HONDA IN EUROPE.docx

HONDA IN EUROPE.docx

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HONDAINEUROPE

HondainEurope（

Introduction

TheHondaMotorCompanyfirstenteredtheEuropeanmarketintheearly1960sthroughthesaleofitsmotorcycles.Thecompany’smotorvehicleswereintroducedintoEuropeatamuchlaterdate.Honda’smotorvehiclesalesinEuropehavebeenrelativelypoor,especiallyinthepreviousfiveyears.DespiteitshugesuccessintheNorthAmericanmarket,HondaisstrugglingtogainasignificantfootholdintheEuropeanmarket.Hondaexecutiveswonderwhytheirglobalstrategyissputtering.Isglobalstrategyjustapipedream,orissomethingwrongwithHonda'sEuropeanstrategy?

HistoryofHonda

In1946SouichiroHondafoundedtheHondaTechnologyInstitute.Thecompanystartedasamotorcycleproducerandbythe1950shadbecomeextremelysuccessfulinJapan.In1956,HondaenteredtheUSmarketandwasabletopositionitselfeffectively,sellingsmallsizedmotorcycles.Intheearly1960s,thecompanycommencedautomobilemanufacturingandparticipatedinFormula-1racing（F-1）toassistitstechnologydevelopment.ThanksmainlytoitsF-1efforts,Hondabecamerecognized,notonlyinJapanbutintherestoftheworldaswell,asatechnologicalsavvycompany.

Uptotheearly1990sthecompanyhadexperiencedseriousorganizationalmismanagementresultingfromtensionbetweenthetechnologysideandthemarketing-salesside.Thesituationbecamesodire,thatthetechnologybiasedpresidentandfounder,SouichiroHonda,wasforcedout,duetohisneglectinimportantmarketingdecisions.AfterSouichiroHonda’sdeparture,thecompanybecamemoremarketing-technologybalanced,andby1999wassecondinsalesonlytoToyotaintheJapanesemarket.Theunderlyingsuccessofthecompanyisbestsummarizedinitsmissionstatement,“pleasureinbuying,sellingandproducing”,and“BeatGM,notToyota”.Hondacurrentlyhas25separatefactoriesintheworld,anditsoperationscoverautomobiles,motorcycles,financialservices,powerproductsandpowertools.Inthefiscalyear2001,81%ofHonda’srevenuescamefromitsautomobilesector,asoutlinedinthetablebelow.

Automobileindustry

Theautomobileindustryworldwideisinthematurestageofitslifecycle.Bythe1990s,anoversupplyofmotorvehiclesbecamesuchaproblemtotheindustrythatanumberofmergersandacquisitions（M&A）andalliancestookplace.Industryexpertsstatedinthelate1990s,only6or7companieswouldremainglobalplayerswhileothercompanieswillbeforcedtosellinnichemarkets.InthelastdecadeDaimlerChrysleracquiredamajorshareofMitsubishi,GMbecamethecontrollingshareholderofFiatandSaab,FordacquiredVolvo,Jaguar,andamajorshareofMazda;andRenaultbecamethecontrollingshareholderofNissan.Globalscaleproductionandsalesbecameimportantasawaytocuttingcostthroughdevelopingcommonplatformorenginesaswellasglobalprocurement.UnliketheirEuropeanandAmericancounterparts,Japaneseautomobilecompanies,includingHonda,didnotadopttheM&Astrategyforexpansion.Toremainasaglobalcompetitor,Hondainsteadexpandeditsoperationsbysettingupplantsinregionalmarkets.ThetablebelowshowsthatHondaiscurrently‘thenumber7-carcompany’intheworld.

HondainEurope

CurrentlyHondahasfiveglobaloperations,NorthAmerica,SouthAmerica,Japan,Asia-Oceania,andEurope.TheEuropeanoperationcoversEurope,theMiddleEast,andAfrica.HondaenteredtheEuropeanmarketin1961asamotorcyclemanufacturer,withitsautomobileoperationsfollowingseveralyearslater.In1986,HondastartedengineproductionintheUK,and6yearslateritlauncheditsEuropeanproductionatSwindoninSomerset,UK.HondaopenedproductionfacilitiesinTurkeyin1999totargettheMiddleEastandEasternEuropeanmarkets.TheEuropeanoperationaccountsforasmallportionofHonda’sglobaloperation,asshowninthetablebelow.

Honda'sGlobalSalesbyRegion

ThereareanumberofreasonsforthelowsalesinEurope.HondaenteredtheEuropeanmarketratherlate,anditsfirstproductionfacilityintheregionwasbuiltin1992,atatimewhenHondawasstillonlyaminorplayerintheJapanesemarket.Priorto1992,HondaEuropewasforcedtoimportitsvehiclesfromtheUS,makingitimpossibleforthecompanytoaggressivelyattacktheEuropeanmarket.OneofthemostimportantreasonsforthelackofsuccesswasthattheEuropeanmarketwashighlysaturatedwithlocallyownedcarmanufacturers.CompaniessuchasSaab,Volvo,BMW,Audi,Volkswagen,DM,Opel,Renault,PeugeotandFiathavebeendominatingtheEuropeanmarketforaconsiderablenumberofyears.Inaddition,otherforeigncompanies,suchasToyota,Nissan,FordandHyundaimaketheEuropeanmarketextremelycompetitive.

