Analysis Of Operating Environment Of Honda In China

Honda got into the Chinese market in 1982 by cooperated with China's Jialing Machinery Factory to produce motorcycles. Currently, Honda has 16 companies in China growing over nationwide. "Respect intellectual property; bring joy to people's life" is Honda's IPR credo in China. Honda's presidents all have technological backgrounds. They are important needed advanced technology for the company's further development.

December 2007, Honda's China collection came out includes over 500 signed up trademarks, 3, 800 granted inventions, model patents and even more than 1, 100 granted design patents. In an addition, Honda improved the ex - intellectual property office into a division and therefore the IPR department was officially proven. Resulted, the range of work was extended. The division's main activity is to provide support on IPR issues. Although they don't have to survey directly to head office, they converse regularly with the head office and sometimes the headquarters gives them directions. In the meantime they'll also give their viewpoints what should be done in China to gain support from the head office and improve their efficiency.

The solution of successful Honda in China is they are very creative and advancement, they never imitate others but still create high quality product. Mr. Honda with a mechanical history was aware that machines could operate so long as there is gas. He created the Honda slogan with the basic ideas, "Respect for the Individual" and "The Three Joys"- "the happiness of buying, the delight of retailing and the pleasure of fabricating. "

The Three Joys imply to a certain extent which related to the IPR work. The happiness of buying identifies customer satisfaction and willing to cover their products and services. They stand strong that the most crucial thing is to bring the happiness of buying to the consumer. On the other hands, the enjoyment of advertising and creating refers to bringing delight to Honda's traders and manufacturers by providing and producing Honda's products which is also an important aspect of Honda business.

Honda's operating strategy is "where there is a demand, there may be production. " The standard of Honda's IP strategy is "providing necessary support on IPR related issues to meet up with the need of development in the local market. " Honda's IP work is to make intellectual properties efficiently and secure IPRs to be able to provide maximum safeguard for the customers' interest and the introduction of business.

In modern times, Honda is facing growing pressure of other fakers and incorrect timing. For instance, Honda might take two or three 3 years for counterfeit products to market on the market after Honda's original's release. However, as soon as Honda launches a new product, some Chinese companies will start counterfeiting. Some counterfeits or fakes seem even before Honda begins productions that have same trademarks, design and patents. Honda needs to take some time from the application form for IPR and it is the problem that Honda is facing in recent years.

Therefore, Honda focuses on their work in China, taking full advantage of IPR to deal with the new challenges. They turn out with a distinctive knowing that IPR is some sort of right and they want to take the full advantage of IPR for the introduction of their business, patent products and completely taking their privileges. Resulted, Honda is carrying out a series of IPR activities such as infringements track down, intellectual property education and helping government's consumer privileges protection campaigns. Spare parts for the maintenance of Honda vehicles are only sold in official Honda dealers but yet many companies are producing under the Honda name.

The Legal & Intellectual Property Division has putted their initiatives on removing indicators and advertising that influence Honda's auto parts markets countrywide to avoid customer reduction. The Honda Legal & Intellectual Property Department maximizes the safeguard for manufacturers, traders and consumers.

Honda even provides intellectual property education for consumers and organizes several promotions. Honda told consumers the methods which to differentiate original from fake spare parts. Besides the education for consumers, Honda compensates attention in building intellectual property consciousness too like plan the "First Beijing Youth Invention & Creativity Competition" for key and middle university students in Beijing and setup the "Honda Intellectual Property Scholarship" too. Moreover, Honda set up promotional promotions to describe to the consumers about the threat of using fake spare parts and motivates them to choose the original extra parts.

Honda regularly attends seminars kept by the Japan Exterior Trade Group (JETRO) and Japan Auto Manufacturers Connection (JAMA) and federal offices notice Honda's patents, product features, and positions so on increase the efficiency of the relevant departments.

