New Technology in Aero-Dynamics and Fuel Efficiency
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New Technology in Aero-Dynamics and Fuel Efficiency
“’Respect for the Individual’ and ‘The Three Joys’-expressed as ‘The Joy of Buying,’ ‘The Joy of Selling’ and ‘The Joy of Creating’” are the four basic principles Honda Motors Company is embodied with, that influences its decision on its journey to continuous growth (Honda Worldwide, 2011). Respecting individuality base on their own customers’ unique characters, while providing direct enjoyment through their product has been the concept that Honda has expressed their belief in. In line with these principles ever since its establishment in 1948, Honda has remained a leading company in the market, through creation of new innovative technologies, products of higher quality at reasonable prices, worldwide customer satisfaction, and commitment to environment protection and enhancement of safety in a mobile society.
Honda Motors Company being the third largest automaker in Japan is perhaps known best as an automaker giant in the industry. Although the company has had its roots in motorcycles, and is even currently the world’s top motorcycle manufacturer, Honda’s automobile product line still accounts for approximately 90 percent of its sales, especially in the United States where the majority of its sales are generated. Honda has manufactured and sold many top-sellers, such as Accord, Civic, Prelude as well as its luxury line within Acura. Such popularity having positive effect on the success of the company has also generated negative publicity, with the Civic having rank first in the United States’ list of most stolen, and thus “in demand”, vehicles. Other products within the Honda’s vast divisions include other times that bolster annual sale, such as agricultural and industrial use machinery, generators, engines, and all-terrain vehicles (Minami & Minato, 2009).
As with any other companies, Honda has its shares of internal and external factors, dictating its success and growth. Where strengths and opportunities is a favorable outcome for the company, it is also shadowed with internal weakness and threats from external sources and competitors. In order to determine Honda’s future growth and its susceptibilities, a company analysis is therefore needed to establish its weak points, to highlight its strong areas, and to determine possible recommendations for future success of the company.
Description of the organization history, all subsidiaries and score of services provided
The Honda Motor Company is a multinational based company in Japan that deals with manufacturing power equipment, automobiles and motorcycles. The company has been the biggest seller of motorcycles for years and has also been the biggest manufacturer of internal combustion engines in the world, selling more than 14 million engines per year. Today the company is among the 8 biggest manufacturers of automobiles in the world. Although the aforementioned items are amongst its biggest offerings, they are not the only ones. The company also manufactures and sells marine engines, garden equipment, generators and watercrafts. Furthermore, there have also been steps in commercializing artificial intelligence, robotics, aerospace technology and aero engines, an interest which the company has been having recently. “Honda also has an excellent record of financial health, never once falling into the red since its inception” (Mie, 2015).
In the automobile market, the company has had tremendous success thanks to the different customer oriented vehicles they have come up with. The automobiles are also manufactured with consideration to the different regions that forms their market. For instance, a car in North America might not look like the international car of the same model. Motorcycles are also among the company’s highest revenue earners. Although the company reduced its production from 3 million every year to just over 500000 every year from 2006, it is still among the highest manufacturers of these vehicles. From there the company is again interested in engines in general, robots, aircraft solar cells, mountain bikes and ATV in that order.
Honda happens to have a number of subsidiaries that are responsible for the different interests that the company has in new fields. One of the first subsidiaries from the company was its dedicated luxury brand which was known as Acura. This brand was released in the year 1986 and as the first of its kind in Japanese automobiles. Another subsidiary of the company is known as the Honda Aircraft Company which is concerned with aerospace and the related aircraft technologies. The subsidiary is responsible for the new technology in aero-dynamics and fuel efficiency. In the solar cells market the company has a subsidiary known as Honda Soltec which was the first to sell the thin-film solar cells for both industrial and public use. Honda also has a Brazilian subsidiary known as “Moto Honda da amaonia” which is responsible of launching versions of Honda brands that are fuel-flexible. There are also a number of other subsidiaries which are grouped in accordance to what a particular purpose (Sakiya, 1982).
