Honda Motors

Global 500 Rank: 39

Team 5:
Logan Rickard, Luis Rodriguez, Baleigh Rossman, Jake Shea, Ryan Shevlin, Jack Sloan

Illinois State University // Spring 2021 - MQM 385 section 011 // Professor Lahiri
 Table of Contents

(1) Strengths & Weaknesses 2

Strengths 2

Weaknesses 4

(2) The Effects of the Macroenvironment 8

(3) Corporate-Level Strategies 13

(4) Business-Level Strategies 16

(5) How Honda Differs from Ford Motor Company 19

Strategies 19

Competencies 20

Recent Performance 21

(6) Recommendations 23

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 (1) Part 1: Strengths of Honda Motors

Various strengths of Honda are as follows: (1) Large product portfolio, (2) brand

awareness, and (3) brand equity. These strengths are the most well-known strengths of Honda

Motors. These strengths help Honda Motors to continue to be one of the world’s leading

automobile, motorcycle, aircraft and engine manufacturers in the world.

The first strength of Honda is (1) its large product portfolio. Honda manufactures

everything from cars, and motorcycles to aircrafts and aircrafts engines. Their automobiles range

from cars, light trucks, and mini vehicles and they also make a various range of motorcycles.

These range from tourer bikes, sports tourer bikes, adventure bikes, street bikes, as well as

scooters and dirt bikes. In the US market, the Honda vehicle is more popular, but in the Asian

market their motorcycle is very popular. Asian markets have seen immense growth in recent

years. Economic growth has resulted in increased buying power of the middle class and the rise

of an entire class of customers interested in bikes priced in the mid-range.

Having a (1) large product portfolio is an important strength to have because when

consumers are looking at purchasing automobiles or motorcycles, Honda has a greater

probability that one of their cars/bikes would be bought with the more variety of products that

they product compared to a manufacturer that only had 1 type of car or motorcycle. By Honda

manufacturing a large variety of products this helps their brand awareness especially because

they are in multiple countries. People like having a variety of options so Honda having a diverse

product portfolio is an important strength of theirs.

The second strength of Honda’s is (2) its strong presence in the United States market.

Honda is one of the strongest car brands in the US market due to their focus on mobility, robotics

and artificial intelligence. They are the first Japanese automaker to begin production in the

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United States and they now have 7 manufacturing and assembly plants in the US. those are

located in Alabama, Ohio (2), Georgia, North Carolina, South Carolina, and Indiana. Having

production plants has helped gain a higher market share here in the United States. In 2018,

Honda’s market share in the U.S. was 9.1% and in 2019 they generated ¥7,480.4 billion ($1.6

USD) in net revenue from the United States. The U.S. is the single largest market for Honda

products that accounted for more than 45% of sales revenue of the brand in the fiscal year 2019.

Honda having a (2) strong presence in the U.S. is an important strength to have because it

gives them a whole other country revenue. Honda originated in Japan, so they still have a big

market in Japan which is where their bikes are most popular. But, now with Honda’ automobiles

being popular in the U.S. market, it gives them a whole different country as a source of revenue.

With 45% sales of Honda’s products being on the United States market, that just shows how

important being a big presence in the United States brings. If they did not have the U.S market,

they would have to find a way to produce billions of dollars each year.

The third and last primary strength of Honda is their (3) brand equity. Honda’s focus on

technology, customer experience, and product innovation has helped them build a strong image

especially in North America, Asian and European markets. In addition to that, their advertising

and marketing campaigns have also helped them have strong brand awareness by gaining a

strong competitive advantage. They used channels such as its distribution network, digital

channels, as well as methods of promotion such as auto-shows for promoting its products and

brand. Another factor that has helped them solidify their presence and gain brand equity is their

global network of distributors and dealers. These kinds of things drive consumer confidence in

the brand and their products.

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 (3) Brand equity is an important strength for Honda to have because if your brand has

positive brand equity, then that allows you to charge more for your products and services than

generic products or other competitors. And if you have a negative brand equity, then consumers

will be more likely to pay more for a competitor’s products or just generic products. Having

positive brand equity also brings you more customers to your door which is always a positive

thing. Positive brand equity overall allows Honda to be more successful because they will

generate more revenue by being able to increase the price of products and services.