Besides that, Intellectual Property Publication had been appearing as a reference point and encouragement for the administrative departments to track down the counterfeits in the market. It is the most efficient way of protecting consumers' privileges.

Although there are numerous administrative departments acquired carried out investigations and punishments resistant to the infringements, they persisted with the production and sales. However, Honda will protect their brand whatever it cost.

Honda dealers maintain details of customers, the fraudulent extra part will be discovered easily every total annual service week to promote and improve intellectual property awareness to their customers.

Since China is a huge country, the counterfeits market is hard to predict. The living standard of the Chinese people is growing dramatically and for that reason people will increase their aware to the counterfeits. Therefore, Honda desires to keep their strength campaigns to help consumers understand and purchase original products. Resulted, Honda creates a fresh environmental standard with introduce new models with increased gasoline efficiency.

4. 0 SWOT Evaluation of Honda in China



High and powerful Research and Development.


Different and unique product.

Strong and powerful brand equity.

Strong brand name

"Accessibility first, organizes later" action for new bazaar assimilation.

Higher cost composition compare to other competition.

Pricing for non-luxury vehicles are greater than other maker.

Lack of patent security.



The high technologic they had help them easily fulfill customer's needs and needs. For example, less air pollution car.

Emerging vehicle market

Fuel efficiency technology creates opportunity to raise sales.

Economic slowdown.

Rapid climb of petro price cause their cost become higher for shipping material and syndication.

Labor attack of Honda in China.

Lower cost competitors.

Price war

4. 1 Strengths

Honda has high and powerful Research and Development (R&D) division. The R&D team use their technology helps Honda to make powerful technology to compete with other competition. Honda's R&D clubs got design varies of unique products, such as electric vehicle and gas efficiency vehicle. Furthermore, China authorities is proposed to give subsidies of 60, 000 yuan per electric vehicle for Honda's R&D team to build up electric vehicle technology (Shah, 2010).

Honda has strong brand on the globe and positioned as fifth most significant motor vehicle producer on earth this year 2010. Besides that, Honda is also second largest maker in Japan in 2010 2010 (Topper10, 2010). They may be well known with trustworthiness and high quality. Honda's economical and green engine had attracted many consumers to acquire its products. On the other hand, Honda also create progressive slogan in Mandarin in China. The slogan can be translate and clarify as "Let renewable technology describe the near future. " They focus on on their eco-friendly hybrid technology to build a greener future. The slogan possessed helped in strong their brand name and reputation in China (Djurovic, 2010).

4. 2 Weaknesses

Although Honda has strong brand name in vehicle industry, also, they are have weakness of relies too much on "enter first, organize later" strategic for new market penetration. Normally, Honda was coming into a market before they had plan out a well organize management. They will observe the market effect before develop infrastructure and business. Honda is using this plan when go into China market as well. Although they are success but this strategy has higher risk. Honda might need use couple of years for learning from your errors before they can find out their circulation methods in new market (Djurovic, 2010).

Honda has higher cost structure compared to other rivals, especially domestic vehicle maker in China. Therefore, their pricing will be greater than other opponents as well. Honda emphasize on the grade of their vehicle. They make investments lot of money and take couple of years of energy to explore new technology to enhance their vehicle. However, this will increase their cost structure as well. The cost for future research and current profit is not balance. Besides that, Honda is lack of patent security. Other manufacturer in China will imitate their idea and produce same patent of vehicle with lower price. Honda might struggling to earn back the expense used for research and development.

4. 3 Opportunity

Since Honda has powerful Research and Development, they can easily fulfil the needs and requirements of consumer. Nowadays, people want to purchase environmental friendly vehicle to avoid pollutions. Therefore, Honda is also following this development and developed less pollution technology for vehicle. Honda's Leader, Takanobu Ito, feels that China gets the possibility of electric vehicle and they are planning to release this car into China market in 2012 (Takahashi, 2010). J. P. Morgan Chase & Co. estimations that electric vehicles are anticipated to take up 1% to 2% of global vehicle sales in 2020 (Takahashi, 2010).

