+5%
+39%
+18%
+8%
+12%
+40%
+1%
+19%
Euromonitor Research 2012-2020, accessed September 1st 2013
2012-2020
This analysis w...
Somboon Advance Technology Pcl (2013) ‘Car Statistics for Japan & Thailand 2013-2018’, accessed via ReportLinker September...
IHS Forum (2013) ‘Automotive Outlook & Review: New Signals of Change’, accessed via ReportLinker September 7th 2013
This a...
2012 Figures
Growth: +8.9%
Market Value: $1563,9B
Cars Segment: 55.9%
, MarketLine (2013) ‘Honda SWOT 2013’, accessed via ...
LMC Automotive (2013) , accessed via ReportLinker September 1st 2013
This analysis was prepared by Urania Coumis. It is in...
Key Auto Market Trends 2013-2018
KPMG (2013) ‘Global Automotive Executive Survey 2013’
• Consumers will base purchasing de...
Example: Rising Demand of Plug-in Hybrids in US
LMC Automotive (2013) , accessed via ReportLinker September 1st 2013
This ...
Example: Honda’s Response
LMC Automotive (2013) , accessed via ReportLinker September 1st 2013
This analysis was prepared ...
Honda Motor Co.: The Firm
• Founded in 1948 in Tokyo, Japan
• ‘The world’s largest motorcycle manufacturer and one of the ...
Honda Motor Co.: R&D Milestones
Source: Grant (2013) Contemporary Strategy Analysis, Chapter 5, p. 114
This analysis was p...
Honda Automobile Sales 2007-2013
Honda Annual Reports 2007-2013, Core Business Light Vehicle Sales; Honda SWOTs 2010-2013;...
Honda Automobile 2007-2013: Expanding in Asia
Japan
19%
US
38%
Europe
7%
Asia
28%
Other
8%
2010 74.6%
Japan
18%
US
49%
Eur...
SWOT Honda 2010-2013
Honda Annual Reports 2010-2013; Datamonitor, 2010-2012; MarketLine 2013; ; B835 DS2 Group 1 wiki Reso...
Honda: Tangible Resources
Resources Key Indicators 2010 2011 2012 2013
Tangible Financial Market Cap B US$
Debt/Equity
Fre...
Patents >17, 600 owned + >13,500 applications pending (Japan)
>25,300 owned + >16,200 pending (worldwide)
Copyright & Trad...
• Trademarks, patents, technology innovation and traditional R&D culture all
qualify for VRIO criteria and are potential s...
Honda: Human Resources
• Honda employs 190,338 worldwide
• Honda invests on average at least 2% new hires per year and, fr...
Strategic Importance Relative Strength
Strategy Implementation Traditionally a strong feature of Honda, leading to new
mar...
0
0
10
10
RelativeStrength
Strategic Importance
Superfluous Strengths Key Strengths
Key WeaknessesZone of Irrelevance
Manu...
Honda: Capabilities Activity Map
‘Keiretsu’
Model
Supplier
Business
Model
Time to
market
Manufacturing
Cost
Value-
added
S...
Automotive Market
Trends by 2018
Honda Car Industry Key Success
Factors
Top 5 purchase criteria are cost of fuel, ease of
...
Example: Honda’s Marketing and Distribution & Sales Capabilities
Honda’s strong sales in China can be partly explained by ...
Example: Honda Diverse Supplier Network keiretsu Capability
Keiretsu means ‘headless combine’, literally layers of organiz...
Example: How is Honda poised to face BRICS competition?
Market Insights predict that BRICS manufacturers will be major
aut...
• Honda has tangible assets deteriorating in value 2010-2013 from 99.111 to
84.032 B US $, including 369 subsidiaries and ...
• Honda is matching industry KSFs for medium term by expanding its
automobile business and by focusing on new technologies...
Upcoming SlideShare
Loading in...5
×

Honda RBV Case Analysis

3,248

Published on

Honda RBV Case Analysis 2013: This is the final presentation prepared after a group collaboratation in OU MBA Strategy course. The case was asking us to analyse Honda's strategy past, present and future utilising the RBV of the firm and attempt to identify Honda's strengths and weaknesses and the resources Honda possess, while evaluating Honda's strategy. We analysed and evaluated Honda's resources and capabilities and matched weaknesses, strengths and oportunities to industry key success factors for the period 2007-2013. A brief analysis of automobile industry market trands is also included.

