Honda Motor Case Study
Honda Motors Co. Ltd is considered the world’s largest motorcycle manufacturer and one of the world’s leading automakers, since its founding in 1948 by (‘’ 2006, p. 1). It produces a wide variety of products ranging from small general-purpose engines and scooters to specialty sports cars, and remains on the leading edge by providing products of the highest quality that create new values, at a reasonable price, for worldwide customer satisfaction (‘ ’ 2006, p. 1). In addition, the company also makes the commitment of providing environmental protection and enhancing safety in a mobile society by improving the fuel economy in all vehicles and make emissions even cleaner (‘’ 2006, p. 1). In its aim to protect the environment, Honda has expanded their line up of hybrid models, by leasing of Japan and the United States of the FCX, which is a fuel cell vehicle developed in-house, incorporating the company’s original next-generation fuel cell stack (‘’ 2006, p. 1). In the United States, Europe and China, Honda increased its sales by introducing new models in the light truck segment, responding to the high demand of diesel-powered vehicles, and continued to expand and achieve remarkable growth with the high profile of the Honda brand (‘’ 2006, p. 1). On the other hand, Honda responded to the low demand in Japan by strengthening the appeal of their products and their sales system to ensure customer satisfaction and raising the company’s profitability (‘’ 2006, p. 1).
The visions of Honda include “Value Creation”, “Glocalization” (globalization plus localization), and “Commitment to the Future”, and sets them apart from other companies by following their philosophy, which aims to focus on the customer, being creative, respecting fresh ideas, enjoying the work, and understanding that change is good (‘ 2006, p. 2). Their philosophy is different from other companies, for it is based on the concept of the “challenging spirit” in the company principle, which intends to “maintain an international viewpoint, in dedication to supplying products of the highest efficiency yet at a reasonable price for worldwide customer satisfaction” (‘’ 2006, p. 2). This goal of Honda is achieved by setting high expectations for itself and for its suppliers, by its willingness to apply whatever resources is necessary to get the job done, by its commitment to cooperation and collaboration, and by its unrelenting attention to detail (‘’ 2006, p. 3). This philosophy is being perpetuated by evaluating the total cost of their product, improving its quality by extensive research and cooperation, and focusing on the needs of their customers.
In line with the company’s philosophy and consistent with setting such high expectations, Honda’s meticulously detailed cost-modeling process demands discipline and rigor from both the company’s purchasing staff and its suppliers (‘’ 2006, p. 3). This means that both the company and its suppliers present costs evaluation to each other to agree on certain matters in product development. Honda’s philosophy of frank, open communication, cooperation and collaboration with suppliers extends even to sharing cost-modeling data (‘’ 2006, p. 3). Furthermore, the cooperative approach insures that targets are achievable and excellent, for the cost-modeling process extends well beyond simply determining the cost of a part or component, but is an integrated process that takes into consideration every factor that contributes to the total cost (‘ 2006, pp. 3-4). With the ability of Honda to develop cost modeling as methodical and precise, it has now evolved into an organizational capability deployed throughout the company (‘ 2006, p. 4).
As mentioned, Honda has a large number of suppliers, and it continually builds and maintains their relationship for the benefit of the company and the consumers as well. It has been reported that 400 supplier companies throughout North America have been supplying more that 80% of the parts and materials for the automobiles, motorcycles, engines and components the company manufactures, and for this, Honda makes sure that every supplier is totally in sync with the company’s philosophy (‘ 2006, p. 4). This relationship also leads to supplier development, in terms of perceiving their work and in doing business with Honda. Example of this is when Honda applied its Best Practices process at Tower Automotive, a supplier of stamped parts and welded assemblies, and helped them to redesign the work cell for making a B pillar, the stamped metal part between the front and back doors connecting the roof of the floor plan (‘ 2006, p. 5). In relation to this, Honda’s aim for supplier development extends also to the point of demonstrating a willingness to commit significant resources towards solving problems when needed, for Honda’s approach to building and sustaining supplier relationships extends well beyond productivity improvement programs and on-the-spot problem solving (‘’ 2006, p. 5). Moreover, for Honda, a cooperative, collaborative relationship is a two-way street requiring clearly expressed and understood expectations, performance measurement, attention to detail and ongoing communication (‘ 2006, p. 6). In relation to this is the aim of Honda to control or leverage its suppliers in research and development programs, by developing a process called Design In, wherein Honda will “invite” guest designers from its outside supplier organizations to assess the very early stages of a new project (‘’ 2006, p. 6). This process is critical to insuring that Honda will successfully integrate the best thinking and the latest technology into its new products, pick up their latest technology and incorporate it into the vehicle (‘’ 2006, pp. 6-7). Another leverage technique is by developing technology road maps, sharing them with suppliers, informing them of the direction Honda is going, and asking the suppliers to help the company (‘2006, p. 7). These techniques enable the company to reduce costs and improve the quality and technology of their vehicles (‘ 2006, p. 7).