Part 2. Honda Motors Weaknesses

Various weaknesses of the company are as follows: (1) Costly spare parts, (2) Lack of

product quality, (3) Overdependence on American market. These weaknesses have been

determined to be the most important and impactful for Honda Motors. These weaknesses could

all lead to market share loss, sales and profit loss, and negative brand image. In this section,

these 3 primary weaknesses and their importance will be discussed in detail.

(1) One of the primary weaknesses of Honda Motors is that they have (1) very expensive

prices for their spare parts. This is an issue for firms in the auto industry because consumers are

always going to be needing new parts for typical repairs or tune ups. Unfortunately for Honda

Motors, they have spare parts that cost significantly more than the competitors. For example,

take a look into the price of Honda brake pads vs competitors. The brake pad is a very common

part in vehicles that is replaced regularly throughout the vehicle's lifetime. If a Honda driver

wants to replace their brake pads, then it will cost 100 dollars per axle, for a total of 400 dollars

( Nalley 2020). This is a low estimate for Honda brake pads. When compared to a competitor

firm like Toyota, we can see that Honda has significantly more expensive parts because it only

costs 225 dollars to purchase the Toyota set of brake pads (How Much Do Toyota).

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 The reason why this weakness is important is because it can lower the value of their

product. By having highly priced spare parts, Honda puts more financial pressure on the

consumer because they are going to have to pay more money to maintain their Honda vehicle.

The result is that the consumer has to pay a large amount of money for a Honda vehicle, and then

has to pay above average prices to maintain it. This could discourage new consumers and could

sway them to purchase a vehicle from a competitor. Especially during these times of pandemic

because consumers everywhere are trying to save money. That means that many consumers

won’t be willing to pay these extra charges, and will more than likely go to a competitor. Issues

like these could lead to market share loss and a drop in sales.

(2) Another primary weakness of Honda Motors is that they (2) lack product quality.

Product quality is very important in the auto industry because consumers need the assurance that

their vehicle will be safe and will perform as it should. Repairs and car maintenance is expensive

over time, so consumers also need high quality products because they don’t want to spend

excessive amounts of money to maintain it. For example, there was a major recall recently in

which Honda Motors had to recall 628,000 vehicles because of a faulty gas pump (Honda

Recalls Over). Owners of these vehicles have been put through this inconvenience and it hurts

the reputation of Honda Motors. Repeatedly going through recalls negatively impacts their image

and brand reputation because they are now seen as unreliable or low quality.

(2) Lack of product quality is an important weakness of Honda Motors because it

negatively impacts their brand image. Honda earned the award of “Best Value Brand” from

Kelly Blue Book in 2020, so it is evident that Honda has achieved an image of low cost, but high

quality products (Book 2020). Lack of product quality can lead to excessive recalls and that

deteriorates the brand image that they’ve worked so hard to achieve. For example, automobile

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consumers could be influenced to purchase vehicles from competitors if there are too many

recalls for Honda Motors. Consumers will not trust the validity of Honda products and this could

lead to negative brand image and profit losses.

Another reason that (2) Lack of product quality is important for Honda Motors is because

it can cause significant losses in market share. The connection between lack of quality and

market share losses lies in the trust of the consumer. Considering that Honda has recently

recalled a certain number of vehicles specifically for faulty airbags, then consumers could lose

trust in the quality and safety of Honda vehicles. If consumers lose trust in Honda and the quality

of their products, then market share losses will follow because consumers will no longer

purchase their cars.

(3) The last weakness that will be discussed is that (3) Honda Motors is overdependent on

the American market. It is evident from Honda financial reports that they are overdependent on

the American market because North American sales contributed to more than 50% of their

revenue in 2018. Not only that, but the United States made up 45% of Honda’s revenue that year

alone (Jurevicius 2016). This is an issue for Honda Motors because the automobile industry in

the United States is already oversaturated. While Honda has seen some growth in North

America, it is going to be hard to sustain that growth unless they can further expand into markets

like China and Europe.