Published in: Business, Automotive
1 Comment
4 Likes
Statistics
Notes
No Downloads
Views
Total Views
3,248
On Slideshare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
2
Comments
1
Likes
4
Embeds 0
No embeds

No notes for slide
  • Slide 1: Introduction Setting the scene for Honda and why the firm has been the subject of debate by strategy theoristsFollowing Elaine’s advice to refer to earlier work put forward by RBV theorists Hamel & Prahalad in the nineties (B835 Elluminate Session, September 2nd 2013)Commenting on Honda’s past strategy in summary, how the firm defines itself and the growth it has achieved since 1946 Defining the scope of our presentation and focusing on Honda’s automobile business division because it has been the most lucrative and it is expected to be the most profitable in the medium term ie in the next 3-5 yearsInclude link to our wiki Resource section
  • Slide 2: Honda R&D MilestonesHonda R&D Milestones 1946-2010 taken from Grant (2013) Contemporary Strategy Analysis, Chapter 5, p.114; freely available from publisher as a sample ebook chapter. Include link to text.
  • Slide 3: Honda Sales 2007-2013Honda automobile division sales results in million US $ (blue bars) and operating profit (%, red line) )extracted from respective Honda Annual Reports 2007-2013. The red arrows indicate the impact of 2008 economic crisis and 2010 natural disasters in Japan had on sales and margins. The figure also shows a steep recovery in earnings and margins in 2013. Link to Annual Reports 2007-2013 and SWOTs 2010-2013.
  • Slide 4: Honda Automobile Business Share by RegionThe pie charts show Honda business shrinking in US and Europe, but expanding in Asia between 2007-2013. Data extracted from Honda Annual Reports 2007-2013. Percentage next to each year indicated automobile share in Honda’s overall business, indicating that automobiles are rendering the most profit for Honda. OK, so data in this slide tie up with the evolution of Honda’s presence in ASIA market, which is the market with the highest demand for cars at the moment. Analysts expect a growth rate of 40% in the automobile market for ASIA between 2012 and 2020 and they predict that ASIAN car manufacturers will become major exporters of cars in the same period. Therefore, Honda seems to be strengthening its position by matching customers’ expectations successfully in ASIA so far. How? We will explain this in the first example of matching marketing, distribution & sales and manufacturing capabilities in Slide 14. Honda is also preparing to compete with ASIAN manufacturers by opening dedicated production plants in Japan for best selling cars to reduce manufacturing cost and leverage increasing demand for cars in ASIA. This will be covered in our second example of matching capabilities with industry KSFs to combat rising ompetition in Slide 16.
  • Slide 5: Combined SWOTs Honda 2010-2013This is a combined SWOT representation in tabular format with data extracted from MarketLine and Datamonitor reports between 2010-2013, focusing on the period of crisis for Japanese manufacturers. We present the data as such to indicate the timeline of weaknesses as they emerge and try to link them to Honda’s resources and capabilities at the time. In this presentation we will be referring to this slide during the course of the discussion that will follow, linking the internal environment of Honda also to opportunities and following up on how Honda develops its strengths.
  • Slide 6: Honda’s Tangible ResourcesTangible resources seem to be deteriorating around the times of economic crisis and natural disasters in Japan. We also calculated the net worth of Tangible Assets from Honda’s Annual Reports 2010-2013 as Angelika has done in DS2 Group 1 wiki Tangible Resources Section. Are Honda’s tangible resources VRIO?Explain VRIO characteristics based on DS2 Group wiki Tangible Resource Section and the difficulty we faced in classifying them into VRIO characteristics.
  • Slide 7: Honda’s Tangible ResourcesThe work behind this inclusive list of Honda’s Intangibles can be reviewed in the group’s wiki. Highlighted are data retrieved by Sven and they are important as they highlight an opportunity to be used as USPs to sell to different customer segments, eg green technology to TRIAD city dwellers and safety aspect to Asian customers.
