Entering of Honda Company into a Potential US Market - Case Study Example

THE “HONDA EFFECT” -CASE STUDY REPORT “The delicate quest for market entry strategies and dominance” Name University Affiliation Executive Summary This report is all about Honda a Japanese world leading motorcycle-manufacturing company. The report focuses on the strategies used by this company to capture the market both home and Away. This analysis is looked in two perspectives i. e sociological and psychological perspective. As much as Honda being a young company than other motorcycle manufacturing companies from other parts of the world, it rose to prosperity within no time and captured a large share of the world market. Therefore, the report analyzes the strategies this company employed for it to reach at such a standard. The report is divided into two sections, first it discusses the strategies that caused this company to thrive in home country i.e. Japan in its initial stages. The second section discusses how it managed to enter into a potential US market. Each section has also two parts, the part that discusses the sociological perspective and the second part that discusses the psychological perspectives exhibited in this company. The “Honda effect”- a case study report Introduction This report is all about Honda a famous multinational motorcycles manufacturing company that has its headquarters based in Tokyo Japan. Honda commenced its business operation humbly in 1950s after the Second World War, thus, it is not a very old company unlike other motorcycle companies based in UK and US. However, amusingly, it is the world’s leading motorcycle manufacturer in the current times. The purpose of this report is to analyze the strategies and decision-making framework, which this company employed for it to arise to the top position despite of its young age in business than its competitors. This report is divided into two parts, the first part it will discuss the early stages of Honda Company in its home country i.e. Japan. The second part, it will focus on the later stage of this company in the foreign markets most especially in the US market. MARKET ENTRY STRATEGIES OF HONDA Co. IN JAPAN The sociological perspective This renowned company started its operations in 1950s by two partners Sachiro Honda and Takeo Fujisawa. These partners had different unique characters therefore, when they collaborated, their uniqueness led to sustainability of a business. Honda was an innovative and enthusiastic engineer who pursued the innovation of new technology. While his counterpart Fujisawa was a wealthy businessperson who had a good experience in business operation. Their motorcycle manufacturing company named “Honda” started at a humble beginning in a competitive business environment in Japan (Pascale, 1996).. However, their success depended much on their sociological perspective. This company’s initial stage of development comprised of only two people this kind of a group can be categorized as a primary set where few members establish and maintain norms. Teale, et al, (2003). Sociological studies show that a small group organization can easily come into consensus and make vital decisions within the shortest time as possible and is more cohesive in their actions. Honda grew steadily because it only composed of two people who had like (cohesive) minds and made decision as fast as possible according to the demand of the prevailing situation. Teale, et al, (2003). Honda and Fujisawa were friendly, this led to what Harrison (1986) referred to as “groupthink”. This is a phenomenon that states that the more friendly and corporative the members of a group, the high the probability that independent critical thinking will be suspended for the sake of the group norms. Still under group, sociologists suggest that for a group to be successful, members are required to adopt different roles. This can be witnessed in Honda Company when the two members played their own role. Teale, et al, (2003). Honda himself was responsible in designing motorcycles that were competitive technologically on the market while Fujisawa concentrated on how strategically markets their motorcycles. Thus, these partners played different roles gearing towards attaining the same goal. Each of them had a well defined role and performed their role with seal zest to ensure that their corporation thrives. Moreover, Honda and Fujisawa practiced what is known as “conformity” while trying to boost their business. Conformity is a phenomenon which states that group members tend to exert pressure on individuals in order for them to act in accordance to the common understanding. Teale, et al, (2003). From the case study, we find that Fujisawa pressurized Honda the designer to come up with a design of a more technologically advanced motorcycle that had a noiseless and four-stroke engine to resemble those of the competitors on the market in order for them to remain in market. In addition, he pressurized his designer to innovate a more technologically advanced motorcycle that will be used for commercial purposes (Pascale, 1996). These motorcycles would be used for carrying