In our current industrial age, companies left and right will face certain decisions to keep them afloat in the sea of commerce, but these decisions also have a certain effect on the society and the products or services these companies produce. With that being said, companies will be forced to increase their costs in producing the good, which will consequently increase the price the consumers are willing to purchase it for. Utilizing the concepts in determining the costs of production will be essential for the creation of the term paper. This paper is aimed to determine the “market forces” that affected the manufacturing company and is there any significant relationship on the costs of production and the low production volume of Honda cars in the Philippines. As researchers in this topic, we will identify factors, using the formulae given to us by our report on the costs of production, the paper will determine the wage rate per worker, the cost to produce one unit, how much are they earning, the accounting and economic profit, are there any explicit and implicit costs affecting their company and how the company will look in the long and short run average total costs.
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The first thing that could come up in your head when you hear about Honda is the
Civic. Or, on the other hand, it could be one of its famous motorcycle, or the humanoid robot Asimo, or even Formula One. Whatever you think about hearing the word “Honda”, one thing is for sure --- this Japanese maker has rich legacy driven by the force of dreams.
Here is Honda’s past:
The Honda Motor Company was founded in October 1946 by Soichiro Honda.
From a young age he was very interested in vehicles, and he used to mod cars and put them into races using his friend’s garage. When he grew up he wanted to be in the car industry. Eventually his efforts paid off, and he got a contract to supply big car manufacturer Toyota with piston rings. But unfortunately he lost the deal because his goods didn’t meet the price expected. So he went to numerous Japanese factories searching for ways to boost the engine efficiency by creating powerful piston rings. Soon he was able to discover a fully efficient method that could manufacture high quality piston rings using unskilled labor. Toyota was impressed by his product ad soon bought
40% of the company and this Soichiro and the officials at Toyota could built a lasting business relation but due to unforeseen events his company got damaged forcing him to fully sell his company to Toyota.
He founded Honda Technical Research Institute in 1946 to sell modified bicycles with motors attached to them. He only had 12 employees employed in a 170 sq ft. area.
In 1949, Honda and his team were able to unleash the Model D after years of effort and became the first complete motorcycle they ever produced from their own components.
Soon demand for his low-priced motorcycle increased and by the 1964 the Honda
Company became the largest motorcycle maker. They didn’t stop there but sought out different possibilities in that span of time. They managed to introduce their first ever four-wheel vehicle in the form of the T360 mini pick-up truck in 1963.
Honda has a reputation as the biggest internal combustion engine maker to hit an unprecedented figure of 15 million in 2012. It is now the world’s eighth-largest car maker; an industry it has a very late entrance into. In 2012, Honda had sales in excess of
$99 billion out of which $3 was the annual income. It has over 175,000 employess working in various parts of the world. As of 2013, more than thirty car models have been launched to boost their performance year after year. (“Success Story”,n.d)
Through manufacturing loud scooters to building the world’s finest vehicles,
Honda has come a long way to grow as a business.
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In the Philippines, Honda is in strong partnership with the Ayala Automotive
Holdings Corporation and the Rizal Commercial Banking Corporation. According to their website, it was established on October 1990 and commenced its manufacturing operations on February 1992. Honda has always been inspired by its visons from its inception to deliver goods of the finest quality at a fair price. HCPI was given an ISO 9002 certification in November 1997 for its robust quality checking --- an indication of the excellent standard of Honda vehicles. With its world class infrastructure and indigenous manpower skills in its production activities, the Honda City is confidently manufactured locally at the manufacturing plant at HCPI in Sta. Rosa, Laguna. With the varied needs of customers in mind, HCPI markets eight models in the Philippines --- City, Jazz,
CR-Z, Civic, Accord, CR-V, Pilot and Odyssey --- suitable for various lifestyles. Honda’s vehicle is engineered to offer pleasurable driving efficiency, excellent fuel economy and optimal safety for riders. Honda has recently launched cutting-edge technology that not only make mobility enjoyable, but also environmentally sustainable. (“Chamber of
Automotive Manufacturer Philippines, Inc., 2014”)
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The Philippine automobile industry today was shocked by the surprising news on
March 25, 2020. Honda Cars Philippines is shutting its assembly plant in Santa Rosa,
Laguna. Company spokesperson Attorney Louie Soriano sent out the announcement. This means the Japanese automaker’s stoppage of production activities in the region. It was on brink of selling out but it came back firmly to cement itself as one of the major names on the foreign car market. It has kept its status as the world’s largest maker of motorcycles since it assumed the position in 1964. At that facility Honda is currently manufacturing two models of vehicle: the BR-V and the City. It should be noted that motorcycle manufacturing is not affected by this growth, as a separated company (Honda
Philippines) manages the two-wheeled products from Honda.
In a phone interview with VISOR, Soriano said that “market forces” had contributed to the company’s decision. He cited the “global market slowdown” and the
“shift in automotive technologies” as the key reasons for the switch.
A total of 387 people will lose their jobs in the process, according to Soriano, but said the staff will be fairly paid. “We will provide them with packages that go above and beyond what is stipulated in our collective bargaining agreement.” Of course, the staff are not the only ones affected by the closure. HCPI reports on its website that they have “about
60 parts and materials supplier”
In February 1992, Honda’s Santa Rosa factory commenced manufacturing operations.
Honda is expected to supply both the BR-V and the City from either Thailand or Indonesia in the future.
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According to salary explorer, a person employed in the Philippine Factory and
Manufacturing usually earns about 39,600 pesos per month. Salaries vary from 18,700 pesos (lowest average) to 74,600 pesos (highest average, higher total gross salary).
That is the average monthly wage for housing, travel and other benefits. Wages vary significantly between various occupations in Factory and Manufacturing
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A salary range for an individual includes the dimensions of the benefits that the person wants to receive. It’s the rate the organization has at its fingertips for a corporation to pay a potential hire, and what existing workers would expect to receive in a similar job. In the Philippines, Factory and Manufacturing wages vary from 18,700 pesos per month (minimum average wage) to 74,600 pesos per month.
The term “median” simply means middle and when it applies to salaries, it is the one that falls into the middle of the table if you mention in numerical order all the salaries of each worker working in that profession. Half of those on the list earn less than the mean and half earn higher. Here in the Philippines, the median wage is 42, 800 pesos a month, meaning that half (50%) of Factory and Manufacturing employees earn less than 42,800 pesos and the other half earn more than 42,800 pesos.
It tells how much a certain percentage of an overall population in a geographic area of within a given industry or field makes. The most commonly used percentile salaries are the 10 th , 25 th , 50 th , 75 th and the 90 th percentile. The salary allocation diagram reveals that 25 percent of people employed in the factory and industrial industry earn less than 27,600 pesos while 75 percent earn more than 27,600 pesos. The figure further reveals that 75 percent of people employed in Factory and Manufacturing earn less than
63, 400 pesos while 25 percent earn more than 63,400 pesos.
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A brand-new Honda Civic 1.5 RS Turbo CVT is valued at 1,608,00 PHP
Cost of Research and Development is 16% of the price
Cost of Labor of an Assembly Line Worker is 17,700 PHP
Marginal product of labor (MPL) =
∆Q
∆L
30
40
L
0
10
20
MPL
1