  • Slide 8: Honda’s Intangible ResourcesIntangible resources are tricky because in there is locked competitive advantage which either the company is not using or it is using it, but it cannot be measured by value added to customer, like R&D culture for example. So, we would allocate VRIO designation to trademarks, patents, technology innovation and R&D culture, provided that the company is organised in such a way as to measure ROI out of these ‘locked’ assets. It takes 2-5 years from development to marketing a car, so for cars in the pipeline we do not know what profits they are going to bring to customers. For new cars, it seems that R&D budget as a % of sales is the highest the market for Honda, which is a valuable resource, but not with VRIO characteristics, because the R&D budget allocated say in 2013 won’t show profits until 2018, so we would not know whether this investment renders value for sure. By the same token, analysts predict further erosion of Honda’s brand value, but brand equity (which indicates value added to customers in when Honda brand exists, compared to the hypothetical situation in which Honda brand did not exist) could fullfill VRIO characteristics, because it is valuable, rare, inimitable and Honda could potentially be milking it to the full. But, it seems that Honda does not fully exploit marketing opportunities as above examples suggest.
  • Slide 9: Honda’s Human ResourcesMain points about human resources revolve around:The importance Honda places on hiring, training and developing employeesA learning organizationHighly skilled employees promoted from within may fit VRIO criteria Organizational culture & corporate culture with R&D exampleSome opportunities, as seen by corporate reporting and withstanding crisesI have not included the lack of stoppage/employee disputes reporting because there are some reports indicating that Honda has suffered stoppages, like every other company with manufacturing sites, cases were in China and Mexico (as Angelika pointed out), links: http://www.washingtonpost.com/wp-dyn/content/article/2010/06/11/AR2010061105718.html; http://www.powerinaunion.co.uk/honda-mexico-plant-completely-paralysed/
  • Slide 10: Honda’s CapabilitiesWe include:Strategy Implementation, Manufacturing, Design, Engineering, New Product Development, Marketing, Distribution & Sales, Customer Service and Multidivisional Coordination10 – point scoring is arbitrary to a large extent because of lack of enough data to analyse Honda’s strategy in a great depth and it is used as a means of practicing the framework, as if we were faced with a real business case with all the available data. Much like what we will have to do for B836 exam. But we can conclude that capabilities are often linked to each other to produce a profit generating activity. We assign scoring on the relative strength based on data from SWOTS 2010-2013 and references mentioned below. We can also include the 2011 Economist Article ‘Civic Unrest’ on the quality problems Civic had and its first launch fiasco story. Let’s take quality problems in manufacturing which could be due to quality lapses in R&D, due to low employee morale and productivity in the heat of the crisis OR it could be due to suppliers’ lack of aptitude when assembling the cars. Quality lapses may cause time to market delays and customer dissatisfaction leading to poor sales and damage to brand reputation. On the suppliers’ side we can proceed to benchmark Honda against Toyota and then we will find that although the 2 companies had to undergo similar external pressures, Toyota recovered much faster. Some analysts maintain that this was because Toyota modernized their keiretsu system of relating to suppliers in the last 10 years, while Honda was left behind on this.
  • Slide 11: Evaluating Honda’s Capabilities to define key weaknesses and strengthsWe roughly conclude, therefore, that main weaknesses are Engineering, Manufacturing and Distribution & Sales, probably mainly from not modernising keiretsu on time to withstand the economic crisis, etc. There is also a weakness in design based on deeply routed customer perception of a Honda as a ‘middle class, reliable sedan’. Despite having won awards for design for its 2012 N series and for making parts for race cars, Honda marketing has not succeeded in reversing the above perception as yet. Weak Engineering brings New Product Development down and lowers analysts expectations of future earnings of Honda brand (KPMG report, 2013), as they expect that new products and green technology will be the major growth drivers in the automobile market by 2018. And we can go on explaining interrelationships between other capabilities like so.
