Sarkis H Mesrobian
SWOT Analysis
Honda Motor Company
Honda SWOT analysis 2013
Strengths
Weaknesses
1. Diversified product portfolio
1. Product recalls
2. Huge investments in R&D
2. Weak position in Europe automotive
market
3. Strong brand image
4. Motorcycle market share in Asia
Opportunities
3. Decreasing sales
Threats
1. Increasing fuel prices
1. Intense competition
2. Positive outlook for global
motorcycle industry
2. Decreasing fuel prices
3. Growing global demand for
environmentally friendly vehicles
4. Growth through acquisitions
3. Rising raw material prices
4. Natural disasters
5. Strong yen
Strengths
1. Diversified product portfolio. One of Honda’s edges over its competitors is that Honda
does not focus only on selling vehicles. HMC is the largest producer of engines and
motorcycles, ATVs, marine engine, and even lawn mowers. Because Honda makes more
products, it can tap into other markets for greater revenues, and also the company is
not as susceptible as its competitors are to market cycles or technology disruptions.
2. Huge investments in R&D. Honda’s investments in research and development reach as
much as 5% of revenue. The business relies on these investments to achieve
competitive advantage through various technologies, such as improved vehicle painting
process, new hydrogen and hybrid engines or new welding technologies. One example is
Honda incorporating the Jewel Eye full LED headlight system in their luxury brand Acura.
This feature provides the driver with day like near visibility without blinding oncoming
traffic.
3. Strong brand image. Honda has a great reputation for producing one of the highest and
best quality engines. When purchasing a Honda product, customers associate the brand
with reliability, quality, durability, with a fair price tag. Honda was the 21st most
valuable brand in the world valued at $17 billion and was only behind Toyota,
Mercedes-Benz and BMW, according to Interbrand.
4. Motorcycle market share in Asia. In 2012, Honda sold 80.5% of its motorcycles in Asia,
the market that has greatest growth potential. Having the largest motorcycle market
share, Honda is well positioned to compete with other companies for the sales and
profits.
Weaknesses
1. Product recalls. Between 2011 and 2012, Honda recalled more than 1,000,000 vehicles
to fix various faulty parts and manufacturing defects. Car recalls severely damages firms
brand reputation and future sales.
2. Weak position in Europe automotive market. Honda holds a very weak position in the
Europe’s automotive market and has maintained only 1.1% market share in 2012.
3. Decreasing sales. In 2012, Honda’s revenue hit the lowest point in 4 years to ¥7.948
trillion. Honda sales were down by 11.2% in North America, which represents more than
40% of total Honda revenues. Revenue from Asia and Europe also declined by 21.3%,
15.5% respectively, signaling poor firm’s performance globally.
Opportunities
1. Product recalls. Although Honda has had a rather high number of recalls, this can be a
great opportunity for Honda to improve its self-image. HMC can incorporate stricter
quality control standards, and more sample tests to insure less if not any recalls. When
customers hear about what extensive procedures are taken to insure a quality product,
they are more drawn to purchase that better product.
2. The pursuit of higher fuel efficiency. In an age of “going green” Honda is emphasizing
on engineering fuel-efficient vehicles, such as the Honda Insight and Honda Civic, and
Honda CR-Z with flexible fuel, hybrid and hydrogen engines. Their newest product, 2014
Accord Hybrid offers 50mpg city, and 45 mpg highway. This product will provide Honda
a greater chance to tap into the Hybrid car market for an increased market share and
increased revenues.
3. Positive outlook for global motorcycle industry. Motorcycle industry grew by 4.2%
from 2011 to 2012 and is expected to grow by at least 6% to 2016. Honda is the world’s
leading producer and seller of the motorcycles having more than 29% of the market
share. Growing demand for the motorcycles is a great opportunity for the company to
expand its global market share and grow sales.
4. Growth through acquisitions. Honda could greatly benefit from strategic partnerships
or acquisitions of smaller competitors. The business would add new brands to its
portfolio, achieve greater economies of scale and would benefit from synergies between
different firms. For example, Ford purchasing Mazda.
Threats
1. Intense competition. Honda faces more intense competition than ever. New small
entrants are disrupting the market with their capabilities in producing electric vehicles
or alternative fuel engines. Toyota recently introduced a whole new lineup of hybrid
vehicles; from small compact to full size SUV’s. Honda does not have products like
Toyota’s to compete on that scale. Big companies, such as Toyota, are restructuring
themselves to become more efficient. As a result, firms like Honda are suffering from
competition from both big and small players.
2. Decreasing fuel prices. Some analysts forecast that future fuel prices will drop due to
extraction of shale gas. This would negatively influence Honda because the company is
focusing on hydrogen fuel, hybrid and flexible fuel engine cars, which are not so
attractive to consumers when fuel prices are low.
3. Rising raw material prices. Metals are the main raw materials used in vehicle and
motorcycle manufacturing and the rising price of the raw metals raises overall
production costs for Honda.
4. Natural disasters. Honda has manufacturing facilities in Japan, Thailand, China and
Malaysia. These countries, including others, are often subject to natural disasters that
disrupt manufacturing in the facilities and decrease Honda’s production volumes.
5. Strong yen. Honda earns most of its profits outside Japan and appreciating yen poses a
great threat to Honda’s profits.
Sources
Jurevicius, Ovidijus. "SWOT Analysis of Honda." Honda SWOT Analysis 2013. Strategic
Management Insight, 12 Apr. 2013. Web. 03 Mar. 2014.