Analysing the importance of Porters five forces Essay Example

entrants for Honda due to barriers to entry including economies of scale, high initial investment costs, fixed costs, legal procedures, and distribution channels. However, the car industry is highly competitive with many participants and little distinction between them. Honda Motor Co., a Japanese car maker that entered the global market in the late 1980s faced tough competition from General Motors and Ford at that time and is currently facing tough competition from its biggest rival Toyota. To combat this competition, Honda believes introducing new products into the market is its best defense. As part of their strategy to do so, they are working on increasing manufacturing flexibility by developing vehicles suitable for Asia, North America and Europe (The Wall Street Journal, 2000).Global integration is a crucial aspect of the modern world. However, this increase in global integration has brought about the introduction of four types of global concentration methods: national/regional hegemony, cross-industry super concentration, industry marketer concentration, and geographic concentration (Ghemawat and Ghadar, 2006). The ability to manage associated risks is necessary for anyone who wishes to engage in globalization as it poses challenges. It has become one of the most influential forces in shaping domestic and international economies. The government plays a significant role in negotiating international and regional agreements and creating an environment that allows domestic manufacturers to compete globally (Lloyd, 2008).

The automotive industry has witnessed substantial growth in globalization during the late 1990s due to the establishment of overseas facilities and mergers among industry leaders. Globalization serves as the primary driver for changes in relationships between car manufacturers and key suppliers. Furthermore, increased global trade has resulted in the expansion of the

worldwide commercial distribution system, intensifying competition within global car industries (Hiraoka, 2004).

Various global strategies are dependent on where a company sells its vehicles. This includes designing vehicles with common global platforms while also considering local conditionsCreating more generic assembly capacities can help achieve this. Honda's global corporate strategy is influenced by various factors such as labor relations framework, hiring and training processes, and organizational procedures in its domestic factories. The car industry faces challenges in meeting the demands of different local markets due to globalization. These challenges include variations in customer preferences, product offerings, marketing strategies, adhering to local government requirements, and disparities in distribution channels like local content regulations and protectionism. Fluctuations in oil and raw material prices, currency exchange rates, and economic uncertainties also put pressure on Honda's management operations. To address these challenges, Honda aims to strengthen its corporate strategy to adapt to diverse needs. However, with operations across Japan, North America, Asia, and Europe; Honda is exposed to risks of global economic decline and loss of customer confidence while facing increased competition from rivals. These factors have the potential to adversely impact Honda's operations. In particular, their collaboration with Hero has impacted Honda's operations in Asia, specifically India where two-wheeler motor vehicles dominate the market (Annual Report 2007).In order to compete with local brands like TVS and Bajaj, as well as other joint ventures, Honda had to introduce fuel-efficient and low-maintenance four-shot vehicles that met the demands of the Indian market (Krippendorff, 2009). However, Honda's late entry into car operations negatively affected their net gross revenue in Europe. The revenue decreased from 249 billion Hankerings in 2000 to 191 billion Yen

in 2001. They faced tough competition from local auto makers such as BMW, Audi, Volvo, and foreign companies Toyota and Ford. Consequently, they only owned a small portion (2.4%) of the European market share (Honda in Europe, 2009).

On the other hand, in North America, Honda made significant investments in advanced manufacturing flexibility to adapt quickly to changing market demands. They operated nine car assembly lines across seven plants and produced sixteen different Acura and Honda models. Additionally, they introduced the fuel-efficient Civic model by incorporating its production into the same line as the Ridgeline pickup truck at their Alliston plant in Canada (Corporate Honda, 2009).

Managing different cultures effectively is crucial for long-term success at Honda Motor Co.Ltd., as cultural dimensions influence business practices within the organization (Krippendorff, 2009). Nipponese management cultures are characterized by high wages good working conditions job security.Graduates from prestigious colleges often have an advantage in major companies. There are various distinctions between Western and Nipponese management cultures, which include differences in organizational structures, inter-firm relationships, manufacturing systems, labor relations, and market strategies. When examining the management strategies of Nipponese companies like Honda, it is important to consider that only one-third of its manufacturing takes place in Japan while the rest is spread globally. While incorporating Western elements into its operations, Honda still retains Japanese characteristics brought by employees raised in Japan (De Wit & Meyer 2004). However, Honda has faced criticism for its failure in the European market due to a lack of understanding of European culture. This was evident through treating Europe as a single market instead of recognizing the diverse cultures present in countries such as Italy, France, and

Germany. Both planning and learning are crucial for a company's success in the business market. Acquiring new knowledge constantly and being adaptable at different levels of administration are essential. However, having a strategic business plan is also necessary to identify various business priorities (Mintzberg 1991). Therefore, while strategic planning is important for achieving organizational goals, it is equally crucial to learn from ongoing events and circumstances in order to adapt and achieve those goals.Senior managers have a crucial role in understanding the business environment and taking necessary actions based on available information. Honda serves as an example of a company that successfully planned and adopted new strategies to reach its objectives. Their rapid and interactive approach to new product development and flexible manufacturing process supports this approach. According to Geus (1988), studying over 30 companies with more than 75 years of experience, their ability to navigate disruptive situations and adapt to slow-paced changes was significant for survival and growth.

Honda's planning strategy reflects various aspects of traditional opposing poles. The process of explicating strategic programs may be prolonged as learning from environmental changes can extend it by a few weeks at most. Honda's strategy focuses on incorporating high technology into all its products, including advanced engines, electric windows, and brakes. This simplifies product assortment within each model type.

