Honda Case Study Hbr

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IB94U0 Strategy Analysis

Group Assessment: Honda Motor Company

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Table of Contents

1. Problem Situation .............................................................................................................. 3

1.1. Focus of the study ................................................................................................................ 3

1.2. History of Honda Motor Company ...................................................................................... 3

2. Cases Comparison.............................................................................................................. 4

2.1. Start-up stage ....................................................................................................................... 4

2.2. Growth stage ........................................................................................................................ 5

2.3. Entry to the U.S.................................................................................................................... 5

3. Strategic Concepts ............................................................................................................. 6

4. The Role of a General Manager ....................................................................................... 7

5. Conclusion .......................................................................................................................... 9

References..................................................................................................................................... 103

1. Problem Situation

1.1. Focus of the study

The case at hand is the establishment of the Honda Motor Company (HMC) in the

motorcycle industry with a particular focus on its entry into the U.S. market. The time period,

which is covered in the study, spans from the 1940s to the 1960s.

The sequence of events, associated with HMC?s success and its strategic approaches,

generated a significant interest of strategic management theorists. This resulted in the

formation of two differing viewpoints: on one hand, analysts interpreted HMC?s actions as a

result of an intended strategy, whilst others emphasized the lack of clear goals and objectives,

which characterized HMC as having an emergent strategy. These viewpoints were

documented in two Harvard Business School cases. Case A presents an external analysis of

the situation, which is based on the Harvard Business School?s "Note on the Motorcycle

Industry – 1975" and on a published report of the Boston Consulting Group (BCG). Case B is

compiled on the basis of HMC?s internal sources and interviews with its founders and senior

executives.

The focus of this study is to explore the two interpretations of Honda?s success, discuss the

strategies implied in each description and analyse the role of the general manager.

1.2. History of Honda Motor Company

The origins of HMC date back to the 1940s. At that time, Japan, emerging from World War

II, was a devastated economy with poor technological and manufacturing conditions.

However, the need to restore the country drove up the demand for cheap transportation. In

1948, the highly fragmented Japanese motorcycle industry consisted of 247 participants.

Amongst them was Sochiro Honda, an individual with experience in automotive repairs,

however, no financial or managerial expertise. Driven by his commitment to restore the

Japanese society by means of technology, Sochiro established the Honda Technical Research

Institute in 1946, which consequently led to the foundation of HMC.

Early engine designs were a creation of Sochiro Honda?s experimental character and were

subsequently sold to support him financially. The initial designs possessed defects and led to

decrease in orders. Honda went to friends for investment and returned to work to produce the

next iteration of his engine. The company enjoyed success with a newer, more robust engine,

but this was short-lived as competitors introduced innovations to the motorcycle engine.

Sochiro Honda soon partnered with Takeo Fujisawa, who offered expertise in the field of

finance and marketing.

In 1951, Sochiro Honda unveiled a breakthrough 4-stroke engine that had superior power.

Orders began to arrive, and HMC moved to a larger manufacturing plant to service the

demand. Success with the 4-stroke engine eased the pressure on HMC, which acted as a

stimulus for Sochiro to pursue his passion for high-performance motorcycle racing. The

research and development effort in motorcycle racing not only brought victories in numerous

competitions, but also led to the creation of the Supercub. The Honda 50cc Supercub was an

innovative motorcycle with a lightweight engine, which allowed HMC to optimize

production costs and sell the bike at a competitive price. The Supercub with its safe and

friendly look became a success leading HMC to expand its production capacity.

The success of the Supercub model made HMC a leading Japanese motorcycle manufacturer

and allowed it to obtain the financial resources required for further expansion. In 1958, HMC

started to explore the international markets, and in 1959, American Honda Motor Co. was

established, as the first overseas subsidiary of the HMC (Honda?s official web-site, n.d.).4

The U.S. team faced many hurdles, including the Japanese government?s restriction on

currency allocation, by which HMC was limited in the amount of cash and equipment, they

were able to invest abroad. Despite the challenges, HMC started in Los Angeles by selling

larger bikes such as the Honda Dream and Benly (Honda?s official web-site, n.d.); this

seemed suitable for the U.S. customers who preferred the automobiles and the larger

motorcycles as a means of transportation due to longer distances in comparison to Japan. In

1960, this peculiarity of the U.S. driving caused engine failures. The time to resolve these

mechanic problems forced HMC to introduce the lightweight Supercub model, which

originally was believed to be a mismatch for the U.S. customers. To support the sales of the

Supercub, in 1963 HMC launched "You Meet the Nicest People on a Honda" advertising

campaign. Within the next 4 years HMC established a strong position in the U.S. motorcycle

market, controlling nearly one of every two motorcycles sold (Pascale and Christiansem,

1989b, p. 7). Moreover, HMC?s actions resulted in the transformation of the whole

motorcycle industry: changes in the distribution system shifted the power from dealers to

manufacturers.

Figure 1: HMC history timeline

2. Cases Comparison

From 1946 to 1966, HMC?s emergence as a key player in the motorcycle industry could be

categorized