The primary reason why the overdependence on the American Market is an issue for

Honda is because it will be hard to maintain growth in North America. The automobile industry

is already oversaturated, so it will be very hard for Honda to maintain its growth in the United

States. This could be a significant issue for Honda because North America makes up more than

50% of their revenue. If Honda can’t rely on the American market in the near future, then they

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will have a huge issue generating sales and could even see losses in profit. For example, let’s say

that Honda does something that causes their brand image to dramatically falter, and the

American consumers no longer purchase their vehicles. This could take Honda out of business

because they have lost half of their existing customers and have no other markets that they can

focus on. To conclude, the overdependence on the American market is an important weakness

because it could cause dramatic losses in market share and sales.

To conclude, the three primary weaknesses that carry significant importance for Honda

Motors include: (1) Costly spare parts, (2) Lack of product quality, (3) Overdependence on

American market. These weaknesses are all important for Honda because they could have

negative impacts on brand image, market share, sales, and profits. Ultimately, these weaknesses

must be improved if Honda Motors wants to maintain steady growth in their corporation.

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 (2) The Macroenvironment for Honda Motors

The Macroenvironment is a concept that looks to identify the necessary acting forces

outside the industry. Macro Environmental forces are essential to determining the degree that

each of the Porter’s 5 forces will affect a company strategy formulation process. These factors

include six main categories: Macroeconomic, Global, Technological, Demographic, Social, and

political/legal forces. (Hill, p.68)

Macroeconomic Forces:

Macroeconomic forces surrounding Honda’s market could entail the type of economic

structure that is practiced by the host country. In the U.S. capitalistic structure helps stimulate

demand for new products and features. In other countries with differing economic practices like

China and some European countries, differing economic factors from those common in the U.S.

or host nation such as tax, interest, and employment rates can drastically affect a firm’s ability

for success. For example, the average U.S. citizen’s tax rate is 24% (Urban Institute and

Brookings Institution, 2020). In light of speculation of a tax rate increase imposed by the new

administration , U.S. consumer demand for Honda's products is more than likely to decrease in

response. Higher tax rates can correlate to problems for Honda by not only weakening the

current demand through sales and income taxes, but also by influencing the cost of operations by

increasing the prices of materials and labour in a specific country.

China also enjoys higher employment rates and higher power of the workforce, yet

American salaries are 4 times higher than for Chinese workers (NationMaster, 2021). This

presents the country as an opportune place to base industrial manufacturing at a higher scale for

less of the cost. Companies like Honda that look to produce their goods at the lowest possible

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cost, but maintain differentiation have found that offshoring sections of production have reduced

cost enough to maintain a lower price than competitors who have yet to offshore production.

Global Forces:

An instance of a global force surrounding Honda’s industry is the newly instilled trade

tariffs between the U.S, and other international countries. During the past administration there

was a slu of import and export tariffs enacted as means of putting america first. In reality, these

tariffs have made it more costly for manufacturers, like Honda, to continue producing the same

product at the same low cost. An example of this are the tariffs placed on aluminum and steel

imports. These tariffs require companies to pay higher fees to be able to import these products

internationally or export them to the United States. In turn steel and aluminum producers look to

shift their higher costs to manufacturers like Honda, resulting in Honda transferring these costs

so the customer ends up paying more and dropping demand. Within the first 5 months of these

tariffs being enacted, the market cost for steel had already seen a 50% increase in price (Kapadia,

2018).

Technological Forces:

One of the most prominent forces affecting Honda’s macroenvironment is the rapidly

changing technological environment. Recent advances in electric vehicle technology has

provided itself as either a threat for slow moving companies or an opportunity for those willing

to innovate. In this case, the boom in the EV market can be seen as an opportunity that Honda is

already making steps to take. Recently, Honda announced that the company has plans to

completely transition to electric vehicles in North America by 2040 (Bomey, 2021). While this

company move is in response to multiple forces, there is an undeniable correlation between the

increase in both recent EV advancements and Honda’s focus on this specific market.

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 Along with opportunities in new markets, the digitalization of vehicles has led to

heightened costs revolving around manufacturing. Increases in the basic costs to manufacture a

vehicle result in a higher barrier for entry to the market. This results in Honda enjoying

economies of scale to spread these newly inccure production costs amongst their large sales

volume. Although slightly raising the total cost incurred to create a vehicle, this can

simultaneously raise the quality of the product while serving as deterrence to new potential

entrants.

