Honda Strategy and Marketing Analysis

Honda Strategy and Marketing AnalysisVolkswagen was the for the first time confederacy entering the Chinese automobile industry. Faced by a satisfied home market place the compevery had to expand its business and therefore the growing economy of chinaware was their next choice.The Volkswagen Beetle, the first cable car produced for the Chinese market, was a real success. After several eldcompetitors, mainly from the Japanese market like Honda, started to enter the Chinese market very aggressively and delinquent to that Volkswagen had to face the challenge to maintain its market leader position and therefore adopt thecorporate dodge.As a consequence Volkswagen mainland china introduced its Olympic computer program strategic plan in 2005. The program is vocaledOlympic since its aim is to reach the strategic goals touch on by the end of the Olympic year 2008.In the following we forget analyze the strategic plans of Volkswagen and set them in context to the strategic behaviour ofthe Japanese competitor Honda.3.1 MarketingVolkswagen announced to focus more(prenominal) on variousiation. This is out-of-pocket to the existence of two pin ventures and theplanned positioning of the Skoda increases. By offering a bombastic product variety the group aims to serve as many diametrictarget client groups as possible.In opposition to previous product designs the new cars offered by Volkswagen leave be adapted to Chinese adjudicate in orderto increase the brands popularity. The former Volkswagen products were designed for the European market but sinceJapanese car manufacturers fit better to the Asian taste the company had to react. The Volkswagen products in Chinacompete on quality but to maintain the companys leading position it is unremitting to produce cars that are bothfashionable and qualitative.3.2 salesSales relationships are going to be restructured and there will be more interaction between the two joint ventures FAWVW and VWS. These strategic inter actions are some other way to increase the companys customer orientation and therebythe attractiveness of the brand. Dealerships will be tailored to the newly-defined customer groups segmentation of thetwo joint ventures respectively. Vehicles of the Volkswagen brand will be distributed through two dealer net progress tochannels. By this, Volkswagen aims at its strategic goal to maintain its leading position by serving various customergroups.3.3 Research and DevelopmentThe company focuses more on in-house exploitations within the Volkswagen joint ventures in China to save costs. Tento twelve new baby-sits demonstrable in China for the Chinese market should be plungeed by the end of 2008.3.4 Sourcing and Supply ChainHistorically the two joint ventures VW Shanghai FAW VW in Changchun sourced on an individual basis but within the last decadesourcing became more challenging for the company the cars are becoming more sophisticated and therefore thecomponents have to fulfil high e xpectations, the technical expertise of the supplier is getting more substantial and it isdifficult for Volkswagen to find suppliers which meet their requirements, lack of availability of certain raw materials(e.g. specific kinds of steel) take a crap sourcing difficulties.As a reaction Volkswagen is trying to introduce a common sourcing knead for the global group and bundle thepurchasing volume in China to create economies of scale. Thereby the target is to find one supplier for each platformpart and carry these parts to China.3.5 ManufacturingIn order to decrease proceeds costs the board decided to introduce so called product cost workshops within themanufacturing departments to communicate cost targets and produce to costs. Also grownup parts of the manufacturingprocess will be done in China and localization in China are planned to be increased to make use of the cheaper roilwages in China. Besides all plans to reduce proceeds costs Volkswagen tries not to compromise its h igh engineeringquality and manufacturing standards since this is a very fundamental success factor for the company.4. Honda dodging in ChinaHonda advocates the spirit of three joys.Because of their belief in the value of each individual, Honda believes that each person working in, or coming in touchwith their company, directly or through their products, should share a sense of joy through that experience. This feelingis expressed in what they call The Three Joys. Their goal is to provide Joy for those who buy their products and produce their products. In that regard, their main concern is for people.First, there is The Joy of Buying for every customer who buys a HondaThis Joy is a step beyond customer satisfaction. As they define it, there are four steps to successfully creating The Joyof Buying.We similarly piece up another 4 strategy of Guangzhou Honda in China. Firstly, large scales of purchasing Honda uses theireconomies of scale by working with their parts suppliers to ord er raw materials in large quantities.Secondly, suppliers localization, more than 160 component suppliers around Guangzhou Honda to manufacture somesupports component for automobiles. For example, the glass seat and engine. These parts are supplied not only forGuangzhou Honda but also sometimes for exporting. Whats more, setting up manufacturing base for