HONDA (B) Case Analysis

Ankil Shangvi
Anurag Anand
Divya.R
Nishanth Chordia
Raghav.R
Sanjana.N

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Company Overview
Honda Motor Co.Ltd. was formed by Soichiro Honda in 1948.
In 1947, Honda Technical Research Institute was formed.
In 1947, Honda introduced the A-design- a 2-stroke, 50cc
engine- failure with numerous defects.
In 1949, it developed and introduced a 2-stroke, D-type
engine- 3hp, Reliable.
In late 1949, partnered with Takeo Fujisawa who invested 2
million yen and brought financial expertise and marketing
strength.
In 1951, he came up with breakthrough design - a 4-stroke
engine with doubled horsepower.
In 1952, $88,000 was raised from the 4-stoke engine, they
established themselves as a full scale motorcycle
manufacturers, with different channels of distribution.

Company Overview
By 1959, Honda became a significant player in thein the
industry with a 23 percent market share.
In 1959, it won the Britains Isle of men- Honda designed a
combustion engine which doubled the horse power and
halved the weight.
In 1958, it introduced Honda Supercub 50cc- automatic
clutch, 3 speed transmission, automatic starter, 50 percent
cheaper than a 100cc engine and safe and friendly looking.
By 1959, Honda took the first place among the Japanese
motorcycle manufacturers, sold around 285,000 units among
which 185,000 were Supercub.
The company started directly selling to retailers- the
motorbikes were sold on cash on delivery basis rather than
consignment.

Entry into U.S Market

According to Honda, U.S. Market was vast, untapped and

affluent.
There were 3000 motorcycle dealer in U.S among which
1000 were open 5 days a week.
The motorcycles were sold on consignment basis by the
manufacturers to the dealers, the retailers provided the
consumer financial and the after sale service was poor.
Among the 4,50,000 motorcycles that were registered in
U.S. , 60,000 were imported from Europe.
Japanese planed to target 10 percentage of the import
market.
They started selling 125cc, 250cc and 305cc bikes through
retailers in 1959.

Entry into U.S Market

In 1960, there machines were reported to leaking oil and
encountered clutch failure,
They worked on the finding the causes of the failure in their
testing labs by working 24 hour day,
They came up with a redesigned headspring and clutch pin
within a month.
Japanese assumed that the American preferred bigger bikes,
thus were hesitant about bringing in 50cc bikes.
They introduced Supercub 50cc which went on to become a
success, the sport bikes stores showed interest in selling their
bikes.
In 1963, they came up with the You meet the nicest people
on a Honda campaign, which raised the sales of Honda.
By 1964, one out of two motorcycles sold was a Honda.

External Environment
Porters Model of Five Competitive Forces:
Two Wheeler Industry
Two wheeler Industry was highly competitive and a lot of disruptive
technologies were evolving.
a) Intensity of Rivalry Among Competitors
) Competitive force is high
) The competitors are Suzuki, Yamaha, Kawasaki, BMW, Harley.
) Loss in market share.
b) Threat of New Entrants
) The entrance of new player in the motorbike industry is difficult as
the cost to enter is high.
) The cost of setting-up a manufacturing plan is high.
) High cost in R&D, development, marketing and positioning.

External Environment
c) Threat of Substitute Products
The threat of substitute is also high.
The treat of substitute is other form of transportation like cars,
trains, bus, etc.
d) Bargaining Power of Suppliers
Supplier power is high.
The bargaining power of the suppliers is high, it was difficult for
the player to switch suppliers easily.
e) Bargaining Power of Buyers
The power of the buyers is high.
The bargaining power of the buyers were high as they had a large
number of choices.
The retailer were given consumer financials, the manufacturers
were giving motorbikes on consignment basis.

SWOT Analysis
Threats:
Imitation of design and technology
The market is evolving and the innovation by competitors is easy.

Opportunities:
Rising disposable income.
Increase in first time motorbike buyers.
Financing was easily available for Two-Wheelers.

Strengths:
The ability to produce innovative technology.
Handwork and commitment (Every time there was a product failure or
competition, they raised and came up with new technology in a short span
of time)

Weakness:
The company entered into markets without a through analysis and strategy,
it entered into the U.S market at the end of the motorcycle trade season.

STRATEGIES ADOPTED BY
HONDA

Honda believed in design and technology innovation that lead to the

success of the company and demand for their products.
They used disruptive technologies and Economies of scale to gain cost
advantage.
They established a strong distribution system and cultivated a strong
relationship with the distributors and retailers.
Moved from Consignment basis to Cash on delivery, which gave Honda
a significant leverage over the dealership than its Competitors.
They started selling their bike to not the existing motorcyclist but to the
general public, which increase the first time buyers and established a
new segment of buyers.
They introduced small, light weighted, cheaper and user friendly
Supercub 50cc bikes compared to heavier bikes to meet the needs of
customers.
They spent a lot for advertising by coming up with You meet the nicest
people on a Honda Campaign.