Honda Strategic Analysis PDF

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THIS IS STRATEGIC ANALYSIS OF HONDA...

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Strategic Management – Report on a firm (Honda Atlas, Ltd.)

Submitted to: Dr. Sir Mubashir Mehdi

Submitted by: 1. Waheed Athar 2. Hamza Khadim Program: MBA 3.5 Years 5th Semester (B - Section)

Institute of Business Management Sciences, University of Agriculture, FSD.

Introduction of Honda (Honda Atlas)

Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited Japan, and the Atlas Group of Companies, Pakistan. The company was incorporated on November, 1992 and joint venture agreement was signed on August, 1993. The company is listed on Karachi, Lahore and Islamabad Stock Exchanges. On July 14, 1994, car bookings started at six dealerships in Karachi, Lahore, and Islamabad. Since then the Dealerships Network has expanded and now the company has sixteen 3S (Sales, Service and Spare Parts) and thirty 2S (Service and Spare Parts) Pit stops network in all major cities of Pakistan.

Vision Statement: “To be the first preference at every level of car lovers, and be the market leader.”

Mission Statement: “A dynamic growth oriented company through excellence in quality, dedication to provide greater fuel efficiency at competitive prices, and service ensuring attractive returns to equity holders, rewarding associates according to their ability and performance, fostering a network of engineers and researchers ensuing unique contribution to the development of the industry, customer safety, satisfaction and protection of the environment by producing emission friendly green products as a good corporate citizen fulfilling its social responsibilities in all respects

Strategic Objectives/Goals

 Customers Our Customers are the reason and the source of our business. It is our joint aim with our dealers to ensure that the customers enjoy the highest level of satisfaction from use of Honda Cars.

 Quality To ensure that our products and services meet the set standards of excellence.

 Technology To develop and maintain distinct business advantages through continuous induction of improved hard and soft technologies.

 Shareholders To ensure health and viability of business and thus safeguarding shareholders’ interest by maximizing profit. Payment of regular satisfactory dividends and adding value to the shares.

External Factors Evaluation (EFE Matrix) The purpose of an external audit is to develop a finite list of opportunities that could benefit a firm and threats that should be avoided. As the term finite suggests, the external audit is not aimed at developing an exhaustive list of every possible factor that could influence the business; rather, it is aimed at identifying key variables that offer actionable responses.

Key Opportunities: 1. People’s awareness about Global Warming. 2. Customer desire for hybrid and fuel efficient vehicles. 3. Increase in technology in automobiles forces customers to return to dealer for service. 4. Introduction of ethanol fuel in Pakistan. 5. Increase in demand of small vehicles. 6. Growing Automotive Market.

Key Threats: 1. 2. 3. 4.

Political Instability. Energy crisis. Rising fuel and steel prices. Inflation & Tax rates.

5. Depreciation of rupee against dollar.

EFE matrix allows the strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. The threats and opportunities of Honda Atlas Company have been identified in the PEST analysis and the ratings of the factors (1-4) have been done from the brain storming and the facts and figures that have affected the company.

Key External Factors (Opportunities) 1. Awareness about Global Warming 2. Hybrid and fuel efficient vehicles 3. Increase in technology 4. Increase in demand of small vehicles 5. Automobiles increasing Key External Factors (Threats) 1. Political Instability 2. Energy crisis 3. Rising fuel and steel prices 4. Inflation & Tax rates 5. Depreciation of rupee against dollar

Weight

Rating

Weighted Score

.07 .10 .15 .15 .09

4 3 4 2 1

0.28 0.30 0.60 0.30 0.09

.05 .07 .10 .10 .10

2 3 3 2 2

0.10 0.21 0.30 0.20 0.20

Total Score

1.00

2.58

From the above matrix calculation, we can see that the total weighted score for Honda Atlas is 2.58, which is above of 2.50 by 0.08 points and shows that it falls in attractive segment.

Internal Factors Evaluation (IFE Matrix) The purpose of an internal audit is to focus on developing objectives and strategies to capitalize on internal strengths and overcome weaknesses.

We list the organizations Key strengths & weaknesses so that we could use them in a way to get positioned competitively. We try to overcome our weaknesses and try to turn them in our strengths!

Key strengths: 1. 2. 3. 4. 5.

