English Assignment help on : CASE STUDY ANALYSIS “HONDA IN EUROPE”

English Assignment help on : CASE STUDY ANALYSIS “HONDA IN EUROPE”

CURRENT BACKGROUND

This report is all about business of Honda in Europe. Honda is among world’s largest car manufacturers and is present in approximately every part of the world successfully such as North and South America, Europe, Asia – Oceania and Japan. The company is facing some issues in Europe region. These issues are basically related to the sales of Honda cars in Europe and hence are associated with the management of the company. Marketing strategies and management decisions of the company have been questioned in the case study and are analyzed in the report. Honda’s performance in other parts of the world is exceptionally well but in Europe it has a poor performance as compared to its competitors which puts a question mark against the strategies adapted by Honda in Europe (Bloomberg Business week, 2012).

The issues in the case have been discussed using SWOT analysis technique. By applying the technique some issues have been found and given priority according to their importance to the success of the business. When the issues are finalized then according to them external scenario of the business has been discussed by using PEST analysis. Strategy of Honda in Europe and its business result has been discussed. An analysis of the performance of Honda in European market is provided in the report. There will be many strategies available to address the issues. An evaluation of the alternative strategies is also given in the report. Based on the evaluation; recommendation and implementation plan is given.

CASE ISSUES

There are many issues related to the performance of Honda in Europe. The main issue which we have got from the case is that Honda had lower sales in European countries. In fact with the same global strategy it has performed very well in North America. A data of sales of the Honda vehicles in different parts of world is given below:

Above data clearly shows that the sale of Honda in Europe is only 8 % and 10 % of its total sales in 2007 and 2008 respectively. We can better understand the issues by doing a SWOT analysis of Honda in Europe with the help of information given in the case study (Honda, 2012).

Strengths

• Biggest strength of Honda is its technology. It participated in F-1 race which made its image of a technologically strong company.
• Strength of company in Europe is its product range i.e. it manufactures cars, motor cycles and lawn movers and hence customers have choice for their vehicles.

Weaknesses

• Maximum part of Honda’s profit comes from North America and due to this it highly depends on North America.
• Maximum percentage of the Sales revenue is earned by only few models e.g. Civic and Accord.
• Honda is not able to spread its fixed cost for a huge volume of vehicles in Europe. It has limited revenue to spend on marketing, technology and research and development.
• In Europe it has also failed in making its strong presence in small car market (You Sigma, n.d.).

Opportunities

• Consumers increasing preferences for lower pollution emitting cars and fuel efficient cars is a big opportunity for Honda. It can invest in R&D to get some new innovative product.
• Alliances are the best opportunities for Honda in Europe.
• Emerging markets are also another opportunity for Honda. It can earn from these countries and invest in Europe to make its position strong.

Threat

• Biggest threat for Honda in Europe is unstable economic condition of the European countries. Entire European Union is suffering from debt crisis which has lowered the growth of private sector in Europe as well.
• Buyer’s consideration for Honda has declined also the reputation of Honda is reducing among young generation in Europe.
• Honda is losing its appeal in Europe (You Sigma, n.d.).

The above SWOT analysis provides many reasons for lower performance of Honda in Europe. One of the reasons is it late entry into European market. Honda entered in Europe in 1961 as a motor cycle manufacturer and started its production facility in Europe in 1992. Other reason is that the European market was highly saturated by the local players in Europe. Also the foreign players like Toyota, Ford and Hyundai gave a tough competition to Honda in Europe. The issues which are responsible for all these problems of Honda are listed below:

v The biggest issue in front of Honda is its lower sales in European region. It needs to get some strong strategies to improve its sales figures in this region.

v Honda is also not able to make its brand image in Europe. Its branding is weaker than its competitors.

v Distribution strategy of Honda in Europe is also an issue for the company as it distributes it cars to those locations where it distributes its bikes which makes its distribution strategy identical for both the segment.

v Promotional strategy is another big concern for Honda in Europe as it applies same promotional strategy for entire Europe. The strategy in France is same as it is in Germany which should change according to the consumers taste and preferences.

v Also Honda has failed in understanding the cultural differences in different European countries. Each country in Europe has a different culture and understanding it is essential for success of any organization today (Kimberley, 2010). Diagram of brand image is given below:

ANALYSIS

As we have understood the issues of Honda with the help of SWOT analysis above now we need to analyze the circumstances so that the company can get some alternatives to improve its performance in European countries. SWOT analysis has already put an image of company’s strengths, weaknesses, opportunities and threats in Europe. Now let us have a look at the external factors which have affected the business of Honda in Europe. PESTLE analysis technique would be a good method to analyze the company is Europe:

POLITIAL

Political situation of Europe is not against the automobile industry but yes it has suffered in the last decade due to economic crisis. Government has proposed to limit the number of cars sold in UK which will obviously affect the business decisions of Honda. Government of Europe is ready to allow foreign investors but with the condition of lesser emission of CO₂. Honda needs to invest in its R&D department to get some fuel efficient cars with lesser CO₂ emission (The Hong Kong Times, 2011).

ECONOMIC

Economic situation of Europe was really bad in the last decade which is also a big reason for the lower performance of Honda in Europe. Entire European Union was suffering from debt crisis and still under the affect of it. Also Japanese Yen is a weak currency against the Euro and it makes Japanese car costlier in Europe. Current Euro and Yen exchange rate is 1 euro = 106.2590 Japanese yen (ECB, 2012). Good thing for Honda is that the income of the people in Europe is now rising which provides a scope to Honda to produce newer models. Also increasing fuel prices is a concern for Honda.

