Honda in Europe - Case Study Example

Global Marketing Case Study - Honda in Europe Does adapting the promotion of its motor vehicles to suit each country's culture make sense for Honda? The issue of cultural diversity, in regards to international marketing, is of utmost importance. It is, therefore, critical for Honda to treat the culture of each country in its own context. Furthermore, different countries from the European region have different cultural values, which significantly affect their thinking behaviors and actions. Honda appears to have made a grave cultural mistake while designing its global marketing strategy and, therefore, it will be very wise to understand the cultural practices and values of each country and design strategies that resonate the individual’s country’s culture The poor performance of Honda in Europe has been thought to have resulted from failure of the company to understand the culture of European countries and instead treating the market as a homogenous block. The differences amongst different European countries has been split between high-context versus low-context cultures – Honda ought to design its marketing strategies to be in line with these cultural divisions, to enhance acceptability of its products in the respective countries (De Wit & Meyer, 2004). Ideally, Honda ought to have understood that the kind of advertisement that is suitable for low context cultures is different from that which is suitable for high context cultures. In essence, the advertisement for high-context culture should encompass an embedded approach where the weight is put on the general view and feel instead of providing the literal information. In this context, showing of the actual product is not necessary since inspiring and implied images are all that the audience needs. In view of this, Honda’s internet marketing in Italy and France was out of touch because a website that contained a lot of unnecessary information was used in high context cultures. Furthermore, acceptance of the internet by high context cultures is, to a great extent, slower than their low context counterparts. In contrast, Honda should have used the actual products in addition to a larger amount of information when advertising in low-context culture. These countries include Germany and UK where Honda’s website have been remarkably appreciated. In conclusion, it is not wise for Honda to market its products the same way in all countries because it is improbable that an advertisement intended for a low-context culture will work in a high-context culture and vice versa. Given that Europe is a multicultural block, Honda should take into account the two cultural segments when designing a market strategy. Is it wise for Honda to market its products the same way in every country? It is not wise for Honda to enter the global market with a similar strategy in every country because, actually, this is the mistake the company committed, in the past, leading to poorly performance in different regions especially in Europe. It is important to pay attention to various political, social and economic forces that influence business in different countries and design strategies that resonates to those factors. These factors are very essential because they are used to define the decisions to take when producing, selling and delivering products and services to consumers from different parts of the world. Honda should carefully assess the style, taste, culture and values and believes of its customers from different countries because these factors are essential when designing an international marketing plan. For instance, Honda should apply marketing mix that is unique to individual countries, based on factors such as language barrier, economic circumstances among many others. Socio- economic considerations, technically, are important factors that influence the company’s taxation, transport cost, people’s taste and needs as well as the competition from other companies. From the statistics, Honda is facing stiff competition from different regions, especially the European region and it is imperative to pay attention to its marketing mix in order to enhance its competitiveness. Making of ideal decisions in regards to marketing mix also entails consideration of currency fluctuations, which is unique to each country, as well as government policies. This also calls for appropriate understanding and analysis of the legal framework that affects doing of business in different countries – this varies significantly from country to country and hence the appropriate marketing mix should be in line with it. The culture, level of wealth as well as the level of technology in different countries also differs and this influences the design, pricing, and promotion of products. Honda should undertake an extensive research on the cultural practices and values because this will largely affect the marketing strategy. The markets that Honda sells its goods appears to be extremely segmented along cultural orientation and, therefore, this should be a critical consideration when deciding the best marketing plan for each country. In general, all the factors that influence consumers buying decisions differ from one country to the other and these should be given preferential treatment when entering an international market - these should be used to design different marketing strategies for different countries. Is pricing its vehicles similar to the competition a good strategy for Honda? Pricing its vehicles similar to the competitors is a good strategy for Honda, as it ensures that its vehicles are comparable to those of the competitors. Furthermore, the products that Honda produces are not so differentiated from those that the competitors are producing and hence there are no many obstacles in using this strategy (De Wit & Meyer, 2004). Since there is strong competition in the automobile industry, the consumers are left with many choices regarding who they should buy from. In such a case, they are likely to buy from the suppliers offering the least price or the ones offering the best customer services – with reference to the prices that they consider normal or reasonable in the market at that given time. Honda in Europe does not possess strong command to enable setting of prices above those offered by their rivals. As a result, they result to using the “going rate pricing”, which is the process of adopting a price that is in line with that set by direct competitors. In such a case, a firm is a price taker because it adopts the going price, which is determined by the twin forces of supply and demand. One advantage of this model is that the prices set are in line with those of rivals; therefore, price does not act as a source of competitive advantage. The disadvantage, however, is that Honda is obligated to find other ways of attracting consumers, which are outside the price methods