Fuel efficiency technology of Honda creates a big opportunity for their company to boost sales and income. Due to the fluctuation fuel price in market, almost all of consumer will choose to choose power efficiency vehicle when doing purchase decision. China residents might unable to spend the money for high charge of fuel engine oil. So, the tiny to midsize of gas efficient vehicles that release by Honda are very popular. It shows by the sales survey of Honda in 2008. In 2008, Honda sold 470, 458 units of cars, then the sales increase to 576, 223 items of cars in '09 2009 (Alibaba. com, 2010).

The rising vehicle market in China make Honda's Chief executive decided to enter into the China market. "The probabilities are good in China, " said by Takanobu Ito (Takahashi, 2010). The high thickness of populace in China emerge the prospect of vehicle market. Besides that, the spending power in China becomes higher. They are able to afford to acquire vehicle for every family. Moreover, China has recently surpassed United States and become the biggest market for auto in the world (Shah, 2010).

4. 4 Threat

Labour attack of Honda's four assemblage vegetable in China becomes another risk to Honda. Because of the 1, 900 staffs do not fulfill with their every month wages, they reach at the plants in May 2010 (BBC Reports, 2010). This strike had obligated Honda halt creation at four set up seed in China. On this strike, the price tag on Honda had increase. This is because they still need to cover other expenditure such as plant rental fees and inventory cost although their factories got halt production. Alternatively, they might struggling to produce the quantity of cars to deal with consumer's demand.

The vehicle market in China has many rivals which is a fierce competition. Other than foreign opponents such as Toyata and Nissan, Honda has to compete with other local vehicle production such as Beijing Vehicle Works and Chery as well. The local vehicle production has lowered cost in development and in a position to give cheaper price for consumer in China. It could cause a price war if Honda wants to contend with them in price strategic. The fierce competition will reduce Honda's earnings and income.

5. 1 Method of Entry

5. 1. 1 Launch for Mode of Entry

To begin with, what's mode of access? How many different types of entrance can a corporation choose or apply? According to Hill et al. (1990), function of entry identifies ways that a business exploits to get gain access to or way in to a new and potential international market. The method of entry takes on an important role in determining the success of business in other foreign country (Driscoll, 1995). In a nutshell, an organization need to carefully try mean of all the environment factors such as politics, economic, public, technology, environmental and legal before identifying the best mode of access into a new market.

An organization has many different method of admittance available that it can be used to increase its business to a international market. Some are more appropriate if compare to others, and yet entry method choice greatly depending after a variety situational affects. Inescapably, there are trade-offs in choosing one entry setting over another and there's always a chance cost (Yadong, 2003). A study by Driscoll (1995), he stated that each setting of entry contains different level and kind of risk and control. Generally, many organizations prefer safe mode admittance whereby most the organizations will take the low-risk or low-control option. After it experienced a continuous market or return, then the organization will move forward for higher risk and control.

The setting of entrance includes exporting, licensing, franchising, contract processing, off shoring, service sector outsourcing, turnkey operations, management deals, International joint-ventures and wholly had subsidiaries. With respect to Honda, the sort of entry used to type in China is joint projects (partnership with local businesses). Joint venture means a contractual arrangement that tie up 2 or even more parties for executing a parallel business undertaking and everything parties talk about the profit as well as loss according with their capitalization (Hennart, 1991).

5. 1. 2 Honda Function of Access in China

The method of entry implemented by Honda in China was somewhat different if compare to other mode of entrance that Honda used in other countries (Jianhan, 2009). Relating to Yadong (2003), Honda penetrated into China's auto market to create Accords and motors while the joint venture of French car producer Peugeot Citroen failed. Then, Honda undertakes the particular plant and created joint ventures with Guangzhou Vehicle Group Company and Dongfeng Motor Organization with the capitalization of $ 140 million and $ 60 million respectively. Honda has a 50 % of overall stake in each one of these joint ventures. It means that each of the companies have the equal authority. In short, the method of accessibility that Honda uses is equity joint venture (Jianhan, 2009).

