Essay Example on Honda's Internal Environment

1.1 Purpose

The purpose of this report is to show Honda's internal environment by conducting an internal analysis using RBV and value chain tools of study.

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1.2 Scope

The scope of this report is to use value chain analysis and RBV frameworks to identify Honda's intangible and tangible resources in promoting the company's core competency.

1.3 Method

The information presented in this document was collected using a secondary method through extensive reading of books, journals, articles, and websites that contain information related to the topic of investigation.

1.4 Limitation

The main limitations of this report are that all information in this report was collected using secondary methods. No effort was made to conduct the primary investigation of the company by visiting the company premises to collect more reliable data. The accuracy of the information in this report, therefore, depends on the reliability and accuracy of the authors who wrote the secondary resources used as the source of information in this report.

1.5 Background information

Honda Motor Company is a Japanese public multinational organization that deals with the manufacturer of power equipment, motorcycles, and automobiles. The company is the leading producer of the internal combustion engine in terms of volume, with the capacity to manufacture over 14 million internal combustions annually. Besides, in the past half a century, the company has been the largest manufacturer of motorcycles in the world. The achievements of the company in the automobile industry are evident by the fact that in 2015, it was ranked as the eighth most significant manufacturer of an automobile in the world (Bacq, Sophie, and Eddleston). The success of Honda in the industry of operation is primarily attributed to its active organization and management of its internal environment that has enabled the company to gain a competitive advantage over many of its competitors in the industry. Honda's internal environment is characterized by excellent utilization of resources and highly effective value chain management strategies. Consequently, value chain analysis and Resource-Based View (RBV) are the best tools for conducting the company's internal analysis report.

Literature Review

A resource-based view framework is a tool that analyzes and interprets resources within a business firm to understand how firms attain a sustainable competitive advantage over their competitors in the industry. The RBV concentrates on attributes that are difficult-to-imitate as the sources of the organization's competitive advantage and superior performance. Resources that cannot be purchased or easily transferred that require significant changes in the organization's culture and climate or lengthy learning curve are often unique to the company, thus making it difficult for competitors to imitate. According to Badhon (2019), the difference in performance between organizations depends on the passion of unique capabilities and resources. Honda is an excellent example of an organization whose success largely depends on their RBV (Badhon).

Since the inception of Honda Company, the firm has used the RBV strategy to gain competitive advantage and competence in the industry. It built its business strategy by relying on its expertise, strength, and capabilities in designing and manufacturing petrol engines. The company initially began with the small bicycle engines before moving to motorbikes, scooters, cars, lawns, generators, garden equipment, and jet planes (Badhon). Even though these products compete in different product categories, they leverage the company's unique capabilities and resources in the manufacturer of world-leading petrol engines.

Value chain analysis (VCA), on the other hand, is a process through which a company identifies its primary and support activities that are critical in adding value to its products before analyzing them to increase differentiation and reduce costs. A value chain is activities within the firm, which firm conduct in the process of transforming its raw materials into final products. Value chain analysis aims to identify activities that are critical and valuable, which, upon improvement, help the firm to attain a competitive advantage. An organization that competitive advantage is based on differentiation attempts to perform their internal activities effectively and efficiently than their competitors (Hoskisson et al.).

Findings: Honda's value chain analysis and Resource-Based View

Honda's Resource-Based View

The success of Honda in the engine manufacturer industry is because of the company's competitive advantage that arose as a result of its RBV strategy. The company has highly valuable and unique resources that other company's find it challenging to acquire and imitate. These resources ranges from tangible and intangible resources.