Demographic Forces:

Demographic influences of Honda's demand is in response to the affordability and

reliability of their products. By creating both cheap and long lasting vehicles Honda has

cultivated an image of value and reliability. This feeds into the reason Honda holds almost 8% of

total vehicle market share amongst 18-29 year olds in the United States (Kunst, 2019). Many

millennials and members of adjacent generations have made it clear that they are not looking to

spend massive amounts on vehicles, or take on loads of debt. Honda has capitalized on this

demographic and created brand loyal customers by maintaining product quality at a lower cost

than most competitors.

Another demographic influence on opportunity for Honda, is the rapidly growing middle

class of China. This presents Honda with an unsaturated market ripe for the EV innovation boom

by being located within an area of cheaper manufacturing paired with a growing percentage of

the population that can afford to purchase a car. The scale of opportunity in China for

automakers like Honda has been ingrained into the creation of business and corporate level

strategies.

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Social Forces:

In examining the social factors that affect Honda’s strategy formulation, the most notable

is the change in environmental consciousness. As previously stated, Honda has pledged to move

to completely electric vehicles in North America by 2040. While also in response to the

enhancements in technology, this push for totally electric stems from the increasing social

movements around climate change. To capitalize on this renewed sense of environmental

awareness Honda plans to develop two new vehicles in a joint venture agreement with General

Motors(GM) (Marklines.com, 2020). Strategies in China and European countries are also

influenced by this social surge of environmental consciousness just alike. In response, Honda is

promoting their first branded EV in Beijing through local joint ventures with plans to later spread

to the European markets (Marklines.com, 2020).

Political and Legal Forces:

Due to operating on an international scale, Honda and its strategies are affected by many

political and legal factors of different countries. While most of these factors are the same, the

degree in which they are imposed varies. For example, in China there is a high level of

bureaucracy. Therefore when creating strategy Honda must consider the government's actions

before those of the people. This is the opposite of markets like the U.S. that lack these

bureaucratic traits. In this case, companies like Honda need to position themselves as responsive

enough to gage the social influence that dictates these markets' legal structure.

International trade can be influenced by political forces like trade regulations and tariffs

imposed on steel and aluminum. Although unaffiliated to either side, Honda’s strategy has been

majorly affected by this political stalemate (Kapadia, 2018). These regulations have not only

slowed the sourcing of materials for a higher price, but have also prompted Honda to outsource

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manufacturing to China (Wollenhaupt, 2018). By outsourcing production, Honda can avoid the

increased cost resulting from tariffs and still enjoy the same resources from the United States for

less of a cost in China.

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(3) Honda Motors Corporate-Level Strategies

The corporate-level strategies are as follows: (1) backward vertical integration, (2) related

diversification, and (3) strategic alliance. (1) Backward vertical integration is where a company

works backward into an industry that produces inputs for the company’s products (Hills, p. 288).

The concept of backward vertical integration can help a company gain customer loyalty through

the making of their own products. This allows businesses to obtain control over suppliers and

help improve supply chain efficiency, which can lead to gaining strategic advantage over

competitors. Backward integration means moving into component parts manufacturing and the

production of raw materials (Hills, p. 288). Implementing this corporate-level strategy can lead

to an increase in profitability through vertical integration and strengthen the business model.

Honda Motors is one of the world’s largest engine manufacturers offering more engine

experience than any other automobile company. Using (1) backward vertical integration gives

Honda the opportunity to have better fuel efficiency, higher power output, and quieter

performance (Honda engines). In the creation of Honda’s own inputs with their engines, it helps

them build a product that is superior in reliability and quality. Honda creates their products to be

extremely reliable and easy to operate for their customers. Reliability of Honda vehicles has to

do with their low repair cost. When there is a need for repair, Honda does not keep their cars off

the road for long like other luxury automobile companies (Rachel Richardson). Also, Honda

Motors does not have as much modern technology which can typically cause issues. The smaller

number of issues helps increase Honda’s reliability with their products.

Secondly, Honda Motors uses another corporate-level strategy called (2) related

diversification. Related diversification is a corporate-level strategy that is based on the goal of

establishing a business unit in a new industry related to a company’s already existing business

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(Hills, p. 319). This strategy has to do with the linkage between a company’s value-chain

functions. Using related diversification, a company can take advantage of strong technological,

manufacturing, marketing, and sales commonalities between new and existing units and

modifying them (Hills, p. 319). Competitive advantage then can arise because a company can

use any general organization competency it possesses to increase performance for all its different

industries. The company is using related diversification when it creates new products under its

current business unit where there is a linkage to the current competency.