SOCIAL

Social factor is very important factor to understand by every company today and Honda failed to understand it. It used same promotional strategies, same product mix for every country in European Country. A glimpse of the cultural difference in different European country is given in the diagram below: Above figure clearly explains the cultural differences in different European country. Language, Taste and Preferences are diversified and Honda is capable of doing it. Also people of Europe prefer fuel efficient and small cars which could be a big benefit for Honda as it has Honda Jazz and Honda Beat.

TECHNOLOGICAL

Technology is not a concern for Honda as well as for Europe. Countries in European Union are technologically developed and Honda is known for its Technology worldwide. Honda can bring some new processes of manufacturing so that in can enhance its manufacturing.

LEGAL

There are some legal requirements which every automobile company is required to follow. General legal requirements like taxation, auditing etc are always there in every country. Car manufacturers in Europe are required to follow some safety regulations and Honda is capable enough of developing safety things in their cars. Also legal requirement related to CO₂ is necessary to follow. Honda continuously monitors these requirements and follows those (The Hong Kong Times, 2011).

ENVIRONMENTAL

Environmental factor is highly associated with the CO₂ emission. European Union decided to reduce the emission of CO₂ by all new cars by 25 % from the level in 1995. Honda achieved success in it. Data given in the diagram below explains the environmental factor clearly:

The figures given above are for 2001. Honda also introduces Civic Hybrid in 2003 a fuel efficient car with low CO₂ emission. Environmental factors are not a big concern for Honda in Europe. From the above external analysis we can identify that Honda had some strategic formulation problems in Europe. Honda is capable enough to follow the rules and regulations and other requirements to operate in Europe. The only requirement is to evaluate the strategic alternatives available to Honda. Strategies applied by Honda in Europe are not appropriate such as same promotional policies for each country in EU. Promotional policy of Honda in Europe is a big question. Similarly, product mix of Honda should also be evaluated as it has some two or three big brands and it relies on them only. Let us have a look at the strategic alternatives available to Honda in Europe (Health – EU, 2012).

FORMULATION AND EVALUATION OF ALTERNATIVES

Promotional Strategy:

Promotional strategy of Honda in France is same as it is in Germany, Italy or in UK. Promotional strategy of Honda should not be same as promotion is done to create an image of the brand into the mind of the consumers and every country’s target audience accepts the promotional messages according to their taste and preferences and culture. Honda relies highly on word of mouth, internet and its technical efficiency. It should be ready to spend on promotional activities so that it can create awareness among its target audience that Honda is technologically equipped car. It should use television commercials and print media to promote its brands. It should have different promotional strategy for different countries (Brooks, 2011).

Advantage of different promotional strategy is that Honda will be able to capture the taste and preferences of the different countries. Also it will increase the consumer base of Honda. The only disadvantage is that it needs fund in a big amount. But Honda should take it in a long term perspective.

Product Mix:

Products of Honda also need to be analyzed not only in Europe but also in the other parts of world. Honda relies only on its few brands which are no doubt excellent e.g. Civic, Accord, City and Jazz. But it needs to get some new brands in the market. For example many people want small cars which are fuel efficient as well as technologically strong. Honda can go for some new product development phases to enhance its sales and revenue. With new small cars in market Honda will be able to take the advantage of lower segment as well because currently Honda relies on big cars like Accord and Civic. It will also increase Honda’s competitiveness. Disadvantage of it is time required to do it as Honda already entered in European market very late; also new product development requires huge amount of money to spend in R&D, marketing and promotion and distribution etc.

Apart from above there are other factors on which Honda needs to think e.g. it distribution strategy, its pricing as the Japanese Yen is weaker than Euro which makes Honda cars costlier in Europe. Honda should also take care of the competition available in European Market as it is competing with world’s big giants like Toyota, General Motors, Ford, Hyundai etc. All these companies are not smaller or less competitive than Honda and therefore Honda needs to have good competitive strategy. Honda can consider product differentiation strategy for European market.

RECOMMENDATION

The best strategy for Honda will be new product development. Although Honda has a good range of products like Civic, Accord, City, Jazz, CRV etc but with these brands Honda is not able to compete with Toyota, GM or Ford. Also all the brands of Honda are not effective i.e. maximum revenue is earned by selling Civic and Accord only. Honda has two opportunities: first to target the premium segment where BMW, Mercedes and Audi are playing as well as middle class segment of small cars (Joseph, 2012). There are few points which should be taken care of while developing the new strategy:

• First of all company is required to arrange proper amount of capital required which Honda can do easily from the profits of its other regions.
• Company needs to understand the cultural differences in the different countries of the EU.
• According to the taste and preferences of the people Honda can go further for the new products development.
• Honda needs to focus more on small cars as pricing of small cars will be easier for the company.

IMPLEMENTATION PLAN

A strategy becomes successful when it is well formulated as well as well implemented and therefore an implementation plan is required to get the strategy successfully implemented. An implementation plan for Honda is provided below:

Resources: The main resource for new product development is money. A huge amount a capital will be required to invest in research and development and then in manufacturing. Manufacturing plant is also necessary as in importing the prices of cars become higher.

Responsible Personnel: Executives of Honda in the European region should take the responsibilities of various activities in the new product development stages. Also the top officials of Honda in European region need to take the responsibility.

Time Frame: As far as time frame is concerned Honda does not have enough time to get the strategy implemented as it already entered into the European market very late. It requires having some new products as soon as possible. It may spend two to three months in research and development and then one month in product tasting. After successful tasting within five to six months product launch will be required and then marketing of the product in a long term basis (Barnett, 2012).

Performance Measurement: For measuring performance Honda will be required to analyze the sales of new product on a monthly basis. Also company can go for a marketing research program to know the responses of the target audience.

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