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					         Case Study No. 7
             Honda (A)

    Assignment Due Date: 2/14/06
         Paper by: Paul Lester
Study Team: Rhodd, Lester, and Kemp

ENT 5053 – The Entrepreneurial Process
      Instructor: Eddie Edwards
Case Study No. 7                                                                                        Due: 2/14/06
Honda (A)                                                                                                 ENT 5053

                                             Case No. 7 – Honda (A)
Principal Question: Why was Honda successful in Japan? Why was Honda successful in the United States?

Specific Answer (Response): Honda’s focus on sales volume rather than short-term profitability ultimately allowed

the company to be successful in both Japan and the United States. In Japan Honda’s commitment to technology and

constant innovation allowed the company to create a competitive advantage. By concentrating on the volume of

sales Honda was able to quickly gain a large amount of experience in the manufacturing process this allowed the

company to produce it’s product at a lower cost than its competitors. Through aggressive advertising and dealer

sales Honda was able to establish itself in the U.S. market.


    a.   Customer: Honda was able to successfully market customers in both the United States and Japan.

                     Japan: Following World War II the Japanese consumer demanded a low-cost, technologically

                      understandable and reliable form of transportation.      Honda was able to fill this market

                      successfully. Because existing motorcycle companies tended to stay with a successful design

                      for a long period of time, they perfected the manufacturing process, eliminating defects. As a

                      result, the customer expected a reliable product.

                      Delivery drivers created a market for a small lightweight easy to handle motorcycle.

                     United States: In 1959 there was a medium demand for lightweight motorcycles in the United

                      States. Consumers were mostly men however female customers were interested in a “step-

                      through” frame.

    b.   Cost: Controlling and reducing cost was a key factor in Honda’s success both in Japan and the United

         States. Honda was able to use the high volume of sales to drive improvements that lead to higher cost. To

         meet the demand for their bikes Honda had to establish efficient production capabilities. The large amount

         of production allowed Honda to gain a large amount of experience in a short period of time. This

         experience translated to more efficient production and lower cost.

         Honda also employed technology, specifically automation, in the manufacturing process. This also allowed

         for lower cost production than traditional labor. Because of the high volume Honda could recover the fixed

         costs quickly. Having steady fixed costs allowed Honda to out-produce the competition on a per employee


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Case Study No. 7                                                                                     Due: 2/14/06
Honda (A)                                                                                              ENT 5053

         Honda also controlled their costs by integrating the production of all critical motorcycle parts such as;

         engines, frames, sprockets, chains, etc.

    c.   Competition: The competition faced by Honda changed a good deal during its assent to success.

                   Japan: In 1948 the market was highly fragmented consisting of 247 manufactures. Most of

                    these were independent job shops.

                   The Japanese motorcycle industry grew to include similar offerings from Honda, Kawasaki, and


                   United States: For lightweight bikes Sears provided the main competition when Honda entered

                    the market other Japanese manufactures also followed. Manufactures of larger bikes such as

                    Harley Davidson and BSA, Ltd.

    d.   Context: Honda also produces cars however the return produced by the car business indicates that it is not

         subsidizing the motorcycle business. However, a positive business in the car market will likely have a

         carry over to other business decisions. Japan is still recovering from World War II and the demand is for

         technologically manageable and affordable transportation.

         In the United States motorcyclists have a poor image due to their portrayal in movies. Motorcycles are not

         viewed as a recreational item by most U.S. consumers.

II. People

                   Honda Management including Sochiro Honda

                   Harley Davidson Management including William H. Davidson

                   BSA, Ltd. Management including Eric Turner

                   Honda’s dealer network in the United States

                   Honda must rely on numerous entities to handle the logistics of bringing there product to the

                    United States

III. Deal: Honda’s success in both countries was based on focusing on volume and market share, sometimes even

    to the point of short term losses. The high volume allowed the company to gain sufficient experience in the

    production process, as a result Honda was able to streamline their production process and lower the cost.

    Honda’s concentration on technology improved productivity and reduced costs.

    Honda’s volume strategy also allowed them to create more bargaining power with suppliers to reduce costs and

    insure availability of materials.
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Case Study No. 7                                                                                      Due: 2/14/06
Honda (A)                                                                                               ENT 5053

    Honda built there sales volume by focusing on low price and market share. The lower costs of production

    allowed Honda to price there motorcycles for less than their American and European competitors. Honda

    associated with dealers that could deliver a significant market share.

    Honda also aggressively advertised, in the United States the company had to crete a market for lightweight and

    recreational bikes through advertising.

IV. Key Success Factors (KSF)
    Key Success Factors for Honda included business strategy focused on sales volume and market share. This

    allowed Honda to sell for a lower cost than the competition. Honda’s aggressive advertising campaign was a

    key success factor in the United States as was its selection of a dealer network that could deliver a high volume

    of sales.

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