Honda is best known for its cars and trucks, but the company started out as a motorcycle

business. At the beginning, Honda developed a unique ability to build small and reliable engines

in their motorcycles. They achieved worldwide fame in the 1960s for their motorcycle and then

in the 1970s for their affordable and fuel-efficient cars (Honda motor company, 2009). The

transition from motorcycles to automobiles proves the company’s (2) related diversification

keeping the affordable and fuel-efficient theme consistent to this day. Currently, Honda offers

automobiles, motorcycles, aircrafts, power equipment, and boat engines (Honda products and

services). Basically, Honda is a manufacturer of almost everything that involves an engine.

Honda motors is continuously using the corporate strategy of related diversification by

constantly creating engines for their customers to use in their everyday lives.

Honda Motors third corporate-level strategy is (3) strategic alliance. A strategic alliance

is a long-term agreement between two or more companies to collectively develop new products

or processes that will benefit all companies in the agreement (Hills p. 295). Companies can find

ways to lower costs and increase product quality that can be beneficial for all companies

involved. This strategy can go along with vertical integration because it builds a stable

partnership for both companies to receive the same kinds of benefits that result from vertical

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integration (Hills, p. 295). Strategic alliances can be beneficial because organizations can reach

broader audiences and new potential customers to help bring in more business.

In the year of 2013, Honda Motors pursued a (3) strategic alliance with General Motors

in North America. Honda and General Motors announced they have signed a non-binding

memorandum of understanding on September 3, 2020 that established a North American

automotive alliance (Honda and GENERAL MOTORS, 2020). Both companies are combining

efforts with this alliance to enable them to accelerate in innovation and effectively deploy

resources in next-generation technologies. The agreement between the two organizations is to

jointly develop two new electric vehicles for Honda based off General Motors’s upcoming global

EV platform and Ultium battery technology (Wayland, 2020). Both companies will benefit from

this agreement due to the innovation of electric vehicles being more attractive to consumers

today. In this alliance, both companies are going to be able to achieve substantial cost

efficiencies and invest in future mobility technology. The consistent image of Honda being

strong products, strong manufacturing capability, and strong business structure will stay intact

(Honda and GENERAL MOTORS, 2020).

Overall, Honda Motors uses (1) backward vertical integration, (2) related diversification,

and (3) strategic alliance to help benefit their company and create a competitive advantage. The

company creates their own products to keep their reliability strong and does this across multiple

related industries. Now, with the strategic alliance involving General Motors, Honda finds

another competitive advantage going into the electric car business. These corporate-level

strategies will help Honda’s competitive advantage grow stronger over the other automobile

companies to help boost profits and cut costs.

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(4) Honda Motors Business-Level Strategies

The business level strategies are as follows: (1) broad differentiation, (2) segmentation

strategy, and (3) value innovation. A business level strategy is the overall competitive theme of a

business. It’s the way a company positions themselves in the marketplace to gain a competitive

advantage. Honda Motors' three main business-level strategies are what gives the company an

edge over their main competitors.

Differentiation strategy is an approach businesses develop by providing customers with

something unique, different and distinct from items their competitors offer in the marketplace.

Within the differentiation strategy, Honda Motors uses a (1) broad differentiation strategy which

consists of building a brand that is different in at least one way from its competitors. The main

broad differentiation strategy set by Honda is the diversification of their products. From their

more fuel efficient internal combustion engines to the way that Honda has recently started to

manufacture robots and jets, the company is staying on top of the diversification of their products

and providing something of high quality for all of their consumers. This diversification is the

main reason for achieving the competitive edge among the company’s competition.

Honda vehicles are known for lasting a long time and giving great value to the customer

for what they are paying. The durability, reliability, and design are some more aspects of Honda's

broad differentiation strategy that leaves their consumers happy when choosing to purchase a

Honda brand product (Honda.com).

Honda Motor Company uses another business-level strategy called (2) segmentation

strategy. Segmentation strategy is a strategy where the company customizes its product offering

to different segments of the marketplace. Customization of products can ramp up costs, but the

one main advantage to segmentation strategy is that those customizations being offered, allows

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the company to capture incremental revenues by offering those customized needs to different

groups of consumers thus selling more in total.

