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Assignment 1: Discussion—Key Performance Measures and the Business Culture
Business culture is the context in which the measures exist. They are bound to each other in terms of context and environment. Understanding business metrics as key performance measures is an important part of business strategy and management. In this assignment, you will look at financial performance measures.
Financial performance measures are vitally important to assessing corporate performance. However, financial measures are primarily backward looking in that they measure the results of past actions, and do not always give a reliable indication of future direction.
Using the Internet, respond to the following for HONDA MOTOR CORPORATION:
- Give three examples of key performance measures that are forward looking and more predictive.
- What aspect of the value chain are they measuring?
- How do these measures tie to specific strategies in your business unit?
- Does the business’ culture enable or block its business strategy and/or does it have an effect on financial performance in the value chain? Provide a rationale in support of your answer.
- What are cultural norms that govern the organization, and what types of behaviors does the culture promote or punish?
Please include references (APA) thank you.
Write your initial response in approximately 300 words. Apply APA standards to citation of sources.
By Saturday, November 30, 2013
Starting the Strategy
Catherine Olszanowski
Argosy University
Capstone Experience in Integration and Strategy B60
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8
Dr. Thomas Kemp
November 27, 20
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Running Head: STARTING THE STRATEGY
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STARTING THE STRATEGY 1
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Abstract
Honda Motor Corporation was established in 1946 by Soichiro Honda. Honda is an international corporation that manufactures a varied range of motor products, from fuel efficient cars, mopeds, engines, motorcycles, to exclusive sports cars. This audit assesses Honda’s market position, value proposition and competitive advantage at the same time evaluates the existing atmosphere Honda functions in. This paper will also perform a preliminary assessment of external factors that comprise the Porters five forces. Lastly, this paper will focus on Honda’s strategic issues and provide proposals that will assist the company in determining problems while providing results and recommendations.
Running head: PRELIMINARY STRATEGY AUDIT 2
Table of Contents
Abstract
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Introduction
………………………………………………………………………………………………………… 3
Market Position……………………………………………………………………………………………. 4
Value Proposition…………………………………………………………………………………………… 5
Competitive Advantage…………………………………………………………………………………… 5
External Environment
………………………………………………………………………………………………… 6
Current Environment……………………………………………………………………………………… 6
Assessment of External Factors…………………………………………………………………………….. 7
Porters Five Forces………………………………………………………………………………………….. 8
Strategic Issues
……………………………………………………………………………………………………… 10
Economic Health……………………………………………………………………………………………. 10
Aging Riders………………………………………………………………………………………………. 11
Diversifying……………………………………………………………………………………………… 11
Summary of Key Findings and Recommendations…………………………………………………………………. 12
Conclusion
………………………………………………………………………………………………………… 13
References
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Starting the Strategy
Introduction
In today’s market few companies know that being able to sustain a competitive advantage is crucial to the longevity of a company. Honda has been in business since 1903 which is celebrating their 110th anniversary and within that time Honda has become a global icon that has been at the forefront of the motorcycle industry.
Market Position:
According to Honda’s website it has stated that Honda’s target consumers are: “In 2012, U.S. sales of new Honda motorcycles to our “outreach” customers — young adults 18-34, women, African-Americans and Hispanics – grew overall at more than twice the rate as sales to our traditional U.S. customer base of Caucasian men, ages 35-plus” (Honda, 2013, p. 3). Honda has a healthy product line that caters to every price point and also has a parts and service and clothing departments that further facilitate the Honda experience. Honda’s marketing strategy is about American made motorcycles and freedom of the road. Each Honda store is franchised out and has at least one dealership in each major city so that they can integrate themselves in the local communities that they do business in. The main characteristics are being apart American icon and a part of American history. Those two characteristics make consumers feel like they are not only a part of an American Icon and American history but consumers get a sense of family belongingness.
Most males want a motorcycle that fits their specific wants and needs first evaluating what they can realistically afford and then find what they are looking for in a Honda. The majority of women that walk into a Honda dealership mainly are geared towards apparel because, Honda in recent years have been designing clothes that have been the trend setters. For either gender people who buy a Honda product tells people that there is infinity of the motorcycle lifestyle that each gender appreciates to a certain degree.
