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External Factors Impacting Decisions in Honda
External Factors Impacting Decisions in Honda
Order ID 53003233773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
External Factors Impacting Decisions in Honda
Without becoming redundant, the positive and negative external factors for Honda, were aforementioned earlier, as opportunities and threats as part of the SWOT analysis. These two external factors have the greatest impact in the direction of Honda Motor Company’s path to success and reaffirmation as a global automotive power. However, it is the negative external factor of threat that may very well have the greatest impact on the decision and direction of where the company is going. The economic slowdown, competition in global automotive market, tightening emission standards, the bouts of recall and appreciating Yen against US Dollar had lead a to sudden restructuring of the Honda’s leaders and overall business approach.
One can infer that they have lost their way from their original basic principles of quality, individuality, and joy; and much more similar to survivability instead. Perhaps Honda may have notice this recently since, much of the surprise by company insiders, have suddenly replace its current CEO Takanobou with Takahiro Hachigo as well as other senior management with an entirely new, younger group of people. With poor global profits, bouts of recall, and bland styling, the company is trying to redirect its path into a much fresher direction (Levin, 2015).
Possible future scenarios
The reconstruction of Honda’s leaders will definitely have a drastic change in the direction of the company and its products. More of its vehicles will probably be updated, especially in aesthetics to combat the bland styling that everyone associated Honda recently with. This is evident with the new release of the Acura NSX, an enthusiast’s exotic car which was once retired by Honda due to increasing price of fuel. The reintroduction of this vehicle should pave a way for new exciting looking cars in the future, capable of bringing joy their consumers. Combined with new technologies, from their research and development department, Honda will once again have products desired by young adults.
Furthermore, by hiring leaders, especially a CEO with global-based experience, the company will be able to expand its growth and grasp as made evident with opportunities that Honda has on its plate. With China’s booming population, a massive market share in motorcycle in the country will bolster the company’s success and alleviate many of the threats the company has had for the past decade (Levin, 2015).
Primary and Secondary Market
Perhaps, Honda Motor Corporation is much more complicated than just assigning one main primary target group. Since Honda has multiple product types, their primary targets are usually of greater criteria. Product Segmentation usually narrows the target market based on the product type. This approach is rather tough because of its inability to satisfy each customer due to unique differences and exposure. In order to generate higher sales record, Honda Motor utilizes target markets that have been clustered precisely which groups customers that are similar on their segmenting dimensions into a homogeneous segment. Honda’s approach with their products, are usually geared towards the economic standing of their customers and their age, which both have the highest tendency for behavioral influences. Geographic locations also place a part, but not as specific as the other two groups aforementioned above (Minami & Minato, 2009).
First of all, geographic influence on Honda’s product, simply defers on their products’ accessories, safety requirements, and aesthetic looks, preferred by that area served. Certain countries may have specific requirements for safety, as well cultural preferences and or necessities. For example, cars sold in the US are usually required to undergo a specific amount of crash testing in order to be sold in the entire 50 states. As such, cars sold in the US may be end up being bigger, heavier and a lot less powerful than their Asian counterparts in order to meet the demands for safety. Although important for advertising and rapport, geographic criteria alone is not enough to determine its target market since automobile market is too broad and encompasses all population. However, this statement should not take geographic location lightly as it has a huge determining potential for profit, sales, and the direction of where the company is heading (Bateman & Snell, 2013).
Honda as previously mentioned, manufactures a form of transportation, whether it’s a car or a motorcycle, and as such, age and economic standing is a huge determinant for its target market. Age and socioeconomic level are both intertwined and have linear relationships. The greater the age of the customer, the higher spending power he or she may have and on the other hand, the lesser the age, the weaker the spending power. However, younger group tends to have higher spending tendencies than that of their elder counterparts.
Honda Motor has dramatically changed its approach over the years and is more evident with this era. Although the company started with a much younger target group in the past, especially since the company originally began as a motorcycle manufacturer, they have gradually evolved and their vehicles are a great example of that. During the 90’s era, Honda created cars that were light, powerful, and fast which had tendency to sell pretty well with the younger crowd. However, overtime, also due to the increasing gas prices and safety concerns, Honda become primarily focus on a more refined age group of around 30 to 50 years old. Factoring age as well as gender, Honda sells vehicles that are more luxurious than before, providing increased convenience, above average fuel efficiency, a good and comfortable ride, and an image booster. It also provided advance safety technologies at an affordable price, for that age group. This primary target group has determined the recent line up of all vehicles Honda is producing. Many of the population within the age group, are considered financially stable, and are looking for a vehicle that satisfies their needs to protect their family. Even, if the price of Honda vehicles are a bit higher than the other competitors, their vehicles are made specifically for that age group, and with consideration of their socioeconomic standing at the time of a person’s age, affordability is never an issue. However, their secondary target group, the younger crowd, have taken a slight hit considering, they are beginning to deem Honda as a boring vehicle manufacturer (Ibarra, 2010).