In its earliest days, Honda Motor Company manufactured motorized bicycles, which

evolved to motorcycle manufacturing. As years passed, Honda realized that their percentage of

sales from motorcycles wasn’t cutting it in terms of overall revenue for the company; in fact,

Honda motorcycle sales declined for the first time in five years in 2020. A Honda Motors

statistics report shows that motorcycles only made up 13.7 percent of sales revenue for the 2020

year. By expanding into the different market segment of selling automobiles a long time ago, this

allowed Honda to reach a revenue number that was feasible. From 2015 to 2016, Honda’s

automobile segment became the largest division of the company by revenue (Parashar, 2016). In

fiscal year 2020, much of Honda’s revenue was generated from automobile sales, as their

worldwide car sales came to around 19.3 million units sold. Honda manufactures automobiles

ranging from small cars to large trucks. With recent high gas prices from the oil embargo, the

Honda Civic car has become one of the most popular selling cars within the company because it

is the most fuel efficient. The Civic also has the cleanest engine, and was the first car to pass the

set standards by the Clean Air Act. Here, we see Honda setting in stone the customization of

their automobiles to certain things we can’t control in the environment and reaching different

market segments so clearly (Parashar, 2016).

(3) Value innovation is simply a practice of choosing to do new things that create value

for customers and the business, without being constrained to what you’ve done in the past. More

specifically, value innovation is a strategic focus for driving high growth in a business through

superior differentiation (Hill, p. 153). Honda Motors positions its differentiated products among

close competition such as Toyota, Ford, General Motors, etc., as a value of money product that

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offers higher engineering quality, better field efficiency, and strong performance at very

competitive rates. In its positioning and differentiation efforts, Honda tries to leverage on its

strong capabilities in engine performance, quality and back-up capabilities with good design, and

a high quality overall package that appeals to the buyers that look for cars or motorcycles that

offer good value for money in their purchases. A survey was conducted in 2018 that showed

Honda products rated number one in value for money, favorite brand, and quality (Laghari).

As another aspect of value innovation, Honda is continuing to enhance people’s lives by

showcasing a variety of mobility, robotics, energy management, and connected concepts to

create a cleaner and safer environment. Honda engineers have been dreaming up a new category

of vehicle for a long time. With continued value innovation, Honda has produced a vehicle that is

a combination of their all terrain vehicle and emerging advanced autonomous technology.

(Honda News) Here we see that Honda is continuing to innovate and create value in their

products by keeping up with today’s ever changing technology.

In a Honda Press Conference on April 23, 2021, Honda Motor Company’s President and

Representative Director stated that Honda will continue to work comprehensively and strive for

carbon neutrality for all products by 2050 (CES 2019). To reach this goal, Honda will need to

put forth a collective effort of their entire value chain in creating this innovation.

Overall, Honda Motor Company uses (1) broad differentiation, (2) segmentation strategy,

and (3) value innovation. These business-level strategies will help Honda maintain their motto of

being the ‘power’ that supports people who are trying to do things through their own initiative

and continue to establish a business structure which has resilience against changes within the

business environment and speedily implement large-scale action plans.

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(5) How Honda Differs from Ford Motor Company

Strategies:

A large part of Honda’s business strategy is how they take advantage of broad

differentiation. By using the best pricing strategy mixed with value innovation. Honda has

discovered a way to build reliable vehicles that will typically last longer than competitors and at

more affordable price points. Additionally, Honda’s segmentation strategy is part of what makes

them so successful among other companies. Honda has established independent factories

throughout multiple countries in which they operate. Each factory is given complete control over

determining what the local market is seeking. This gives Honda the advantage of tailoring

specific needs to specific demographics, ultimately resulting in higher sales and a stronger brand

image. Rather, Ford’s business strategy focuses heavily on market penetration and technological

innovation. The company has been continuing to increase their sales volume by building more

and more dealerships to gain a greater market share among competitors. This has proven to be

successful by increasing customer retention as well as increasing sales to pre-existing Ford

customers. Ford has also recently invested a large amount of their resources into technological

innovation by producing electric vehicles, something that is relatively new to their company.