  • Slide 12: Honda’s Capabilities Activity MapMajor profit yielding activities Honda has to perform which may be a source of competitive advantage, how they are interlinked and what capabilities come into play.For example, Honda stubbornly refuses to collaborate with other manufacturers for common, flexible lines of production like e.g. Fiat & VW do (Adam’s example), presumably because it does not want to share know how. Instead it supplies China with best seller models Fit/Jazz via local sourcing and insists that this strategy lowers manufacturing cost and in developed countries it will its own 2 dedicated plants for producing Fit/Jazz again for lowering manufacturing cost and improving quality (Japan, Mexico). However, as Adam pointed out in the wiki these strategies probably increase costs and deprive Honda of the opportunity to collaborate with other manufacturers to meet customer demands through flexible production. There is a risk involved in pursuing strategies outside the box, which should be assessed. Above, we have analysed Manufacturing Cost blob, which may make a big difference in profitability if run more efficiently.
  • Slide 13: Honda’s Capabilities matched to Market trends by 2018 & KSFsThis slide is self explanatory. We match market trends for 2018 with Honda’s capabilities and industry success factors to highlight what Honda is doing and where opportunities or threats lie.
  • Slide 14: Marketing and Distribution & Sales CapabilitiesCar buyers everywhere in the world require fuel efficiency when they decide which car to buy, as Adam showed in the wiki. But in China up until now they chose on the basis of safety and comfort. Honda scores very highly in safety, so it is poised to march consumers’ preferences perfectly, also reflected in rising sales in China. This example shows us how Honda has leveraged marketing, distribution & sales to create value for Chinese customers. However, by 2018, Chinese consumers’ preferences will be the same as TRIAD consumers for quality and reliability and they will be demanding SUVs. Is Honda poised to satisfy changing Chinese consumers’ preferences?
  • Slide 15: Honda’s Manufacturing & Keiretsu Supplier ModelHonda’s difficulty in recovering from recent SWOT challenges may be attributed to an outdated supplier & dealership business model, not aligned with future market demands. Honda prefers to either have its own production plants for best sellers or entrust to suppliers the assembly and distribution of automobiles. The latter may lead to quality issues and hence poor cost management. Market trends show that neglecting to partner with other manufacturers to achieve more flexible production tailored to customer demands and modernize dealership model may severely impact profitability. Will Honda use its existing structure and systems more effectively to ensure flexible production and cost management, or will it have to alter its supplier & dealership business model?
  • Slide 16: Honda’s Manufacturing Capabilities in view of BRICS competition
  • Honda RBV Case Analysis

    1. 1. +5% +39% +18% +8% +12% +40% +1% +19% Euromonitor Research 2012-2020, accessed September 1st 2013 2012-2020 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    2. 2. Somboon Advance Technology Pcl (2013) ‘Car Statistics for Japan & Thailand 2013-2018’, accessed via ReportLinker September 7th 2013 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    3. 3. IHS Forum (2013) ‘Automotive Outlook & Review: New Signals of Change’, accessed via ReportLinker September 7th 2013 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    4. 4. 2012 Figures Growth: +8.9% Market Value: $1563,9B Cars Segment: 55.9% , MarketLine (2013) ‘Honda SWOT 2013’, accessed via EBSCO 25th August 2013 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    5. 5. LMC Automotive (2013) , accessed via ReportLinker September 1st 2013 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    6. 6. Key Auto Market Trends 2013-2018 KPMG (2013) ‘Global Automotive Executive Survey 2013’ • Consumers will base purchasing decision on fuel efficiency, they will prefer plug- in hybrids – City dwellers: wider mobility concept, alternatives to car ownership, added value services & design – BRICS go for SUVs & same levels quality, safety & reliability as TRIAD – TRIAD consumers prefer basic cars • R&D: ICE downsizing, plug-in hybrids; 18% do not know how budget is allocated • Rising competition from ASPAC manufacturers, VW/Toyota market leaders – BRICS manufacturers: best growth areas South East Asia & Eastern Europe – BRICS manufacturers: best hubs Mexico & Eastern Europe – BRICS will be major exporters so trade barriers for Honda will rise • Future Success: New product development, corporate JVs, supplier expanding value chains & diversification; vehicle manufacturing • Suppliers: online dealership on the rise, multi-brand dealership, financing key This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    7. 