Strategic Management Assignment: Business Analysis Of Honda Motor Co.
Question
Task:
Through this strategic management assignment, you are required to address the following questions:
1. Honda Motor Co. has four business units. For these three - Motorcycles, Automobiles, and Aircrafts and Jet Engines - work on the tasks below:
a. Analyze the three business units on the BCG matrix, that is where you think they should sit, and argue where you would put them. Assume that, globally, Honda Motor Co. has the number 1 position in motorcycles, the number 5 position in automobiles, and the number 8 position in the global business jet market. Analyze (take apart and examine in depth) each business unit (you can do it in bullet points) and explain why you have decided to put the business unit where you put it. Include and cite supporting data for your decision.
b. Cite three (credible!) sources from where you have collected information. Follow the Harvard referencing guidelines.
2. Use the Ansoff matrix to create product development and market development strategies for Honda Motor Co.
a. Product development: Write down ideas for new products in existing markets. What should Honda Motor Co. take into account when it develops new products
b. Honda Motor Co. is present in all major countries in motorcycles and cars – therefore, developing new geographical markets is not an option for these two business units. However, what could be new markets for Honda in terms of target segments or consumer groups Think of current users and potential new users for existing Honda products.
c. Give three (credible!) sources from where you have collected information. Follow the Harvard referencing guidelines.
Answer
Solution of Question 1:
a) BCG matrix analysis
The BCG matrix evaluated within this strategic management assignmenthelps businesses to predict growth opportunities by reviewing the market share and market growth of products. Additionally, it enables the businesses to decide effective areas to invest in, discontinue or develop products. The below BCG matrix analysis of Honda company will put each business unit in the four categories. The BCG matrix analysis is discussed below:
Stars:
The Stars are considered as the leaders in the business. These products foster rapid growth and dominant market share. These products require heavy financial resources and investment in order to maintain their position and their market share.
Additionally, Stars contribute to a vast number of cash generation and cash consumption. Thus, it is important to hold the market share and to support the business growth, otherwise, the Star product can become a cash cow. For instance, Honda Star product is its motorcycle business unit.
Figure 1: Honda Groups Motorcycle sales from FY2011-FY2021
Source:
As per the above figure, Globally Japan Honda sold about 4.5 million automobiles in FY2021. These sales figures are determined to be 244,000 below in comparison to FY 2020 (Statista.com, 2022). Apart from this, the company sold around 15 million motorcycles (Statista.com, 2021). The entity effectively sold more than 5.6 million other types of products in the same year. Vietnam, India, the United States, and Pakistan are indeed Honda's most profiting target markets.
In FY2020, Honda Scooters and Motorcycles obtained 27% of the motorcycle market within India. Further in the same year North American Honda sales obtained around 332,000 units, turning it the second leading regional market for Honda. The Honda company is determined as one of the leading motorcycle manufacturers in the United States and worldwide marketplace (Statista.com, 2021).
According to the Forbes report, Honda motors are able to benefit by introducing innovation within the Motorcycle segment. The Motorcycles such as water motors and ATVs segment contributes for more than 15% of Honda company valuation, with its revenues accumulating 14% of the overall company revenues. The entity is offering self-stabilizing features that allow motorcycles to function without being controlled by the owner and still ensure the health and safety of the rider (Forbes.com, 2018). This type of technological advancement has made motorcycle riding safer and reduced the rate of accidents. It is the major reason Honda's market share within this segment is around 33% (Forbes.com, 2018). It is expected that these figures will stay stable for a longer period of time due to consideration of innovation and the health safety of riders.
Cash cow:
The cash cows are the products that provide high market share but have low growth. In cash cows lose their demand and appeal and incur decline, a retrenchment policy must be followed.
Honda's cash cow is indeed its automobile segment which accounts for the company's worldwide revenue. Honda currently has the largest passenger cars segment, small SUVs, which contributes to 51% of revenue in FY2020 (Statista.com, 2021). Honda's 2nd largest segment is considered as the Medium cars segment of automobiles. This segment provides around 14% of the market revenue in FY2020. In terms of market share considering the revenue category, Ford (7.3%), Toyota (10.6%), and Nissan (6.7%) take the dominating position within the worldwide marketplace. Honda currently has 6.41% of the market share within this segment (Statista.com, 2021).
