This essay Honda Marketing Strategy has a total of 1576 words and 9 pages.
Honda Marketing Strategy
The American Honda Motor Company was established as a subsidiary by
Honda in 1959. During the 1960's the type of motorcycles brought by
Americans underwent a major change. Motorcycle registrations increased
by over 800,000 in five years from 1960. In the early 60's the major
competitors were Haley - Davidson of U.S.A, BSA, Triumph and Norton of
the UK and Motto - Guzzi of Italy. Harley-Davidson had the largest
market share with sales in 1959 totalling a6.6 million dollars. Many of
the motorcycles produced were large and bulky and this led to the image
of the motorcycle rider as being one who wore a leather jacket and went
out to cause trouble.
The Boston Consulting Group ( BCG ) report was initiated by the British
government to study the decline in British motorcycle companies around
the world, especially in the USA where sales had dropped from 49% in
1959 to 9% in 1973. The two key factors the report identified was the
market share loss and profitability declines an the scale economy
disadvantages in technology, distribution, and manufacturing.
The BCG report showed that success of the Japanese manufacturers started
with the growth of their own domestic markets. The high production for
domestic demand led to Honda experiencing economies of scale as the cost
of producing motorbikes declined with the level of output. This provided
Honda to achieve a highly competitive cost position which they used to
penetrate into the US market. " The basic philosophy of the Japanese
manufacture is that high volumes per model provide the potential for
high productivity as a result of using capital intensive and highly
automated techniques. Their marketing strategies are therefore directed
towards developing these high model volumes, hence the careful
attention that we have observed them giving to growth and market
share." (BCG p.59 ).
The report goes on to show how Honda built up engineering competencies
through the innovation of Mr Honda. The company also moved away from
other companies who relied upon distributors to sell their bikes when
the company set up its headquarters in the west coast of America. The
BCG found that the motorcycles available before Honda entered the market
were for limited group of people such as the police, army etc. But Honda
had a "policy of selling, not primarily to confirmed motorcyclists but
rather to members of the general public who had never before given a
second thought to a motorcycle"( SP p.116 ). The small, lightweight
Honda Supercub sold at under 250 dollars compared to the bigger American
or British machines which were retailing at around 1000 to 1500 dollars.
In 1960 Honda's research team comprised of around 700 designer and
engineer staff compared to the 100 or so employed by their competitors
showing the value which the company placed on innovation. Production per
man-year was 159 units in 1962, a figure not reached by Harley-Davidson
Honda was following a strategy of developing region by region. Over a
period of four to five years they moved from the west coast of America
to the east coast. The report showed the emphasis which Honda paid to
advertising when the company spent heavily on the advertising theme "
you meet the nicest people on a Honda" thereby disassociating themselves
from the rowdy, hell's angels type of people.
Essentially the BCG is portraying Honda as a firm dedicated to being a
low cost producer, utilising its dominant position in Japan to force
entry into the U.S market, redefining that market by putting up the
nicest people image and exploiting its comparative advantage via
aggressive advertising and pricing.
Pascale tends to disagree on many points of the BCG report. The report
suggests that there was a smooth entry into the U.S market which led to
an instant success. Pascale argues that Honda entered the American
market at the end of the motorcycle trade season showing their impotence
to carry out research in the new market. As they entered the market at
the wrong time sales were not as good as they should have been and any
success was not going to be instantaneous. Pascale also criticises the
assumption that Honda was superior to other competitors in productivity.
He says that Honda was successful in Japan with productivity but
circumstances indicate that the company was not superior. The lack of
funding from the ministry of finance and the ploughing back of profits
into inventory meant they had a tight budget to follow.
The BCG report shows that Honda had a smooth policy of developing region
by region, moving from the west to the east. Pascale response is that
this is partly
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