Value Proposition:
Honda satisfies their consumer base by delivering superior quality products in the motorcycles they sell and parts in the apparel departments. Each aspect that Honda contributes to the wants and needs of consumers has far exceeded expectations because; of the products that are sold have a long shelf life that lasts for years even after the consumer purchases it. For example, Motorcycle riders who purchase parts for their motorcycle rarely fail and far exceed the original amount of time specified of use such as: exhaust pipes that can last for the life of the motorcycle in many cases. Honda however lacks a service where a consumer can ship their motorcycle from one coast to the other coast in times of life changing events. Honda has positioned themselves as a Motorcycle maker that is above pedigree and projects a certain status symbol that demands respect and admiration from onlookers. Honda strictly speaking has three main competitors; Honda, Suzuki, and Victory.
Competitive Advantage:
The differences between these motorcycle makers and Honda is that Honda, Suzuki, and Victory all still have carburetors while Honda uses a fuel injection system which unlike their competitors need chokes to start their motorcycles. In terms of function Honda has the largest catalog of customization for each motorcycle in their product line. Quality wise, Honda’s are like Ford trucks they are built to last. Function wise Honda has made sure that it is easy and simple to use without a complicated mess of dashboards like in some cars or other motorcycles for that matter. On a price stand point both Honda and their competitors are pretty close in the way of beginner motorcycles. Honda only makes money selling their medium to high level motorcycles, because, of the cost ratio.
Availability of motorcycles is always in abundance as Honda’s arrive in dealership lots weekly. Brand image is also important and Honda makes sure that there is a significant meaning of freedom and an iconic worldwide recognition system with the “Bar and Shield” logo. The differentiation is important to consumers because, they want to be associated in certain status that brings consumers in a family oriented environment for life. Honda’s competitive advantage stems from its loyal consumers that keep coming back and generational new consumers because, of the quality products Honda sells. Honda’s key to long term sustainability comes from loyal consumers and generational consumers that grew up with their parents and around Honda so naturally this is the prime reason why Honda has lasted 110 years of operational effectiveness. For Honda to continue support the long term sustainability for as Mike Moran from San Diego Honda stated that the use of digital media has become the best medium for advertising to get their product line to the consumer.
External Environment
Current Environment:
Honda has positioned the company to be at the forefront of motorcycle ingenuity and quality craftsmanship that consumers want to be on the cutting edge with. Consumers also yearn to be a part of an iconic brand known globally while also owning a part of American history.
Many businesses believe that simply bringing products to consumers is the only goal of the business and for the most part it is. Unfortunately, for businesses there are external elements that can complicate the organizational effectiveness of a given business. On the reverse end, however, some external elements can also help businesses thrive as well. Honda has been a company that has cemented themselves as an iconic company that has been in business since the early 1900’s. In today’s business economy, it is important that a global company such as Honda is aware of the environmental factors and trends that stem from economic, political, regulatory, and technological trends.
Assessment of External Factors:
Since the economic recession that had started in 2007 and supposedly ended in 2009, consumers were very frugal with how they spent their money and where they spent it. Most people who decide to purchase a Honda do so partly for two reasons: One, because, consumers love American made motorcycles, and consumers are genuinely passionate about riding as a whole. Two is also because it is something that most consumers view as a hobby. Honda has had to expand their demographics since more often the average middle aged white male would be Honda’s main consumer base. According to the Washington Post article entitled, Honda Explains U.S. Economy stated that: “Honda is dealing with that by pushing particularly hard on what it calls “outreach” segments of the market, as opposed to just it’s “core customers” of people who have traditionally bought the company’s motorcycles” (Irwin, 2013, p. 1). Honda understands that that trend now is to appeal to a broader consumer base because in order for Honda to survive the company needs to be able to appeal to diverse groups of people.