The company came to be as a result of the founder, Soichiro Honda who supplied Toyota with Piston Rings, and learnt about engines under a company known as Tokai Seiki. Following World War two, the company was bought by Toyota, and Soichiro Honda went on to open the Honda Research Center. From this point, they started researching and developing engines that could be attached to bicycles and motorcycles. In 1949, the company produced a full motorcycle that was known as Model D. This led to the success of the company and within the year 1964, it became the biggest seller of motorcycles in the world. However, they did not indulge in the development of automobiles until 1963 when they put up the T360 mini pick-up truck for both public and industrial use. Its s500 sports car was then developed and had a chain linking the vehicle’s engine and its back wheels. This is the possible origin of the design that motorcycles went on to acquire. The company then went on to expand and sell the two developed vehicles to different markets for the next decade. It is during this time that the company opened a subsidiary in America that was known as the Honda of America.
Due to the design of the vehicles, the company became successful as it opened branches throughout the entire world. The company went on to unveil their Acura brand which was successfully launched as a luxury brand in the American market. The sports utility vehicle and truck boom that took place in the globe, as well as the death of Honda’s founder, led Honda to become outpaced by other Japanese automakers. At this time, the company had a lot of financial woes and was on the brink of a hostile takeover by Mitsubishi Motors. However, the former CEO of the company back then, decided to change their working culture so as to meet the requirements of the buyers, instead of making vehicles that only the engineers will love to see. This gave birth to recreational vehicles such as the CR-V and the odyssey (Kato, Omae, & Nagao, 2005). Also, in the year 1995 the company officially birthed the Honda Aircraft Company which had the aim of producing aircraft bearing Honda’s name.
Scope of market distribution – are they global or regional etc
The company is an international company and has its market spread across different countries. The company has divided its market segments into three main ones; Japan, international market and sports. The Japanese market was the first one for the company and was competitive between Nissan and Toyota. As a matter of fact, it is as a result from the competition between these two that Honda was forced to spread into an international market. Apart from Japan the company has also advertised and opened a number of stores and manufacturing plants all over the world. The UK, New Zealand and Argentina were the first countries where the vehicle company first advertised their products. In the year 2007 the company was a significant sponsor in the ITV’s coverage of the Formula one race in the UK.
Furthermore, the company specifies some of their vehicles to ensure that they fit the particular segment of the market. This and the numerous stores the company has strategically show the attention the company is giving its international market. Another market segmentation that the company has is related to sports. This is one of the most important marketing segments to the company as it forms a significant target of the clientele. Ever since its initial years the company has took part in racing activities such as the Indy racing league where it was directly involved and also in other events that it sponsors in one way or another.
Overview of the leadership and management structure and individuals
The company was founded by one Soichiro Honda and is today being headed by Takahiro Hachigo. In the philosophy that guided the company was ideas that were not only innovative but also imaginative; this is the condition that the top management strived to create in the organization. The combination of both innovation and imagination ensured that the company experienced a number of benefits such as being able to analyze things from more than one perspective. This helps one look at the problem from multiple dimensions that give the individual the best strategy to approach the issue at hand. This strategy also puts into essential consideration the horizontal decision making mechanism in the organizations which are also important. It was also able to operate in a flexible state since the task forces and the teams can be put to different tasks regardless to serve the needs. Lastly, the structure of the company is optimized in such a way that both the individual and the organizational freedoms are in coherence. The top executives of the company form a matrix that promote complimentary relationships and promote both individual initiative and team strategy (Mito, 2012).
Current issues that may affect the future of the organization
There are a number of things that are currently happening in the news today that might affect the future of the company. One major situation is that Honda Motor Company is planning to manufacture and export more than 100000 motorbikes manufactured in Vietnam by this year of 2015. The company is trying to double its current Vietnamese export in an ambitious plan that seeks to become the biggest shareholder of motorbike in Asian countries. Furthermore, the company is also seeking to revamp its customer offerings, by introducing high end bikes where the old ones were purchased before. This will increase the number of sales than the company would have expected in such a short amount of time. The company is expected to push for and find new clients, informing them of new available motorbikes. If there are no clients, the company will be forced into a loss considering their input in the different strategy that has been used.
Perhaps the biggest issue right now for Honda is its recent bouts of recalls, most notably due to faulty airbags, made by its Japanese supplier Takata. These recalls have forced the company to replace its president. “Mr. Ito will be replaced by Takahiro Hachigo, 55, whose recent duties have included overseeing the automaker’s European and Chinese operations. The change will take effect after Honda’s annual shareholders meeting in June, Honda said. Mr. Ito will remain on the board, with the title of senior adviser” (Soble 2015). Although little is known about Mr. Hachigo outside of the company, many deemed him as similar to previous presidents that Honda have had, which is a complete opposite of Mr. Ito. How would he lead in the face quality problems Honda has been having in the following years, will dictate the direction the company is heading into.
