and Honda Aircraft company are the subsidiaries of Honda Motors.

PRODUCTS AND SERVICES

A product is something that can be used, acquired or attended to by the target market
to satisfy needs or wants (Kotler & Armstrong, 2012). On the other hand, a service is a
worthful activity performed for satisfying a need of a person. The difference between product
and service is that products are tangible and the transfer may result in the ownership change
but service is essentially intangible and there is no ownership. A physical product may or may
not be involved in the production of a service (Kotler & Keller, 2012).
Spring & Araujo (2009) reported that services and products help companies
establishing their business locally and globally. The main sources of revenue for companies
are products and/or services.
All the products and/or services that a company produces is called its product or
service portfolio. Some companies produce one product, while other produce a diversified
array of products (Day, 1977).
HONDA PRODUCT PORTFOLIO
Automobile production
Honda started manufacturing of automobile in 1963 with T360 mini truck followed by
the making of S500 sports car (Honda Motors Co. Ltd, 2016). After that Honda never looked
back and went on becoming the 2nd largest company in Japan in the automobile industry
(Forbes, 2016). Honda makes three, four or six-cylinder diesel engine, gasoline-electric plugin hybrid systems and gasoline-electric hybrid system with principle focus on passenger cars,
mini vehicles and light trucks. Some of Hondas famous car models are Accord, City,
Jazz(Indian model), Civic, Brio satya, Grace, Shuttle, Mobilio, Jade, Acura etc. and its fleet

of mini trucks include Odyssey, Elysion, Crosstour, Vezel/HR-V, Vamos, S660etc. Honda also
produce UTE Ridgline (Honda Motors Co. Ltd, 2016).
Motorcycle Production
The company manufactures a wide range of motorcycles and scooters with different
engine capacity and different utility. The size of engine range from 50cc for local commute to
1800cc for sports and professional racing. The well-known motorcycle models of Honda are
Goldwing, NC750X, CG150 TITAN, PCX 150, Super Cub, Giorno and CB500X (Honda
Motors Co. Ltd, 2016) making Honda the world biggest Motorcycle producer since 1959
(Robert M. Grant & Neupert, 2003).
Power Product and Other Businesses
The power products line produces a range of products including electrical generators,
water pumps, lawn and garden equipment, tillers, outboard engines, solar cells, snow blowers
and internavi. Honda robotics and HondaJet are the other two business units that Honda
operates. HondJet manufactures private jets and small aircraft engines. Some of the important
trademark products of Honda in the field of robotics are ASIMO (humanoid robot), walking
assist, UniCub, High Access survey robot and walking assist device with body support
system (Honda Motors Co. Ltd, 2016).
HONDA SERVICE PORTFOLIO
Financial Services Business
Honda offers a range of financial services to its customers and dealers through finance
subsidiaries in countries, including Japan, the United States, Canada, the United Kingdom,
Germany, Brazil and Thailand. The services of these subsidiaries include retail lending,
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leasing to customers and other financial services, such as wholesale financing to dealers.
Services are offered even on the sold products (Vom Brocke & Lindner, 2004).
BUSINESS UNITS
Harter, et al., (2002) reported that an independent part of an organization in terms of
operations, decision making and planing is called a business unit. A business operates in a
specific market and it is different from the other business units of its parent organization.
According to Howell & Bruce (1993) organization is considered as business unit because it
has all the human capital, resources, skills and its own assets and liabilities and it captures a
defined segment of the market.
Honda has three distinct business units. Honda Motors Limited makes automobiles
and competes with Ford and Toyota. But it also manufactures power products and competes
with John Deere, and Murray etc. By producing Jet skis (Honda Aircraft Company) and
motorcycles (Honda Racing Corporation) and so competes with Yamaha and Kawasaki. All
these business units including Honda Robotics operate independently as a business unit under
Honda Motor Corporation Limited (Amason, 2011).
Product line
Product line is a group of products that are related to each other and are manufactured
and sold under the same brand or company name. It is a marketing strategy to capture vast
portion of the costumers in the market. The difference in the product line is mainly on the
bases of color, price, utility, size and quality. Companies change their product lines according
to different criteria that may be reaching new customers of either different socioeconomic
groups or different region.

