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 transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing commodity prices,
increasing energy prices, central banks are concerned over increasing inflation, 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 -
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.
Successful track record of launching new products
– Honda Motor has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Honda Motor has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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.
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.
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.
Innovation driven organization
– Honda Motor is one of the most innovative firm in Auto & Truck Manufacturers sector.
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.
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.
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 United States 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.
Ability to recruit top talent
– Honda Motor is one of the leading players in the Auto & Truck Manufacturers industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Weaknesses of Honda Motor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Honda Motor are -
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.
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 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.
Need for greater diversity
– Honda Motor has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
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.
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.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Honda Motor supply chain. Even after few cautionary changes, Honda Motor is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Honda Motor vulnerable to further global disruptions in South East Asia.
Honda Motor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Honda Motor are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Honda Motor to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
Threats Honda Motor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Honda Motor are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.