After that, the primarily production starts in the beginning years of 1999 and full creation in the end of this particular time (Yadong, 2003). 40% of the required raw materials are purchased locally and the ratio is likely to rise anticipated to China gets the cheaper labour cost if equate to other countries. Honda is the first Japanese car supplier that produces its brand cars in China and therefore Honda was considered as the first mover who exposes to China market. Hence, Toyota have sell its particular make of cars (Daihatsu) in advance if equate to Honda in China. However, it was under licensing contract. Licensing identifies an organization received fees or a sum of royalty in exchange for other company (licensee) to utilize its intellectual property, trademarks, and patents (Bhauik, 2003).

Even though Honda got joined to China, but nonetheless the individuals in China have less knowledge or less knowing of the products. For that reason, Honda creates awareness among the individuals through community activities and also funding the events. After the market and individuals know well of the brand, Honda beginning to set up vegetable. Next, Honda motivates its parts manufacturers or suppliers to develop their plants about the Guangzhou Honda to increase efficiency of the herb (Jianhan, 2009). On top of that, it can also reduce the forex risk and diminish the chances for father or mother company (Guangzhou Honda) to work with its resources on travel of raw materials, logistics cost and warehouse storage. Some of the parts are in reality produced by suppliers close by the Guangzhou Honda, for example automobile seats. It could diminish the business lead time and increase development per source.

Last however, not least, whatever the general setting of entrance into a different country, Honda does make exclusions if the situational influences are allowed to do so. For instance, Honda will not successful enter into China market if it didn't practice jv with local automobiles manufacturers (Guangzhou Auto Group Firm and Dongfeng Motor unit Corporation). Thus, if Honda does not pursue such jv, it will lose the profitable market show by reason of increasing high demand of cars in China. In a nutshell, Honda has its individual selection of entry into goal country. Honda can be considered a major player in the Asian automobiles manufacturer if it constantly maximum the usage of local quite happy with lower cost of type.

5. 2 Global Marketing Strategies

Honda became the 3rd foreign traveler carmaker in time 2004 in China by used its global marketing strategies. In yr 2005, Honda became the first automaker who exports cars to European country which made in China (Singh and Chaudhuri, 2005). By tailored difference global marketing strategies, it is significant as an enterprise going to success. Honda is techniques mixture of global and local strategies practices to enter China market (Javel, 2008). You will discover four elements of global marketing strategic that required conducted from time to time in the many market segments. Product strategies, price strategies, place strategies and advertising strategies are the four elements comprised become strategies to attain the target.

5. 2. 1 Product Strategies

Honda, which originated from Japan, was famous brand that complies with the high technology to create automobiles. Create the brand awareness in the eye of the consumer to let brand name became amazing so that consumer will described. One of the central competencies for Honda is their spectacular design and high technology interiors system of their automobiles (Javel, 2008).

Basically, Honda provides three categories of products and technology which can be automobiles, motorcycles and the power products. Each one of the product categories are complete by itself and comprise of smaller component products. Let take a look in automobiles part, there are several model of vehicles offered such as Honda Accord, Honda City, Honda Civic and many more. In China, Honda Accord and Honda City will be the most popular model therefore Honda produce to fulfil the market needed (Javel, 2008). In motorcycles, it split into three types which can be bike, scooter and cub. At last categories is the power product which included tillers, water pushes, snow throwers and others. China is one of the countries which have four months thus snow thrower is necessary.

Packaging is one of the aspect under product strategy that been applied. Honda with the innovativeness in creation of well-designed product would draw in people's attention. A packaging not only means the outlook of a certain product yet it also refers to maintain its quality (Singh and Chaudhuri, 2005). Among the services offering by Honda is after-sales service. That is important because would impacts customer's purchase decision making. Consumer will remain loyal to the products with the nice after-sales service. Honda benefits a good reputation with the energy of word of mouth.

