Marketing Of Honda Motorcycles In The Usa Essay, Research Paper
Marketing of Honda motorcycles in the USA
The American Honda Motor Company was established as a subsidiary
by Honda in 1959. During the 1960’s the type of motorcycles
brought by Americans underwent a major change. Motorcycle
registrations increased by over 800,000 in five years from 1960.
In the early 60’s the major competitors were Haley – Davidson of
U.S.A, BSA, Triumph and Norton of the UK and Motto – Guzzi of
Italy. Harley-Davidson had the largest market share with sales in
1959 totalling a6.6 million dollars. Many of the motorcycles
produced were large and bulky and this led to the image of the
motorcycle rider as being one who wore a leather jacket and went
out to cause trouble.
The Boston Consulting Group ( BCG ) report was initiated by the
British government to study the decline in British motorcycle
companies around the world, especially in the USA where sales had
dropped from 49% in 1959 to 9% in 1973. The two key factors the
report identified was the market share loss and profitability
declines an the scale economy disadvantages in technology,
distribution, and manufacturing. The BCG report showed that
success of the Japanese manufacturers started with the growth of
their own domestic markets. The high production for domestic
demand led to Honda experiencing economies of scale as the cost
of producing motorbikes declined with the level of output. This
provided Honda to achieve a highly competitive cost position
which they used to penetrate into the US market. ” The basic
philosophy of the Japanese manufacture is that high volumes per
model provide the potential for high productivity as a result of
using capital intensive and highly automated techniques. Their
marketing strategies are therefore directed towards developing
these high model volumes, hence the careful attention that we
have observed them giving to growth and market
share.” (BCG p.59 ).
The report goes on to show how Honda built up engineering
competencies through the innovation of Mr Honda. The company also
moved away from other companies who relied upon distributors to
sell their bikes when the company set up its headquarters in the
west coast of America. The BCG found that the motorcycles
available before Honda entered the market were for limited group
of people such as the police, army etc. But Honda had a “policy
of selling, not primarily to confirmed motorcyclists but rather
to members of the general public who had never before given a
second thought to a motorcycle”( SP p.116 ). The small,
lightweight Honda Supercub sold at under 250 dollars compared to
the bigger American or British machines which were retailing at
around 1000 to 1500 dollars. In 1960 Honda’s research team
comprised of around 700 designer and engineer staff compared to
the 100 or so employed by their competitors showing the v alue
which the company placed on innovation. Production per man-year
was 159 units in 1962, a figure not reached by Harley-Davidson
until 1974. Honda was following a strategy of developing region
by region. Over a period of four to five years they moved from
the west coast of America to the east coast. The report showed
the emphasis which Honda paid to advertising when the company
spent heavily on the advertising theme ” you meet the nicest
people on a Honda” thereby disassociating themselves from the
rowdy, hell’s angels type of people.
Essentially the BCG is portraying Honda as a firm dedicated to
being a low cost producer, utilising its dominant position in
Japan to force entry into the U.S market, redefining that market
by putting up the nicest people image and exploiting its
comparative advantage via aggressive advertising and pricing.
Pascale tends to disagree on many points of the BCG report. The
report suggests that there was a smooth entry into the U.S market
which led to an instant success. Pascale argues that Honda
entered the American market at the end of the motorcycle trade
season showing their impotence to carry out research in the new
market. As they entered the market at the wrong time sales were
not as good as they should have been and any success was not
going to be instantaneous. Pascale also criticises the
assumption that Honda was superior to other competitors in
productivity. He says that Honda was successful in Japan with
productivity but circumstances indicate that the company was not
superior. The lack of funding from the ministry of finance and
the ploughing back of profits into inventory meant they had a
tight budget to follow.