7. Example: Rising Demand of Plug-in Hybrids in US LMC Automotive (2013) , accessed via ReportLinker September 1st 2013 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    8. 8. Example: Honda’s Response LMC Automotive (2013) , accessed via ReportLinker September 1st 2013 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    9. 9. Honda Motor Co.: The Firm • Founded in 1948 in Tokyo, Japan • ‘The world’s largest motorcycle manufacturer and one of the leading automakers. The company develops, manufactures and markets motorcycles, automobiles and power products’ (Datamonitor, 2012) • An exemplar of business strategy for the: – Cost-based advantage developed from scale & learning to occupy UK’s motorcycle segment retreat – Competitive product it developed to sell successfully in US, based on superior design & learning from mistakes; ‘Honda Effect’ [1974-1990] – Ability to turn emergent to deliberate strategies based on internal strengths of the firm [1974-mid 90s] • Defines itself around its expertise in developing and manufacturing engines • As of March 31st 2013, 369 subsidiaries & 86 affiliates • In this report, we focus on Honda Automobile business division Honda Annual Report, 2013; Datamonitor, 2012; BCG Report, 1975; Mintzberg, 1985; Hamel & Prahalad, 1990; Rumelt, 1995; B835 DS2 Group 1 wiki Resources Section This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    10. 10. Honda Motor Co.: R&D Milestones Source: Grant (2013) Contemporary Strategy Analysis, Chapter 5, p. 114 This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    11. 11. Honda Automobile Sales 2007-2013 Honda Annual Reports 2007-2013, Core Business Light Vehicle Sales; Honda SWOTs 2010-2013; B835 DS2 Group 1 wiki Resources Section 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 OperatingMargin(%) NetSales(000s/$) 2 1 3 4 5 6 7 8 0 -2 2007 2008 2009 2010 2011 2012 2013 Economic Crisis Natural Disasters in Japan This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    12. 12. Honda Automobile 2007-2013: Expanding in Asia Japan 19% US 38% Europe 7% Asia 28% Other 8% 2010 74.6% Japan 18% US 49% Europe 9% Asia 17% Other 7% 2007 70% Japan 16% US 47% Europe 10% Asia 19% Other 8% 2008 79.1% Japan 16% US 42% Europe 10% Asia 23% Other 9% 2009 76.7% Japan 17% US 41% Europe 6% Asia 29% Other 7% 2011 74% Japan 19% US 42% Europe 5% Asia 28% Other 6% 2012 73% Japan 17% US 43% Europe 4% Asia 28% Other 8% 2013 78% Honda Annual Reports 2007-2013, Core Business Light Vehicle Unit Sales per Region (in thousands): Asia expanding, US/Europe & Japan shrinking This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    13. 13. SWOT Honda 2010-2013 Honda Annual Reports 2010-2013; Datamonitor, 2010-2012; MarketLine 2013; ; B835 DS2 Group 1 wiki Resources Section This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    14. 14. Honda: Tangible Resources Resources Key Indicators 2010 2011 2012 2013 Tangible Financial Market Cap B US$ Debt/Equity Free Cash Flow Credit Rating 70.7 0.95 -2.81 A1, stable 78.5 0.92 -1.94 52.6 0.93 -3.17 64.77 0.97 -1.81 Physical Market Values B US$ Age Capital Equipment % Scale of Plants 36.33 55.73 39.78 56.63 41.59 56.23 3,660k 45.06 53.7 Net Worth Balance Sheet Annual Reports 2010-2013 B US$ 99.111 94.872 85.887 84.032 Adapted from Grant, 2010 Ou B835 online material; Honda Annual Reports 2010-2013; Datamonitor, 2010-2012; MarketLine 2013; Moody’s 2013; Ycharts.com for Honda; Stock Analysis on Net for Honda; B835 DS2 Group 1 wiki Tangible Resources Section • International Presence: 369 subsidiaries & 86 affiliates worldwide • 47 manufacturing facilities - valuable, organised • 8 R&D centres – valuable, rare, inimitable, organised • Wide, heterogeneous distribution network , keiretsu operated - valuable, organised • Financial assets - valuable, organised • Operating lease property - valuable, organised • Flexibility in fixed assets: Honda insists this is a competitive advantage fitting VRIO criteria This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    15. 15. Patents >17, 600 owned + >13,500 applications pending (Japan) >25,300 owned + >16,200 pending (worldwide) Copyright & Trademarks >50 TMs, many registered designs (WIPOs); 2010 Gold Award for N-series mini vehicle Trade Secrets Extended know-how, secrecy may be the reason why Honda does not share production lines with other manufacturers Technology Innovation Building on core competence of R&D which numbers numerous , key innovations since 1948 and boosting new product development with the view to moving from the ‘middle- class, reliable sedan’ brand image, Formula 1 with McLaren 2014; safety aspect 4/5 scoring R&D Staff as a % total R&D Investment as % Sales Number & Location of R&D Facilities Direct Presence (No of Continents) Brand Value (Interbrand/$m) Brand Value (Brand Finance/$m) Ranking Surveys of corporate reputation 2012 Shareholder Return CSR/Ethics Initiatives Corporate Transparency Index 2012 N/A 2010:5.6%; 2011:5.7%; 2012:6.5%; 2013:6% - traditionally the highest in the market 14 centres in US alone, but opening around the world to merge with regional manufacturing, sales and procurement and reduce risks arising from natural disasters in Japan/Asia Pacific; R&D centres as subsidiaries Asia, Oceania, Europe, North America, South America, Japan, Middle East, Africa, China 2008:19,079; 2010:17,803; 2011:18,506; 2012:19,431; 2013:17,280 – Rank 21 from 7 AA+:16,114, versus Toyota AA+:25,979 and Nissan AA+:17,430 Brand Finance Top 500(100): 53; Fortune 500(100):45, for 2013; Interbrand Japan’s No2; Interbrand Best Global Green Brand No3 for 2013 Barron World’s Most Respected Companies No 34; Customer Service Index Rank No 9 Dividend Yield: 2.14% from 1.91%, highest since 2009 Extensive on Diversity, Environment, Community & Education pillars; CO2/heavy metals/rare & valuable metals reduced; 90% recyclable materials used in cars 1.9/10 with 8% ACP, 50% OT and 0% CBC, 3rd from last of 100 companies* * ACP = anti-corruption programs, OT = organizational transparency, CBC= country-by-country reporting Honda: Intangible Resources Adapted from Grant, 2010 OU B835 online material ; Interbrand Top100, 2012: Honda; Interbrand Sector Overviews: Automotive Industry 2012; Honda This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    16. 16. • Trademarks, patents, technology innovation and traditional R&D culture all qualify for VRIO criteria and are potential sources of sustainable competitive advantage • To definitively allocate sustainable advantage designation for any of the above resources, information on how they render value for customer is needed • Honda brand equity could also be a source of competitive advantage despite the erosion of brand strength due to SWOT challenges 2010-2012 • However, marketing has been focused on building Honda image as a technology innovator, so there is room to promote other aspects which could qualify as USPs for specific customer segments, e.g. Chinese & Safety aspect; TRIAD & green technologies, etc. Honda: VRIO for Intangibles Honda Annual Report 2013; DS2 Group 1 wiki Intangible Resources Section This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    17. 17. Honda: Human Resources • Honda employs 190,338 worldwide • Honda invests on average at least 2% new hires per year and, from their CSR, appears to place much importance in its employees, compared to other stakeholder groups • Employee creativity, participation and opinion sharing are encouraged through the NH circles to support continuous learning • Rate of employee suggestion implemented: 90% • Highly trained employees may be considered a VRIO asset to Honda, which traditionally promotes from within to senior positions • Strong R&D culture, extensive training throughout and collaborative environment leading to hugely successful learning organization • Good employee relations seem to nurture emergence of an "organizational culture" in line with the corporate culture and that can be considered a resource and when this is not the case, like in 2010-2011, it may lead to R&D void and sluggish cash flows – VRIO • Opportunity for more transparency in diversity, employee disputes and female workforce numbers Honda Annual Report, 2013; Honda 2012 Report; 2012 Transparency in Corporate Reporting; Honda SWOTS 2010-2013; B835 DS2 Group 1 wiki Human Resources Section This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    18. 