Case Presentation 1.

HONDA
Group 4 Matthew Cruz, Brooke Feery, Jacob Hostetler, Daniela Nicula, Manh Duc Tran

Who is Honda?
Honda Motor Company, Ltd is a Japanese public multinational corporation primarily known as a manufacturer of automobiles and motorcycles.

Honda at a Glance
Is Honda a MNE? YES!
Industry: Automotive Founded: 1948 Country: Japan CEO: Takanobu Ito Website: world.honda.com Employees: 179,000 2012 Sales: $96.7 trillion Headquarters: Minato, Tokyo, Japan

Forbes Lists
#59 Global 500 #19 Most Powerful Brands #44 in Sales #77 in Profit #178 in Assets #93 in Market value

The Honda Portfolio

Subsidiaries:
Many subsidiaries are companies that manufacture specific components (i.e. Honda Lock Manufacturing). These companies manufacture transmission parts, motorcycle exhaust components, electronic safety systems, solar cells, brake discs, etc.

Affiliates:
Multiple companies supply components go into Honda products (i.e. Keihin Corporation, Masuda Manufacturing). These companies make automobile body parts, fuel systems, air conditioning systems, injection-molded plastic parts, etc. Most affiliates and subsidiaries are Japanese (single diamond). For example, Honda is starting to install Krell stereo systems on Acura vehicles.

Total Revenue
(by Region)

12.3% 18.1% 6.4%

18.9%

Japan
North America Europe

43.3%

Asia Other

Honda is Bi-Regional (37% Asia, 43% North America)

Case Study Questions

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5. 6. 7.

What was Honda's distinct resource base that provided internationally transferable FSAs? Which value-added activities in which foreign locations permitted Honda to exploit and augment to the fullest its distinct resource base? What were the expected costs and difficulties Honda faced when transferring this distinct resource base? What specific resource recombination was required so as to make the proposed international value-added activities successful? Did Honda have the required resource recombination capability in-house? What were the costs and benefits of using complementary resources of external actors to fill resource gaps? What were the main bounded rationality and bounded reliability problems Honda faced when extending the geographic scope of the firm's activities the changed linkages with outside stakeholders and the changes in its internal functioning?

Honda and the Four Distances

Cultural
Honda hired American workers for their passion, not for their knowledge of motorcycle manufacturing. Honda sent American workers to Japan to learn about Hondas manufacturing processes, and sent some Japanese workers to the US to instill Hondas philosophy into the plant.

Administrative
US government passed the Clean Air Act imposing stricter requirements on tailpipe emissions. Honda feared that if demand rose for their fuel efficient cars, the US would impose export restrictions.

Honda and the Four Distances

Geographic
Honda had to search for a long time before finding the proper place to being manufacturing Marysville, Ohio. Only a few suppliers agreed to follow Honda and build their own plants in the US.

Economic
The rising price of the yen against the dollar in the 1970s made continued exporting problematic. The Oil Crisis of 1973 caused the price of Hondas exports to increase while causing consumer demand for more fuelefficient cars to increase as well.
Hondas approach to bridging the Four Distances in the 1970s classifies it as an International Projector.

International Expansion
Honda is striving to be the world's leader in environmental and energy technologies through its product development, production, and other activities. By 2014 North American capacity will hit 1.92 million vehicles annually. The automaker is targeting a stronger position in mini-vehicle and compact vehicle segments to reinforce business operations in Japan. Honda plans to terminate 800 jobs at its South Marston plant in England due to sagging demand for its vehicles in Europe.

Hondas Performance as a MNE

Degree of Multinationality
Licensing Honda licenses its technology to other companies in different countries (i.e. India) and engages in international joint ventures. Export Honda is a net exporter, exporting more Americanbuilt vehicles than it imports from Japan. Honda exports 11 models accounting for over 100,000 units shipped to more than 40 countries. Local Packaging / Assembly Honda has 57 factories worldwide, 49 outside of Japan and 12 plants in North America . FDI Honda establishes relationships with suppliers in host countries.

Firm Specific Advantages

Tangible Resources
57 factories in all regions 8 R&D facilities worldwide Many additional facilities

Human Resources
Hondas management style Honda selected employees based on the passion for their work rather than their experience Japanese/American employees visited one anothers countries

Firm Specific Advantages (contd)

Intangible Resources
Manufacturing process Brand reputation: practical, reliable, high-quality products Immense experience with internal combustion engines Partnerships with many affiliates who manufacture parts for motorcycles, cars, and other products More than 17,600 patents in Japan and 25,300 patents abroad as well as 29,400 patents pending worldwide. Supply chain management Green initiatives such as reducing PVC use and fuel efficient car and motorcycle engines

Firm Specific Advantages (contd)

Subsidiary Specific Advantages
Subsidiary HAM in case study had connections to Ford that Honda was able to leverage Over 25,000 patents in foreign markets Decentralized manufacturing allowed Honda to overcome the Earthquake and Tsunami in 2011 that disrupted Japanese manufacturing

Country Specific Advantages

The 1970 Clean Air Act passed by US Congress opened up an opportunity for Honda to bring fuel efficient cars into America. European Union fuel costs are high and environmental restrictions are very severe on products with internal combustion engines. The mix of strong CSAs and strong FSAs places Honda in the 3rd Quadrant of the FSA-CSA Matrix

Competitive Advantage Single Diamond

Foreign Direct Investment

Efficiency-seeking:
Honda has mainly taken advantage of low-wage countries like Indonesia, Vietnam, Thailand and India

Market-seeking:
Honda Motor of Japan is going to expand its operations into India

Strategic Asset -seeking:

8 R&D facilities worldwide

Recombination Patterns
Type III
Internationally transferrable FSAs are developed at home but in order to exploit them in host countries, location-bound knowledge must be added. Honda recombined its FSAs such as its manufacturing process to better cater to international consumers. Honda manufactures automobiles targeted specifically towards the host countrys consumers. Hondas extensive knowledge and experience with internal combustion engines is easily applied to many diverse markets.

Recombination Patterns
Type VIII
Honda also features characteristics of this pattern. Affiliates of the MNE located in various countries develop FSAs together, contributing knowledge upstream and downstream. Honda R&D and other facilities worldwide cooperate to create new technologies that can be applied to innovative products in multiple host countries.

Summary
Bi-Regional MNE (NAFTA and Asia) Activity Level: Licensing, Export, Assembly, FDI International Performance: Stage 3 Revenues are declining MNE Archetype: International Projector FSAs are Primarily Transferrable Single Diamond Framework FSA-CSA Matrix: Quadrant 3 FDI Types: Market, Efficiency, & Strategic Asset Seeking Recombination Patterns: 3&8

Works Cited
http://world.honda.com/group/Manufacturing/index.html http://world.honda.com/group/manufacturing-facilities http://www.consumerreports.org/content/cro/en/cars/bestcar-brands-consumer-perception-consumer-reports.html http://www.interbrand.com/en/best-globalbrands/2012/Best-Global-Brands-2012-Brand-View.aspx http://www.wikinvest.com/stock/Honda_Motor_Company_(H MC)/Patents_Licenses http://world.honda.com/investors/library/annual_report/201 2/honda2012ar-Cover-03.pdf