The automobile industry is one of the industries that are advanced technologically. With the increase in economic integration, low-income countries have managed to venture into the global market more so on division of labour thereby putting a lot of competitive pressures on the countries relying on the tradition production of automobile. New automobile producers have emerged from central Europe, Asia, and Latin America.
The German and Japan automobile industries have gone to the extent of outsourcing for labour intensive segments to improve their value chain on the national level. Globalization has changed the face of automobile industry especially in the countries that relied on traditional production. The automobile industry is now flooded with new producers and exporters of its products and this has been made easy because of availability of outsourcing of skilled labour.
One of the effects of globalization is the increase in global warming. As production increases, a lot of gases is released to the atmosphere because most companies, not to mention the automobile company, use the fossils fuel as a source of energy. As a result of this, automobile companies are required to use technologies that emit very minimal amounts of carbon dioxide. To respond to this, Honda motor company launched Hybrid electric vehicles. Instead of collaborating with other companies, Honda decided to Hybrid technology alone.
This paper looks at the core competencies of Honda that makes suitable for the development of the new strategy. It also looks at the benefits and risks of this approach and concludes by giving the SWOT analysis for Honda motor company and the Hybrid technology.
Honda’s Distinctive Competencies
Honda uses effective technology to manufacture its vehicles and sells then at an affordable price for the consumer (Dewees 526). Its technology is based on four rights, that is, proving products using the right technology, at the right time, in the right place and for the right value to the customer.
The company believes that it has a social responsibility as a global automaker and that is to provide right technology and at the same time meeting the customer and the society needs. The company aims to be a “sincere eco-innovator”. It has involved itself in vigorous activities all of them aimed at achieving a sustainable environment. Many innovations have been made by the company on ways of reducing the impacts caused by its vehicles on the environment. The recent innovation is the hybrid technology that is aimed at boosting the company’s sales revenue.
The Hybrid Technology
Automotive companies often receive criticisms as a result of environmental degradation that emanates from the automobiles that they produce as well as the manufacturing processes of these products. Almost all automobile companies use fossil fuel in their production and they also produce vehicles that use fossil fuels. As we all know, fossil fuel is a non renewable resource and once it is exploited it cannot be replenished (Anurag 6). This has prompted the companies to take responsibility by formulating and implementing strategies that are aimed at improving the global environment (Cramton & Kerr 20). These strategies are aimed at enhancing the production of fuel-efficient vehicles. It was estimated that if all automobile companies agreed to produce fuel efficient vehicles, then the level of carbon dioxide emissions would reduce by 25% come the year 2020 and the fossil fuels would be preserved. Currently, the world is changing at a very high rate and the economic situation continues to deteriorate, not to mention the growing environmental measures that are becoming a challenge to many businesses.
To overcome these challenges, companies have to come up with creative environmental technologies in order to increase and strengthen their global competitiveness (Spatz 6). Many automobile companies have realized the need to conserve the environment and are now producing vehicles that utilize other sources of fuels such as gasoline rather than relying on the fossil fuels. Honda Company has recently been named as the world’s ‘Greenest automaker’ by the union of concerned scientists and has received awards for the same (Mike 2). It has introduced new vehicles called Hybrid electric vehicles which are run on a battery that does not release carbon dioxide. Some automobile companies have merged with others in order to fight with the problem of competition (Anon.
5). Others have acquired smaller companies in order to increase their production capacity. However, Honda motor company has chosen to remain solo in its development of the hybrid technology. This approach has some benefits as well as risks for the company which will be discussed in this section.
Benefits and Risks of This Approach
One of the benefits associated with this approach is that hybrid vehicles are run on a battery that consumes very minimal amount of petroleum. Moreover, these vehicles use a lithium-ion battery which emits very little volume of CO2. With the current level of literacy and the advancement in technology, almost every person has been cautious of his/her health and the need to conserve the environment and the hybrid electric vehicles are the solution to the current effect of globalization in the automobile industry. Vehicles manufactured through the hybrid technology can use two or more sources of power.
These include compressed air, diesel fuel, solar, wind, among others. This means that the company can rely on the readily available sources of energy for instance the gasoline to manufacture vehicles that are environmental friendly (Cubby 5). Due to the rapid developments in the hybrid technology, Honda stands to benefit more by going solo than if it had merged with other countries (Markus 1). Many people have become aware of the hybrid vehicles and demand for these vehicles is likely to rise. One of the risks associated with this approach is that hybrid technology is expensive and Honda Company may face difficulties in financing its operations which would have been solved by collaborating with other companies.