1
10

0 .
1
MPL
2
MPL
3

2
10

0 .
2

3
10

0 .
3
MPL
4

4
10

0 .
4
Q
0
1
3
6
10
MPL
0
0.1
0.2
0.3
0.4
8

L
0
10
20
30
40
Q
0
1
3
6
10
Cost of
Research and
Development
257,280
257,280
257,280
257,280
257,280
Cost of Labor Total Cost
0
177,000
354,000
531,000
708,000
257,280
434,280
611,280
788,280
965,280
9

Q
0
1
3
6
10
Marginal Cost (MC) =

TC

Q
Total Cost
257,280
424,280
611,280
788,280
965,280
10

1
3
6
Q
0
10
FC
257,280
257,280
257,280
257,280
257,280
11
VC
0
177,000
354,000
531,000
708,000
TC
257,280
434,280
611,280
788,280
965,280

Q TC MC
0 257,280
167,000
1 434,280
93,500
3 611,280
59,000
6 788,280
10 965,280
44,250
Q
0
1
3
6
10
FC
257,280
257,280
257,280
257,280
257,280
AFC
N/A
257,280
85,760
42,880
25,728
12

Q VC AVC
0
1
3
0
177,000
354,000
N/A
177,000
118,000
6 531,000 88,500
10 708,000 70,800
Q
0
1
TC
257,280
434,280
3 611,280
ATC
N/A
434,280
203,760
6 788,280
131,380
AFC
N/A
257,280
257,280
257,280
10 965,280
96,528 257,280
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AVC
N/A
177,000
354,000
531,000
708,000

With the provided data given by the results of the paper, the researchers recommend the following:
1. The production of motor vehicles must be more focused on which has the most sales that will have a significant difference in total profit of the company.
2. The marketing team are encouraged to engage in touring other industries that are successful in the business and use what they have learned to improve theirs.
3. The company must be aware of their average total cost curve (ATC) in the long and short run so that they can understand on which quadrant must they focus their production on.
4. The company is also encouraged to conduct monthly surveying on their competency with other vehicle manufacturers in order to keep up with the trends and keep producing vehicles that will give competitors a run for their money.
5. Future researchers are encouraged to conduct similar topics about what factors do consumers highly prioritize when purchasing a vehicle and how will it affect the consumers’ comfort and daily living after purchasing the vehicle.
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