Honda is considered as one the largest conglomerates within the worldwide marketplace which generated around 13.2 trillion Japanese yen in revenue in FY2021. The company incurred 12% lesser revenue in comparison to prior years which reflects Automobile sales declined by 5% (Statista.com, 2022). The United States is considered the leading market for automobile sales. The United States automobile market was severely affected due to the COVID-19 outbreak. However, Honda managed to secure over 320,000 vehicles in the U.S. market in the Q4 of FY2020 (Statista.com, 2022). Honda is required to keep the sales high as this business unit is generating good revenue streams.
Question mark:
These products lack an understanding of how to benefit from the existing opportunities. For Honda, the jet engines are indeed the products as the company lacks understanding of whether to increase the investment or not.
Honda is lacking in obtaining profitability in this segment. Therefore, the product is losing its appeal (Bogaisky, 2018). Honda is required to rethink whether the products have any scope for making profits for the business to avoid any losses.
Dog:
The dogs are considered the products that perform weakly in the products and make it strenuous to make a profit out of it. The aircraft segment of Honda has incurred a loss of $380 million annual loss in FY2018 (Bogaisky, 2018).
According to the Forbes report, the Honda aircraft business is in question due to poor financial gains by the segment. The output in this segment is significantly lower in comparison to other segments. The analysts have highlighted that the organization's decision to sell aircraft through mere dealership networks in the United States was poor decision-making. The company avoided hiring its own sales team which contributed to such poor performance of sales of the product.
The company has invested around $1.5 billion to $2 billion to remove HondaJet from the marketplace (Bogaisky, 2018). The parent company is no longer satisfied with the ways sales are going and the financial damage incurred to the company. The deliveries of these aircraft have reduced down to 30%. The entity is also incurring an operational loss of 41.8 billion yen. The deliveries have constantly slowed down due to backlog in orders as well. The dealership network is not of much success in ensuring the sales of the aircraft. The entity saved excess costs by avoiding the building up of sales teams however it backfired by increased operational losses (Bogaisky, 2018).
Hence, from the analysis, it can be stated that these products can be improved by not solely depending on the dealership network to sell the aircraft. The quality of the aircraft is remarkable but the company is showing fewer efforts in pushing sales of the product. A professional sales team must be established to increase the sales of the product. The product is suffering due to ineffective sales management and decision-making.
b) Credible sources
Bogaisky, J., 2018. Honda's Jet Business Clears The Trees, But Flight Path Is In Question. [online] Forbes. Available at:
Forbes.com. 2018.Honda Motors Should Benefit From Innovating In the Motorcycle Segment. [online] Available at:
Statista.com. 2021.Honda Report 2021 | Statista. [online] Available at:
Statista.com. 2021.Worldwide motorcycle sales of Honda 2021 | Statista. [online] Available at:
Solution of Question 2:
a) Product development
While the company aims to expand the growth of the business in existing markets the launching of a new product strategy is being used. From the analysis, it is clear that Honda makes a profit margin through its motorcycle segment.
According to the Forbes report findings, the demand for motorcycles is now expected to grow by around 5.4% annually through 2024. It can occur especially due to electric motorcycles and e-bikes' growing demand in the marketplace. The customers are attracted to sustainable products which address the planet's concerns. As per the Safety Administration (NHTSA the number of bike fatalities has increased (Tengler, 2021). The growing motorcycle accidents have even led to product recalls. For instance, Yamaha incurred 32% of MY20 recalls in the past decade. This data reflects that factors such as safety notions, design, requirements, and quality factors must be checked to avoid product recall (Tengler, 2021).