18. Strategic Importance Relative Strength Strategy Implementation Traditionally a strong feature of Honda, leading to new market entry, increased profitability and growth ; ability to merge deliberate with emergent strategies to fulfil organizational goals (10) Although still recovering from crisis and natural disasters and coming second to Toyota in recovery, capability in place as evidenced by 2013 sales (8) Manufacturing Impacts efficiency, quality & flexibility which are critical to cost and customer satisfaction (10) Robust, low cost production, but traditional perception of reliability fraught with quality problems in 2012 & 2013; maybe a suppliers’ problem (4) Design Important, but imitable (6) Less than memorable designs (3) Engineering Key for new product development (9) Green fuel efficiency and flexibility of parts, falling behind with market trends for new technologies (5) New Product Development Regular launches relevant to customer needs (10) Strong but slow new product development, not always bringing in the sales (7) Marketing Media presence, promotion & community building important, but imitable (6) Weak, turning around since 2011; has yet to build strong customer community and strong brand equity (6) Distribution & Sales Critical to customer access & bottom line (9) Keiretsu philosophy with suppliers falling behind to Toyota & Nissan; although network robust, sales could benefit from modern supplier business models (4) Customer Service Impacts brand reputation (8) Not as strong as Toyota’s (6), e.g. weak in exploiting financial services to add value Multidivisional Coordination Critical to successful reinforcement of global presence and further expansion (9) Key weakness since Honda grew larger from 90s onwards, turning around since 2009 restructuring to SED model (6) Honda: Capabilities Adapted from Grant, 2013, pp.134-135; Alex Taylor, 2013; Harvard Business Review on Keiretsu: http://hbswk.hbs.edu/archive/4791.html This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    19. 19. 0 0 10 10 RelativeStrength Strategic Importance Superfluous Strengths Key Strengths Key WeaknessesZone of Irrelevance Manufacturing Design Engineering New Product Development Marketing Customer Service Distribution & Sales Multidivisional Coordination Strategy Implementation Interbrand Top100, 2012: Honda; Interbrand Sector Overviews: Automotive Industry 2012; Honda Annual Report 2013; Brand Finance Top500 Honda Capabilities: Key Strengths & Weaknesses This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    20. 20. Honda: Capabilities Activity Map ‘Keiretsu’ Model Supplier Business Model Time to market Manufacturing Cost Value- added Services Flexibility in Production Lines Own plants for FIT/Jazz High customer recognition This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    21. 21. Automotive Market Trends by 2018 Honda Car Industry Key Success Factors Top 5 purchase criteria are cost of fuel, ease of recharging , driving distance, battery lifecycle and battery management and value added services (financial sevices, MaaS, customer service, fast response to product recalls, financing of e- components) In Europe, 5-door Civic hatchback with newly developed 1.6 liter i-DTEC diesel engine , the lightest in its class; plus financial sevices, MaaS, service and warranty options; should leverage finance services to reap opportunities in BRICS ICE downsizing/hybrids Enhanced vehicle lifespan Joint approaches R&D Management & Funding New urban mobility concepts Added value services Brand Management Plug-in Connectivity Solutions Online services Multi-brand dealerships Emerging market expansion Global footprint/expansion Trade barriers Capacity management Module/platform Strategies Plug-in Hybrids, Non Plug-in hybrids, Battery electric vehicles with extender, Fuel cell electric vehicles and Battery electric vehicles Accord Plug-in Hybrid released boasts the highest power economy rating of any plug-in hybrid in the US market; should also invest in Russia for rising demand in e-mobility Highest expected vehicle demand will be in compact, subcompact and SUV vehicles Falling behind in SUVs and small urban green cars Environmental challenges push for ICE downsizing and e-mobility Lightweight and fuel efficiency technology in place Growing urbanization push for innovative urban car design and MaaS Launch of Nbox+ & N-One mini vehicle models in Japan with Emergency Stop Signal and ‘excellent fuel economy’, lightweight technology in place, limited MaaS Changing Customer Behaviour demand new dealership concepts and financial services; online activity on the rise Falling behind compared to other brands, but released Fit EV for lease sales in US and Japan as an electric vehicle with high power economy, declining relevance of current model may be a source of profitability loss Growth & Globalisation require strong presence in emerging markets and overcapacity Strong presence in China & India. How about Russia? • Existing dealership model irrelevant to future success • Joint Approaches in Manufacturing favoured •R&D budget allocation a challenge for automakers • Community building with customers and brand image are key to successful value- added service strategies Tying Honda Capabilities with Market Trends by 2018 and KSFs KPMG 2013 Report This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    22. 