• Written on 12 Apr 2013

SWOT analysis of Honda

Honda logo

This is Honda Motor Company SWOT analysis for 2013. For more information on how to do SWOT analysis please refer to our article.

Company background

Name Honda Motor Company, Ltd.
Industries served Automotive, Aviation, Telematics
Geographic areas served Worldwide
Headquarters Japan
Current CEO Takanobu Ito
Revenue ¥7.948 trillion (2012)
Profit ¥211.48 billion (2012)
Employees 179,060 (2012)
Main Competitors Daimler AG, Ford Motor Company, General Motors Company, Nissan Motor, Toyota Motor Corporation, Suzuki Motor Corporation, Volkswagen AG.

Honda Motor Company is a Japanese business producing automobiles and motorcycles. Honda is the largest engine producer in the world in terms of units as well. The firm was the eighth largest automaker in the world in 2011.
You can find more information about the business in its official website or Wikipedia’s article.

SWOT

Honda SWOT analysis 2013

Strengths

Weaknesses

  1. Diversified product portfolio
  2. Huge investments in R&D
  3. Strong brand image
  4. Motorcycle market share in Asia
  1. Product recalls
  2. Weak position in Europe automotive market
  3. Decreasing sales

Opportunities

Threats

  1. Increasing fuel prices
  2. Positive outlook for global motorcycle industry
  3. Growing global demand for environmentally friendly vehicles
  4. Growth through acquisitions
  1. Intense competition
  2. Decreasing fuel prices
  3. Rising raw material prices
  4. Natural disasters
  5. Strong yen

Strengths

  1. Diversified product portfolio. Honda unlike many other automotive companies does not focus only on selling vehicles. It is the largest producer of the engines and motorcycles as well. Therefore, the company is not as susceptible as its competitors are to market cycles or technology disruptions.
  2. Huge investments in R&D. Honda’s investments in R&D reach as much as 5% of revenue. The business relies on these investments to achieve competitive advantage through various technologies, such as improved vehicle painting process, new hydrogen and hybrid engines or new welding technologies. In 2012, the company owned 42,000 patents and had pending applications for 29,000 more patents.
  3. Strong brand image. Honda has a reputation for producing the best quality engines around the world. The company’s brand was the 21st most valuable brand in the world valued at $17 billion and was only behind Toyota, Mercedes-Benz and BMW, according to Interbrand.
  4. Motorcycle market share in Asia. In 2012, Honda sold 80.5% of its motorcycles in Asia, the market that has greatest growth potential. Having the largest motorcycle market share, Honda is well positioned to compete with other companies for the sales and profits.

Weaknesses

  1. Product recalls. Over 2011 and 2012, Honda recalled more than 1,000,000 vehicles to fix various faulty parts and manufacturing defects. Car recalls severely damages firms brand reputation and future sales.
  2. Weak position in Europe automotive market. Honda holds a very weak position in the Europe’s automotive market and has maintained only 1.1% market share in 2012. Although, Europe’s market share is declining at the moment and many companies experience losses, the market is huge and firms can benefit from the economies of scale.
  3. Decreasing sales. In 2012, Honda’s revenue hit the lowest point in 4 years to ¥7.948 trillion. Honda sales were down by 11.2% in North America, which represents more than 40% of total Honda revenues. Revenue from Asia and Europe also declined by 21.3%, 15.5% respectively, signaling poor firm’s performance globally.

Opportunities

  1. Increasing fuel prices. Honda’s strong emphasis on engineering fuel-efficient vehicles (Honda Insight and Honda Civic) with flexible fuel, hybrid and hydrogen engines will pay off due to increasing fuel prices.
  2. Positive outlook for global motorcycle industry. Motorcycle industry grew by 4.2% from 2011 to 2012 and is expected to grow by at least 6% to 2016. Honda is the world’s leading producer and seller of the motorcycles having more than 29% of the market share. Growing demand for the motorcycles is a great opportunity for the company to expand its global market share and grow sales.
  3. Growing global demand for environment friendly vehicles. The declining levels of fossil fuel sources and the rising CO2 emissions became a major concern for many people and many governments. Therefore, ecologically friendly cars, powered by hybrid, hydrogen or flexible fuel engines became very popular. The market for such cars was $33 billion in 2010. Honda’s focus on hybrid and hydrogen fueled engines is a great opportunity to capture the market share for this new demand.
  4. Growth through acquisitions. Honda could greatly benefit from strategic partnerships or acquisitions of smaller competitors. The business would add new brands to its portfolio, achieve greater economies of scale and would benefit from synergies between different firms.

Threats

  1. Intense competition. Honda faces more intense competition than ever. New small entrants are disrupting the market with their capabilities in producing electric vehicles or alternative fuel engines. Big companies are restructuring themselves to become more efficient. As a result, firms like Honda are suffering from competition from both big and small players.
  2. Decreasing fuel prices. Some analysts forecast that future fuel prices will drop due to extraction of shale gas. This would negatively influence Honda because the company is focusing on hydrogen fuel, hybrid and flexible fuel engine cars, which are not so attractive to consumers when fuel prices are low.
  3. Rising raw material prices. Metals are the main raw materials used in vehicle and motorcycle manufacturing and the rising price of the raw metals raises overall production costs for Honda.
  4. Natural disasters. Honda has manufacturing facilities in Japan, Thailand, China and Malaysia. These countries, including others, are often subject to natural disasters that disrupt manufacturing in the facilities and decrease Honda’s production volumes.
  5. Strong yen. Honda earns most of its profits outside Japan and appreciating yen poses a great threat to Honda’s profits.

Related topics

BMW SWOT

Ford SWOT

General Motors SWOT

Hyundai SWOT

Nissan SWOT

Toyota SWOT

Volkswagen SWOT

Sources

  1. ACEA (2013). PASSENGER CAR REGISTRATIONS: -7.6% OVER 11 MONTHS. Available at: http://www.acea.be/index.php/news/news_detail/passenger_car_registrations_-7.6_over_11_months_-10.3_in_november
  2. Honda (2013). Investor relations. Available at: http://world.honda.com/investors/
  3. Wikipedia (2013). Honda Motor Company. Available at: http://en.wikipedia.org/wiki/Honda

Written by Ovidijus Jurevicius

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