Honda Motors Co. Ltd produce different product lines under the same brand names.
E.g. There are different models of Honda Accord including LX, Sport, EX, EX-L, EX-L V6
and Accord Touring. Likewise, Honda Civic comes in many variations Civic, Civic Type-R,
Civic Tourer, Civic LX, Civic EX, Civic EX-T, Civic EX-L etc. and also Acura ILX, Acura
CSX and Acura ILX is another example from the HONDA Automobile product line. They
differ on the bases of engine capacity, type of fuel, transmission and passenger capacity etc.
Moreover, in Automobile segment Honda targets minivans and mini-truck segment of the
market as well.
In the motorcycle unit (Honda Racing Corporation) Honda produces many models
differing on the bases of engine size and utility mainly. Hondas product line includes largesized sports, mid-size sports, small sized sports, scooter model, business oriented model and
50cc two wheeler model for normal commute. The engine size of these motorcycles range
from 50cc to 1800cc (Honda Motors Co. Ltd., 2016).
In the power product market Honda has covered a vast segment of the market from a
small lawnmower and single stroke engine to outboard engine and general purpose
generators. In the field of Robotics (Honda Robotics) and Jet engines (Honda Aircraft
company) is fairly new in the market with a handful of products including ASIMO (humanoid
robot), Walking assist and Honda HA-420 HondaJet and Aero engine HF120.
REVENUE
According to the conceptual framework when the ordinary activities of a company are
carried out it results in an increase in the economic benefits which is called revenue. It
consists of revenue from sale, interest, fee, dividends, rents and royalties etc. Gains should
not be confused with revenue as gains dont arise from the ordinary operations of the entity

(Carlon, 2011). Generally, revenue is the income from the sale of goods and services but
some entities get revenue from fees, interest and royalties (Jan, et al., 2012).
Revenue center is the part of a company from which revenue is collected. Revenue
center has no responsibility for any other part of the organization and its main goal is to
increase the revenue of the center (Tulsian, 2006).
For a manufacturing company like Honda Motors Co. Ltd. the revenue center will be
the sale center where the products are sold and revenue is earned. According to the financial
documents of Honda Motors Co. Ltd. largest revenue center for Honda is the Automobile sale
with a total revenue of US$ 86 billion in the year ending 31 March 2016. Sale of Motorcycle
and Financial services earned US$ 14.5 billion and US$ 14.6 billion respectively. Power
products and other business made about US$ 3 billion (Honda Motors Co. Ltd, 2016).
OPERATING AND EXTERNAL ENVIRONMENT
Operating environment or external environment is made up of all the factors that
affect the business operations of the organization in one way or the other. The external
environment is difficult to understand because of its complexity, uncertainty and the
interconnected factors. Understanding of these factors and their connections is important for
the long term strategy formulation of the business. For the sake of simplicity these factors can
be divided in three distinct layers around the organization. The first layer is called macroenvironment which consist of political, economic, social, technological, environmental and
legal environments (PESTEL). They differ from one sector to another and from one country
to another therefore they have different effects on different organizations. The second layer is
called industry or sector which consist of companies producing the same products or services.

Competitors and markets forms the third and most immediate layer of external environment
(Johnson, et al., 2008).
THE PESTEL FRAMEWORK
As the name suggests PESTEL is the list of six external environmental factors namely
political, economic, social, technological, environmental and legal. These factors influence
the strategy formulation of organizations that operate in it. These factors are interdependent
and interlinked which makes it more complicated and complex for the managers and decision
makers to respond to in terms of strategy making. E.g. the advancement of technology stirs a
change in the lifestyle and hence changes the socioeconomic conditions of the costumers.
Which totally changes the competitive environment for the companies in the market. The
PESTEL framework provides a clear list and trustable on the possible success or failure of the
strategy (Johnson, et al., 2008).
Political
Political factors mainly include government policies, changes in tax rate, restriction
on certain type of business, subsides for a certain industry, export duty etc. are all important
factors that should be considered by the strategist. For a multinational company like Honda
this can be very complex issue as Honda is operation in almost all the political regions of the
world. Everywhere the policies are different. E.g. a decision by a government to reduce the
amount of toxic gases or increase taxes on certain type of fuel. Both these decisions will lead
to a change in the car sale and Honda will have to look for alternate technology e.g. Hybrid
cars to keep the current market capitalization.
Economic

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The economic condition of the market is another tool used by strategists to forecast
the future trends in the market. It can be broken down to the Gross Domestic Product (GDP)
of the country, unemployment rate, inflation, corporate tax rate, currency exchange rate and
last but the most significant the price of resources in the market. The increase in oil prices has
pushed Honda and other automobile companies to explore other energy options e.g. Hybrid
and electric cars. Honda has already excelled in the technology by producing its eco-friendly
Honda Jazz and hybrid Accord and Civic models. For a poor country like India Honda should
produce small economic and cheap cars while for a country with a much higher GDP the
target should be luxury and high performance car.
Social
Different societies have different preference for the products. E.g. an inclination
towards buying locally made products, change in the habits of usage and a tendency towards
a rerating type of products e.g. eco-friendly. Honda is working hard to keep abreast of these
kinds of changes by investing in eco-friendly cars and cars that can be easily modified
according to the customer preferences and social needs of the market.
Technological
Change in technology can make a company to totally overhaul its production line if it
wants to keep its current position in the market. Hybrid technology, eco-friendly and and
driverless technologies have pushed Honda to invest in this field. Honda is doing very well
by introducing hybrid cars and eco-friendly cars with iv-tech engines.
Environment