22. Example: Honda’s Marketing and Distribution & Sales Capabilities Honda’s strong sales in China can be partly explained by the fact that they have tapped into consumers preferences for safety and comfort. This is a classic example of Honda leveraging distribution and sales with marketing capabilities to solidify their presence in China. BrandZ Top100 for Car Industry, Section on Chinese Consumer preferences This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    23. 23. Example: Honda Diverse Supplier Network keiretsu Capability Keiretsu means ‘headless combine’, literally layers of organizations linked with business ties, a characteristic of Japanese automakers. Toyota and Nissan have modernized their keiretsu in the last 10 years, while Honda seems to be falling behind. This is an example of how capabilities may come together in supporting the structure and systems to effect a change that would benefit and strengthen supplier networks according to market demands Harvard Business Review, September 2013 on keiretsu This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    24. 24. Example: How is Honda poised to face BRICS competition? Market Insights predict that BRICS manufacturers will be major automobile exporters in the next 3-5 years, from Eastern Europe and Mexico hubs. Honda is strengthening its presence in Mexico by opening a new production plan for FIT/Jazz best selling cars to US, thereby being perfectly poised to face imminent BRICS competition. Honda is leveraging market sensing with distribution & sales and manufacturing capabilities to produce superior offering to customers, thereby preparing to face imminent BRICS competition successfully. KPMG 2013 Report This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    25. 25. • Honda has tangible assets deteriorating in value 2010-2013 from 99.111 to 84.032 B US $, including 369 subsidiaries and 86 affiliates worldwide as of March 31 st 2013, with the R&D centres fitting VRIO criteria • Intangible assets including trademarks, patents, technology innovation and traditional R&D culture all qualify for VRIO, but to allocate sustainable advantage designation for any of the above resources, information on how they render value for customer is needed • Human resources include 190,338 employees. Honda places high importance on hiring, training and developing staff in an internal environment that fosters creativity, R&D culture, diversity, inclusion and where the opinion of employees matter. Highly skilled employees are VRIO, while senior managers are promoted from within. HRM results in strong corporate culture and a learning organization • Honda capabilities include Strategy Implementation, Manufacturing, Design, Engineering, New Product Development, Marketing, Distribution & Sales, Customer Service and Multidivisional Coordination • Honda’s key weaknesses include Design, Manufacturing, Distribution & Sales and Engineering • Potential activities rendering sustainable competitive advantage if running efficiently are SED business structure, a strong and diverse supplier network and processes favouring low manufacturing cost and customer service Conclusions This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.
    26. 26. • Honda is matching industry KSFs for medium term by expanding its automobile business and by focusing on new technologies and new product development, but seems to be missing out on flexible manufacturing opportunities via corporate JVs and on modernizing supplier business model. Risk should be assessed on not pursuing the latter 2 strategies • New product development should focus promptly on consumers’ preferences of the markets with the highest demand for automobiles, like e.g. SUVs for China. Capabilities like R&D management and budget control, brand management and leveraging sales networks to effectively gauge consumers’ preferences come into play • There are opportunities to market unused product attributes, like e.g. green technologies, safety and awarded design to specific customer segments. There is room to exploit strong brand for developing customer community further in view of successful value- added strategies. Strategies like these will improve customer satisfaction and loyalty and thus lead to increased profitability Recommendations This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

    ×