Honda Europe Case Study

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Honda Europe Introduction

It is important for companies in order to gauge their external and internal business environments in order to maintain an effective competitive advantage. Gauging the business environment aids on appropriate development in the systems of a company and helps in ensuring market advantage. This study seeks to look into the case of Honda Europe in order to understand the internal and external business environmental factors that affect the company. The study seeks to conduct a SWOT analysis in order to gauge the internal environmental factors and a PESTLE analysis in order to gauge the external environmental factors.

Company Profile

Company Name

Honda Motor Company Ltd.

Type of industry

Conglomerate

Headquarters

Minato, Tokyo, Japan

Sales/Revenue

1.05 Trillion Yen

Area Served

Worldwide

Number of manufacturing plants

50 Manufacturing units worldwide

Competition

Ford, Mercedes, BMW, Toyota, Hyundai

USP

Honda offers designer, comfortable and luxury cars at affordable prices

Target Group

Upper middle bracket young executives

Products

Honda Accord, Civic, City, CRV.

Website

https://global.honda/

Table 1: Company profile

Honda Europe Swot Analysis

Strengths

  • One of the largest automobile manufacturers of the world
  • Great branding and advertising strategies (Chinomona, 2016)
  • Huge number of employees globally (Cloutier et al. 2015)

Weaknesses

  • Limited market share growth (Sinha and Seth, 2018)
  • Selective Models recalled

Threats

  • Fuel prices increasing worldwide (Leard et al. 2017)
  • Intense competition from Toyota, BMW, Hyundai.

Opportunities

  • Building a global brand by tapping new emerging markets
  • Creating cost effective hybrid cars
  • Automobile sector is growing (Kenworthy et al. 2015)

Table 2: SWOT Analysis

(Source: As influenced by Leard et al. 2017)

Honda Europe Analysis

Strengths

In respect to the case study, one of the strengths of the company is that company has a global reach and that the company also has a great brand image. As per the views of Chinomona (2016), it can be understood that a great brand image helps in order to maintain the goodwill of the company in a certain market. This aids to the development of business and also generates customer loyalty. Another major strength of Honda is its global presence and its large workforce. According to Cloutier et al. (2015), a large workforce contributes to ensuring that a company can open up new branches and tap emerging areas effectively in the light of market fluctuations.

Weaknesses

As per the case study, Honda in spite of having a strong brand image and global reach, can be seen to lack in the areas of development of its models. It can be understood that the company has had to recall a few of its models from the market and this has served as a major drawback in the case of intense competition that prevails in the market. In respect to the company of Honda it can also be understood that another inherent weakness lies in the automobile industry itself, as it is a saturated industry and there is every little scope for market share growth. According to Sinha and Seth (2018), saturated markets have low rates of acquisition and loss and the scope of growth remains minimal.

Threats

In case study of Honda it can be seen that, the company faces a major threat majorly from the rising fuel prices in the case of the global economy. It can be understood from the study of Leard et al. (2017), that with the depletion of fuel reserves he prices of fuel are rising and the market is shifting towards sustainable energy as fuel prices are growing beyond the affordability of the people who are the target segment of Honda. Honda also faces major competition from companies such as BMW, Hyundai and Toyota who function in the same target segment and thus it has a low ability for market development.

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Opportunities

As per the study of Kenworthy et al. (2015), even though the threats of the automobile market are widespread the segment is growing on a global scale. In the light of this it can be viewed that the market is shifting towards hybrid and electric cars. As per the case study of Honda, to ensure its sustainability the company should seek to move into these markets alongside tapping new markets. This will result in effective business development for the company on a global scale.