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With the increase in demand for products that cause minimum possible gas emissions
and that use renewable energy companies have to change their production techniques. Now
the companies will not only have to focus on their own profit but also pay attention to the
environmental issues like climate change, pollution, gas emissions, renewable source of
energy and noise pollution. Honda has produced a wide range of cars that run on renewable
electric energy and eco-friendly cars that emit minimum harmful gases into the environment.
Legal
Organizations are bound to obey the relevant laws of the region where the operate.
Discrimination laws, company and commercial laws, anti-trust laws, consumer protection and
e-commerce laws, employment laws, health and safety laws, copyrights etc. are some of the
example of laws that impact the operations of companies. While Honda cant do much about
the changes in these laws, it can adjust its own strategies in order to overcome the loss caused
by these laws. For this purpose, Honda has a strong legal consultation team (Honda Motors
Co. Ltd, 2016).
SUSTAINABLE COMPETITIVE ADVANTAGE
Sustainable competitive advantage is the unique position that an organization
develops in relation to competitors that allows it to outperform them consistently. A company
is said to have a sustainable competitive advantage (SCA) when it owns a unique long term
value creating position and process that other organizations cannot easily imitate or duplicate
(Hofer and Schendel, 1978).
According to Barney (1991) a firm must have the following four attributes or
resources in order for it to keep ahead in the present or potential competition and ensure
leadership:
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a) Value
The resources of the firm are considered to be valuable if they exploit opportunities
and neutralize threats for the good of the firm. This result in an increased customer value.
b) Rare
Rareness is another attribute that is essential for sustainability in the competitive
market. If the resources are not rare and possessed by other firms, then this is not SCA.
c) Costly to imitate
Because of casually ambiguous, unique historical conditions, and/or socially complex
reasons it is imperfectly imitable. Hence other firms cannot imitate or buy this resource with
a reasonable price.
d) Non-substitutable capabilities
There is no strategically equivalent substitute for the capability or resource that is rare
and valuable and hard to imitate. The firm will have a distinct sustainable advantage in the
market if all the above four conditions are met. And as a result the firm will enjoy market
leadership.
In the case of Honda there are three distinct areas that help Honda to have SCA in the
marketplace. The Honda brand name itself, Research and Development and Engineering
Design.
Honda manufactures reliable cars by using its Engineering prowess and design. There
are very few other firms as well with this resource. For other manufactures it is very difficult

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to imitate Hondas success because of this Engineering and design gap. Finally, Hondas
business units are aligned to take advantage of design breakthroughs.
High quality of R&D has put Honda on the forefront of technology. Honda use this
resource very well in manufacturing cars with the latest technology e.g. Hybrid, Electric, and
eco-friendly cars. In the field of Robotics Honda is the first company in the world to make
humanoid robots ASIMO thereby taking the lead in this field as well. In the Motorcycle
industry Honda is already enjoying the top spot by being a company with the most number of
unit sale in the world. Because of an independent R&D department (Honda Research and
Development) it has the ability and freedom to develop new technology that its opponents
and competitors are lacking.
The brand name HONDA brings with itself the two attributes: quality and value.
Because of this, consumers are happy to pay more for Honda products. For other competitors
it is difficult to imitate this quality because it took Honda a very long time to earn this
reputation.
STRATEGIC DIRECTION
Every organization has some targets to achieve and for this purpose it has its own
goals, mission, vision, core values and strategies. The combination of all these give rise to the
strategic direction of the organization. Without clearly defined goals, vision, mission and core
values it is impossible for an organization to make strategic decisions and move forward in its
niche (Donaldson. et, al. 1997).
Recommendations

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 Honda should formulate different strategies across the borders because of

differences in buying behaviour and habits
The marketing mix plane is very ineffective because of ineffective tactics and
advertising. Very little attention is given to marketing and advertising.
Marketing and promotion should be according to the local culture.
There are no diesel cars made by Honda. Honda should explore this possibility
as well. Further Honda should invest in heavy trucks as well.
Honda should explore the possibility of a strategic alliance with other
automobile company in Europe. This will not only increase sale but also give
an opportunity to get knowledge of their technology and processes.
Honda should utilize its core competencies to the full by offering more ecofriendly and low CO2 emitting cars. Electric cars is the best option.

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