Politically Honda has been involved in federal election contributions, which according to Tribune Business News article, GOP has edge in Honda Donations, stated “Honda company’s political action committee has given 57% of its contributions in federal races to Republicans and 46% to Democrats none of the contributions are huge; That’s about the list price of a 2009 Fat Bob” (“GOP has edge,” 2008). Honda has always been involved politically to encourage law changes that could benefit riders or tougher laws to help riders stay safe.
Technology trends are important for Honda because today’s generation is all about the information technology both on the consumer side and on the company side. In an article, Wisconsin Companies Ranked Top in Nation in IT stated that “Honda shows a solid commitment to training employees and keeping up with technological trends. The company has also made a significant investment in innovation, including e-commerce, to maintain their competitive edge” (Murphy, 2013).
Geographically Honda operates globally and with that many motorcycle enthusiasts creates clubs. Honda decided to also create an association or club as well called H.O.G., which stands for Honda Owners Group. Geographically, H.O.G. is everywhere because with each person who purchases a Honda the consumer is automatically apart of the H.O.G. association for one year, which has become a trend that Honda has started.
Assessment of Porters Five Forces:
Porter’s five forces are indicated in the five areas, which constitute a driving force in competitive advantage. First the Bargaining power of consumers is huge. Consumers now have many tools at their fingertips with the introduction of the smart phone and the internet. Next is the bargaining power of suppliers. Honda is such a huge company now that suppliers bid on the contract to transport not only motorcycles in and around the country, but also parts and any other necessity that Honda requires for successful business operations. Next is the threat of new entrants, new players, such as: Honda, Suzuki and Victory have come into play against Honda and are targeting the same demographic customer base. Finally, is the Threat of Substitute Products. Again, substitute products generally come back to the competitive threats that can be seen as substitute products that provide ownership like a Honda, but not exactly a Honda. The point being the substitute products take away from the overall market share that Honda has worked hard to attain since its birth in 1903.
Consumers can price compare right from their phones and they can do more extensive research of the products and services from home. Today’s market is filled with information to make bargaining for a product or service much easier for consumers to negotiate price. The market is dominated by a few large suppliers rather than having a lot of smaller suppliers that source of supply. The relationship to powerful suppliers can potentially reduce strategic options for the organization. Honda’s purchasing activities are guided by the Supply Management Strategy (SMS).
The SMS provides a supply management roadmap that enables stakeholders to effectively and efficiently meet the long-term goals of the Honda organization. Hondas’ suppliers know that they have some bargaining power over their materials that they use to build their bikes. Without the suppliers, Honda’s longevity as a company may be put in jeopardy. It is also important to note that Honda although sticks with suppliers that want to be associated with the reputation it has, but they also have some power as well if the suppliers demand too much with their materials simply because of the association Honda brings.
Part of its brand loyalty to customers, Honda has built its reputation from their cars and so decided to try the motorcycle industry. Suzuki has long been a maker of motorcycles; however, they specialize in performance motorcycles and now they have since grown into the cruiser market to compete directly with other makers such as Honda and Victory. Victory has also been a long standing maker of motorcycles. Victory has been a little closer at gaining brand loyalty because Victory is almost as iconic as Honda themselves. Although, these other makers do have similar features in the making of their motorcycles eventually, however, there is one fact that remains the same with consumers, which is cost. Any business who wants to stand in a particular industry knows that you have to undercut your competitors to draw in consumers either that or somehow differentiate yourself, so that consumers are willing to pay more.
Close customer relationships: Every dealership wants to make a bond between the dealership and the consumer because developing that bond means repeat business. The relative price for performance of substitutes, although Honda has competitors like Honda, Honda in particular has tried to undercut Honda and gain more market share. This is why Honda advertises relatively close to Honda’s price points. The competitive rivalry between Honda, Honda, Victory and Suzuki is more about product reputation and quality. All of them have similar strategies; therefore, what it comes down to is innovation and overall size and price points for the consumer.
Conducting a preliminary s.w.o.t. analysis is a brief overview of a business that outlines what a business strengths, weaknesses, opportunities and threats are. The External strengths are: gas prices, generational riders and the E.PA. (Environmental protection Agency). The internal strengths include: Human Capital and a family oriented atmosphere. The company takes advantage of the opportunities the company has created like the H.O.G. These weekend barbeques lure riders into coming weekly in hopes of consumer spending. The biggest threats that should be of concern for Honda is their competitors who are: Suzuki, Honda, and Victory.