less bulky goods, which would be inconvenient to be transported by buses.. Therefore, he wanted his designer to make a unique product that would solve the problem of inconveniency and attract the attention of the buyers on the market to beat their competitors. The psychological perspective Like any serious business oriented firm, Honda kept a keen eye on the behaviors of its customers on the market. Its marketer Fujisawa had the ability to study the preferences of the buyers on the market (Pascale, 1996). He advised his partner to design unique products that will serve the customers satisfactorily after studying the desires of the customers. When they came up with motorcycles that would transport goods, this was the turning point for this company to rise to prosperity. This situation can be compared to the term “significant others” that was coined by George Herbert Mead a famous psychologists Gerrig, et al. (2012). Significant others are the people or group of people who are important to us and have more influence on us. In relation to significant others, Mead also suggested that we also have the “generalized others”. This is how we tend to perceive others expectation of us. Normally, people tend to think behave and act according to the pressure exerted on them by significant others and generalized others. The two partners valued their significant others who are the buyers of the motorcycles on the market. Customers to any business firm are very important since they are the ones that determine their success or failure. The prosperity of Honda Company was much driven by the characters of the owners. Honda himself was described as an inventive genius with large ego; he had an inventive ability and ultimate self-confidence. In fact, Fujisawa said that Honda had no end for his pursuit of technology (Pascale 1996). His main purpose was to come up with products that surpass their competitors’ technologically. On the other hand, Fujisawa was a well off businessperson who had a vast experience in marketing. Now the combination of characters of this to people had a big advantage to their business over others. Their characters can be associated to what is referred in psychology as “instrumental aggression” Gerrig, et al. (2012). This is a goal directed and cognition based acts. Normally, people tend to carry out the acts of aggression with premeditated thoughts to attain some specific aims. The aggression of these partners had premeditated thoughts that aimed at having a big share of the market for their products. 2 MARKET ENTRY STRATEGIES Of HONDA Co. IN THE U.S MARKET The sociological perspective The two American Honda executives Kihachiro Kawashima and his assistant actually adopted the same norms as those of their bosses at home while they launched a subsidiary in the United States of America.. These characters are again exhibited in these American executives (Pascle, 1996). They were also hardworking, always keen in analyzing issues on the US market in order to for them to get its really picture. They focused their mind on how they could make their products be favored on the market despite the presence of other competitors such as Harley Davidson (Pascale, 1996). Honda and Fujisawa formed or set the norms of hard work and critical decision analysis for this company. These executives in America adopted these norms. This situation can be linked to what is known as “norm crystallization”. Teale, et al, (2003). This phrase means norm formation and solidification; sociological studies reveal that once norms are established in a given group, they tend just to perpetuate themselves. These norms are said that they can be transmitted from one generation of members to another and continues to influence individuals’ behaviors even long after the original group that formed it had gone (Ayson, n. d). This means that social norms that are formed at the initial stages of the formation of a particular group tend to shape the attitudes and behaviors of the proceeding group members. In most cases, middle and lower income earners these kinds of people were majority in many parts of US such as Los Angeles, Dallas etc, and owned motorcycles (Pascale, 1996). Therefore, the Honda executive took this advantage of cultural diversity and different in status quo to capture the market.. This fact can be linked to Idler’s (1991) sociological hypothesis, which states that the diversity offered in multicultural groups can lead to higher productivity than homogenous groups. Teale, et al, (2003). Thus, the multicultural population of US enabled this foreign company to take roots into market. The major factors that have led to high technology and efficient production methods in Japan include; specialized production systems, balancing engineers, marketing requirements, cost efficiency and reliable suppliers. Earlier manufacturers initiated all techniques that are employed by Japanese manufacturing companies. Thus, high technology and production efficiency is a norm that is deeply rooted in Japanese manufacturing companies. People like Honda and other earlier engineers initiated this norm. In sociology, such trends