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VRIO Honda and general motors

value chain analysis, VRIO frame work, sustained competitive advantage explained,vrio -valuable, rare,imitability,organised etc..

VRIO Honda and general motors

  1. 1. VRIO FRAMEWORK ANALYSIS HONDA & GENERAL MOTORS PRESENTED BY- Molina sinha P SVSSN Parameswarao Ranjana singh Dharma reddy Shahi arman Sanjay Singh
  2. 2. •A value chain is a chain of activities. In the value chain, some of the activities are deemed to beprimary, in the sense that these activities add direct value. -In the preceding figure, primary activities are logistics (inbound and outbound), marketing, and service. Support activities include how the firm is organized (infrastructure), human resources, technology, and procurement.•Products pass through all activities of the chain in order, and at each activity, the product gainssome value.•A firm is effective to the extent that the chain of activities gives the products more added valuethan the sum of added values of all activities.
  3. 3. VRIO and Relative Firm Performance
  4. 4. GM - INTRODUCTION• General Motors Company (NYSE: GM, TSX: GMM.U), commonly known as General Motors or GM, formerly incorporated (until 2009) as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the worlds second-largest automaker.• GM employs 209,000 people in every major region of the world and does business in some 157 countries. General Motors produces cars and trucks in 31 countries, and sells and services these vehicles through the following divisions/brands: Buick, Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden, as well as two joint ventures in China. GMs OnStar subsidiary provides vehicle safety, security and information services.• The U.S. government still owns a 27% stake in the company,and the Canadian government owns a 12% stake in the company. The Ontario government has owned a 3.8% stake in the company since 2009.
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  8. 8. {Support}LEADERSHIP TECHNOLOGY1. [+] CEO Rick Wagoner continues to oversee a massive 1. [+] Pioneering advances in telematics systems—as of restructuring of GM to a centralized structure and is 2008 OnStar was a standard feature in every GM striving to lead toward fully implementing the four- vehicle, making it the only car company to offer this step strategy introduced in 2005. (GM Case p.14) [-] technology across all brands and models. (“Demand Wagoner is coming under fire from Congress as innovation: GMs OnStar case.”) pressure for new leadership of GM grows amid the bailout, but Wagoner remains highly supported by 2. [N/+] Advanced propulsion technology that GM suppliers, dealers and GM employees. pioneers is helping GM offer 17 vehicles with 30 MPG or better, more vehicles than2. [+] GM Vice Chairman Bob Lutz is employing visionary competitors.(Datamonitor Report: General Motors design and technology leadership in making GM beat Corporation p.42) out its competitors to be the first come out with a fully electric vehicle, the Chevy Volt, by 2010. (“The Man 3. [+] Leading competition in new lithium ion battery Who Revived the Electric Car.”) technology for new electric vehicle. 4. [+] Continued development
  9. 9. HUMAN RESOURCE DEVELOPMENT INFORMATION SYSTEMS1. [-] Average cost of healthcare per vehicle exceeding 1. [+] Creation of complementary web-based channel $1,500 in U.S.—three times the level of Japanese called GM BuyPower allowing customers to search companies. (General Motors Case p.12) for vehicles and simultaneously provide GM/dealers2. *++ ―GoFast‖ GM Human Resources campaign seeing with vital customer information. (“GM: Building a success in cutting bureaucracy/problem-solving on the Digital Loyalty Network” p.9-10) spot—after implementing 7,000 GoFast workshops, savings of $500+ million. (“GM Goes Fast.”) 2. *++ ―Big Three‖ launch of Covisint in ‘00 creates3. [+] GM wins Workforce Management Optimus Award world‘s largest Internet-based virtual marketplace; for general excellence in 2004 through campaign to turn managers into strategic partners. (“GM Goes Fast.”) B2B exchange connecting GM with thousands of4. [+] Centralization across GM allowing talent in suppliers. (“GM: Building a Digital Loyalty Network” organization to rise to the top—180% increase in the p.12-3) number of women in the top 450 positions. (“GM Goes Fast.”) 3. [+] Complete revamp of its global manufacturing5. [+] Centralization toward globally standard training information technology infrastructure finished in programs. 2008. (Support)
  10. 10. GM has the opportunity to sustain long-term organic growth• GM operates under the core competencies of – technology, – leadership, – large scale operations, and – product/research development• GM must reposition itself as an innovative global competitor in order to survive.• The company has been continually plagued with a host of issues including lacking internal cost control and perpetually shortsighted strategies. – The company must first and foremost close the gap between the perception of its product reliability and the actual quality and innovation of its vehicles. This involves a sharp, dedicated focus on product excellence throughout the entire organization rather than slow, bureaucratic decision-making. – Second, GM must consolidate its brands to strengthen its brand portfolio.
  11. 11. Conclusion & recommendations (i)• Product reliability is one of GM‘s primary pitfalls, both in production facilities and with consumer perception. Product recalls throughout GM indicate a serious quality assurance problem and a lack of quality control systems.About half of GM‘s models are below average in reliability.• We recommend that GM continues to expand on its successful ―Go Fast‖ internal campaign, which has eliminated the slow, bureaucratic processes which were uncovered as a fundamental weakness . The GoFast program is a single meeting designed to fix a problem on the spot in order to eliminate future meetings addressing the same issue.• As of March 2004, savings of over $500 million have resulted from the implementation of GoFast.• GM has a history of cars leaving their plants with unaddressed problems in order to artificially decrease the number of reported defects. This includes faulty brakes, inadequate seatbelts and missing bolts.• In a recent lawsuit, management routinely deleted or downgraded reports on vehicles since 2005.• Setting up more quality check points in the production line along with an open platform for employees to express concerns will ensure that each vehicle produced is flawless.
