Honda Motor (HNDAF) SWOT Analysis / TOWS Matrix / MBA Resources
Auto & Truck Manufacturers
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Honda Motor (United States)
Based on various researches at Oak Spring University , Honda Motor is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, 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 United States
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 -
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.
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.
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.
Innovation driven organization
– Honda Motor is one of the most innovative firm in Auto & Truck Manufacturers sector.
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.
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.
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.
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.
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.
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.
Ability to lead change in Auto & Truck Manufacturers
– Honda Motor is one of the leading players in the Auto & Truck Manufacturers industry in United States. Over the years it has not only transformed the business landscape in the Auto & Truck Manufacturers industry in United States 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.
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.
Weaknesses of Honda Motor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honda Motor are -
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.
Capital Spending Reduction
– Even during the low interest decade, Honda Motor has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Auto & Truck Manufacturers industry using digital technology.
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.
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.
High cash cycle compare to competitors
Honda Motor has a high cash cycle compare to other players in the Auto & Truck Manufacturers industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
High bargaining power of channel partners in Auto & Truck Manufacturers industry
– because of the regulatory requirements in United States, 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.
Slow to strategic competitive environment developments
– As Honda Motor is one of the leading players in the Auto & Truck Manufacturers industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Auto & Truck Manufacturers industry in last five years.
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.
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.
Honda Motor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Honda Motor are -
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Honda Motor can use these opportunities to build new business models that can help the communities that Honda Motor operates in. Secondly it can use opportunities from government spending in Auto & Truck Manufacturers sector.
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.
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.
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.
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.
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.
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.
Using analytics as competitive advantage
– Honda Motor has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Auto & Truck Manufacturers sector. This continuous investment in analytics has enabled Honda Motor to build a competitive advantage using analytics. The analytics driven competitive advantage can help Honda Motor to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Manufacturing automation
– Honda Motor can use the latest technology developments to improve its manufacturing and designing process in Auto & Truck Manufacturers sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Honda Motor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Honda Motor are -
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.
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.
Increasing wage structure of Honda Motor
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Honda Motor.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
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.
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.
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.
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.
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.
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.