Honda Europe Pestle Analysis

Political

  • United Nations Sustainable development goals
  • Laws regarding sustainability
  • Brexit

Economical

  • Automobile Industry contributes to 7% of Europe’s GDP (Acea.be, 2019)
  • Automobile industry revenue went up by $3 Trillion in 2019 (Ibisworld.com, 2019)

Social

  • The shifting market demand towards hybrid and electric automobiles
  • Market demographic trend of loyalty towards sustainability

Technological

  • Hybrid electric cars and electric cars
  • Shifts from fuel based systems to alternative energy systems

Legal

  • Directive 70/220/EEC specifies emission standards (Ec.europa.eu, 2018)
  • Euro 1 Standards or EC93 specify emission rates by use of Directive 91/441/EEC for passenger cars and light trucks (Ec.europa.eu, 2018)

Environmental

  • Rising environmental concerns of climate change
  • Rising concern and need for pollution and sustainable products respectively

Table 3: PESTLE Analysis

(Source: As influenced by Curasema et al. 2015)

Analysis

In the case of the company of Honda it can be viewed that the external business environment is quite suitable for the company and its developmental needs.

Political

As per the study of Curasema et al. (2015), it can be viewed that the automobile market on a global basis is emerging and is also growing in its size. In the case of the political environment it is important for Honda in order to effectively adhere to the UN Sustainable Development Goals which have been set up on a global scale.

Economical

In the case of the European automobile market it can be viewed that automobile segment contributes for 7% of its total GDP and on a global scale the industry has grown by $3 Trillion in 2019 (Acea.be, 2019).

Social

In respect of the case study of Honda it can also be viewed that in the light of the social factors the company has an opportunity to tap emerging markets with hybrid and electric cars effectively as there is a growing focus on sustainability.

Technological

Innovation is key for ensuring company growth of market share. From the case study it can also be viewed that the technological aspect of the company must be strengthened by the use of sustainable systems in the case of the market of the company.

Environmental

As per the case study of Honda it can be understood that there is a major requirement of the development of the company and its products in the case of sustainability. In the light of the legal aspect it can also be viewed that there are strict directives in the EU with regards to the case of emissions that need to be controlled.

Legal

According to the case study it can be understood that there is a major requirement for Honda to shift from fuel based cars into other energy sources. This will help the company adhere to the legal and environmental requirements.

References

Acea.be, (2019). Facts About The Automobile Industry. Available at: https://www.acea.be/automobile-industry/facts-about-the-industry [Accessed on: 20 July, 2019]

Chinomona, R., (2016). Brand communication, brand image and brand trust as antecedents of brand loyalty in Gauteng Province of South Africa. African Journal of Economic and Management Studies7(1), pp.124-139.

Cloutier, O., Felusiak, L., Hill, C. and Pemberton-Jones, E.J., (2015). The Importance of Developing Strategies for Employee Retention. Journal of Leadership, Accountability & Ethics12(2)..pp.185-209.

Cuaresma, C., Lagrimas, A.P., Perez, A. and Atento, R.G.O., (2015). Strategy Innovation For Honda High–End Car. Laguna Business and Accountancy Jounal1(2), pp.185-200.

Ec.europa.eu, (2018). Reducing CO2 emissions from passenger cars. Available at: https://ec.europa.eu/clima/policies/transport/vehicles/cars_en [Accessed on: 21 July, 2019]

Ibisworld.com, (2019). Manufacturing industry- Market research report. Available at: https://www.ibisworld.com/industry-trends/global-industry-reports/manufacturing/car-automobile-manufacturing.html [Accessed on: 21 July, 2019]

Kenworthy, J., Newman, P. and Gao, Y., (2015). Growth of a giant: a historical and current perspective on the Chinese automobile industry. World Transport Policy and Practice21(2), pp.40-56.

Leard, B., Linn, J. and McConnell, V., (2017). Fuel prices, new vehicle fuel economy, and implications for attribute-based standards. Journal of the Association of Environmental and Resource Economists4(3), pp.659-700.

Sinha, M. and Sheth, J., (2018). Growing the pie in emerging markets: Marketing strategies for increasing the ratio of non-users to users. Journal of Business Research86(9), pp.217-224.

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