Honda

Honda Motor Co., Ltd. (本田技研工業株式会社 Honda Giken Kōgyō Kabushiki Kaisha) {{tyo|7267}}, {{nyse|HMC}} is a Japanese manufacturer of automobiles, trucks, motorcycles, and scooters. They also make ATVs, water craft, electrical generators, marine engines, and lawn and garden equipment. With more than 14 million internal combustion engines built each year, Honda is the largest engine-maker in the world. In 2004, the company began to produce diesel motors, which were both very quiet whilst not requiring particulate filters to pass pollution standards. Honda's high-end line of cars are branded Acura in North America. Many Japanese automakers have well-earned reputations for dependability and longevity, with production being well quality-controlled. Honda automobiles have developed something of a cult status in terms of reliability, even above other Japanese brands, with many owners never having any major problems for the vehicle's life.

Honda's strategy

During the 1960s, when it was a small manufacturer, Honda broke out of the Japanese motorcycle market and began exporting to the US. Taking Honda’s story as an archetype of the smaller manufacturer entering a new market already occupied by highly dominant competitors, the story of their market entry, and their subsequent huge success in the US and around the world, has been the subject of some academic controversy. Competing explanations have been advanced to explain Honda’s strategy and the reasons for their success.

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The first of these explanations was put forward when, in 1975, Boston Consulting Group (BCG) was commissioned by the UK government to write a report explaining why and how the British motorcycle industry had been out-competed by its Japanese competitors. The report concluded that the Japanese firms, including Honda, had sought a very high scale of production (they had made a large number of motorbikes) in order to benefit from economies of scale and learning curve effects. It blamed the decline of the British motorcycle industry on the failure of British managers to invest enough in their businesses to profit from economies of scale and scope.

Related Topics:
Boston Consulting Group - UK - Economies of scale - Learning curve - Scope

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The second story is told in 1984 by Richard Pascale, who had interviewed the Honda executives responsible for the firm’s entry into the US market. As opposed to the tightly focused strategy of low cost and high scale that BCG accredited to Honda, Pascale found that their entry into the US market was a story of “miscalculation, serendipity, and organizational learning” – in other words, Honda’s success was due to the adaptability (and hard work) of its staff, rather than any tightly formed, long term strategy. For example, Honda’s initial plan on entering the US was to compete in large motorcycles, around 300cc. It was only when the team found that the scooters they were using to get themselves around their US base of San Francisco attracted positive interest from consumers that they came up with the idea of selling the Supercub.

Related Topics:
1984 - Richard Pascale - San Francisco - Supercub

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The most recent school of thought on Honda’s strategy was put forward by Gary Hamel and C. K. Prahalad in 1989. Creating the concept of core competencies with Honda as an example, they argued that Honda’s success was due to its focus on leadership in the technology of internal combustion engines. For example, the high power-to-weight ratio engines Honda produced for its racing bikes provided technology and expertise which was transferable into mopeds.

Related Topics:
Gary Hamel - C. K. Prahalad - 1989 - Core competencies

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Honda's entry into the US motorcycle market during the 1960s is used as a case study for teaching introductory strategy at many business schools worldwide.

Related Topics:
Case study - Business school

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