Honda uses Functional safety and automotive spice practices within its existing supply base and has controlled recall rates. This way the company has earned recognition for being a reliable brand. It reflects that the most trusted brand in the motorcycle segment is indeed Honda which has met performance standards for passengers to ensure warning. A developed stability control system, for on-road motorcycles. Thus, the entity is highly reliable and stable within this segment (Tengler, 2021). Honda can introduce new e-bikes efficiently to target middle and low-income groups. The company is required to produce e-bikes with less investment involved. This way the risk involved will be lower. The higher investment amid business uncertainty and volatility is not often appreciated. This way the brand can offer e-bikes at competitive pricing and leverage profit in the business. It will allow the company to target higher-income groups with the desire of running a superbike. Honda can foster product development in varying ways:
Modification of existing product line
The existing product's efficiency can be increased by modifying the existing features. For instance, Honda utilized innovation to enhance the operational performance of motorcycles and improved the overall health and safety features. These developments and modifications effectively forced sales by improved product offerings.
The market analysis and customer database can be used to detect the customer's needs and wants. This way the products can be manufactured having customer demand. This way the sales can be forced by meeting customer needs and wants (Garinaet al. 2018). Through this way, Honda can forecast the demand for new product development to avoid any losses by ineffective product development initiations.
Launching new products
The consideration of R&D activities is important to effectively understand the factors which overall shape the customer demand within the marketplace.
After the detection of points of consumer demand, the NPD processes are facilitated. These processes are developed which ensures the successful; launching of new products within the market for consumers.
Through this strategy, the brand breadth can be increased to reach wider customer segments. It will allow Honda to strategically penetrate new market segments.
Focus on Research and Development
The Honda companytimely invests in R&D activities-especially in order to understand dominating consumer trends, market trends, and consumer behavior. The analysis of these factors allows effectively producing products that the majority of consumers desire (Garinaet al. 2018).
The strategic investment within R&D fosters Honda to sustain its competitive edge by ensuring creativity and innovation. It will facilitate efficient product launch, functional areas such as marketing, finances, and operations management.
The efficient R&D can allow Honda to become more effective in routine and operational types of activities.
Use of strategic partnership
The use of partnership can be used to get access to quality suppliers. In this way, the entity can lower the operational costs by using the supplier networks strategically and exploring new options for product development.
The brand through strategic partnership can access new product development possibilities and processes with fewer financial investments-and thus the risk degree can get lower automatically.
It is a highly significant food Honda-to effectively understand the growing customer needs, effective development procedure, and possible market reaction towards new launches. This way the entity can accept the after-effects and engage in processes that allows full-fledged production of its own.
Confirming product quality
Honda strictly follows quality standards, policies, procedures, rules, and regulations to avoid quality compromise in any manner. The entity will be required to consider different quality standards due to the suggested e-bikes' new products (Garinaet al. 2018).
Effective quality management will enable the company to penetrate new markets and target audiences, as well as target new customer segments without failure.
b) Target segment
Currently, Honda targets the middle-income groups as they have expertise in the motorcycle segment. This suits the target consumer group's budget and allows fosters value for money services. The entity will use a mix of demographic and behavioral segmentation strategies. The demographic will focus on age, income, gender, and preferences. On the other hand, behavioral segmentation will stress purchasing behaviors, buyer user journey, customer loyalty, benefits, and user status.
The demographic segmentation will focus on targeting Millennials that are considered as the national biggest spenders according to the Forbes report (Costin, 2019). The report findings reflect that millennials are currently dominating the worldwide market due to their drive to buy. Millennials are impressed by brands that are socially responsible and ensure products with the lesser environmental game. Hence, the brand face and image highly matters for millennial. It impacts the purchase intentions and motivations to buy.
Millennials while shopping highly value discounts and consider price over any recommendations or even product quality (Costin, 2019). Thus, Honda can acquire this segment by stressing price determinants to induce the right consumer behavior, attitude, and mindset in the marketplace. The entity will offer e-bikes at competitive pricing to ensure that Millennial prefer their offerings.
Further, the message of eco-friendly practices marketing will be leveraged on social media sites to grab this segment's attention. This way the chances to acquire this segment can get higher. Honda will target this specific segment to force sales and an effective profitability ratio. The effective segmentation will allow a good sales rate and will ensure that profit margins are maintained within the motorcycle segment.
c) Credible sources
Costin, G., 2019. Author Post: Millennial Spending Habits and Why They Buy. [online] Forbes. Available at:
Tengler, S., 2021.Motorcycle Sales, Deaths And Questions Increase. [online] Forbes. Available at:
