Motor Co., Ltd (??????????) is a Japanese multinational corporation
founded by Soichiro Honda and his partner, Takeo Fujisawa in 1948 in Hamamatsu.
The company is well-known for the production of automobiles, motorbikes,
airplanes, machine engine and robots. Honda, with its endless development, has
become one of the biggest automobile manufacturing companies on the world. The company’s
development from a start-up to become an international company, with
unimaginable today’s achievements, is a long history with many obstacles and
step-by-step trials and efforts. The appropriate and superior strategies should
be analyzed to understand why Honda can grow into such a successful enterprise;
as well as consider the difficulties of the company.
As written by Reference for Business
website, Soichiro Honda started with producing piston rings to sell it for
Toyota, but his product was rejected due to low quality. However, 2 years later
he was finally able to sign the contract in large amount with Toyota. After the
collapse of the two plants due to the bomb attack in World War II and the 1945
Mikawa earthquake, Honda sold his company for Toyota.
Honda decided to concentrate on manufacturing
motorcycles. The release of Honda’s first motorcycle, Dream, helped Honda to
become the world’s largest motorcycle manufacturer. In 1958, Honda introduced
50cc Super Cub, which brought Honda a lot of orders and sales of $55 million.
Honda then expanded its market into Asia,
Europe and especially the U.S. Honda operated its U.S. subsidiary in 1959,
which changed the bad image of motorcyclist at that time in the U.S. and
replaced it with the motivation for everyone to own a motorcycle. With much
cheaper price compared with other U.S. motorcycles, Honda undoubtedly became a
popular motorcycle brand. By following the suitable regional policy, the sales
grown significantly, from $500 thousand to $77 million between 1960 and 1965. Another
factor contributed to this success is sufficient distributors and marketing
addition, in 1964, Honda took a risk of developing motorcycle shipping and cash
on delivery service and succeeded with it. Honda became the company that owned
the largest market share in the world. In 1967, it began manufacturing cars, trucks
and agriculture machines and achieved continuous success in the U.S. in
particular and around the world in general.
After the death of Soichiro Honda in
1991, Nobuhiko Kawamoto, the president and CEO, led the company. The company
faced some obstacles due to the U.S. car producing congestion and Japanese
competition but then recovered quickly. Honda continued to grow and opened
production facilities in many countries, such as India, Indonesia, Vietnam,
etc. In 1998, a joint venture agreement to produce and sell cars in China was
Moreover, in 2005, Honda completed its
robot production. Its name is Asimo. In 2015, HondaJet first went into service and
started passenger delivery.
Honda has developed endlessly and
unlimitedly in technology and production with diverse products available around
the world. We can expect its further development and success in the future.
Honda is not only operating its business
in Japan but also many other countries and continents, such as China, Asia,
Europe, North and South America. It owns about 13 offices and 442 affiliated
companies around the world. As estimated until March 31, 2017, there are about
211,915 consolidated employees and about 21,903 nonconsolidated employees
working for the corporation. The total capital is approximately 86 billion yen.
The consolidated sales revenue reported in March 2017 was about 13,999.2
billion yen and the consolidated operating profit was around 840.7 billion yen.
The global total products sales through wholesale and retail channel in 2017
was 28.76 million units. These are colossal figures that indicates how successful
Honda is on the global market.
It can be seen that the key part of Honda
manufacture is Automobile which accounts for 72% of the sales revenue. Following
that are Financial service and Motorcycle with 13.4% and 12.3% in succession.
Although the Automobile part was developed after Motorcycle one, it becomes an
important part that brings about six times larger in revenue. The smallest part
is power products and other business.
Despite being the largest in unit sale,
with 14.81 million units, Asia just ranks the second in sale revenue. The biggest
and most significant market is America. Honda invested about $18.5 billion into
and constructed 12 manufacturing plants in America
The slogan of Honda is “The Power of
Dream”, which actually delivers its way of operation. Honda sets and approaches
unlimited targets that not every company can complete. Honda prefers creating
ideas and completing its dreams, despite of risks. According to Nonaka I. and
Takeuchi H. (1995), when some disadvantages occurred in the Japanese market, Honda
developed the 1994 Accord to bring itself out of the shocks. Honda had ever
done anything like this before. They brought American and European specialists
in engineering and marketing term to Tokyo to develop the new model, which would
reduce the cost in manufacturing stages. A contest for studio design in Japan,
the U.S. and Europe was also hold. This reveals that Honda created new knowledge
to go against crisis. (17) What they wanted to say is that by the effort to
learn and innovate knowledge endlessly, Honda could overcome obstacles and enrich
its history of success. Rothfeder J. mentioned in his book (2014) that: “”Success,”
Honda said, “can be achieved only through repeated failure and
introspection. In fact, success represents one percent of your work, which
results only from the ninety-nine percent that is called failure.”” This means
that success is the result of the long period of failure. Honda believes that
they cannot get any achievements without experiencing failure. By that way of
thinking, they do not affair trying new things and taking risks, which is one
of the factors that make the company become more and more successful.
The way Honda operating is likely the
same as other Japanese company but has some outstanding points. According to
Rothfeder J. (2014), Honda encourages its employee to always enrich their knowledge
and keep thinking. Meetings, which is called “waigaya”, are organized everyday so
that they can together reappraise the decisions, from large to small, and try
to build better strategies. They try to consider the two sides of every issue. The
CEO cannot his mind until the argument is done and everything fits. Honda
supports paradox to motivate critical thinking and go forward general knowledge.
“At our company, self-satisfaction is the enemy”. To make sure of reaching the
best quality for the products, Honda believes that they have to be reevaluated
as much as possible by the co-working of the company’s employees. Honda never stops with its success, instead, continue
with looking for more knowledge, more inspiring ideas and better innovation.
One of the remarkable strategies that
makes Honda company become a thriving multinational corporation is “localize,
not globalize”. Many companies use localizing strategies when operating in
other countries, but not every aspect. Honda is a special case. According to
Rothfeder J. (2014) and Johnson K. (2014), Honda is not controlled by the headquarters.
When setting up in a new region, it will develop a new office which will manage
every stage of manufacturing, as an autonomous company, in that place. Honda
decentralize all critical aspects, such as R, design, engineering, etc. Moreover,
the subsidiaries are being run by the local people. The input is got from
Japan. By that way of operation, the company can quickly adopt the demand of
the local market and solve the problems or unsuitable points of the products. In
other words, Honda become a local company when it comes to a new market.
Finally, other stupendous strategies of
Honda that are mentioned in the book of Rothfeder J. (2014) are that:
responsibility over corporate mandates;
making based on observed and verifiable facts, not theories assumptions;
flat organization over an exploding flow chart;
and ad hoc design, development, and manufacturing are nonetheless continuously
accountable to one another;
cynicism about what is believed to be the truth;
goals for employees and suppliers, and the company’s active participation in
helping them reach those metrics; and
borrowing from the past as a bridge to what Honda calls innovative
discontinuity in the present.”
Those strategies help Honda improve the
company’s flexibility. Honda appreciates the role of a superior structure and
system in the development of an adaptive organization.
Honda has faced some obstacles from the
natural disasters, resources and competitors. The 2011 huge earthquake in Japan
pushed Honda into a slight crisis. Gammelgard A. reported (n.d.) that the
disaster had made Honda Motor Co.’s domestic factories suspend their production
and in consequence, the loss of 16,600 units output. Dalavagas I. also stated
(2011) that Honda was one of the companies that suffered the most from the
adverse effect of the disaster. The company was forecasted to endure the mass
shortages in output, at about 50%, and double-digit decreases in capacity in
Japan and the U.S. Honda also has manufacturing facilities in Thailand,
Indonesia and China, which usually suffer from many natural disasters every
Recently, the Kobe steel company’s
scandal of unqualified aluminum and copper used in transportation has made a
big shock among Japanese manufacturer. According to Finnerty J. (2017) Honda is
a client of the company and Honda’s reputation in products’ safety can be
influenced by that scandal. Honda was using the metal from Kobe steel in
producing doors and bonnets. However, in October, 2017, Honda announced the
confirmation of its safety standards.
Last but not least is the increase of
competitors in automatic market. Jurevicius O. (2016) indicated that the
revenue growth in 2016 of Honda motorcycle was only 5.4% in Asia, while 20.3%
in North America. It was the result of the entrance of cheaper price products
from new brands in India and China. The same condition occurred in automotive
market. Furthermore, other big company in car manufacturing market, like Toyota,
Volkswagen, Huyndai, etc, own larger budgets and are potentially capable of taking
larger market share. This means that the rivals of the company are not only
well-known enterprises but also new and small to medium companies. Automotive market
is always considered as a competitive market.
Honda is a successful
multinational corporation with 70 years of development. Going through a hard
begin as a piston ring manufacturer for Toyota, Honda, now, has become a big
rival of the company. Honda operates and its products are well-known for the
high-quality around the world. Strategies that make Honda get so many achievements
are the spirit of unlimited studying and expanding knowledge; reexamining the
issues; localizing better than globalizing; developing the flexibility of
structure and system. Although the company is successful, but there still has
some barriers that need to overcome, which are the influence of natural
disasters, the scandal from cooperating company and the fierce competition with
small to large companies available in the market.