Honda Strategy and Marketing Analysis

Honda system and Marketing AnalysisVolkswagen was the first classifynership entering the Chinese carmobile industry. Faced by a satisfied home market the company had to expand its business and therefore the growing economy of chinaw atomic number 18 was their next choice.The Volkswagen Beetle, the first cable car pull ind for the Chinese market, was a real success. After several historic periodcompetitors, in the first place from the Japanese market like Honda, started to enter the Chinese market very aggressively anddue to that Volkswagen had to appear the challenge to maintain its market leader position and therefore adopt thecorporate strategy.As a consequence Volkswagen china introduced its Olympic Program strategic plan in 2005. The program is calledOlympic since its aim is to come across the strategic goals set by the end of the Olympic year 2008.In the following we exit crumble the strategic plans of Volkswagen and set them in context to the strategic behaviour o fthe Japanese competitor Honda.3.1 MarketingVolkswagen inform to focus more(prenominal) than on variousiation. This is due to the existence of two joint ventures and theplanned positioning of the Skoda products. By offering a show upsize product variety the group aims to serve as many differenttarget customer groups as possible.In opposition to previous product designs the new cars offered by Volkswagen leave be adapted to Chinese taste in orderto increase the brands touristyity. The former Volkswagen products were de sign-language(a) for the European market entirely sinceJapanese car manufacturers fit better to the Asian taste the company had to react. The Volkswagen products in chinawarecompete on quality but to maintain the companys leading position it is unremitting to pitch cars that be bothfashionable and qualitative.3.2 SalesSales relationships are going to be restructured and there will be more interaction amidst the two joint ventures FAWVW and VWS. These str ategic interactions are an other bearing to increase the companys customer orientation and therebythe attractiveness of the brand. Dealerships will be tailored to the newly-defined customer groups divider of thetwo joint ventures respectively. Vehicles of the Volkswagen brand will be distributed finished two dealer networkchannels. By this, Volkswagen aims at its strategic goal to maintain its leading position by serving different customergroups.3.3 Research and DevelopmentThe company focuses more on in-house rebelments within the Volkswagen joint ventures in China to pen be. Tento twelve new models developed in China for the Chinese market should be launched by the end of 2008.3.4 Sourcing and Supply ChainHistorically the two joint ventures VW Shanghai FAW VW in Changchun sourced separately but within the last disco biscuitsourcing became more challenging for the company the cars are be advance more sophisticated and therefore thecomponents have to fulfil higher expectation s, the technical expertise of the provider is getting more all important(p) 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) cause sourcing difficulties.As a reaction Volkswagen is trying to introduce a common sourcing process for the global group and chock up 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 production costs the board decided to introduce so called product cost workshops within themanufacturing departments to communicate cost targets and find to costs. Also large parts of the manufacturingprocess will be done in China and kettle of fish in China are planned to be increased to make use of the cheaper labourissue in China. Besides all plans to reduce production costs Volkswagen tries not to compromise its high te chnologyquality and manufacturing standards since this is a very important success factor for the company.4. Honda strategy in ChinaHonda advocates the tone 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 ex touch in what they call The Three comforts. 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 travel to successfully creating The Joyof Buying.We also pick 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 order raw materia ls in large quantities.Secondly, suppliers local anaestheticization, more than 160 component suppliers around Guangzhou Honda to manufacture some sustainments component for carmobiles. For example, the glass seat and engine. These parts are supplied not tho forGuangzhou Honda but also sometimes for exporting. Whats more, setting up manufacturing secondary for transmission inGuangzhou really makes a record, because this is the first time for foreign-funded automobiles enterprises to set uptransmission manufacturing introduction in China. And this coronation 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 consort to the pattern in Janpese Logistics Company. They emphasizeimporting the service quality in logistics, decreasing logistics cost puff out market share and competitiveness and importnew technology and methods in logistics from USA.Fourthly, making planning string 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 production has been promoted alot.In the influence of transmission localization. The biggest supplier of upon) 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 endure considerably decrease the cost which gives Guangzhou Honda more profits.Then we mo ve on to the 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 equal launching docket all over the world it means same timepromoting same time marketing.Secondly, Honda adjusts the price to the military position of market nearly every season. Demand fluctuation, price fluctuation.The flexible price strategy is different from Volkswagens stabilize price strategy which perhaps gives consumers morereliability.Thirdly, Honda fight for market share and Volkswagen emphasize brand repute in long term, Honda targetconsumers which means flexible strategy will be much easier for company to survive and succeed. While forVolkswagen, more luxury and exclusive element allow Volkswagen to offer more acceptance for consumers in order togain reputation in long term.Case study SIAC6.4 .1. General narrative of SVW and SGMNot only did Shanghai present an advantage as a potential market, butShanghais minatory 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 urban tendernesss steel and other heavy industries,cried out for the final ingredients necessary for rapid breeding moderntechnology and management skills.An automobile cluster began to develop in Shanghai in the 1980s, thanks to well-set governing support at different levels. To ascent the national automobileindustry following international standards and to avoid an influx of automobileimports, the central authorities 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 official 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 wooden leg andproposed the idea of localization as China became more experienced in producingquality part supplies. at bottom 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 China guinea pig railroad carmotive Industrial Corporation. The involvement of Chinese partnersrevealed watchful forethought The Bank of China could provide or guarantee neededloans, SAIC would have an interest in solving local problems, and CNAIC could be a plug in 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 venture 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 exceedingly 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 domesticcompany. However, the obvious disadvantage of working with SAIC was its existingjoint venture with VW which was one of GMs global competitors and which had prevail 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 sup portedby municipal policies, including infrastructure development, labor market, andindustrial policies. In addition, to stimulate kind manufacturing competencies and tointegrate Chinese suppliers within the region, the central government enforced local-content regulations on those auto joint ventures to urgency the development of a regionalproduction network with substantial local linkages.Mean musical composition, there has been a strong tendency in the international automobileindustry to develop hierarchical supplier networks and shift the developing,manufacturing, and manufacture 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 with in the region. However, production volume (less than 20,000 units in 1990) at that time was excessively 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 Firm Strategy and CompetitionSAICs strategy is clear-to form multiple auto JVs with different globalfirms and to benefit from competitions bet ween those partners, in regard totechnology transfer, new model introduction, and supply market rationalization.SAICs experience with GM and VW proved this strategy, and GM seems to do abetter job in quality control, technology adaptation, and accurate appraisals ofdomestic 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 seek of being shunted aside as Chinas domestic autoindustry develops.In July 2004, national auto gross revenue rose only 3.7% over the same period in 2003(CAAM, 2005). The growth slowdown has had a substantive 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 SVW in brief in June 2004 to become the market leader. Over the past few years, Chineseconsumers have become more savvy shoppers through great access to information(The middle 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 ne twork and industrialinfrastructure were important reasons wherefore 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 established 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 cd Chinese engineers, which,though not directly training Chinese engineers, gives China the op portunity to work tight with advanced techniques and learn in the process.According to Porter (1990), only when a foreign company transfers RDdecisions can it add to the host nations competitiveness.