Honda has a lot of highly valuable tangible resources that have enabled the company to be in a better competitive advantage over its competitors. The company's physical assets have international presence characterized by the 86 affiliates and 369 subsidiaries well distributed across the world (Bacq, Sophie, and Kimberly). The subsidiaries and affiliates have enabled the company to be at the forefront in the distribution of its products across the globe. Many of it's the company's competitors, such as BMW, do not have such a large number of the distribution network in many markets. Besides the company-wide distribution networks called Keiretsu, that enable the company to distributes its products to different parts of the world. Besides, the fact that Honda has enormous categories of products ranging from generators to jet engines means that the company has a competitive advantage in terms of brand visibility and marketing. The marketing on one product, tend to make customers familiar with the brand, and, therefore, if the consumer was impressed by the first product from the company, he/she will tend to buy another different product from the company. Besides, the company has 47 manufacturing facilities spread across the world (Bacq, Sophie, and Kimberly). For example, the company has the manufacturing facilities in places such as Wuhan in China, Lahore in Pakistan, Ohio in the USA, Ontario in Canada, Swindon in the UK, Hamamatsu in Japan, Ghent in Belgium, Sunter in Indonesia, and Uttar in India among many other regions in the world. The presence of these facilities means that the company has access to a large pool of labor around the globe, especially in places like India, where the cost of labor is low. As a result, the cost of Honda products is cheaper in those places. For example, the presence of the Honda plant in the US A means that their products are less expensive in the US A because they are not subjected to any import duty. As a result, Honda products manufactured in the US A will be cheaper than products that are exclusively imported into the country.

With the continuous changes in the market, it is crucial for any company to continually come up with new products that suit the trends in the market. The presence of eight Honda research and design centers means that the company can continuously come up with updated products that suit the demands in the market. The products coming out of Honda R&D centers have a reputation for being unique, valuable, and perfect (Bahety, and Sonakshi). These innovations have enabled the company's product to stand out the global market that is characterized by cut-throat competition that forces many companies to shut down productions due to lack of demand for the products. These tangible products give the company its core competencies and competitive advantage over its competitors.

Intangible Resources

Honda's intangible resources have played a critical role in the success of the company. These resources have enabled the company to produce unique products through differentiation that are difficult for the manufacturer. Some of the intangible resources owned by the company include patents, trade secrets, and copyright & trademarks. As of 2018, Honda held 17 600 patents in Japan and 25,300 patents worldwide (Badhon). Besides, it had a 13500 and 16200 patent application pending in Japan and worldwide, respectively (Badhon). In terms of Trademarks and Copyright, Honda has 50 TM, and numerous designs registered under the company. In the list, the company won the 2010 Gold Award for its N-series mini vehicles. The company has valuable trade secrets that have forced the company to use its production lines alone without incorporating other manufacturers as a way of increasing profits. Other intangible resources include:

Direct presence in all continents

High brand value that was worth 20 billion in 2016 (Badhon).

The company has high ranking based on various criteria, such as Interbrand Japan, which ranked the company 2nd in 2013, while Fortune 500(Top 100) ranked Honda 45th in the same year (Badhon).

These intangible resources have helped the company gain core competencies in engine manufacture Honda: Tangible Resources, thus giving the company a competitive advantage in industries that involve the production of products that use petrol engines.

Honda Value Chain Analysis

Honda has excellent value chain strategies cutting across primary and secondary activities. In the primary activities events, the company has successfully used inbound logistics to differentiate their products. The company has achieved this through the procurement of high-quality raw materials, a strategy that has enabled the company to produce high-quality finished products. Besides, the company has a highly effective raw material handling facilities that minimize damages. In terms of operations, the company has successfully differentiated its products through the flexible manufacturing system. The company manufacturing system can support the production of various range of products without any adjustments. As a result, the company can improve multiple products with minimal changes. As a result, it is easier for Honda to enhance various aspects of its products. The company's manufacturing system has room for adjustment to accommodate the production of multiple categories of products. In terms of outbound logistics, Honda has a highly effective policy characterized by fast and efficient product handling and shipment. Besides, the company has a highly effective and flexible delivery capability that can deliver the products to different parts of the world through its robust distribution network (Hoskisson et al.). Besides, the company has a highly effective sales and marketing strategies. The company can directly communicate with its customers from different parts of the world. The company's communication strategy has created a good relationship between customers and their suppliers. Generally, Honda has adopted policies in its primary activities that have enabled the company to gain core competencies and a competitive advantage in the industry.