In2001,VolkswagenwasrankednumberoneinEuropewith17.6%ofthemarketandPeugeotnumber2with15.8%.Renault,Ford,Fiat,GMhadapproximately10%ofthemarketeach,andToyota,BMW,andAudihadamarketshareintheregionof5%.Hondacapturedonly2.4%oftheEuropeanmarket.ThecompetitiveindustrymapbelowshowsHonda’scurrentpositionintheEuropeanautomobilemarket.

BrandImageinEurope

TheHondabrandimageinEuropeisrelativelyweakandtheproductlineisnarrowcomparedtotheothermajorplayersinthemarket.Thecompanyneedstoexpanditssalesandproductiontosurviveinglobalscalecompetition.

Honda’sEuropeanMarketing

ThefourlargestmarketswithintheEuropeanmarketarethatofGermany,UK,ItalyandFrance.Honda'sEuropeanmarketingstrategyinthosefourcountriesishighlightedbelow.

Product.Honda’sEuropeanmanufacturingplantislocatedintheUK,andasresultthecountryhasmoreHondamodelsthananyothercountryinEurope,withatotalof20.Germany,thecountrywiththehighestnumberofvehicleregistrations,hasthenextlargestnumberofmodels,16.ItalyandFrance,bothsimilarinsizetotheUKhave11and9models,respectively.TheproductsfoundinItalyandFrance,arefoundinGermanyandtheUK.TheUKhasanumberofautomobilesthatcannotbefoundintheotherthreecountriesincludingdiesel-poweredcars.

Price.ThepricesofHonda’svehiclesinEuropearecomparabletosimilarcarsproducedbylocalmanufacturers.ThetablebelowcomparesthepriceineurosofHonda’snew1.4-literJazzwithsimilarcarsofferedintheEuropeanmarket.

AutomobilePrices

Vehicle

HondaJazz

Peugeot307

VWPolo

RenaultClio

OpelAstra

FiatStilo

Price（euro）

13,800

13,250

13,930

13,650

13,400

13,500

ThetableclearlyimpliesthatHondaisattemptingtopriceitsproductatasimilarleveltocompetition.

Distribution.TheimageofHonda’svehiclesandmotorcyclesinEuropeisalignedtogether.ConsequentlyHondavehiclesthroughoutEuropearedistributedatthesamelocationsthattheirmotorcyclesare.VehiclesproducedintheUKandTurkeyaredistributedthroughoutEurope,theMiddleEastandAfrica.Recently,duetothedepreciatingEurovis-à-vistheUSdollar,carsmanufacturedintheUKhavealsobeenexportedtotheUS.

Promotion.ThepromotionofHonda’smotorvehiclesisessentiallythesamethroughoutEurope,whetherinFrance,Germany,ItalyortheUK.Thecompanyspendsverylittletimeandmoneyinpromotion,however.ItbelievesthatitssuccessinFormula1racing,togetherwithitsabilitytoproducehighmileagefuelefficientproductsthatexhibitgreatengineeringisenoughtomakeitapopularintheEuropeanmarket.ItreliesonwordofmouthbyitscustomerstopotentialcustomersandtoalesserextentontheInternetandthecompany’svariouswebsites.

Intherecent2002launchoftheJazz（knownastheFitinJapan）,thecompanyreliedheavilyonwordofmouthandonawebsitecreatedespeciallyfortheoccasion.Thewebsite,thesamedesignforallEuropeancountries,promotedthecarassuitableforyoungworkingwoman.Thewebsiteattemptedtogivethecaracool,‘young’imagebyassociatingitwithFengShui,Yogaandotherrelativelyhip‘activities’.Asenseoffunwasalsoattachedtothewebsite,inanattempttodrawintheyoungwoman.OnceinsidetheJazzwebsite,theusercouldeasilyfindthenearestdealershiptopurchasethevehicle.

EuropeanSales

ThetablebelowshowsthesalefiguresforHonda’seightmostpopularmotorvehiclesinthelastsixyears.Honda’smostsuccessfulyearwasin1998,howeversincethensaleshavebeendecreasingdramatically.

Honda'sUnitSalesinEurope:

1996-2001

Honda’smotorvehicleshavebeenrelativelyunpopularinthemajorityofEurope,inparticularItalyandFrance.Thecompany’sbestsaleshaveoccurredintheUKandGermanyasshowninthetablebelow.

Honda'sUnitSalesinEuropebyCountry:

1994-2001

Country

1994

1995

1996

1997

1998

1999

2000

2001

U.K.

38,187

45,772

50,075

55,611

61,044

65,290

68,736

63,459

Germany

53,687

52,614

54,550

55,918

48,247

43,610

33,536

31,868

France

14,411

11,848

13,260

12,585

14,095

15,270

8,717

6,495

Italy

12,063

14,101

15,014

25,406

24,532

22,031

18,570

13,732

EuropeanCulture

TherelativepoorshowingofHondavehiclesinEuropemaybeexplainedbyanumberofreasons.ThemainproblemwasthatthecompanyfailedtotrulyunderstandthecultureofEuropeandmoreimportantlyittreatedEuropeasonegiantsinglemarket.ThoughFrance,Germany,theUKandItalyareallEuropean,culturaldifferencesaboundbetweenthem.Onetheorythatexplainsthedifferencesbetweenthefournationsisthatofhigh-contextversuslow-contextcultures.Inahigh-contextculture,theinterpretationofmessagesdependsoncontextualcueslikegender,age,balanceofpower,etc.andnotonphysicalwrittentext.Inahighcontextculturethe