Business Environment and Strategic Management - Essay Example

? Business Environment & Strategic Management Table of Contents Part A- Internal Analysis: Analysis of the Company’s Strategic Capabilities 3 Part B:Evaluation of Possible Future Strategies for the Company 7 Key Strategic Issues 8 Future Potential Strategies: Organic Development 8 Recommendation 9 References 11 Part A- Internal Analysis: Analysis of the Company’s Strategic Capabilities Honda Motor Company is a multinational Japan based automobile manufacturer headquartered in Tokyo. It is one of the largest automobile manufacturers in global market place. Effective product differentiation and value added services to the global customers are the major reasons behind the success story of Honda. The organization expanded its business operations in several potential and emerging global areas to avail significant competitive advantages. This part of the essay will analyze several value added activities of Honda motors in the Chinese market place in recent years. China is one of the rapid growing economies in the world. Sustainable economic development, political stability of the country and huge social acceptance motivated Honda motors to enter in the emerging Chinese automobile market. People of China accused that the automobile maker may not be able to meet the satisfaction of them. However, looking into these intense market demand and favourable scenarios, the organization decided to enter in this emerging global market place. Guangzhou Honda Automobile Co. Ltd. is one of the leading automobile producers and distributors in the Chinese market (Fukushi, Sumi and Honda, 2010, p.9). It is a joint venture between Guangzhou Automobile Group and Honda Motor Co. Ltd. the success of this organization has been drawing the attention of several customers, researchers and journalists. Effective resource based value addition strategies and activities helped the organization to achieve potential competitive advantages in the Chinese automobile industry. Several value added activities increased the popularity and demand of Guangzhou Honda in Chinese market. Effective just in-time approach enhances the customer service process of Honda. However, the popularity of the organization increased in the Chinese market due to effective quality of the vehicles. Effective resource management strategy helps the organization to provide quality automobiles with economic price level. Recently, China is achieving significant economic growth. Therefore high disposable income and improved purchasing power are motivating the Chinese people to shift towards the luxury car segment. This intense market demand is helping the organization to push its highly valued luxurious vehicles in Chinese market. According to the resource based view, it can be stated that brand reputation, customer engagement and innovation are considered as the unique resources. R&D of Honda Motors in China tries to maintain effective quality of the vehicles. It is a part of unique resource as the expertise and effective quality control process helps the organization to meet market demand in Chinese market (Chen and Shi, 2005, 124). The leading global organizations are trying to enhance their organizational culture. Effective organizational culture of Honda is considered as intangible resource. The organization follows bottom-up organizational culture. Employee-engagement in decision making process helps the organization to retain its effective and skilled employees (Dunne, 2011, p.151). It increases the confidence level of the employees. Moreover, it reduces the possibility of several workplace conflicts. Effective technician support and financial resources are considered as the threshold resources. Following VRIN analysis framework will help to evaluate the value added activities and resource based view of Honda in Chinese market. Valuable Accord, Fit Saloon and Odyssey are popular and well accepted product expansion of Guangzhou Honda Automobile Co. Ltd. in Chinese Market. Moreover, the organization is trying to introduce new innovative vehicles in Chinese market in order to penetrate the market. Effective implementation of advanced technology and outsourcing of several vehicle parts from foreign countries helped the organization to offer effective quality to the target customers. Moreover, the organization tried to employ young and energetic employees (Varma and Budhwar, 2013, p.29). This is an effective decision. They tried to implement workplace diversity in China. They hired local employees. It is known to that the wage rate in China is quite low comparing to other developing countries. This specific resource based strategy helped the organization to reduce operational cost achieve significant competitive advantages. Rare Honda Motor is trying to capitalize on the potential opportunities that have been developed due to advanced technology in order to achieve competitive advantages. Chinese automotive industry is becoming highly potential and competitive due to globalization and presence of several leading competitors. The organization is trying to introduce electric cars in order to reduce the consumption of fossil fuels. Very few organizations are trying to introduce these kinds of vehicles. It is true that introduction of electric car will help the organization to avail huge competitive advantage in the competitive industry. In-imitable The organization has implemented unique marketing and promotional strategy in order to market their vehicles in Chinese market. It is hard for other organizations to follow or copy the same strategy. On the other hand, the organization never reveals their manufacturing process. Engine and performance of Honda vehicles are quite premium comparing to others. Therefore, it can be stated that effective resource management and inimitable innovation helped them to achieve potential competitive advantages in global market place. Non-Substitutable The organization is continuously focusing on product and service differentiation strategy along with effective quality and cost control process. The automotive company recently introduced world’s first ever reusing rare earth metal car. Several experts believe that this new car segment can bring revolution in the automotive industry. People are tending to use energy efficient vehicles to reduce their daily cost (Warner, 2005, p.75). The specific process to reuse metal hauled out from the nickel-metal hybrid batteries. It can increase energy efficiency of a vehicle. It is hard to find out a substitute of this element. Therefore, it can be stated that introduction of reuse hybrid batteries can increase the core competency of the organization in Chinese market. The organization is enjoying potential competitive advantages in Chinese market due to effective product extension and innovation strategies. Effective resource based