Firstly what is strategic management? It is the process of specifying an organization’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. Strategic management is usually performed by the highest level of managers in the company. A company’s strategy must be realistic enough for it to achieve it; hence it must make sure it has the right resources to be able to cope with the strategy. An example of an overall business strategy may be to put the organization in a position where it can carry out its mission.
Now to see how the definition of strategic management conforms to what’s been written about how Honda grew and developed its markets in the US. Firstly in the BCG account of how Honda grew into the US markets it quotes “the success of the Japanese manufactures originated with the growth of their domestic market during the 1950s.” To think strategically there are three big questions that need to be answered that are, where are we now? Where do we want to go?
How will we get there? I believe the first question of thinking strategically is now answered, “where are we now” Honda must of seen that they have been successful in their own domestic market and are ready to go into other markets so at this point they must have been thinking where do they want to go next hence the second strategic question.
Another quote from the BCG report, “….
the basic philosophy of the Japanese manufactures is the high volumes per model provide the potential for high productivity as a result of using capital intensive and highly automated techniques.” This now I believe has answered the third question of thinking strategically, “how will we get there.” Honda knew from the success of their own domestic market the key to their success was gaining economies of scale as the cost of producing motorbikes declined with the level of output. So this would be their way of entering the US markets as they also knew their competitors would have a scale economy disadvantage in technology and manufacturing. If we look at the second account of how Honda grew and developed its markets in the US we can see other ways of how its conforms with strategic management. Pascal’s version is based on interviews with the Japanese executives. They say they had no strategy other than the idea of seeing if they could sell something in the United States so this gives us the idea of Honda going into the US markets was made by them the executives.
In the definition of strategic management and what has been discussed in tutorial lessons its has been said strategic management is usually performed by the highest levels of the company so Pascal’s versions of accounts coincide with this. Strategic management is also concerned with how to out-compete rivals and win competitive advantage, respond to changing industry and competitive conditions. So if we look back at Pascal’s version of accounts we see that the Honda executives say they had an idea to see if they could sell in the US so this can be thought of as an idea to see if they can grow into other markets and be successful. Also strategic management involves being able to respond to changing industry and competitive conditions. In Pascal’s version it states the 50cc model of the motorcycle seemed wholly unsuitable for the US markets but when attracted attention they were quick to push the 50cc into the market and then were successful. Strategy making is also about catching market opportunities and we can see that Honda went into America wanting to seize this opportunity as they knew motorcyclist in US have a bad image.
2. The BCG report makes you think Honda’s strategy was following a strategy model. One model in particular is 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 resource and formulating a corporate strategy which would be implemented throughout each process of the organisational structure. The BCG report illustrates 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.
Pascal’s version portrays a different image compared to the BCG report as if Honda used the emergent strategy. The emergent strategy shows a realised strategy made up from an intended strategy alongside an emergent strategy which is not planned. The two versions seem to contradict in many ways. The BCG report tends to make you think Honda went right into the US market and had an instant success, while on the other hand Pascal’s reports gives the image Honda first had a hard time getting into the market and this may be due to the time Honda went in at a time when the motorcycle trade season was at a end. The BCG report claims Honda was superior to other competitors in productivity while as Pascal’s version disagrees with this and says Honda was successful in Japan with productivity but circumstances indicate that the company was not superior.
In my view I believe Pascal’s version of accounts makes more sense and is more realistic. Pascal’s version gives me the idea that Honda used a emergent strategy which I feel is more sensible to believe. In business we all know that nothing can always go to plan but there are certain methods and techniques which can help to stay in line with the plans. Also Pascal’s version of events was based on interviews with the Japanese executives so who better than them to tell us how Honda broke through to the US market. When reading the BCG version it makes you feel Honda had no problems on the other hand Pascal’s version talks about problems they had such as how Honda were completely in the dark for a year and how there larger bikes started to break so therefore these points in the Pascal’s version gives it a bit more realism and tends to make me think this was the real situation.
3. The functional activity of marketing I believe was most at use during the strategic move by Honda into the US, whereas production, financial management and human resource management was touched on. Honda started off with four products in the US the 50cc Supercub, 125cc, 250cc and the 305cc. Initially Honda was confident with their larger bikes as they thought in the US everything is bigger and luxurious so their bigger bikes would sell more rather than their small bikes. Also the larger bikes handlebar shape looked like the eyebrow of Buddha which they thought was a good selling point. However Honda marketed their 50cc in such ways that it might not usually be called marketing. They used the 50cc to ride around Los Angeles on errands but at the same time little did they realise this was a form of marketing. When riding around on errands they were indirectly advertising the 50cc which caused attraction and a lot of attention.
When Honda came into the US they wanted to sell motorbikes to the general public who had never before given a second thought to a motorcycle so Honda priced their products much cheaper than their competitors. Honda had to market themselves in such a way that US consumers saw Honda different to any other motorcycle company. When they entered US a group called Harley Davidson had the largest market share but sales were declining for them. This was because motorcycles were produced large and bulky and it led to the image a motorcycle rider as being one who wore a leather jacket, had tattoos on him and was out to cause trouble. So Honda had to dissociate themselves with this image so they started a advertising theme “you meet the nicest people on a Honda.”
