Honda Motor (7267) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Manufacturers
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Honda Motor (Japan)
Based on various researches at Oak Spring University , Honda Motor is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, cloud computing is disrupting traditional business models, geopolitical disruptions, wage bills are increasing, central banks are concerned over increasing inflation, increasing commodity prices, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Honda Motor can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Honda Motor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Honda Motor operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Honda Motor can be done for the following purposes –
1. Strategic planning of Honda Motor
2. Improving business portfolio management of Honda Motor
3. Assessing feasibility of the new initiative in Japan
4. Making a Auto & Truck Manufacturers sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Honda Motor
Strengths of Honda Motor | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Honda Motor are -
High switching costs
– The high switching costs that Honda Motor has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Cross disciplinary teams
– Horizontal connected teams at the Honda Motor are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to recruit top talent
– Honda Motor is one of the leading players in the Auto & Truck Manufacturers industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of Honda Motor comprises – understanding the underlying the factors in the Auto & Truck Manufacturers industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Auto & Truck Manufacturers
– Honda Motor is one of the leading players in the Auto & Truck Manufacturers industry in Japan. Over the years it has not only transformed the business landscape in the Auto & Truck Manufacturers industry in Japan but also across the existing markets. The ability to lead change has enabled Honda Motor in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Honda Motor has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Auto & Truck Manufacturers industry. Secondly the value chain collaborators of Honda Motor have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Auto & Truck Manufacturers industry
– Honda Motor has clearly differentiated products in the market place. This has enabled Honda Motor to fetch slight price premium compare to the competitors in the Auto & Truck Manufacturers industry. The sustainable margins have also helped Honda Motor to invest into research and development (R&D) and innovation.
Learning organization
- Honda Motor is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Honda Motor is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Honda Motor emphasize – knowledge, initiative, and innovation.
Training and development
– Honda Motor has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Honda Motor is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Auto & Truck Manufacturers industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Honda Motor in the Consumer Cyclical sector have low bargaining power. Honda Motor has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Honda Motor to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Honda Motor
– The covid-19 pandemic has put organizational resilience at the centre of everthing Honda Motor does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Honda Motor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honda Motor are -
Workers concerns about automation
– As automation is fast increasing in the Auto & Truck Manufacturers industry, Honda Motor needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Lack of clear differentiation of Honda Motor products
– To increase the profitability and margins on the products, Honda Motor needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that Honda Motor needs to have more collaboration between its sales team and marketing team. Sales professionals in the Auto & Truck Manufacturers industry have deep experience in developing customer relationships. Marketing department at Honda Motor can leverage the sales team experience to cultivate customer relationships as Honda Motor is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Japan, Honda Motor needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Honda Motor is just above the Auto & Truck Manufacturers industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners in Auto & Truck Manufacturers industry
– because of the regulatory requirements in Japan, Honda Motor is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Auto & Truck Manufacturers industry.
Ability to respond to the competition
– As the decision making is very deliberative at Honda Motor, in the dynamic environment of Auto & Truck Manufacturers industry it has struggled to respond to the nimble upstart competition. Honda Motor has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of Honda Motor, it seems that company is thinking out the frontier risks that can impact Auto & Truck Manufacturers industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, Honda Motor has high operating costs in the Auto & Truck Manufacturers industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Honda Motor lucrative customers.
Skills based hiring in Auto & Truck Manufacturers industry
– The stress on hiring functional specialists at Honda Motor has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on Honda Motor ‘s star products
– The top 2 products and services of Honda Motor still accounts for major business revenue. This dependence on star products in Auto & Truck Manufacturers industry has resulted into insufficient focus on developing new products, even though Honda Motor has relatively successful track record of launching new products.
Honda Motor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Honda Motor are -
Better consumer reach
– The expansion of the 5G network will help Honda Motor to increase its market reach. Honda Motor will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Auto & Truck Manufacturers industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Honda Motor can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Honda Motor can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Use of Bitcoin and other crypto currencies for transactions in Auto & Truck Manufacturers industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Honda Motor in the Auto & Truck Manufacturers industry. Now Honda Motor can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Auto & Truck Manufacturers industry, but it has also influenced the consumer preferences. Honda Motor can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Honda Motor to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Honda Motor to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Honda Motor can develop new processes and procedures in Auto & Truck Manufacturers industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Honda Motor can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Honda Motor to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Honda Motor can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Honda Motor can improve the customer journey of consumers in the Auto & Truck Manufacturers industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Low interest rates
– Even though inflation is raising its head in most developed economies, Honda Motor can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Honda Motor has opened avenues for new revenue streams for the organization in Auto & Truck Manufacturers industry. This can help Honda Motor to build a more holistic ecosystem for Honda Motor products in the Auto & Truck Manufacturers industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Honda Motor can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Honda Motor can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Auto & Truck Manufacturers industry.
Threats Honda Motor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Honda Motor are -
High dependence on third party suppliers
– Honda Motor high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Honda Motor can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Auto & Truck Manufacturers industry.
Easy access to finance
– Easy access to finance in Auto & Truck Manufacturers industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Honda Motor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Honda Motor needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Auto & Truck Manufacturers industry regulations.
Environmental challenges
– Honda Motor needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Honda Motor can take advantage of this fund but it will also bring new competitors in the Auto & Truck Manufacturers industry.
Technology acceleration in Forth Industrial Revolution
– Honda Motor has witnessed rapid integration of technology during Covid-19 in the Auto & Truck Manufacturers industry. As one of the leading players in the industry, Honda Motor needs to keep up with the evolution of technology in the Auto & Truck Manufacturers sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Auto & Truck Manufacturers industry are lowering. It can presents Honda Motor with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Auto & Truck Manufacturers sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Honda Motor can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Honda Motor prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Honda Motor in Auto & Truck Manufacturers industry. The Auto & Truck Manufacturers industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Honda Motor business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Honda Motor demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Auto & Truck Manufacturers industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Honda Motor needs to understand the core reasons impacting the Auto & Truck Manufacturers industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Honda Motor Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Honda Motor needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Honda Motor is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Honda Motor is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Honda Motor to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Honda Motor needs to make to build a sustainable competitive advantage.