  12. 12. (ii)• One of GM‘s crippling weaknesses is its plant inefficiency. As of 2005, GM plants have been running at 85% of capacity38 and the company plans to further cut production in Q1 2009 by 250,000 units, or 30% of total capacity.• Based on these statistics, it is apparent that GM is operating with too many plants that are not reaching their manufacturing potential.• Therefore, we recommend permanently closing some of its plants and transferring the workforce to the remaining open plants to optimize production capabilities. GM should sell or lease the closed plants to offset related fixed costs of the closures.
  13. 13. • (iii) In looking to gain market share and build a stronger brand image, a competitive joint venture with industry leader Apple Inc. would be a successful tactic for the company. – With a leading telematics system already in place, a strategic alliance with Apple would jointly increase both telematics innovation and consumer perception of GM products. – GM could model its Apple joint venture along the same line as Ford‘s partnership with Microsoft, which resulted in the creation of Sync. Similarly, Toyota has announced that it will be offering an ―in-car information and entertainment system‖ in its Lexus and Toyota brands in August 2009. – Partnering with Apple would result in pioneering technologies such as interactive applications that can be customized by vehicle owners, real-time weather, traffic and sports reports, and updates that can be instantaneously downloaded through the system. – Additionally, a partnership with Apple would enhance the OnStar system with Safari search engine capabilities. GM‘s partnership with Apple would appeal to a younger, more technologically advanced demographic. – Blending computer and wireless communication technologies has become a strategy for automakers attempting to appeal to younger car buyers. – Apple is ranked the highest in customer loyalty and branding by two recent independent surveys, which would spark the interest of dedicated Apple users. – With Apple‘s innovative skills at their fingertips, GM has the capacity to remain at the forefront of the telematics field while revitalizing its declining North American market share.
  14. 14. HONDA - INTRODUCTION• Honda Motor Company, Ltd. is a Japanese public multinational corporation primarily known as a manufacturer of automobiles and motorcycles.• Honda has been the worlds largest motorcycle manufacturer since 1959 as well as the worlds largest manufacturer of internal combustion engines measured by volume, producing more than 14 million internal combustion engines each year.Honda surpassed Nissan in 2001 to become the second-largest Japanese automobile manufacturer. As of August 2008, Honda surpassed Chrysler as the fourth largest automobile manufacturer in the United States. Honda is the sixth largest automobile manufacturer in the world.• Honda was the first Japanese automobile manufacturer to release a dedicated luxury brand, Acura, in 1986. Aside from their core automobile and motorcycle businesses, Honda also manufactures garden equipment, marine engines, personal watercraft and power generators, amongst others. Since 1986, Honda has been involved with artificial intelligence/robotics research and released their ASIMO robot in 2000. They have also ventured into aerospace with the establishment of GE Honda Aero Engines in 2004 and the Honda HA-420 HondaJet, scheduled to be released in 2011. Honda spends about 5% of its revenues into R&D.[
  15. 15. Financial Resources• Honda funds its financial programs for customers and dealers primarily from “corporate bonds, medium-term notes, commercial paper, and securitization of finance receivables” (Annual Report, 2008).
  16. 16. Organizational Resources• Honda is able to achieve a fast and flexible in infrastructure to meet customer needs through the efficient exchange of products, components and the expertise of Honda people between Honda operations worldwide.• Honda employs Newview Technologies Inc. to supply the company with information technologies needed to control its every part of its supply chain.
  17. 17. Physical resources• Raw Materials:• Easy access via supply chain management state of the art solution software created by Newview Technologies, Inc.• Fully integrated solutions provide the opportunity for Honda and its suppliers to work together in a real-time environment, making it easy for Honda to meet its manufacturing projections. Since Honda implements a pull- system of operations, it is important that raw materials are present at the right time, in the right amount. (
  18. 18. Technological Resources• Honda owns or otherwise has rights to a vast amount of patents and trademarks relating to the products it manufactures, which have been obtained over the company’s lifetime. These patents and trademarks have been of value in the growth of Honda’s business and may continue to be of value in the future.• Honda does not regard any part of its operations as being dependent upon any single patent or related group of patents. However, “an inability to protect this intellectual property generally, or the illegal breach of some or a large group of Honda’s intellectual property rights, would have an adverse effect on Honda’s operations” (Annual Report, 2008).
  19. 19. Intangible – Human Resources• Honda’s organizational culture helps to unite team members and provide them the opportunity to be a part of something much larger than themselves. Team building is used in work organizations and is the essential part of a leader’s work.• Team building skills are necessary for an ideal leader, such as Honda. These skills are required for effective work of a company and better understanding of teamwork can help members become more effective in the corporation. The essential element of teamwork success is the ability of a team to direct their efforts toward a certain a common goal (Annual Report, 2008).