and value added activities helped the organization to avail competitive advantages. It is true that Chinese automotive market is becoming highly competitive due to the presence of several potential competitors. Honda needs to review and change their strategies based on the nature of market competition in Chinese market. Moreover, Honda is doing business with Guangzhou Auto in Chinese market as joint venture. It helps Honda Motors to utilize existing supply chain and customer base of Guangzhou Auto. Strengths and weaknesses of the Honda Motors in Chinese market have been discussed below based on the above analysis. Strengths Strong global brand name and effective innovation strategy. Implementation of advanced technology and unique product differentiation strategy based on the market demand. Significant market share. Weaknesses The organization tries to focus on luxurious SUV and Sedan. The organization cannot target price sensitive people due to lack of Hatchback cars. Part B: Evaluation of Possible Future Strategies for the Company From above analysis, it can be stated that Honda Motors achieved several potential competitive advantages by operating with Guangzhou Auto in Chinese market. Guangzhou Auto is one of the leading automotive organizations in China. Honda Motors took the advantage of this. They effectively utilized large client base and effective supply chain network of Guangzhou Auto in China (Briscoe, Schuler and Tarique, 2012, p.197). This strategy gave a potential platform to Honda Motors to increase their brand value and brand reputation in Chinese market. The joint venture organization continuously introduced product differentiation strategy. It has helped the organization to avail huge brand awareness. Moreover, Honda Motors is known for quality vehicle engine manufacturer and distributer. Therefore, it can be stated that both the organizations have achieved favourable business advantages from each other. Key Strategic Issues Two critical issues have been found out from above analysis, i.e. limited introduction of Hatchback Model in China market and lack of price sensitive vehicles. It is true that the organization achieved huge advantage through this joint venture business. They created their own brand value in Chinese market through effective brand endorsement and business practices. Despite the success, the organization has to share their business profit with Guangzhou Auto. At this point of time the organization has to think something bigger in order to improve and increase their market share in Chinese automobile market. First of all the organization should try to capture Chinese hatchback market. Recent financial crisis and global economic recession affected the global economic environment. Low per capita income, limited disposable income and reduced purchasing power of people are the major consequences of economic slowdown. Now-a-days, people are trying to save more rather than several consumption activities. However, introduction of low priced hatchback model can help the organization to pull price sensitive customers. Future Potential Strategies: Organic Development After covering this hatchback market segment, the organization can opt for organic development strategy. Organic development is an effective business expansion strategy. Under this strategy, the organization generally develops own capability by individual strategy implementation. This future strategy will help the organization in several ways. Learning and knowledge can be enhanced through this strategy. After a long successful business operation practices, it can be expected that the organization availed a potential brand recognition and customer base. Honda is known for innovation, integration and effective performance. The organization already fulfilled the created market demand. In addition, introduction of new differentiated vehicles is generating more market demand. On the other hand, through this long business performance the organization already has developed own supply chain network. Therefore, it would be effective if the organization employ organic development process. Honda Motors can avail strategic independence through this strategy. On the other hand, burden of searching for new acquisition target or suitable partners can be significantly avoided due to effective penetrative marketplace. Easy financing and decision making option is major advantage of this process. Moreover, the organization can enjoy 100% business profit through this strategy. Recommendation It is discussed earlier that limited presence of hatchback model vehicles and focusing on premium pricing are major weaknesses of this organization. This organic development process will help to resolve these issues. The organization can replace its old model vehicles by new upgraded models with competitive price level. This strategy would not hurt the profitability of the organization as only they are going to enjoy 100% business profit (Mognetti, 2003, p.121). The organization already developed significant client base in the Chinese market. This competitive pricing strategy will pool more number of price sensitive customers. It is known that hatchbacks are known as fuel efficient cars. The organization can attract customers of all income groups if the organization focuses on both category and segment such as, luxurious SUV and Sedan, and fuel efficient hatchbacks. Several potential competitors are majorly focusing on hatchback models due to growing market demand for this specific segment. Organic development strategy will suit Honda’s innovation, internationalisation and differentiation strategies. At the initial stages, joint venture is an effective approach. This process helps a new foreign company to stable in local market after a significant period of time. After the successful business operation of 15 years, this adoption of organic development process will be effective. Honda already developed huge brand reputation in China. Moreover, effective quality and performance of the vehicles helped to develop potential client base and effective supply chain network across the country. Management of Honda Motors should focus on this organic development strategy in order to achieve more competitive advantage in Chinese market. References Briscoe, D., Schuler, R., and Tarique, I., 2012. International Human Resource Management. London: Routledge. Chen, J., and Shi, H., 2005. High-tech Industries in China. London: Edward Elgar. Dunne, M., 2011. American Wheels, Chinese Roads. New Jersey: John Wiley & Sons. Fukushi, K., Sumi, A., and Honda, R., 2010. Sustainability in Business. New York: Springer. Mognetti, J., 2003. Organic Growth. New Jersey: John Wiley & Sons. Varma, A., and Budhwar, P., 2013. Managing Human Resources in Asia-Pacific. London: Routledge. Warner, M., 2005. Human Resource Management in China Revisited. London: Routledge. Read More