are termed as “normative influence” Teale, et al, (2003). These group effects arise from individual desires to be liked, accepted and approved by others. Therefore, the desire for innovation for people such as Honda affected positively other people in Japan leading to the norm of having the passion of innovation. Psychological perspective After the first visit of US executives, they went and reported to Fujisawa their boss what they found in the US market. Fujisawa promised to authorize $1 million for that person who will be able to make sale deal in this foreign market. The situation was discouraging but the two executives accepted the offered and went to US attempt if they will be able to make some sales to introduce Honda motorcycles. The offer of one $1 million was a motivating factor to entice executives to try the new market that seems to be difficult. From the psychological point of view, we can deduce incentives act as motivating factors to let people attempt a riskier act, Gerrig, et al. (2012). Therefore, motivation is one of the aspects in psychology that can be used by traders to increase productivity and growth of firms. When the advertisement team of Honda in US resorted to adopting the nicest people campaign, they disregarded the one suggested by their president and the treasurer. The team was a bit confused whether the strategy would work and if it could not work their bosses would blame them for neglecting their proposal. In psychology, we refer to some confusion that comes after making some decisions due to anxiety. We refer to this confusion and “cognitive dissonance” Gerrig, et al. (2012). It is a theory that was postulated by psychologist Leon Festinger in 1957. In most cases, this confusion makes us to work very hard not to fail to attain on what you decided. These campaigners worked hard to remove the blame on them and later on the campaign beard fruits. Still under psychological perspective, Honda executives in the US market seized the opportunity of the high demand for their products and took a riskier decision. They announced that they are stopping to ship on consignment but sale their products on cash on delivery basis. They risked the rapport they had created with American dealers since cash on delivery basis meant that they would be selling their products directly to consumers without using the dealers. This is value that is contained in a risk alternative is referred to as a “risk shift” Gerrig, et al. (2012). He suggested what is called a risky value hypothesis. Therefore, the executive team in US applied this hypothesis because of the value of that was contained in the risky alternative. Lastly, under psychological perspective, Honda Company found that people in US do not prefer using motorcycles; this was because they associated motorcycles with rowdy people with funny characters. Therefore, to counter this belief in the market, it established a campaign with a strategy of “you meet nicest people on Honda” (Pascale, 1996). In this situation, the Honda executives applied what is known in psychology as “cultural amplifier hypothesis” Gerrig, et al. (2012).This is a hypothesis that tends to focus on the problem that is in the society and coming up with the best solution to deal with such a problem. Recommendations Any serious business firm must have industrious and focused staffs who work towards the attainment of the company’s goals as seen in Honda Company. The managing team should be innovative to go with the changes with technology to stay in business. Specialization and division of labor should be employed in the company operations this boosts productivity like that of Honda. Companies should learn to set norms, the norms set by the pioneers of Honda are the ones that still guides the operation of this company even up to the current times. Lastly, production technology and marketing strategies should be well defined to avoid some inconveniences in the operation of the business. Conclusion Honda is one of the multinational companies that have unique features from other multinationals whose image has been outstanding in the test of time. People who were focused established the company just in a humble beginning. In less than a decade, the company had overtaken most of its competitors at home and in the world market. Generally, since it was a Japanese company, it emphasized the issue of technology and capital intensiveness. These major factors propelled this company to fame. References Ayson, S. (2003) Managing under uncertainty: Sociology of decision making. Pearson Custom Publishing Exclusively for University of Newcastle. Gerrig, R. et al. (2012).Social psychology. In psychology and life.Pearson Custom Publishing Exclusively for University of Newcastle. Pascale, R. (1996). The Honda effect. Pearson Custom Publishing Exclusively for University of Newcastle. Teale, m. Dispensa, V. Flynn, I &Currie. D. (2003). Group processes. In management decision making: towards an integrative approach. 1st Edition United Kingdom. Pearson Education. Wynfan, L. (20100. Multi-perspective strategic decision making. Amazon Publishers. New York City. Read More