2. Abstract
In this assignment, I have tried to analyze the resources of Honda Corporation and Toyota. A
research was done to find, why one firm outperforms the other. The marketing strategy of both of
these firms was compared to find their capabilities and strengths. VRIO framework was used to
find the firm that is performing well in the market in comparison to the other and also, why how
much customers rely upon that firm.
Keywords
1. Toyota
2. Honda
3. Lexus
4. Capabilities
5. Research & Development
6. Uniqueness
7. Rivalries
8. Technique
Introduction
In order to be successful in today’s tough market competition, it has become important for the
firms to know about their competitive advantage that can provide them a leading edge over other
firms. This analysis will determine which firm is better out of Honda and Toyota. VRIO
framework has analyzed internally about all the resources and capabilities of both the firms. The
key strength of the firms has been found out, to show the uniqueness of the firm that keeps it
different from other firms.
HONDA
Some facts and features about Honda are mentioned below: -
It is a Japanese public multinational corporation. The headquarters of the company are in Tokyo,
Japan. Honda is primarily a manufacturer of automobiles and motorbikes. The company was
founded by Soichiro Honda. Honda ranks as 5th largest automobile manufacturer in the world. It
ranks 2nd in Japan. Honda was established on 24 September 1948. (Erica, 2009)
Capabilities of Honda
Honda’s corporate structure is unique as it is made up of 3 companies viz. Honda Motor, Honda
Research and Development, and Honda Engineering. Honda Motor produces and sells all the
products of Honda. Honda Research & Development is responsible for research & development
of innovative products for the company. Honda Engineering lays its focus upon manufacturing
process, system, and equipment’s that are used for manufacturing the resources. Capability of
superior design of Honda products has enabled the company to manufacture reliable products of
high quality.
3. Honda’s unique and efficient manufacturing technique has helped to keep the cost of production
costs low as compared to other companies. (Competitive advantage of Honda Corporation ,
2015)
TOYOTA
Toyota is world’s largest automobile manufacturer according to a survey organized in year 2010.
Headquarters of the company are in Toyota city, Japan. Toyota was founded by Kiichiro Toyoda
in year 1937. Corolla, made by Toyota is one of the most selling cars in the world. 30 million
cars of this model have been sold by Toyota. (Nkomo, n.d.)
Capabilities of Toyota
A unique and distinct competence of Toyota is its production system called ‘Toyota Production
System’, which is based upon lean manufacturing concept. Apart from Toyota, company
produces Lexus brand also. In financial year 2012, market share of Toyota was 45.5% in Japan.
In the same year, company had a market share of 12.2% in North America, 13.4% in Asia
(excluding Japan and China), and 4.3% share in Europe. The company has an extensive
production and distribution Network. Toyota produces its automobiles in 50 manufacturing
companies in 27 countries. Company has a strong focus on its Research & Development
department. Toyota conducts Research & Development at 14 facilities worldwide.
(Nkomo, n.d.)
VRIO Framework for HONDA
VRIO refers to Valuable, Rare, Imitate, and Organized.
If we try to apply this framework to Honda Corporation, and observe at all the three companies
of Honda viz. Honda Engineering and Design, Honda Research & Development, and Honda
Motor, we will find that:
Valuable
Q.1 Is Honda able to exploit an environmental opportunity?
Supply chain management of Honda is its key strength. Company has developed very good
relationship with its suppliers. Honda has 50 production plants in 27 countries, so in order to
keep the pace of production up to the level of demand, it is essential to get the raw material and
other sources at proper time. In large size companies like Honda, time is very important.
Management lays its focus to use the time effectively and make it sure that production does not
stop even for a second. Hence, the role of Supply chain manager becomes even more important.
Honda has developed this area so much that it has become the key strength of the company.
4. Rare
Q.2 Is the resource controlled by only a smaller number of firms?
Research & Development is the part of Honda which is extremely rare. This is the focal point of
the firm, because the firm can sell more of its cars only if it will develop something new which
other firms are unable to develop. Company has a stockpile of patents and trademarks in
Research & Development. The company has access to innovation and technology that other
firms are lacking in. Hence, Research and Development has made Honda stand out in this tough
competition in the area of Automobiles.
Imitable
Q.3 Do firms without a resource face a cost disadvantage in obtaining or developing it?
Production technique of Honda is very costly to imitate. In every continent, company has
developed extremely centralized production facilities. If any firm tries to obtain it or develop,
that firm will face a heavy cost disadvantage. Along with Information and Technology structure,
production system enables smooth and fast distribution to all the dealers and results in faster
delivery to the customers. (Products and technology, 2016)
Organization
Q.4 Are Honda’s other policies and procedures organized to support the exploitation of its
valuable, rarely, and costly-to-imitate resources?
Yes, all the policies framed by the management are organized in such a way that value of
resources of the company, rarity, and imitation can never decrease. Honda is running since last
68 years and it has developed itself in a better way and has organized itself in even better
manner.
VRIO Framework of Toyota
Valuable
Q.1 If any resource of Toyota has enabled the firm to exploit an environmental
opportunity?
Yes, low production costs by Toyota has made it possible for the firm to exploit environmental
opportunities. While producing on large scale, it becomes important to keep the costs low,
because decrease in costs will add to the profits. Toyota’s innovative technique has made it
possible to carry out production work at less cost. Being cost effective as compared to other
rivalries, has enhanced the value of the firm.
5. Rare
Q.2 Is the resource controlled by only a smaller number of firms?
Production Technique of Toyota is extremely rare. This resource if controlled by only a few
firms. Most of the firms in this sector use Just-in-time production technique. On the other hand,
Toyota uses ‘Toyota Production Technique’ which is a specialized technique of the firm. This
makes it rare among other firms,
Imitable
Do firms without a resource face a cost disadvantage in obtaining or developing it?
Production technique of Toyota is highly imitable. Other firms that tried to duplicate, copy or
develop the production technique of Toyota, they had to pay huge costs. In other words, those
firms could not do it in an efficient manner.
Organization
Are Toyota’s other policies and procedures organized to support the exploitation of its
valuable, rarely, and costly-to-imitate resources?
Yes, Toyota is a very well organized company; in which all the policies are organized to exploit
valuable, rarely and costly-to-imitate resources. The firm is running successfully since last 56
years and is perfecting it along the way. Hence, Toyota possesses good organization. (Company
Profile, 2016)
Conclusion
Overall, it was observed that Honda has a competitive advantage over Toyota. Different
resources of Honda make it stand out in competition with other firms like Toyota. Honda excels
at designing high quality cars. It is hard to catch up with the resources used by Honda as long run
production reduces the effectiveness of reverse engineering. Apart from this, the market share of
Honda in global market, its brand image, its value to the customers make it even more
competitive in the market.
6. Bibliography
Bacon, E. (20019, 02 02). Retrieved from http://www.slideshare.net/erikabacon/Honda
Company Profile. (2016). Retrieved from toyotaglobal.com: http://www.toyota-
global.com/company/driving-project/
Competitive advantage of Honda Corporation . (2015, 03 23). Retrieved from UKESSAYS:
https://www.ukessays.com/essays/business/the-competitive-advantage-of-honda-
corporation-business-essay.php
Erica, B. (2009, 02 02). Retrieved from http://www.slideshare.net/erikabacon/Honda
Nkomo, T. (n.d.). Analysis of Toyota Motor corporation. Retrieved from scholar.harvard.eu:
http://scholar.harvard.edu/files/tnkomo/files/analysis_of_toyota.pdf
Products and technology. (2016). Retrieved from world.honda.com: http://world.honda.com/