Brand image Strong R&D Timely new models Advance technology Customer loyalty

Key weaknesses: 1. 2. 3. 4. 5.

Costly spare parts Dealership network Shortage of trained technician Limited product line High Production Cost

This strategy-formulation tool (IFE Matrix) summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas. Intuitive judgments are required in developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted to mean this is an all-powerful technique.

Key internal Factors (strengths) 1. Brand image 2. Strong R&D 3. Timely new models

Weight

0.15 0.10 0.07

Rating Weighted Score

4 3 3

0.60

0.30 0.21

4. Advance technology/equipment 5. Customer loyalty Key internal (weaknesses) 1. Costly spare parts 2. Dealership network 3. Shortage of trained technician 4. Limited product line 5. High production cost

Total Score

0.20 0.15

3 3

0.60 0.45

0.08 0.05 0.07 0.08 0.05

2 2 2 1 2

0.16 0.10 0.14 0.08 0.10

1.00

2.74

From the above matrix calculation, we can see that the total weighted score for Honda Atlas is 2.74, which is above of 2.50 by 0.24 points and shows the company is above the minimum point.

TWOS MATRIX The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an important matching tool that helps managers develop four types of strategies: 1. SO (strengths-opportunities) Strategies. 2. WO (weaknesses-opportunities) Strategies.

3. ST (strengths-threats) Strategies. 4. WT (weaknesses-threats) Strategies. Following are the Honda Atlas’ important Strengths, Weaknesses, Opportunities and Threats:

Strengths: 1. 2. 3. 4. 5. 6. 7. 8.

Brand image Strong R&D Timely new models Advance technology/equipment Customer loyalty Smoother drive as compare to its competitors Safety Environment Friendly Cars

Weaknesses: 1. 2. 3. 4. 5.

Dealership Network Costly Spare Parts Limited Product Line Shortage of Trained Technicians High Cost of Production

Opportunities: 1. People’s awareness about Global Warming 2. Customer desire for hybrid and fuel efficient vehicles 3. Increase in technology in automobiles forces customers to return to dealer for service 4. Budget friendly & economy cars 5. Automobiles increasing

Threats: 1. WTO (World trade Order) opening local markets for global competition 2. Political instability 3. Energy crises 4. Depreciation of rupee against dollar 5. Increase in Petroleum and steel prices 6. Inflation 7. Declining quality of the infrastructure in the country.

ST strategies: Use a firm’s internal strengths to overcome external threats. 1. Utilize research and development to minimize the steel prices 2. Energy crises can be minimize through advance technology (by using more efficient Plants & Equipment).

WT strategies: Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats. 1. Rightsizing 2. Strict employee policies to contain overhead and unfavorable economic condition.

SO strategies: use firm strength to take advantage of external opportunities. 1. By using technology hybrid and fuel efficient vehicle can be manufactured. 2. Through R&D global warming can be minimize and customer awareness program can be conducted.

WO strategies: Improving internal weaknesses by taking advantage of external opportunities 1. Introducing new budget friendly small vehicles 2. Introduction of flexible fuel vehicle and going for product diversification.

Market segmentation Market segmentation can be defined as the subdividing of a market into distinct subsets of customers according to needs and buying habits.

Importance of segmentation: The importance of market segmentation is that it allows a business to precisely reach a consumer with specific needs and wants. In the long run, this benefits the company because they are able to use their corporate resources more effectively and make better strategic marketing decisions Honda has made their segments based on the Following aspects:

1. Demographic:  Income  Occupation.

2. Psychographic:  Personality

 Social class

Product Positioning Positioning entails developing schematic representations that reflect how your products or services compare to competitors’ on dimensions most important to success in the industry. High convenience

Honda High customer

Low customer

Loyalty

loyalty

Low convenience

High price

Honda High quality

Low quality

Low price

Conclusion: After the analysis of Internal & External Factors as well the TWOS strategy matrix, it is clear that it is appropriate and feasible for Honda firm to follow the product diversification strategy. In this context, the company will have to put new production plants in order to produce new cars. This will include the arrangement of heavy budget and extensive marketing of the new products. Since the monetary policies of the country are tight at present, the company should arrange the capital in form of equity by floating the shares in the market or wait for the interest rates to fall down as the economic and inflationary situation of the country stables. The products will contain product line of small cars i.e. 800 c.c. and below....