Analysis, Pages 3 (613 words)
In 2012, the company owned 42,000 patents and had pending applications for 29,000 more patents.
- Strong brand image. Honda has a reputation for producing the best quality engines around the world. The company’s brand 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.
- 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.
- Product recalls. Over 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.
- 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. Although, Europe’s market share is declining at the moment and many companies experience losses, the market is huge and firms can benefit from the economies of scale.
- 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.
- Increasing fuel prices. Honda’s strong emphasis on engineering fuel-efficient vehicles (Honda Insight and Honda Civic) with flexible fuel, hybrid and hydrogen engines will pay off due to increasing fuel prices.
- 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.
- Growing global demand for environment friendly vehicles. The declining levels of fossil fuel sources and the rising CO2 emissions became a major concern for many people and many governments. Therefore, ecologically friendly cars, powered by hybrid, hydrogen or flexible fuel engines became very popular. The market for such cars was $33 billion in 2010. Honda’s focus on hybrid and hydrogen fueled engines is a great opportunity to capture the market share for this new demand.
- 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.
- 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. Big companies are restructuring themselves to become more efficient. As a result, firms like Honda are suffering from competition from both big and small players.
- 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.
- 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.
- 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.
- Strong yen. Honda earns most of its profits outside Japan and appreciating yen poses a great threat to Honda’s profits.