  20. 20. Innovation Resources• Honda has always been a company for reliability and innovation. With a new and improved R&D structure, Honda continues to be a leader technology.• Expansion of Hondas global production and R&D operations now includes more than 124 plants in 28 countries with growing R&D centers in each of the six regions (Annual Report, 2008).
  21. 21. Reputational Resources• Honda’s reputation for its products stands among the top brands for quality. According to an overall brand analysis by consumer reports, Honda finished in the top five in six out of seven categories.• It is common knowledge that owning a Honda will produce value for the customer long into the future. In a survey of the top 100 global brands by BusinessWeek magazine ranked Honda at number 20 in overall brand value (BusinessWeek, 2007).
  22. 22. Value Chain Analysis• Primary Activities• Inbound• Honda purchases raw materials, and certain components and parts, from numerous external suppliers. They rely on key suppliers for items and the raw materials it uses in the manufacturing of its products. Hondas ability to continue to obtain these supplies in an efficient and cost-effective manner is subject to a number of factors. These factors include the ability of its suppliers to provide a continuous flow of supplies and Hondas ability to compete with other users in obtaining these supplies. Loss of a key supplier may negatively affect our production and increase costs. However, since Honda claims to use smaller, more independent suppliers, they have high bargaining power to counter-act risks associated with suppliers (Newview, 2006).• By centralizing procurement, HTA has the ability to control quality, guarantee availability of product, accurately determine delivery schedules, and establish consistent costs for Honda, as well as pricing for its major suppliers
  23. 23. Manufacturing & Operations• Honda’s final product manufacturing is a well-kept secret. But it is known, however, that Honda possesses a highly ergonomic design to help worker productivity and ensure a free-flowing production line. Regional manufacturing enables Honda to distribute, through their pull system, specific amounts of finished product as needed by sales, production predictions, and special volume orders. The orders are then shipped via rail or truck, or freight.• Through the introduction of Honda’s flexible manufacturing system, Honda continues to cut time and resources necessary to launch new models into production and there by improving the efficiency of manufacturing operations that meet regional needs. Moreover, the grouping of production processes into cohesive units has improved the working environment, raised product quality, and further accelerated production (Newview, 2006).
  24. 24. • Marketing and Sales:• To help boost revenue and to encourage buying, Honda offers financing for nearly every product it sells. Honda’s website implements a Web 2.0 type approach complete with financial calculators to determine what models customers are able to afford, as well as monthly payments due. Furthermore, customers can also apply online for pre-approval of financing options (Honda Powersports, 2009).• Service :• Honda, itself, does not service motorcycles. Instead, Honda recommends having products serviced at an authorized Honda dealer, who employs Honda “certified” technicians. If a the consumer decides to maintain it themselves or have it maintained by an independent repair facility Honda requires the use of Genuine Honda Parts and also requires all receipts should a warranty concern arise (Honda Powersports, 2009).
  25. 25. Support Activities• Human Resource Management:• Honda uses, to train employees, advanced programs provided by solutions such as Certpoints VLS software. VLS is a multi-lingual software that helps provide 40 thousand employees, distributors and dealers throughout the world with a mixture of e-learning, classroom training, and product information (Certpoint, 2007). According to datamonitor, one of Honda’s weaknesses, however, is the production level of employees (Datamonitor, 2007).• Firm Infrastructure:• Honda management style is the decision taken some years ago by the management of Honda to locate themselves in the middle of the headquarters building rather than the traditional practice of occupying the top floor, as this allowed them to remain more in touch with their employees (Annual Report, 2008).
  26. 26. VRIO• Honda Motor Co., along with its Powersports division, produces quality motorcycle, ATVs, and PWCs. – Among core competencies, Honda finds strength in its supply chain management. The company maintains a real-time relationship with parts suppliers and manufacturers. Honda has partnered with Newview Technologies Inc. to help secure a powerful supply chain from start to finish.• Honda possesses rare capabilities in its R&D department. Due to its stockpile of patents and trademarks, Honda has access to technology and innovation that many companies do not possess.• Honda’s production is very costly to imitate. The company has extremely centralized production facilities on almost every continent. This, along with their IT infrastructure, enables smooth and fast distribution to all dealers and ensures order accuracy.• Honda’s motorcycles are substitutable, as they do not have a specific culture associated with their brand. Honda Powersports’ products are very similar to brands such as Kawasaki and Yamaha.
  27. 27. JAPAN TSUNAMI EFFECT-HONDA Worldwideproduction experienced a year-on-year decrease forthe sixth consecutive month (since February 2011). A TEMPORARY DISADVANTAGE
  28. 28. HOPE NO Queries THANK YOU GROUP-2 31

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value chain analysis, VRIO frame work, sustained competitive advantage explained,vrio -valuable, rare,imitability,organised etc..


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