Production and Human resource management were to other key areas as well in the strategic move by Honda into the US. Honda’s success 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. So this provided Honda to achieve a highly competitive cost position which they used to penetrate into the US market. Honda’s research team also had around 700 designers and engineering staff compared to the 100 or so by their competitors so this showed the value Honda had on innovation. Read about disadvantages of riding a motorcycle
4. To answer the question if Honda would have been more successful if it had adopted a more formalised strategic planning approach to its launch then we have to first understand what a formalised strategic planning approach looks like and what it involves. Firstly a strategic review it prepared which covers a number of different elements such as an environmental analysis which in itself will include a pestle analysis and a swot analysis. Then a needs assessment of service users/ beneficiaries, based on original research and/or drawn from existing evidence. After maybe draw up a positioning statement showing all its other major service or products and this will also take into account where its products services are against its competitor’s products/ services. And then construct a marketing mix along side consultation with other stakeholders.
From reading Pascal’s version of accounts it seems Honda had not really a strategic plan or did not devise one. So basically they had no objectives when coming to America other than to see if they can sell something there. This is not really a sensible idea as objectives gives direction to a company and gives direction to its workforce. Objectives are goals that a organisations seeks to reach, they should be manageable and able to reach. Once objectives are met they can indicate to a company how well they are doing and then the company can plan future objectives. It also seems from reading Pascal’s version Honda had no idea about there external environment. They knew their products were good but not far superior and also they seemed a bit intimidated by their competitor’s bikes. So if they done an situation analysis they could have identified their available opportunities.
Honda also needs to know their own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success so therefore an analysis of the external and internal environment would have done a lot of good for Honda. By doing a PESTLE analysis they could have gained more knowledge about the American economy at the time and also the social situation. From this they may have realised that motorcyclist in America had a bad image so they could have worked around this however later on the campaign they did sort this out by advertising “you meet the nicest people on a Honda.” Another technique they could have used is the Porter’s 5 forces which is good for industry analysis. It goes into barriers to entry, customers, suppliers, substitute products. Pascal’s reports also say Honda’s larger bikes started breaking down so this gives the feeling they didn’t do enough research on their products if however on the other hand they did so then maybe these wouldn’t have broke down so easily and maybe their larger bikes could have also been successful.
So on the whole I conclude Honda could have been more successful earlier into its US market entry then after a few years. If Honda had set objectives and aims then this would have given them a better direction of where they are aiming rather than just saying to themselves let’s go to America and see if we can sell. Also if they researched their markets better they may have gained useful knowledge of their stakeholders and competitors which would of given them the upper hand as motorcycles in America at that period were in decline. However on a positive note forming a strategy is a learning process and Honda did come to America to learn.
5. By having a formalised approach to strategy development and implementation there can be advantages and disadvantages. In strategy development firstly objectives need to be set and how these objectives are going to be met. Objectives are goals that an organisation seeks to reach. By setting objectives it allows a business to monitor its progress and make corrections as needed. Also by having a formalised approach to strategy development it can help the company gain relevant knowledge and information about the area they are looking to go into such as the market and economy state of the country and also an in-depth knowledge of their competitors strengths and weaknesses at the same time they can gather the same information about themselves. So if we relate this to Honda’s case we can say that if they had done a thorough market analysis and product analysis they would have known they were entering the US market at the end of the motorcycle trade period, which resulted in bad sales and any success would not have been instantaneous.
Implementation of a strategy is better understood at functional levels. So the strategy should be translated into specific policies for functional areas such as marketing, finance, HRM etc. The implementation process also involves identifying the required resources and putting into place the necessary organisational changes. If Honda had a formalised approach to implementation and broke down specific policies for functional areas then maybe they would not have the problem of exactly knowing what the American market wanted. Honda at first were pushing for sales for their larger bikes but then later found out it was the smaller bikes that would be successful and sell in the US market.
However after looking into what advantages there are of having a formalised approach to strategy and implementations there are some disadvantages. Having a formalised strategy can mean a lot of time and thought need to be put into forming a good strategy which might mean a huge drawback in cost savings whereas this time and thought could be implemented elsewhere in the business. A formalised approach to strategy development can also mean a slow response when there is a change in the market. Developing a strategy and implementing as said before takes a long time and a lot of thought which in business means money so when there is a change in the market the strategy may not be relevant to the new situation which could consequently mean further cost occurring such as forming new strategies and responding to the new market situation. A situation like this can be learnt from Honda when they thought their larger bikes would sell as Americans liked bigger things and also they thought the Buddha like handlebar would assist in sales of these larger bikes, but when this was not the case and they learnt it was the smaller bikes (50cc) the consumers wanted they had to quickly change their main strategy and follow on with a new one.