Honda Environment analysis

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					1. Many marketers use the tag of being environmentally friendly to entice customers. Do
you think it is an effective strategy? If yes, does the tag appeal equally in all product
categories?


Environmentally friendly or eco-friendly mean product or service that not or less harmful and
impact with environment. For example, in case study Honda try to reduce fuel consumtion,
less emission, reduce noise pollution, alternate energy source and etc. These are the company
conscious of environment impact. On consumer side, there are one main criteria to be used for
compare the product or service before make a decision when buying. For example, in the
same category and engine displacement. Which car have better fuel economy rate? Nowadays,
the emission rate being the important criteria to consider because of government provide tax
incentive. Moreover, in central London when the driver drive car pass the congestion zone
have to paid for the congestion charge but there are some exception exception for the car emit
100g/km or less of CO2http://www.tfl.gov.uk/roadusers/congestioncharging/6733.aspx .


Thenfore, environmentally friendly is one significant strategy to entice customer to buy a eco-
friendly product but might not always bring to be a criterion. In fact, it good to have an eco-
friendly product but in the research and develop process of eco-friendly product have to spend
with a lot of money. All the cost that cause to the product will use to calculate in total cost for
the product. That mean the cost of product will raise and more expensive than usual. In case
of customer get direct benefit from this change, might not have any affectation about the price
because of after consider on Return on Investment (ROI). ROI could evaluate the efficiency
of what pay more. Then can summarized that:


   1. In case of consumer get direct benefit, the product will have bring customer attractive
       to the product or service.
   2. In case of consumer not get direct benefit, the product will have less attractive to the
       product or service because of the cost more expensive.


However, environment awareness is crucial. The standardize of product not impact to
environment is important. Because of this, many country government, for example, United
Kingdom and European Union were setup many rule and regulation. Restriction of the use of
certain hazardous substances in electrical and electronic equipment (RoHS) and Waste
Electrical and Electronic Equipment (WEEE) were being declare http://www.rohsguide.com/ .
Moreover, EU prepare to enforce the rule for eco-friendly label in 20 June 2011 http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:153:0001:0012:EN:PDF . The label
have to specify Energy efficiency rating for electronic and carbon footprint. This will make
the product have eco-friendly as a standard and urge the people to be more awareness of
environment impact.


2. Honda spends more per vehicle on R&D and capital expenses than any other major
automobile manufacturer. Discuss this in light of Honda's profitability, customer
perception about its environment sensibility, and competitive position.


Honda would like to be the leader of its commitment to the environment. The main objective
are fuel economy, low emission and using alternative energy source. Honda categorized these
under seven domain – product development, purchasing, production, transportation, sales,
disposal and recycling and administration.


Research and Development (R&D) or product development is using very huge expense
because this department is the initial stage of the product. At this stage, The research of new
technology, product design and selected the material were done at this stage. Even change, the
cost of change and simply to change before pass through mass production. Once the
production and sell to the market be difficult to solve or repair. In case of change, the
manufacturer need to call back the product to service centre for repair or solve the problem.
Moreover, this will have effect with the reliable of brand and product.


In the Product development domain Honda have four aspects – reducing air pollutant,
reducing CO2 emission, reducing noise and altering energy source. These aspects are the
main resposible of this department to reduce environment impact. There are one more thing
should considered is useful life. In fact, the new car have high performance and ability to
reduce the impact to environment, but after using for a while the performance drop not as
advertise and being increase more pollution. The way to keep the performance for the long-
lasting is important.


The significance of businees is return on investment. To develop a new technology need to
used a lot of expense. Nevertheless, if the research and develop successful, the company will
grant a patent and gain high revenue too. In term of environment impact will diminish.
In term of customer, The benefit have an effect on the customer. That mean the user can
economize their expense. Moreover, the environmental pollution will become lower and
extend the period of oil quntity slowly decreasing. In other words, The oil will remain more
longer.


However, since Honda started their environmentology project. Their competitive position in
some categories especially SUV can not make the fuel consumption lower than their
competitors. This can obviously seen in Medium SUV between Toyota Highlander and Honda
Pilot. Nearly the same engine displacement Toyota put Hybrid technology for Highlander then
the fuel consumption better than Honda. In fact, for fuel consumption should compare in term
of the same categories, engine displacement and transmission. These compare term can check
which car got the better fuel consumption.


There are one more problem that why market share of Honda very small in USA. That
because once the car sell to the user have 112 problem for every 100 car sold. For the first
position is Lexus have 81 problem for every 100 car sold.


3) Is Honda taking a risk when it assigns huge budgets for fuel cell research? Is the top
management justified in spending company resources on environmental projects, even when
they do not seem to have commensurate beneficial impact on public perceptions about the
company? Are Honda's environmental initiatives adding value to its shareholders?


In point of investment even more or less always have a risk as a natural. If do not have any
risk then not call an investment. High risk also high return.


Honda not look at the present or short time but looking for the long term investment then
venturesome with the huge amount of investment in 2007 with over 545 million yen even net
profit only 597 million yen in 2006. This investment is betting for the future. This case have
to check with Honda investment policy that how much their set for the investment and
shareholder dividend. The porpotional 91% of the last year net profit regard as very high but
if look in the detail what Honda spend on investment on the new product, fuel cell,
hunmanoid robot and business jet. All of them are the new technology for the next decade
then it normal to spend a high investment on its. As describe above that the investment have
risk but if successful then this investment worth to spend and Honda will receive greatly
return of their investment.


Another sides, to worry is the sales history of Honda in USA even got a lot of award but the
market share in USA can not compete its competitor. If look about achievement of sale,
Honda greatly lost. When the company received award its a benefit for the company because
once the award announce there are many publish about their award. That almost free
advestising about company to everybody know about what Honda doing. It not only car but
theire are environmentally freiendly that Honda concern and build the conscious about
enviroment at the same time.


In the shareholders view have many aspect to look. In short term, The company make a high
investment then the shareholder received small dividened because Honda continue investment
from their new profit. In long term, It is advantage for the shareholders because in long term
period Honda may possible successful of developing in new product then will gain a lot of
profit from this investment. If Honda not do any new investment, Honda technology might
behind another competitor. That mean this investment not add any value to the shareholder
but necessary. Because the investment of new technology keep/increase Honda's revenue and
market share in the future.

				
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