Investing in the talent and the skills of the company’s employees is also essential in boosting the reputation of Honda. It has been reported that Honda is good at rounding people out, is good at challenging the skills and talents of its employees, and expects them to have a well-rounded knowledge and experience in different aspects (‘’ 2006, p. 8). Moreover, the atmosphere of open communication maybe the primary reason for the high confidence level of individuals in the company to step forward and contribute, leading to a strong undercurrent to make continuous improvement (‘’ 2006, p. 8). Respect for the individual and a de-emphasis on hierarchical differences among Honda workers also contribute to a highly motivated, involved work force (‘ 2006, p. 8), which generates teamwork and cooperation. Honda also invests in training and development opportunities (‘’ 2006, p. 8) to ensure the success of the company.
Honda Motor Co. Ltd creates a positive advantage by modeling the firm as a chain of value-creating activities, having primary and a secondary activities. One of the primary activities of the company is modeling their total cost, by starting with high expectations in cost management (‘’ 2006, p. 3). As with the example of the 1998 Accord, the purchasing personnel of Honda determined the selling price up front by deducting their profit, and the result was what the cost should be (‘ 2006, p. 3). The company then broke out all those costs by component, such as the chassis, engine and other parts, and set targets for each area and each part (‘ 2006, p. 3). With this, the quality of the car was build, to maintain high levels of customer loyalty and good resale value (‘’ 2006, p. 3), meaning, the reduction of the price of the 1998 Accord would still compensate its quality. In addition, another primary activity includes knowing the cost structure of the suppliers, for by determining the cost of the suppliers, Honda can estimate their cost also (‘’ 2006, p. 3). This is done by showing each others’ logic in coming up with the cost, thus ensuring a cooperative approach, by determining first the initial cost of the product and asking for the opinion of the supplier (‘’ 2006, p. 3). In essence, Honda’s cost modeling process extends well beyond simply determining the cost of a part or component, as it is an integrated process that takes into consideration every factor that contributes to the total cost (‘’ 2006, p. 4). Moreover, the purchasing function of Honda is unique, where all its employees are fully involved with the product for they are located on the plant sites, see the problems, understand the issues, know the cost implications, and in touch with manufacturing every day (‘’ 2006, p. 4). It has been reported that Honda has been able to develop its methodical, precise cost modeling capability over time due to its willingness to apply the resources required to get the job done right, and to its central focus on customer satisfaction (‘’ 2006, p. 4). These activities are essential in creating value exceeding the cost of providing Honda’s product and generate good profit.
Part of the secondary activities of Honda is managing the suppliers of the company thru supplier development programs, such as giving out supplier awards or incentives and “winning their hearts” (‘ 2006, p. 4). This is to reach the company’s goal of productivity improvement by helping the supplier through the charted 13-week program designed and led by Honda staff members (‘’ 2006, p. 5). With the implementation of this program, the supplier’s associates start to see improvements right away (‘’ 2006, p. 5), and see the yearning of the employees to also improve their performance. The 13-week program also focuses on involving the supplier’s associates directly in the process, by taking some of their first ideas and putting them into place immediately for faster action, leading to the success of the program with their rapid execution and action (‘ 2006, p. 5). Another focus of Honda’s secondary activities is the use of its technology to assist their suppliers, such as Tower Automotive. An example would be when Honda proposed using fixed position welding stations, with simple pick-and-place robots moving the parts between stations, rather than having a sophisticated welding robot move around the part (‘ 2006, p. 5). The new cell design nearly doubled the production output, from 63 parts an hour to 125, and because the fixed position of the welding gun reduced wear and tear on the welding tips, their useful life was extended to 250,000 welds from 50,000 (‘2006, pp. 5-6). With the company’s attention to detail and focus on performance measurement, Honda uses a comprehensive program evaluation and gathers data to set new goal and measure future success (‘ 2006, p. 5), thus increasing the success and the profit of the company from the market. In addition, Honda aims also on giving the suppliers the chance to be involved in production. By the process of Design In, it successfully integrates the best thinking and the latest technology into Honda’s new products (‘’ 2006, p. 6). Another point is that Honda also uses technology road maps, to obtain their supplier’s latest technology and to keep up with Honda’s performance to get the final product to the market (‘’ 2006, p. 7). This gives them the advantage of leveraging its suppliers in removing cost, study each component, prioritize them and start focusing their work on developing them (‘’ 2006, p. 7).
Furthermore, the edge of Honda over other companies is on their investment in their employees and by encouraging them to contribute their ideas in the development of the company. One realization is the working environment in Honda where one employee is expected to be a well-rounded person in terms of knowledge and experience (‘’ 2006, p. 8). In addition, respect for the individual is high and hierarchical differences are never emphasized, as all employees of the company wears the same identical white uniforms (‘’ 2006, p. 8). This working environment highly motivates and involves the work force, as every employee is given a lot of respect (‘2006, p. 8). In addition, open communication among the employees is encouraging, and the primary reason that every individual has the confidence to step forward and contribute (‘’ 2006, p. 8). In relation to open communication is the investment of Honda to the training and development opportunities of employees for future success (‘’ 2006, p. 8). Moreover, Honda implements a no layoff policy, which values the ideas of its employees and their alumni, sustaining their relationships (‘ 2006, p. 8). Due to the high regard of Honda with its human resource management, the company was able to sustain their success in the market, maintain their reputation, and exceed their expectations. The execution and the implementation of its philosophy, Honda has established itself in the market, and satisfy their customers in terms of their products and services in different parts of the world.
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