Honda Motors decision to focus primarily on customers with the age group of 30 years old and older has hurt the image of the company, especially since the company advertises that they manufacturer and sell vehicles for “respect for individuality and the joy driving”. They are anything but their former glory, considering many people have perceived their vehicles to be boring and generic. They are no longer selling vehicles for joy, but rather to satisfy a target group that would make the best profit. It is understandable considering, this age group, is no longer Honda’s primary customer base, and may have less money and fewer demands for their product. Since it is a business after all, the direction of the company is often determined where their products will most likely sell. However, secondary target audiences are still just as important (Honda Worldwide, 2011).
With the abysmal global profits that Honda suffered in recent years, the company has decided to shuffle and replace it’s head executives to change its approach. In fact, in recent declaration of lineups and concept cars during the 2015 auto conventions, the company seems to have developed and financed, new powerful vehicles, with exotic looks, worthy of gear heads, and rich men suffering mid-life crisis. These new vehicles such as the new Acura NSX, has capabilities, equivalent to the likes of Ferraris, Lotus and Lamborghinis. Furthermore, new models of their current line up were unmasked recently and featured, an edgier style, faster engine, whilst retaining the previous quality, safety and comfort of the older models. Honda also will also introduce more model varieties to accommodate the levels of different customer economic status. For example, Civic will be sold in different trims, with the base model being the cheapest, and the SI and Mugen, being more powerful and aggressive, at the cost of an increased price. Honda Motors has taken steps to accommodate both its primary target group and the secondary target group, taking into perspective the customers age and economic status in their product. This change of approach is creating new opportunities by capitalizing, on a much younger and growing secondary target group, whilst maintaining the habitual decision making in the much older primary group. A success that Honda has established where “consumers engage little conscious effort” when deciding in the purchase of their product (Bateman & Snell, 2013).
Target Market
Regardless of the change of direction for such company like Honda, or any other company regarding this matter, one will never let go of their most established and most profitable group of customers. In this case, North American baby boomers, a suitable name for a target group, are of the greatest profitable group for Honda Motor Company. Although it is not limited to North America alone, but with 90% Honda vehicular purchases are transacted in this continent, it is no wonder that the company has spent millions of dollars for advertisement and development of vehicles, made for American specificity and of that primary target age group.
Honda’s specific target group’s demographic, putting geographic locations aside, are usually people of age 30 years old to 50 years old, married or single, with no gender preferences, and at a mid to high middle class status. Although there has been a change in the pricing of their vehicles to accommodate all levels of socioeconomic background, the main bulk of their target are still of those of the middle class. To further expand on these criteria, aside from the demographics and location, customer lifestyle is also greatly considered. Honda’s primarily targets working class population with established work and buying power, fairly successful, desires value for money and prestige in what they drive in. Furthermore, within this target group Honda also aims for behavior patterns of customers who has a habit of replacing cars every 5 to 7 years, a monthly amortization of 15 to 20 thousand and has a desire for a good ride and efficient fuel consumption. Combined all this, Honda is able to influence their customer’s behavior following the Maslow’s theory of needs to their own advantage and thus gaining profit. The North American Baby Boomers target group is at an age, when the physiologic, safety, social, esteem, and self-actualization needs are of greatest importance, and combined with an ability to purchase vehicles, establish a profitable target group for Honda Motor Company (Thompson, 2009).
Market Position
How strong is Honda Motor Corporation compared to its competitions? Based in Figure 1, out of the big five automobile market company share in U.S., Honda is indeed last, with an exception of around 2009 when it took the fourth spot from Toyota, then lost it again ever since. Currently as of March 2015, shown in Figure 4, Honda’s share percentage is at constant 8.4%. Although Honda is not the main leading automobile manufacturer in the states, evident with the fact that it is still a foreign company in a domestic US market, it can be seen that the company has been stable and maintained it shares steadily. Where as the other big companies, have huge fluctuation in their share percentage, Honda Motor Corporation has maintained a consistent percentage since 2005.
Possible reasons for this pattern can be seen in how Honda has played it safe ever since. Since their target group has always been stable as aforementioned above, Honda maintained its strategy and is quite evident as shown with their consistency. To further this idea, considering that Honda is not solely an automobile manufacturer, it is safe to assume that, all of its profits are not entirely from vehicle industries and therefore, the company does not seek glory of being number 1, but being stable and consistent. However, this approach has made Honda boring and with change in demands, due to gas prices decreasing as shown in figure 2, it will be interesting as to what the company will do in response to this sudden change. Furthermore, Honda’s grasp in the motorcycle industry has been threatened, especially after the termination of the partnership between HeroMotoCorp took place, which resulted in the lost of almost 40% of sales for the company (Cain, 2015).
External Factors Impacting Decisions in Honda
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