transmission inGuangzhou really makes a record, because this is the first time for foreign-funded automobiles enterprises to set uptransmission manufacturing base in China. And this investment of Honda makes the supplier localization especially thesuppliers for core parts.Thirdly, optimizing logistics process. They use logistics management software from USA.The logistics department ofGuangzhou Honda was demanded to operate according to the pattern in Janpese Logistics Company. They emphasizeimport the service quality in logistics, decreasing logistics cost enlarge market share and competitiveness and importnew engineering science a nd methods in logistics from USA.Fourthly, making interpret concatenation perfect. The Honda setting up a local transmission manufacturing base in Guangzhoumakes transmissions no longer popular in importing and components industrial chain in China will develop to perfect.the newly set-up base will provide transmissions to three Honda companies in China(Guangzhou Honda, DongfengHonda and China Honda)In this pattern, the most crucial part of automobileengine turnout has been promoted alot.In the influence of transmission localization. The biggest supplier of clutch in Japan set up a factory in 5 years with thetotal investment54million dollars in Nanhai District in Guangzhou and it manufacture clutch for Guangzhou Hondadirectly.With the localization of supplier of transmission and clutch the supply chain of Guangzhou Honda has developed intonearly perfect.Hondas strategy in supply chain can considerably decrease the cost which gives Guangzhou Honda more profits.Then we move on to th e comparison of the marketing between Volkswagen and Honda. Firstly, for Honda they launch anew car later in China compared with in Japan. For example, the Accord in 2008 was launched half a year later in Chinathan in Japan. But for Volkswagen, a new car will have a same launching agenda all over the world it office same timepromoting same time marketing.Secondly, Honda adjusts the price to the situation of market nearly every season. Demand fluctuation, price fluctuation.The flexible price strategy is different from Volkswagens steady price strategy which perhaps gives consumers morereliability.Thirdly, Honda fight for market share and Volkswagen emphasize brand reputation in long term, Honda targetconsumers which style flexible strategy will be much easier for company to survive and succeed. While forVolkswagen, more luxury and exclusive element allow Volkswagen to offer more credence for consumers in order togain reputation in long term.Case study SIAC6.4.1. General History of SVW and SGMNot only did Shanghai vex an advantage as a potential market, butShanghais heavy industrial infrastructure also made major contributions to ShanghaiVW (SVW) and Shanghai GM (SGM). A larger number of parts factories, togetherwith the extant Shanghai car plants and the citys steel and other heavy industries,cried out for the final ingredients necessary for rapid development moderntechnology and management skills.An automobile cluster began to develop in Shanghai in the 1980s, thanks tostrong government support at different levels. To upgrade the national automobileindustry following international standards and to avoid an influx of automobileimports, the primordial government started negotiation with VW in 1978 for theestablishment of a joint auto production firm. During that entire year, the countrysstate-owned auto factories produced only 15,500 vehicles, and the industry was characterized by old-fashioned, low-quality cars that were produced with outdatedequipment in a labor-intensive process (Kiefer, 1998). Chinese prescribed pressed theidea of building autos for export and insisted on auto-parts localization. The Germancounterpart, however, explained the necessity of auto-part import at the first stage andproposed the idea of localization as China became more experienced in producingquality part supplies. Within this cooperative atmosphere, the contract was signed in1984. This joint venture was owned 50% by Volkswagen, 25% by SAIC, 15% by theBank of Chinas Shanghai Trust and Consultancy Corporation, and 10% by the ChinaNational Automotive Industrial Corporation. The involvement of Chinese partnersrevealed careful forethought The Bank of China could provide or guarantee neededloans, SAIC would have an interest in solving local problems, and CNAIC could be alink to the central planner. (Harwit, 1995, p. 153).To reduce its dependence on VW and to stimulate technology transfer afterone decade of cooperation, SAIC decided to engage in the joint ve nture with GM inthe early 1990s. SAIC and GM signed a contract to jointly set up Shanghai GMproduction facilities in Pudong in 1997. GM was anxious to win this joint venturebecause it believed that SAIC was the best automobile company in China. Indeed,SAIC was highly profitable due to many advantages. Notably, the Chinesegovernment had chosen SAIC to be the primary passenger car producer enabling it toacquire the most relevant technological experiences, more so than any other municipalcompany. However, the obvious disadvantage of working with SAIC was its existingjoint venture with VW which was one of GMs global competitors and which haddominated the Chinese passenger car market since the mid-80s (see Table 