of competition. An example of the models that they can use to attract customers to purchase their products is by guaranteeing customers quality in their products. Furthermore, the usefulness of same price model to Honda managers is that it allows them to formulate strategies to creating competitive advantage for their business, which is done creatively to outweigh the associated value of their competitors. Should Honda change its product mix from country to country? It is important for Honda to change product mix from country to country because different countries have different characteristics that calls for different combinations of products. Changing product mix based on different factors that influence customers purchasing decisions in different countries ensure that Honda optimizes its sales across the world. Different customers’ needs from different countries are very evident from the European market (Greiner, 2000). In Japan, the majority of the Japanese cars are newly working young women and housewives who have little cash and, therefore, Honda should ensure that the product mix is uniquely designed for this category of customers. This also implies that a bigger number of cars, which are sold in this country, should be the cheaper model. In Italy, Honda should pay attention to the fact that diesel cars are preferred and hence factor them in, when deciding the product mix for this country. The product mix for Germany should focus on its low contextual culture that values durability and practicality. Ideally, each country has its unique characteristics that make it important to change product mix from one country to the other, paying attention to those characteristics. Is distributing its motor vehicles together with its motorcycles a good strategy for Honda? Distributing its motor vehicles together with its motorcycles is a brilliant strategy especially because the motorcycles strong brand can be used to boost sales of vehicles, which are performing very poorly in the European market. Essentially, motor vehicles were the first products for the company to produce and seemingly, this brand has performed well unlike the vehicles. In actual fact, the company’s motorcycle brand is superior and if sold alongside motor vehicles, the customers could have a perception that the superior motorcycle brand is also associated with the vehicles and perhaps all the products produced by the company are of high quality. This strategy, therefore, could be used to support the poor performing vehicle products, especially by increasing their sales where they have not been well-accepted liken the European market. Is the European market too competitive for Honda? Indeed, the European market is competitive for Honda, though the competition is manageable because it is mainly caused by the fact that they were rather late entering that market and some poor marketing mistakes, which can be fixed. The extent of this competition is evident from exhibit 2-6, which shows that the sales from Europe have declined dramatically since 1998. Honda first established a production facility in the European market in 1992, at a time when its competitors had already established root in this region. Low sales in this region have also been exacerbated by the fact that Honda entered this market when it was already saturated by locally owned manufacture, such as BMW, Volkswagen, Peugeot, Audi, and Opel, some of which have outdone Honda in the global ranking. Furthermore, when Honda entered the European market, it was only a minor player in its home country, which perhaps means that it could not have possessed substantial financial strength to establish strong grounds. Ideally, Honda faces a stiff competition in Europe, but if it embarks on strong marketing strategies, there is hope of gaining ground. This, for example, calls for the opening of more plants in Europe and investing in more superior technology so the company can remain ahead of its competitors. PART II: CASE ANALYSIS REPORT Honda background Honda Company was founded by Souichiro Honda in 1946. Initially, the company was started as a motorcycle manufacturer a time when it became especially flourishing in Japan in the 1950s. In 1956, Honda started capturing overseas markets when it entered the US and established its ground there, successfully. To support its technology expansion, Honda established automobile production in the early 1960s when it produced Formula-1 racing (F-1). The F-1 model helped the company gain wide recognition in Japan as well as the rest of the world – it was renowned for its powerful technology knowhow (The History of Honda, n.d.) Unfortunately, by 1990s, Honda had started experiencing mismanagement, a situation that saw its founder, Souichiro, ousted because he was blamed for overlooking critical marketing decisions. Following his departure, the new management struck a balance between technology and marketing, since these were previously cited as the key sources of the company’s problems. Presently, Honda has established to the tune of 25 distinct plants across the world, producing motorcycles, automobiles, power tools and products as well as financial services (The History of Honda, n.d.) SWOT Analysis Strengths 1. Honda has been ranked position six globally, as a producer of automobile. It sells its products to over 100 countries across the world. 2. Its branding, after sales services and branding are remarkably good. 3. Honda has a wide employee base – it has over 180,000 globally. 4. Honda has continuously improved its production system over the years. It also prides of a powerful Research and Development. 5. The company enjoys powerful brand royalty and brand equity 6. Its motor sports such as F1 are widely known and accepted. 7. Honda has remarkably improved its brand image through its eco-friendly Honda Prius. Weaknesses 1. Its cost structure is comparatively higher 2. The customer base is limited because the company only serves the upper middle segment 3. Honda had established a lot of models which caused a hue and cry – these should be recalled. 4. Honda has over relied on South America for market, which covers more than 80% of its total sales. 5. It has not been able to successfully capture the European market, which is a major automobile destination. Opportunities 1. The company can gain brand image by developing fuel efficient and hybrid cars for the future 2. The company can build a global brand and capture emerging markets globally. 3. The automobile industry is growing rapidly Threats 1. The price of fuel is ever increasing 2. Government policies 3. The global automobile brands present fierce competition. 4. Alternative models for providing public transport such as trains and buses. The issues that the management should address 1. Honda seems to have lost the battle in the European market. This is despite being very successful in other parts of the world. This issue is of paramount importance because Europe is a very crucial and strategic market for automobiles (Hill & Westbrook, 1997). 