5. 2. 2 Price Strategies

Set appropriate price of a product is very important in order to obtain the profit and can take customer affordability into consideration. Honda arranged the motorbikes level of price similar to the others and match the affordability of open public (Singh and Chaudhuri, 2005). For the automobiles, Honda's car are more expensive than other due to it regular invention and high quality which much better than others.

Discount is one of the strategies that may help in attract community to take a look into Honda product. Honda will put into action discount predicated on seasonality. Another way to catch the attention of people purchase Honda product is offering appertain product when there is absolutely no any discount because of their automobiles.

5. 2. 3 Place Strategies

In despite of people might considered "Made in China" concepts that are poor product. Still, Honda create its manufacturing facility in China mainly for exporting to foreign country. China is a large country with the huge amount of population, which means distribution of something need to planned and well-constructed to save lots of company cost and make sure it able deliver safely. Rely on the demand and prior sales style, amount and types of product need to be distributing appropriately. Travel costs getting big impact to the product cost. Therefore cost can be minimize by implements effective distribute channel in order to distribute the merchandise at the right time to the right person. (Singh and Chaudhuri, 2005).

5. 2. 4 Advertising Strategies

In promotion strategy, the most common ways are advertising in publication, magazine, television set and radio. Honda's advertising included publicity, advertising, public connection and presentations. Honda's global brand slogan play a substantial role as Honda procedures, "The Power of Dreams" which identify that company continuous obstacle to make fantasy come true. People relationship with consumer will gain the customer satisfaction because they'll thought they being offered and they're very important to company.

Live demo by Honda such as they will have a lavish advertising campaign to promote those new start product to make consumer more understand and have an possibility to experience it. For example Honda provides street show or test generating car for consumer to feel it before buying it. Through this method, consumer is better to be convinced with the encouragement and persuasion from sales groups, rather than simply know the features through reading materials (Bhasin, 2010). Let we take a look in the petroleum-electronic hybrid car Honda produced. The solutions with the eco-friendly idea have been differentiate Honda with opponents and it promoted by live demonstration to enables open public know what is the technology about, and feel at ease the Honda's technology atlanta divorce attorneys solitary thing they produced.

5. 3 Global Resource Chain Management

Supply string management can simplified as a network that gathers all activities of creating a product from commence to the finish. Furthermore, it can even be referred to as managing and building the partnership between the sites, such as getting uncooked material from the suppliers, transfer raw materials to done good, distribute to the finish customers, customers give back faulty products and etcetera (Longtailsupply, 2010).

As we know, China is a huge country which having many says and for this reason condition existing, Honda should be careful in term of think about this problem and manage their supply chain management properly. As the reason why, Honda adapts jv strategy as one of its setting of entrance into china to making their products (Dongfeng Honda Engine Corporation, 2010). Furthermore, from the China Honda's website we can know that the Honda network in China was huge due to the size of China. Also, Honda cannot let one company to manipulate the China market, so that, Honda choose several well-reputation company as the joint venture partner and internet marketer partner to be mindful Honda its in-depth supplier lines. Such as for example Dongfeng Honda Vehicle Company, Guanqi Honda Auto Corporation, Honda Auto (China) Organization, and etcetera (Honda, 2010). Besides that, Honda also managed subsidiary company all around the China to manufacturing it product component.

The selected jv company as well as the subsidiary company will need part in term of production difference part of product components. Suppose for example the Dongfeng Honda Vehicle Parts Organization will produce the engine unit parts, Sundiro Honda Motors Firm will produce motorcycles part and etcetera (Honda, 2010). Besides that, different spouse will also jointly take part in the new car-making group. For example, the new car-making between Guangzhou Honda Car Organization and the Donfeng Electric motor Firm (Dongfeng Honda Engine motor Co, 2010). Furthermore, Honda's provider will involve in product development and also creation technology development, for example Honda Anatomist China Corporation which highlight in produce development equipment used in china and also technology development (Honda, 2010).

