Honda (A)

SECTION: 2 GROUP: 4

Amit Kumar Biswal DM21213

Hrithik Jajodia DM21229
Nanditha K R DM21247
Paras Mittal DM21252
M Shaalini DM21266
M Siva DM21270
Case Facts

 Japan’s postwar devastation resulted in the downsizing Honda’s ambitions from

automotive industry to motorcycle field; technologically manageable and
economically affordable
 1946: Honda Technical Research Institute; foundation technologically based
strategy
 Opportunity: Honda’s competition was low, Japan loosely defined motorcycle
industry, hampered by inferior technology and materials
 1947, first 2-stroke engine, however 1949 expanded presence as its reliable engine
coincided with intro of quieter and more powerful engine by larger competitors
 1951, superior 4-stroke engine, exploit this advantage purchased plant =
manufacturing expertise of producing engines, frames, chains, sprockets and
essentials for motorcycle performance
 Instead of minimising risk by investing in one winning design, Honda seeking simultaneously
to offer a multiproduct line, take leadership in product innovation, and exploit
opportunities for economies of mass production by gearing designs to production objectives
 Honda identified niche segment: small ‘unintimidating’ motorcycle for local deliveries;
one-hand control enabling handle machine while carrying packages
 In 1959, entered US market as world’s largest motorcycle producer
 Established US subsidiary, American Honda Motor Company (foreign producers relied on
distributors)
 Began push offering very small lightweight motorcycles, selling for significantly less than
the bigger American or British machines
 Developed market region by region over four to five years through concerted advertising ,
spending $150,000 on regional advertising, targeting middle class consumers with heavy
backing
What were the factors that contributed
to Honda's success in the US market?
 Success of Honda was fueled by success in the Japan market. Heavy demand of the
products in the domestic market led to Honda experiencing economies of scale as the cost of
producing motorbikes declined with the level of output. This provided Honda to achieve a
highly competitive cost position which they used to penetrate into the US market.
 The company also moved away from other companies who relied upon distributors to
sell their bikes, when the company set up its headquarters in the west coast of America.
 Honda had a "policy of selling, not primarily to confirmed motorcyclists but rather to
members of the general public who had never before given a second thought to a
motorcycle“.
 The small, lightweight Honda Sears sold at under 250 dollars compared to the bigger
American or British machines which were retailing at around 1000 to 1500 dollars.
 In 1960 Honda's research team comprised of around 700 designer and engineer
staff compared to the 100 or so employed by their competitors showing the value
which the company placed on innovation. Production per man-year was 159 units in
1962, a figure not reached by Harley-Davidson until 1974.
 Honda was following a strategy of developing region by region. Over a period of
four to five years they moved from the west coast of America to the east coast.
 Honda paid to advertising when the company spent heavily on the advertising
theme “you meet the nicest people on a Honda" thereby disassociating themselves from
the rowdy, hell's angels type of people.
Conclusion

Honda's strategy was directed towards high volumes per model, providing high
productivity, and low costs. Their main overview highlights that Honda
succeeded in US by introducing a new product (small motorcycles) that expanded
the motorcycle market in the US through price generic competitive strategy.
They underline that in 1959, Honda was already the largest motorcycle producer
in the world. That suggests that Honda was prepared with capacity, capital and
technical capability to enter the US market.
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