The company has to meet the registration cost for manufacturing the hybrid vehicles which can be quite expensive. Moreover, these vehicles require a complicated system which makes the manufacturing process and maintenance quite expensive. This technology therefore requires experienced professionals which may be difficult to find. These vehicles are also sold at a very high price thereby limiting the number of customers who are able to purchase these vehicles. Honda Company is likely to face stiff price competition from other companies such as Nissan motor company, and Toyota which have also adopted the hybrid technology.
Can Honda Reduce The Risk Of Going Solo?
Honda decided to go solo in order to have a direct process for addressing environmental problems.
It did not join the other Automobile companies because of its desire to be the leader in the development of environmentally friendly automobiles. Honda is unlikely to reduce the risk of going solo because its culture requires it to retain complete control over its technology development as well as direction. Honda is a global manufacturer of automobile which takes a lot of care to identify the impacts that the production process may have on the environment and takes necessary measures to minimize the negative impacts, such as, emission of carbon dioxide.
The ultimate goal of the hybrid technology is to minimize the environmental impact caused by its operation and also from its vehicles to significant low levels that can be absorbed by the earth through natural practices
Honda’s Success in Its Approach
Honda Company was recently named the ‘Greenest automaker’ by the union of concerned scientists making it a five consecutive holder of the award (Union of Concerned Scientist 6). To achieve this end, the company has introduced cost effective cars. In addition, the Odyssey minivan and Accord made a remarkable contribution towards ensuring that the company achieves fuel economy through the use of more efficient low-friction engines as well as improved aerodynamics (Honda motor co. 3). The company’s further dedication to ‘commitment to the future’ is displayed in its announcement in 2003 annual report that it would make every effort to contribute to preservation of human health through development of safety technology that is aimed at reducing emission and developing alternative forms of energy (Honda motors Co.
2). The company is likely to succeed in use of hybrid technology even after choosing to go solo.
A strong brand name- Honda’s name is internationally recognized. Strategic leadership and effective management- It employs highly competent staff for leading and managing the company thus it is guaranteed of success in the hybrid technology. Strong organizational culture- Honda practices task culture where every stakeholder is a valuable asset. Each employee is given a task which he is expected to accomplish within a given time; this can be applied for the hybrid technology.
Strong capital base- It has a large number of shareholders who are always ready and willing to contribute towards the success of the company. High technological innovativeness- Hybrid technology is one example of the technological innovativeness of the company.
Customers’ attitude towards new products- One weakness Honda is likely to face with the new technology is negative attitude from customers. Consumers have a tendency to fear new products and have to be assured of their effectiveness before they make a decision to purchase them. Market uncertainties- the market is full of uncertainties, for instance market prices, and change in tastes and preferences of consumers Low profit margins due to competition- Due to increased competition, the company can only offer the new products at low costs if it wants to retain its market share; this results in low profit margins.
International business expansion- With the new technology, Honda can expand its business operations into other countries that it has not been able to venture in. Market development- It has an opportunity of introducing the new electric vehicles into new regions within its country of operation.
Increasing technological advancements- With the rapid growth in the international market and technological growth, the company is assured of technological advancements, for instance the recent recovery of the hybrid technology. Emerging markets- People are becoming more and more conscious about their impacts on the environment so Honda Company is likely to attract a new market with the introduction of the hybrid vehicles.
Global competition- Increased global competition is likely to have adverse effects on Honda with the new technology. Intense rivalry- Other motor companies are merging or collaborating amongst themselves and this is going to be a threat to Honda which has chosen to go solo. Political and legal problems- Before being allowed to marketing the new vehicles, Honda has to fulfill some legal requirements which can be a challenge. Price competition- Other motor companies, for instance Nissan, are in the process of introducing hybrid vehicles and so Honda is likely to suffer from price wars.
The contemporary economy is characterized by rapid advancements in transportation, communication and technology which have reduced the world diverse and geographically unattached economies into one global market. This has prompted regional authorities to formulate strategies through which they assist the process of restructuring and adjusting the automotive sector as well as the global economy as a whole with major focus on labour market policies and extensive training in leading technologies.
The process of production of motor vehicles involves the use of resources that are powered by fossil fuels. Honda automobile company is in the process of making more innovations to help the company achieve its environmental action plan otherwise referred to as Hybrid technology. The purpose of this program is to see that a sustainable environment is achieved to enable vehicles and people to coexist with nature. In stead of collaborating with other auto mobile manufacturers, Honda chose to go solo.
It is likely to succeed in its approach although it has to encounter many challenges among them being high costs.
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