The BCG report shows that Honda had a smooth policy of developing
region by region, moving from the west to the east. Pascale
response is that this is partly true but reminds that Hondas
advertising was still in Los Angeles in 1963, four years after
setting up their subsidiary. The report to the British government
showed that Honda had a deliberate strategy of disassociating
themselves from the hells angels type of people by following the
nicest people advertisement policy. Pascale shows that this was
not an intentional move since there were disputes within the
company with the director of sales eventually persuading to
management against their better judgement. The BCG report found
Honda pushed into the U.S market with small lightweight
motorbikes. However Pascale says this is again not true. He
argues the intended strategy was one of promoting the larger
250cc and 350cc as Honda felt that this was what the market
wanted since Americans liked all things large. The bikes were
unreliable which led to the promotion of the supercubs. These
bikes salvaged the reputation of the company. An idea which
hardly came from an inspired idea but one of desperation. Overall
Pascale gives the impression that it was through an incidental
sequence of events which led to Honda gaining a strong hold in
the U.S market, mainly through the unexpected discovery of a
large untapped segment of the market while at the same time
trying to retain the interest of the current market.
The criticism made by Pascale can be further analysed by looking
at the strengths of the Honda company. The strengths of Honda
start with the roles which the founders played.
Honda was an inventive genius with a large ego and a volatile
temperament. His main concerns were not about the profitability
of the company or its products, but rather to show his innovative
ability by producing better engines. Fujisawa on the other hand
thought about the financial section of the company and how to
market the ideas. He often challenged Honda to come up with
better engines. By specialising in their own abilities the two of
them were able to pool together resources and function
effectively as a team. Another strength was the way the company
utilised its market position. Strengths in design advantages and
production methods meant they were able to increases sales in
Japan even though there was no organisation within the company.
Once there was a large enough demand for its products, mainly the
supercub, Honda both in Japan and in America, moved from a sale
on consignment basis to one that required cash on delivery. This
seemed a very risky decision to make at the time but within three
years they had changed the pattern within the motorcycle industry
by shifting the power relationship from the dealer to the
manufacturer. Mr Honda had cultivated a “success against all
odds” culture into the company. This was tested when he sent two
executives to the U.S with no strategy other than to see if they
could sell something. The weaknesses within an organisation can
become irrelevant if the strategy is strong and there is good
leadership.
An element of luck also helped Honda follow an emerging strategy.
Restrictions placed on funds by the government for the U.S
venture forced Honda to take an alternative route. If they had
all the funds necessary they may well have gone through the
normal distribution channels.
Honda entered the us market right at the end of the motorcycle
trade season. When leaking oil and clutch problems occurred on
their bikes it did not affect Honda as hard as it would have had
they entered in the beginning of the season. Also people noticing
the Supercubs led the company to produce a bike which was not at
first supported by senior management.
The success of Honda was not the result of senior management
coming up with all the answers. In fact senior executives in most
Japanese manufacturing companies do not take their strategic
positions too seriously. Salesman, cleaners and those working on
the manufacturing floor all contribute to the company is run and
thereby influence its strategic position. It is this ability of
an organisation to move ideas from the tom to the bottom and back
again in continuos dialogue that the company values the greatest.
As a conclusion it is necessary to consider the theoretical side
of Hondas strategy and see whether the company was in fact
following a model. The first model is the Andrew’s model. Andrew
came up with the idea that there were two stages to corporate
strategy, formulation and implementation. Formulation involved
looking at the market, competitors and resources and formulating
a corporate strategy which would be implemented throughout each
process of the organisational structure. This model was also
supported by Porter. This is how the BCG saw Honda, as a
corporation, who had looked at the market, formulated a strategy
to cope with the environment and competition pressures and
implemented it, making all Hondas plans and activities
deliberate. The second model known as the emergent strategy
portrays a different image to the Andrews model and shows how
Pascale viewed Honda. The model shows a realised strategy made up
from a an intended strategy together with an emergent strategy
which is not planned but emerges in relation to activities within
the environment. Pascale seemed to think that in Hondas case a
substantial proportion or the companies corporate strategy was
emergent and less was actually intended strategy. The actual
strategy followed by Honda is likely to be a combination of
both.
BIBLIOGRAPHY
Minzburg, H. & Quinn, J.B. ( 1991), The strategy Process.
Prentice hall.