Case Study – Reconciling Managerial Dichotomies, Honda Motors in De Wit & Meyer
Honda Motor Company was established in 1948 in Japan, on the backdrop of 1 million (Yen) and 34 employees. Over the years the company has grown to become the world's largest engine, motorcycle and automobile manufacturers, withmore than 178000 employees and stock holder equity of 4,544265 million Yen (Annual Report, 2008). Honda is the 5th largest automobile manufacturer in the world. Moreover, it recently surpassed Chrysler as the 4th largest automaker in the US. It is the 2nd largest Japanese automaker, behind Toyota and ahead of Nissan (Just Auto, 2008). In the early years, the Company was focused in manufacturinglocally and serving its domestic market, after which it began exporting its products internationally. In 1982, it became the first Japanese automaker to setup a plant outside its domestic boundaries (Ohio, USA). Now it has established plants all over the world, covering bases such as North America, South America, Europe and Asia. In terms of Japanese automakers, it has the largest share of plants as aratio of total business outside its domestic boundaries (Dicken, 2007). North America, with Unit Sales of 1850 (thousands) is the largest Market of the company, noted for the year ended 31 March 2008. In 1963, the company set up its first international motorcycles production plant, in Belgium. Honda currently produces motorcycles at 32 plants in 22 countries around the world. Honda establishedlocal motorcycle R&D operations in the U.S, Germany, Italy, Thailand, China, and India dedicating its effort to develop motorcycles that meet the needs of local customers (Honda, 2008). Asia is the largest market for the brand with a sales of 6633 (thousand) units for the year ended 31 March 2008 (Annual Report, 2008). In the following paragraphs, we will undertake a Porters 5 forces analyses.Question One:
Porters Five Forces (Industry Analysis)
Bargaining Power of Suppliers:
The nature of JIT (just in time) manufacturing, affords external suppliers considerable influence, whilst on the other hand significant gearing towards one auto manufacturer. There is some interdependency resulting in mutual power-sharing for the short-term. The long-term favors the auto manufacturersuch as Honda, who can switch suppliers, acquire existing ones or set up its own. JIT Manufacturing can be related to page 667 of the case study ‘right first time’. It can also be linked with and reconciles the dichotomy that fast delivery means lower quality; because (in USA) if Honda sells the products that it actually produces in the USA it will deliver at a faster rate, cut costs & maintainits dependable quality.
Bargaining Power of Buyers:
The automotive industry is highly competitive, therefore buyers tend to have some degree of control as there are many substitutes to choose from. However as companies create strategic alliances there is more and more power gain available for the car manufacturers. Individual buyers have a slight degree of control, this type of customer makes upthe majority of the market, whilst large buyers such as multinational organizations fleet departments will likely have much greater influence in the procurement of vehicles and are likely to strategically align themselves with one buyer, therefore making negotiation of prices easier for them.
Threat of new entrants:
Within the automotive industry barriers to entry are habitually high due tothe vast capital outlay required in automated manufacturing, design, location, cost of materials, copyright, marketing expenses and the list goes on.
New technologies in engine design, for example alternative uses of different types of energy will ultimately enter the market as our worldwide fuel sources deplete, such as hydrogen technology, these new fuel sources will allow new entrants in the...