19). Sinceits establishment, SGM has grown into one of the largest car producers in China.6.4.2. Auto Supplier Cluster in Shanghai AreaThe development of the automobile industry in the city was strongly supportedby municipal policies, including infrastructure development, labor market, andindustrial policies. In addition, to stimulate broad manufacturing competencies and tointegrate Chinese suppliers within the region, the central government enforced local-content regulations on those auto joint ventures to spur the development of a regionalproduction network with substantial local linkages.Meanwhile, there has been a strong tendency in the international automobileindustry to develop hierarchical supplier networks and shift the developing,manufacturing, and assembly responsibilities of important modules to the first-tiersuppliers. Along with the globalization strategy of the automobile producers, largefirst-tier suppliers were also required to follow their auto assembly partners and set upproduction facilities in other nations (Sadler, 1998). As a consequence, VWdemanded that important first-tier suppliers establish production facilities in China,preferably within the region. However, production volume (less than 20,000 units in 1990) at that time was too small for global suppliers to set up mass productionfacilities in Shanghai.In the initial years after production was launched, SVW still imported mostparts and components for the production of the VW Santana from overseas, a large part of which was from Germany. At that time, there were basically no firms in theregion that could have supplied the parts that were needed. However, the Chinesegovernment threatened to impose a production limit on SVW if the firm would notincrease its local content in production. To achieve the 70% local content regulationbut at the same time to ensure global quality standards, VW and the Chinesegovernment worked interactively in promoting joint venture partnerships in the autoparts sector.6.4.3. Joint Ventures sign Strategy and CompetitionSAICs strategy is clear-to form multiple auto JVs with different globalfirms and to benefit from competitions between those partners, in regard totechnology transfer, new model introduction, and supply market rational ization.SAICs experience with GM and VW proved this strategy, and GM seems to do abetter job in quality control, technology adaptation, and accurate appraisals of domestic demand market than its competitor VW. While VW and GM areincreasingly going head to head in the marketplace as they expand their product lines,SAIC may find itself competing with both when its own car goes on sale. At the same . time, VW and GM run the risk of being shunted aside as Chinas domestic autoindustry develops.In July 2004, national auto sales rose only 3.7% over the same period in 2003(CAAM, 2005). The growth slowdown has had a significant impact on VW who waslosing market shares because of an aging product line and increased competition. In2002, cars made by SVW had 27.6% of the China market in 2003 they slipped to19.6%, and for the first seven months of 2004, they fell further to 15.5% (Xu, 2005).VWs difficulties have created an opportunity for GM, which passed SVWbriefly in June 2004 to bring forth the market leader. Over the past few years, Chineseconsumers have become more savvy shoppers through greater access to information(The essence class., 2001), said Phil Murtaugh (CEO of GM China) at the 2001China Business Summit, and they have higher expectations for the products and theirquality. (The middle class., 2001). He pointed to the dramatic increase of internetusage and the greater number of Chinese auto publications. Chinas growing middleclass itself represents a sophisticated customer base for a broaden product mix andthus fierce competition, Murtaugh said (The middle class., 2001). A carefulevaluation of changing domestic consumers and a close relationship with Chineseengineers in its technical center keeps GM consistently in the leading position inChinese passenger car market. 6.4.4. Technology Transfer Good and BadScholars advocated that the existing supplier network and industrialinfrastructure were important reasons why GM also decided to set up productionfacilities in Shanghai in 1997(Gallagher, 2005 Taylor III, 2004), while the latersuccess of GM, to a large extent, is attributed to its sincere investment in localtechnology development and close cooperation with Chinese engineers. Nonetheless,problems could rise from inter-JV technology transfer.GM was the first company that actually effected a technical center withadditional investment in Shanghai, following the governments promotion oftechnology transfer in the 1994 industrial policy. A separate $50 million US jointventure was established between GM and SAIC named the Pan Asian TechnicalCenter (PATAC). PATACs main purpose is to provide engineering support to SGMand other Chinese auto companies. PATAC has also established an in-houseemissions testing center and has employed around 400 Chinese engineers, which,though not directly training Chinese engineers, gives China the opportunity to workclosely with advanced techniques and learn in the process.According to Porter (1990), only when a fo reign company transfers RDdecisions can it add to the host nations competitiveness.