An instance of Honda adapting its production capacity occurred in 2008 when they initially produced 400 Honda Civics daily but realized sales would decline due to recession and decreased demand. Honda adjusted its production capacity to 300 units per day.

The resources based view and market placement suggest that a firm's specific resources can be strategically deployed to gain an

advantage in product markets.Honda utilizes a variety of resources, including capital equipment, patents, finance, brand name, and individual employees. They are known for acknowledging employee achievements and fostering competition among them to maximize potential. De Wit and Meyer (2004) categorize the merchandise market into conservative cost control, selling distinction, complex innovation, and product/market range. Honda's success in the U.S market is attributed to their tailored strategies that fit American culture and adapt foreign ideas. This has set a benchmark for other car manufacturers to measure up to. When Honda entered the U.S market, they had three main plans: identifying market opportunities, implementing unique marketing strategies as both a bike maker and a car company appealing to a wide range of American citizens, and promoting environmentally friendly, affordable, and high-quality cars. Additionally, Honda introduced a distinctive managerial approach for its U.S production that differed from both its Japanese plants and American car plants in general (Koepp 1996). According to Koepp (1996), resources hold no value for an organization on their own; it is only when they are utilized productively that value is created. The house's resources can be divided into two categories: tangible and intangible resources.In its operations,Honda utilizes both types of resourcesHonda utilizes internet and mobile phones to facilitate voting for shareholders, while ensuring independent oversight by the audit office under the president's control (Annual report, 2007). Skilled labor is employed for various tasks. Intangible resources are considered advantageous due to their less visible and harder-to-replicate nature. Honda differentiates itself from other Western companies through its culture that prioritizes the "right first time" principle or building in quality, thereby enhancing its brand image.

The success of

a company relies heavily on its core competencies as defined by Hamel and Prahalad (1990). Core competencies refer to the collective knowledge and coordination skills within a company that contribute to product development. Honda's core competency lies in its innovative internal combustion engines, which power a variety of products. These core products serve as the foundation for creating a range of consumer goods.

Imitating Honda's core competencies proves challenging for rivals, further solidifying Honda's strong market position. The reputation of Honda being known for sporty and advanced cars stems from models like the Civic and Accord, renowned for their simplicity combined with high quality at low cost based on core capabilities. Going beyond this, Honda invests in both mental and engineering research, influencing its product design philosophy.Honda's competitive advantage lies in its successful combination of technology and design. The company has also invested resources into developing the CVCC engine, which enables competition in alternative power sources. Corporate Social Responsibility and Corporate Governance have been important since the mid-1980s, focusing on the Board of managers and the relationship between managers, management, and stockholders. Balancing stakeholders' interests is considered, along with examining the company's existence and value. Honda appoints corporate auditors and managers according to Japan's company law to ensure control over management objectives. Each region has its own central office with a general manager responsible for specific concerns, including risk management and ethical compliance. Quarterly disclosure of direction schemes and accurate fiscal information is practiced by Honda to enhance trust among investors and stockholders (Honda Corporate Governance, 2009).There is an ongoing debate about whether large corporations should have more freedom to pursue their goals while also taking

on increased social responsibility, including human development, human rights, and environmental protection issues (Morrison, 2006). Social responsibility refers to an organization's obligation to protect and enhance the society it operates in (Griffin and Pustay, 2007). All major corporations now follow a CSR policy that is essential for their operations. Carroll's theoretical model called the CSR Pyramid outlines four main responsibilities: economic, legal, ethical, and philanthropic (Carroll.A.B., 1991). This model incorporates stakeholder theory as a comprehensive framework for the social aspect of CSR. It considers exceeding minimum legal requirements as part of ethical duty while also considering the company's economic duty in its operations. Philanthropy is seen as the least significant responsibility. Honda has implemented a strategic policy of reemploying retired individuals to create diversity among older age groups in their workforce. This allows them to utilize these individuals' expertise in their workplace operations. Additionally, global companies face challenges in managing corporate social responsibility across borders and balancing different governments' expectations.Honda has always placed importance on establishing connections with local markets and customers through social activities. Their corporate culture values respect for each person and acknowledges their uniqueness, a belief shared by Honda associates and stakeholders. According to the Honda CSR Report (2008) and Honda (2009), Honda follows the Three Joy principle of buying, selling, and creating. They partake in various philanthropic endeavors such as environmental initiatives, community service, and education.

In Colorado, Honda has founded schools that provide free tuition for students and teachers to show their commitment to education. Their "Mark up your challenge" program encourages students to present inventive ideas for innovative products and services, benefiting both their knowledge acquisition and informing Honda's strategic

decision-making process. Additionally, prioritizing environmental responsibility is crucial for Honda as they employ technologies aimed at reducing waste and pollution.

Being recognized as one of the top "10 green giants," Honda plans to introduce electric cars in the US market by 2015 with the objective of safeguarding the environment while enhancing brand value and consumer awareness about protecting nature (Motor Trend, 2009). Moreover, safety remains a significant focus for Honda. They are devoted not only to safeguarding drivers of their vehicles but also pedestrians, cyclists, as well as other individuals residing within communities. The safety policy implemented by Honda encompasses all aspects in order to prioritize the well-being of every individual involved.According to Honda Safety Initiatives (2009), the company has played a major role in innovation by introducing various advancements such as the first-ever motorcycle airbag, eco-friendly products, and noise reduction technology. These safety innovations not only showcase Honda's commitment to corporate social responsibility but also serve as a strategic method to boost motorcycle sales.