On the other palm, the distribution centre in China which mainly has 5 distribution points and there are Dongfeng Honda Vehicle Co, Guanqi Honda Vehicle Co, Honda Car (china) Co, Honda Mindong Generator Co and the fifth the one that is Sundiro Honda Street bike Co where distribute motorbike and other 4 distribution center are all distribute auto (Honda worldwide home, 2010). However, the route of Honda or the branches of Honda tend to be and all over the China because Honda adapts franchise strategy to grow its branches in the China and it want to ensure that consumers are convenient to contact with Honda at all the time.

Figure 1. 0 The procedure of Honda after sales service. (Source: Dongfeng Honda Vehicle)

From the aforementioned graph we can plainly know the whole complete after sales service process of Honda in China. Besides, it implies that Honda treat its customer in a very proper manner which it will brings about high customer's satisfaction eventually.

The complete process is begin from the appointment between customer and the worker of Honda particular branch. This stage is wished to avoid all customers come into the same time and then lead to unsatisfactory things happen, such as customer are not being proper entertain by the workers. The second stage is pleasant customer that your customer will be welcome by the receptionist at the reception counter-top. The third level is verifying problem which to verify the situation that occur in the customer's car is absolutely existing. Next is to approximated the fees of restoring or preserving which determine the technician's fee, car component payment and etc. Besides that, at this stage it is also included the estimation of around repairing or maintaining time to the customers (Dongfeng Honda Auto, 2010).

The fifth level is control the timing of repair or maintenance because Honda must concur that the restoring or preserving process will completed and complete promptly because this is a trust that Honda must build after customer romance. For another stage would be the actual mending or retaining work. After done the previous stage which repairing stage Honda should go to checking level again to check the automobile condition whether in a good security condition or not. Then it goes to washing stage which washing the automobile to enhance the customer's satisfaction. Next, Honda will contact their customer to about the final amount of fee by stated clear method of repairing or maintaining the automobile this level is want to ensure that customers are well-understand that Honda charge is fair. And then after complete the repayment it will go to the stage of go back the automobile to the customers. Finally, Honda provides follow up service to ensure customer's car condition is good (Dongfeng Honda Auto, 2010).

5. 4 Control and Analysis Mechanism

An productive changing of the procedure based on the results of process monitoring is thought as a process control. The objective of process adjustments is to immediate and to monitor the activities of individuals so that to compel activities that supports the goals of the organization. Honda in China has understood 'zero emissions', in addition to providing fine products to modern culture (Gјler Aras, David Crowther). As Honda's got expand globally, all Honda facilities continue steadily to ensure the support of 120% product quality

There are 5 steps in Honda quality circuit for Honda headquarter to control Honda subsidiaries included Honda in China. Firstly, design and develop. They apply quality guarantee through the use of plan and manufacturing expertise to produce drawings made to facilitate making from the sketching stage. Secondly, follow by development preparation. Through development operations whereby building processing control technique that limit the procedure variability. Next, evaluated production also included which Honda use within quality control process. Honda conducts strenuous inspections of part and completed vehicle and do something to provide surety no destruction occur.

Moreover, sales and after-sales service also one of the control buttons by Honda Headquarter to Honda in China. Honda use to collect quality-related date from customers regularly to ensure the market quality issues after sales. Lastly, Honda uses the data that they had collected to investigate quality-related data from customers and market segments. Hence, this will boost quality in a prompt manner. Last but not least, Honda head office control and assess their subsidiaries such as sales, mechanism, quality yet others to maintain Honda brand on the globe. Hence, those control and analysis helps Honda in China to keep up their business until nowadays.

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