When it comes to corporate strategy, Honda is a big proponent for backward vertical

integration. Honda prides themselves in their ability to make superior and reliable engines in

their vehicles. Honda uses related diversification by being involved in several similar industries

such as motorcycles, jets, batteries, and much more. Honda has also recently decided to

participate in a strategic alliance with GM in an effort to collaborate on building more innovative

products (source). Similar to Honda, Ford’s main goal from day one has always been to provide

vehicles that the everyday person could afford. In recent times, Ford has been focusing largely

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on product development to manufacture new cars for the electric market. By providing smart

cars, the company will offer differentiated vehicles designed to create a deeper connection with

their customers.

Honda’s global strategy focuses on establishing autonomous subsidiary operations

wherever they go. For example, in Saudi Arabia, local consumers were very concerned with the

cleanliness of the car's exterior, due to the sandy environment. Honda originally did not know

this and received a tremendous amount of complaints about how their car’s were not performing

well. Only to discover that the real complaint was that they became dirty too quickly for

consumers in Saudi Arabia. The company reconfigured the design and found ways to expel the

sand away from the car (source). Honda saw this as a huge learning process and now treats every

country as its own independent market, taking everything into consideration. Honda’s global

strategy is all about becoming immersed within the local environment so that they can adopt the

mindset of becoming a local company wherever they operate.

As of recently, Ford’s global strategy has involved partnering with Volkswagen and

forming a strategic alliance. Ford is making a massive effort to transition into creating more

electric vehicles and is seeking the assistance of Volkswagen. The alliance is more cost effective

for both parties when dealing with such an enormous volume. Globally, Ford has issued a

statement that they will be laying off over 12,000 employees in Europe and will also be

restructuring operations there. The company plans to close several operational plants throughout

Europe, Brazil, and Russia (source).

Competencies:

Honda truly excels when it comes to the company’s organizational structure and overall

culture. All projects at Honda are managed through multiple stages including research, design,

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product engineering, and early production. Having it structured this way helps to integrate

different tasks with employees and helps show how essential the relationship between each other

is, in order for the company to be successful. This structure helps promote positive relationships

within the workplace and an all around better environment. At Honda, seniority plays a minor

role and is practically nonexistent. The company believes in a flat organizational strategy to

further promote innovation. This makes every employee feel that they’re important and valued.

Additionally, if/when an employee feels mistreated, they can call to the court of peers where

colleagues resolve the problem. Also, problems and work related issues are shared by members

in each team every morning to encourage a group problem-solving approach. It is not the

manager that decides exclusively over the fate of the individual, but rather everybody in the

company (source). This is why Honda continues to have a competitive advantage among

competitors when considering company culture. The second core competency that Honda offers

is that they are both technical and product-oriented. All of Honda’s products and divisions are

engines and propulsion systems and serve as technical sources of competitive advantage for the

company.

The core competencies seen in the Ford Motor Company include their manufacturing and

distribution network since it extends to over 100 countries. In addition to Ford’s enormous size,

the company’s quality assurance, customer service, and consistent marketing campaign are all a

part of their core competencies. In the financing segment of the business, diversity is a part of

the company’s core competency since they finance their automotive operations through diverse

sources of funding (source). Due to these core competencies, Ford has been able to attain a

competitive edge amongst competitors in the industry.

Recent Performance:

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 As of March 31st, 2020, Honda earned an annual revenue of $138,321,808. Granted this

was before the global pandemic was in full effect , the company was able to earn a gross profit of

$28,527,292 (3.2%) (source). When considering Honda’s return on equity, the company has

averaged about 8.2% over the fiscal years ending March 2016 to 2020. When viewing the

company’s ROE over the past twelve months, they have earned 4.9%. Identifying the stock price

of Honda within the past 52 weeks, the company reached a low of $22.04 and a high of $31.92.

The current price of Honda stock is $30.43 (source). Overall, Honda is currently doing

significantly better than its competitor, Ford Motors.

Comparatively, as of December 31st, 2020, Ford earned an annual revenue of

$127,144,000. Ford also earned significantly lower profits when compared to Honda, coming in

with $14,392,000 in gross profit. When considering Ford’s return on equity, the company earned

an average of 9.2% for the fiscal years ending December 2016 to 2020 (source). When viewing

the company’s ROE over the past twelve months, they received a negative return at -4.0%. Over

the past 52 weeks Ford’s stock reached a low of $4.52 and a high of $13.62. Ford stock is

currently worth $12.22 (source).

