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 – there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, cloud computing is disrupting traditional business models,
increasing commodity prices, technology disruption, 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 -
Effective Research and Development (R&D)
– Honda Motor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Honda Motor staying ahead in the Auto & Truck Manufacturers industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
High brand equity
– Honda Motor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Honda Motor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Diverse revenue streams
– Honda Motor is present in almost all the verticals within the Auto & Truck Manufacturers industry. This has provided Honda Motor a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
Superior customer experience
– The customer experience strategy of Honda Motor in Auto & Truck Manufacturers industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Auto & Truck Manufacturers industry
- digital transformation varies from industry to industry. For Honda Motor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Honda Motor has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
Strong track record of project management in the Auto & Truck Manufacturers industry
– Honda Motor is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Honda Motor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honda Motor are -
Slow decision making process
– As mentioned earlier in the report, Honda Motor has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Auto & Truck Manufacturers industry over the last five years. Honda Motor even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Honda Motor has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ less understanding of Honda Motor strategy
– From the outside it seems that the employees of Honda Motor don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Honda Motor is dominated by functional specialists. It is not different from other players in the Auto & Truck Manufacturers industry, but Honda Motor needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Honda Motor to focus more on services in the Auto & Truck Manufacturers industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Honda Motor is slow explore the new channels of communication. These new channels of communication can help Honda Motor to provide better information regarding Auto & Truck Manufacturers products and services. It can also build an online community to further reach out to potential customers.
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 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.
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.
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.
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.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Honda Motor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Auto & Truck Manufacturers industry, and it will provide faster access to the consumers.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Honda Motor is facing challenges because of the dominance of functional experts in the organization. Honda Motor can utilize new technology in the field of Auto & Truck Manufacturers industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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.
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.
Leveraging digital technologies
– Honda Motor can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Honda Motor to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
Loyalty marketing
– Honda Motor has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Honda Motor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Honda Motor are -
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Honda Motor in the Auto & Truck Manufacturers sector and impact the bottomline of the organization.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Honda Motor.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Honda Motor will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Honda Motor may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of 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.
Shortening product life cycle
– it is one of the major threat that Honda Motor is facing in Auto & Truck Manufacturers sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.