2. The ever-increasing price of fuel has led to popularity of diesel cars, which Honda rarely produces. If this issue is not addressed, then the company is likely to lose a substantial market to its competitors who embrace the market trends. 3. Fuel efficient and hybrid cars should be capitalized on in order to counteract the stiff competition from other automobile producers. This could help establish the grounds on those regions that Honda seems to be experiencing too much competition such as Europe, and also help to avoid over relying on South America for market. 4. The company should increase its product line because it has limited its customer base on the upper middle segment. This will entail production of more luxury models, which are very popular with, for example, European wealthy customer – this will help increase customer base in Europe and other regions where the company has not established strong grounds. Analysis of the issues Honda’s poor performance in Europe has been as a result of various reasons including poor cultural positioning, stiff competition from local producers, lack of good brand image in the individual countries, unsuitable product design, and inappropriate marketing strategies, just to mention, but a few. All in all, Honda has not lost it all in this region. The fact that the company has been remarkably successful in other overseas markets, such as South America, means that poor marketing strategies have been adopted in this particular region; and a change of tactic could turn the situation around (Kotler & Keller, 2009). In particular, the management should revisit its marketing mix that has been adopted to market products in this region. Most importantly, the promotion strategies that have been adopted are inappropriate especially considering the cultural orientation of individual countries. For instance, the internet marketing that Honda uses in Italy and France should be abandoned in favor of other methods that ensemble a low context culture. In addition, Honda should consider changing its product mix to suit the tastes and needs of different European countries. For example, luxuries and expensive model could be introduced in the UK targeting the wide market of wealthy people who are not too patriotic and hence can easily accept models from other countries (Paliwoda, 1993). Honda can only ignore the issue of ever-increasing prices of fuel at its own peril. Customers from different parts of the world seems to be increasingly adopting diesel models, because diesel is cheaper compared with gasoline fuel and due to the fact that diesel models are cheaper to maintain. The time has come for the Honda to start producing diesel models in high numbers because more customers seem to be adopting these models. Furthermore, Honda should use its strong research and development to research on more sustainable and cheaper models so it can attract customers on this ground (Gilligan & Hird, 1986). Following the global warming disaster, the world is awash with carbon reduction campaigns. Honda should capitalize on this scenario by stepping up its production of cars with low levels of CO2 emissions. This is particularly a very prudent tactic to sell its products in Europe, where carbon emission reduction campaigns have intensified. In doing so, Honda can position itself as an environmentally friendly producer and, hence promote its products on those grounds. In this regards, Honda’s efforts to introduce the Civic Hybrid in 2003 is remarkable and the project should be taken to greater heights (Albaum & Duerr, 2011). Finally, the management should focus on increasing the product mix, and also more research should be conducted to establish the needs and style of different customers from different countries, so that variance of product mix can ensemble characteristic of customers from each country. In the past, Honda had almost poorly in terms of aligning its product mix with the unique needs of the customers from different countries. This will also, perhaps, require the introduction of more product lines so that the company can have a variety to design appropriate product mixes (Keegan & Green, 2008). Recommendations Honda is ranked at position six, which means that it is a remarkably powerful automobile producer. However, its analysis has revealed that its market coverage across the world is not well-balanced. The key reason for performing poorly in some regions is lack of appropriate marketing mix and in particular the promotion mix. Honda should ensure that it adopts different marketing strategies for each country, because it has been found that different countries varies significantly, mainly in terms of cultural orientation. Relying on the internet to market products in all countries should never again be the habit since it has caused the company to lose ground on very strategic markets. Instead, Honda should capitalize on its strong research and development capability as well as wide and skillful staff, to research on specific factors that influence the customers’ decision making from each country, and henceforth adopts a contra-specific marketing strategy. Having done this, the company will be headed for a bright future (Pettinger, 2004). Implementation plan Honda should amass its human and capital resources, which it is well endowed with, to ensure a successful implementation of the proposed marketing strategy. The marketing department in conjunction with the management executives should throw all their energies towards implementation of this hallmark strategy. The planning team could set aside the next one year for the implantation (Pride & Ferell, 2010). References “The History of Honda” n.d. Retrieved from http://www.cars-directory.net/history/honda/ Albaum, G., & Duerr, E. (2011). International Marketing and Export Management. Harlow: Financial Times Prentice Hall. De Wit, B., & Meyer, R. (2004). Strategy Process, Content and Context. London: International Perspective. Gilligan, C., & Hird, M. (1986). International Marketing Strategy and Management. Kent: Croom Helm. Greiner, L. (2000). Patterns of Organisation Change. Harvard Business Review. 45: p.3. Hill, T., & Westbrook, R. (1997). SWOT Analysis: It’s Time for a Product Recall. Long Range Planning, 30 (1), 46–52. Keegan, W.J., & Green, M.C. (2008). Global Marketing, 4th edn. Upper Saddle River: Pearson/Prentice Hall Kotler, P., & Keller, K.L.(2009). A Framework for Marketing Management, 4th edn. London: Prentice Hall. Paliwoda, S.J. (1993). International Marketing, 2nd edn, London: Butter-worth Heinemann. Pettinger, R. (2004). Contemporary Strategic Management, Palgrave. London: Basingstoke. Pride, W.M., & Ferell, O.C. (2010). Marketing International, 15th edn, Sydney: South-Western. Read More