Honda Motors Ford Motors

Strategies - Broad differentiation - Market penetration

- Psychographic, Demographic, - Technological innovation

and Geographic segmentation
- Psyographic, Demographic, and
- Value innovation Geographic segmentation

Competencies - Organizational structure - Manufacturing and Distribution

network
- Extensive product portfolio
- Brand image and Marketing
- Technological innovation

Recent performance - Gross Profit: $28 billion - Gross Profit: $14 billion

22
 - ROE (past twelve months): - ROE (past twelve months): -4.0%
4.9%
- 52 week range of stock price: $4 -
- 52 week range of stock price: $13
$22 - $32

(6) Recommendations

One recommendation for Honda Motors would be to increase innovative technology to

increase product quality. Honda is known for their reliable products, but lack in high technology

inside of their vehicles. Less product quality can lead to many issues with vehicles breaking

down or features not operating how they are supposed to. Honda’s products tend to be very basic

on the inside providing basic interior systems with lower end quality. Improvements need to be

made from Honda so that customers feel that their product is safe and worth the money.

Honda can improve their product quality by putting a bigger investment into research and

design. They are pushing closer to improving quality through their strategic alliance with

General Motors in the attempt to come out with two new electric vehicles. In order to compete

with a company like Tesla that specializes in electric vehicles, Honda needs to improve their

product quality. Also, with the world constantly evolving, product quality should become a

higher priority especially with Honda because they already have the reliability. Increased quality

can help generate more revenue because products can be charged at a more premium price.

Additionally, it is recommended that Honda switch to exclusively outsourcing the

production of spare parts in order to cut expenses. Honda’s are notoriously known for being

reliable and (generally) price friendly to consumers. Eventually, the inevitable happens and parts

begin to break down and eventually fail. Unfortunately, when it comes to spare parts, Honda

23
charges more than competitors. This is largely due to the fact that Honda manufactures these

parts themselves.

This is a great opportunity that Honda can profit from by taking advantage of

outsourcing. By outsourcing, Honda can significantly reduce the overall cost for the spare parts

that are often in demand by consumers. This will create a snowball effect, by charging less

money for parts, consumers will then continue to purchase these products, rather than consider

investing in another car. This will also reinforce Honda’s image of being reliable and trustworthy

while furthering customer loyalty.

Another recommendation of top level management at Honda would be to strengthen Ad

campaigns focused around the growing need and availability of their EV vehicles in other

markets. By creating ads centered around specific demographics of countries can help bolster

Honda’s brand image in this emerging market. Specifically cater advertisements to the specific

needs of each country. For example, Europe is known for compact cars that allow for easy

maneuvering. Honda can hown in on this market by creating ads that reflect that they share this

same value

Markets like Europe and China have expressed vested interest in transitioning to electric

vehicles. Honda is already aware of this opportunity and are making specialized vehicles suited

to the specific demands, but how they execute this entry into a new market is the important part.

Honda should be aware of the growing middle class in China and create ads targeted towards

affordability and reliability. As well as China, the degree of opportunity is determined by the

execution of strategy. In Europe rather than focusing on affordability, Honda should create

advertisements detailing the ease of mobility and transportation that its cars could bring.

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 The last recommendation that we have for Honda Motors is to focus on the training of

manufacturers to prevent mistakes leading to recalls and faulty products. In the past, Honda has

recalled plenty of vehicles that have had faulty gas pumps, ignition switches, electrical belts, etc.

This could have a negative impact on Honda because recalls such as these lower the superiority

of their brand image. It can be assumed that if Honda’s brand image deteriorates, then consumers

will not continue to purchase their vehicles and products. In the end, these negative implications

could drastically lower sales and revenue if consumers no longer purchase their products.

In order to implement this idea, Honda should specifically focus on the training of

manufacturing plant managers. This should be done because it would help lower the number of

mistakes that occur during the production and assembly of products. Once manufacturing plant

managers are trained to minimize mistakes and increase efficiency, then it will lower the number

of recalls that occur. It might be expensive to re-train all manufacturing managers across the

board, but it will be worth it because it avoids all the extra expenses associated with recalls.

25
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