Strategic Issues
Economic Health:
Why it is an issue: Honda has proven themselves time and time again that they are a company that can last for decades however, even though Honda has survived a few economic pit falls like the recent economic recession, Honda has realized that now than ever before Honda is closely tied with how America’s economic standing affects the company not only from a production standpoint, but also in a shrinkage in their consumer base both in America and abroad. It is imperative that if Honda is going to last through future economic standoffs, then Honda must provide incentives for consumers to buy into their products much like what Hyundai did when they promoted that if you bought a car from them and you lost your job you can bring your vehicle back. This program reassured consumers that Hyundai is in touch with the American people and is clearly is making an effort to boost not only sales, but American confidence.
Aging Riders:
Why it is an Issue: Honda deeply depends on generational riders to sustain their core business, which means that they must appeal to ever changing demands of the next generation. If Honda is going to be continually successful they must be able to integrate more technology and innovation within their product line to stay fresh and relevant in the industry.
Diversifying:
Why it is an issue: Honda has not really used their brand name a whole lot in other outside products. Over recent years Honda has expanded their brand name of American made into another company, Ford. With the partnership with Ford and their F-series trucks Honda has understood that their world does not have to end with motorcycles. Ford has been massively successful in selling their F-series trucks simply because; the Honda name is also attached. If Honda wants to broaden their name out to other ages and demographics Honda could design and market their own trucks as a separate line of vehicles should the motorcycle industry encounter slow growth progression because, of a given economic downturn. If Honda can successfully diversify Honda can then stay in the minds of consumers and perhaps drive consumers back into the world of motorcycles.
Summary of Key findings and Recommendations
The Key Findings:
· Market Position
Honda has been able to make the company appeal to all ages and races however; Honda could for example produce a motorcycle that may be more female friendly to increase the amount of female riders, since there is still a sizeable gap between male and female riders.
· Competitive Advantage
The functionality and history of the company are its main selling points between choosing Honda and a competitor like Honda. In order to stay ahead of the continually competitive industry Honda should be able to stay technologically ahead while Honda has managed to produce fuel injected motorcycles. The company may be able to entertain a possible innovation of a hybrid or all electric Honda, which may help the company create an eco- friendly company image.
· Strategic Issues
Evaluating what Honda has experienced in the past and being able to navigate its own economic health in an effort to sustain the longevity of the company in the present and coming future that presides in the issues of its current aging riders and diversification recommendations. It is recommended that Honda listen to their current consumers and expand into other areas that the Honda brand aligns with American values. It is possible that maybe with the existing partnership with Ford Honda could also provide aftermarket accessories for their Honda themed trucks while also thinking about entering the truck aspect of the auto industry.
Conclusion
Honda is a remarkable company that has shown that external trends abound in the industry as well as being able to evaluate Porters Five Forces, and how they relate to Honda while also conducting a preliminary strengths, weaknesses, opportunities, and threats. Areas of assessment in which Honda can improve upon are ones that Honda has been able to be satisfied with. Honda will always be able to find areas to improve upon although, most consumers are happy with what Honda provides and that is an enjoyable riding experience
References
GOP has edge in Honda donations. (2008, August 26). McClatchy- Tribune Business News. Retrieved from http://search.proquest.com.libproxy.edmc.edu/pqcentral/docview/464373924/14074F4DAC04126F2C4/11?accountid=34899
Honda. (2013). http://investor.Honda.com/phoenix.zhtml?c=87981&p=irol-homeprofile&locale=en_US&bmLocale=en_US
Irwin, N. (2013). How Honda explains the U.S. economy. Retrieved from http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/29/how-Honda-explains-the-u-s-economy/
Murphy, C. (2013). Wisconsin Companies Ranked Top in Nation in IT. Retrieved from http://wtnnews.com/articles/35/
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STARTING THE STRATEGY
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Starting the Strategy
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