Strengths and Weaknesses
In order to be able to portray the strengths of the company, while avoiding redundancy or turning into a disorganize mess, one must categories the company’s shining moments through its portfolio, success, and popularity. The portfolio of the company encompasses it’s the strength of its diversified products, as well as its strong brand image that it portrays around the world. First of all, having the 21st most valuable brand in the world, valued at $17 million dollars, Honda is one of the very well-known companies which thrives on its dependability and best quality made engines in the automotive industry (Honda Corporate, 2011). Furthermore, Honda, unlike many other automotive companies, has a multi-focal approach. It does not only focus on selling of automotive vehicles alone, but has various sectors and departments which focus on technological advancements as well. It is the largest producer of engines and motorcycles as well as multitude of equipments ranging from garden equipments, scooters, ATVs, generators, robotics, jets and solar cells (Honda Corporate, 2011). The company thrives with this dual form of decentralize and divisional organization. Wherein lower management focuses on their specific areas of expertise, with the development of the various examples aforementioned above, Honda also follows “Departmentalization that groups units around products, customers, or geographic regions” which is made evident by various factories in different part of worlds, selling region-specific goods (Bateman & Snell, 2013). Therefore, this form of organization structure that Honda follows protects the company against susceptibility to market cycles and technological disruptions. Since the company has multiple investments in different sectors, a disruption in the automotive field for example, will not debilitate the company as strongly as others (Honda Corporate, 2011).
The success of the company also portrays the over all strength of the company. Honda is one of the largest vehicle manufacturer in the world, encompassing cars, trucks, and motorcycles. Although there are stiff competitions in the automotive industry, its motorcycle market share in Asia, as of 2012 has dominated compared to other companies. In fact, Honda has sold 80.5 percent of its motorcycle in the Asian market, which presumably has the greatest growth potential for any company. Having the largest motorcycle market share, Honda has one of the best positions to compete with other companies for overall shares and profits. Furthermore, Honda’s success is evident also due to its advancements in technology through means of research and development. Their involvement and success in motorsport program, has proven their capabilities to compete with other automotive companies, in the further advancement of engine function and fuel utilization. Although labeled as sports, the importance of these event aids in the development of new powerful engines and technology, which often finds its way into the mass produce cars sold in the future. Honda’s investments in research and development has gained them 5% in revenue, and lead to improved vehicle paintings, hydrogen hybrid engines, and new welding technologies capable of strengthening vehicles and its safety. In fact, the company owns over 42,000 patents with another 29,000 pending (Honda Corporate, 2011).
Last but not least, the strength of a company is highly dictated based on its popularity. There are a lot of different factors that determines the overall reputation of the company and its product. The main factor is the quality of customer experience, which is often dependent on the reliability and durability of the goods. Consumers of Honda products, being one myself, have enjoyed the experience with Honda goods, often being durable and reliable for a lengthy period of time. Having appreciated the longevity of Honda products; the company has won numerous awards for quality and customer satisfaction. With a strong distribution network and continuous refining of its production system over the years, have yield more innovative and fuel efficient, low emission products for Honda. Saving the planet and keeping the cash inside the wallet has yield Honda with greater popularity in recent years (Honda Worldwide, 2011).
No company is devoid of or immune to any weaknesses. Some of Honda’s strength is also its weakness. Having branched out into different sectors such ATV, generators, garden equipment, and with a fairly strong automotive production line and a complete dominance over motorcycles sales, Honda is still particularly weak in the truck industry compared to other manufacturers. This sole factor inhibits their full grasp within automotive industry. Furthermore, as of late, the modern style of their car line has been deemed “boring and bland” compared to its predecessors in the past. Although each new vehicle acquired new technologies, this in turn drove up the price and drove away new consumers. The availability of these technologies has been questioned by consumers whether Honda’s vehicles are worth the steeper price. Furthermore, their popularity amongst young adults has dwindled ever since companies such as Nissan have release far more powerful and exotic looking cars such as the Nissan GT-R. Honda, on the other hand, continues to suffer from underpowered products, less roomy, and often annoyingly loud engine sounds during operation. This is quite disturbing considering this goes against their basic principles, aforementioned in the introduction (Honda Corporate, 2011).
Honda Motor Company is also suffering from recent bouts of recalls which is now beginning to take a toll on their brand reputation and future sales. Honda has recalled more than 1,000,00 vehicles to fix various faulty parts and manufacturing defects. Although, in Honda’s defense, it is their company’s affiliates that and manufactured and provided the faulty parts. However, as a decentralize organization, a fault of one branch or affiliates will always lead back to the head branch in times of mistakes. Always will and always has been. Speaking of branches, Honda’s weak position in Europe automotive market has cost the company to lose valuable profits and decreased sales. Honda has maintained only 1.1 percent market shares in Europe since 2012. Although, European market share is in decline at the moment, it does not justify Honda’s extremely low share on the continent, especially since Honda deems itself as a global automotive manufacturer (Car Complaints, 2011).
The accumulation of all these problems has led to greatest weakness for the company; decrease sales and profit. With the rising price of raw materials, and demand for lower cost vehicles, Honda’s revenue has hit the lowest point in 4 years, to 7.948 trillion yen. Sales were down by up to 11.2% in North America, which is troubling considering the continent represents more than 40% of total Honda revenues. Furthermore, revenues from Asia, has also declined by 21.3 percent, signaling a poor global performance (Honda Corporate, 2011).
Opportunities and Threats
With increasing fuel prices, a wonderful opportunity for growth can be found within the hybrid models and emphasis on engineering fuel-efficient vehicles. The decline of levels of fossil fuel sources and the rising emissions of C02 has led to change of perspective towards vehicles, and a major concern from people and many governments. As such, ecological cars, powered by hybrid systems of gas and electricity, hydrogen or flexible fuel engines have become extremely popular, a shadow of the past of what once was; where gas guzzlers were highly sought after. Having a new demand for these types of vehicles is a 33 billion dollar market and a great opportunity for Honda to capture (Honda Engines, 2011).
Furthermore, Honda has an ability to develop more aviation products as well as expands its grasp in the automotive industry by furthering and developing their truck line to compete with the other larger automotive manufacturers.
Honda can even capitalize on a couple of its strength already and make it even stronger. The motorcycle industry has grown by 4.2 percent from 2011 to 2012 and is expected to grow by at least 6 percent by 2016. Being one of the world’s leading producer and seller of motorcycles in Asia, the company can further expand its global market share and sales by targeting other continents. Honda can also grow through acquisitions of smaller competitors and benefit from strategic partnerships, especially in the motorcycle industry. New brands will be added to Honda’s portfolio, and achieve greater economic scale between the synergies of the two companies. There is extreme need for cheap dependable transportations, as within Honda’s grasp to take the opportunity for further growth a return to profitable stature (Honda Corporate, 2011).
The life of a company is of course never without threats as it can be seen from every angle and perspective. The fickle economy can change ever so slightly, causing death to or success for a company. The rising raw material prices for instance are a huge threat for Honda. Metals which are the main raw materials used for automotive manufacturing as well as research and development has raised the overall production cost for the company. The depreciating dollar and appreciating Yen alongside with higher cause of raw materials is a massive threat. On top of that, the much recent drop in fuel prices due to extraction of shale gas, evident of recent times, will have negative influence on Honda’s share. Considering that the company has invested immense amount of money into research and development on hydrogen fuel, hybrid and flexible fuel engine cars, will lose its demand since the fuel prices are low. Furthermore, natural disasters which, occurs yearly, are always looming around every corner. Honda manufacturing factories in Japan, Thailand and Malaysia are subject to natural disasters that disrupt manufacturing productions, thereby decreasing production volumes (Honda Worldwide, 2011).
Perhaps the biggest threat for a company, especially Honda is its competitions. Now for consumers, competition is a wonderful thing, since it avoids monopoly, and forces the company to decrease prices and increase quality of goods to “one-up” the other competitors. However in a business perspective, this is a huge threat for growth, success, and profit. In fact Honda is facing more intense competition as of late, especially since small new entrants are disputing the market having capabilities of producing electric vehicles and alternative fuels. Furthermore, big companies are restructuring themselves to become more efficient, and targeting a variety of areas that consumers are in demand of. Honda is taking hits in both small and big players (Honda Corporate, 2011).
New Technology in Aero-Dynamics and Fuel Efficiency
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