Business Plan Proposal

 

The focused company for the business plan proposal is Honda Company as there shows market growth and stability in terms of business operations and management, implying assumptions for better finances for balancing sales and profits and adopting to a suitable and conducive business milieu for Honda’s management board, employees, target groups as well as customer base ranges.

 

Target Market and Customer Base

 

The target market and customer base of Honda is actually diverse as the company has various business operations not just in one country but several of them. Thus, for instance in Japan in which their customer base is high, the company have its plans to integrate the company’s three existing domestic automobile sales channels – Primo, Clio and Verno into one Honda channel last March 2006. This integration enabled the Honda customers to purchase and service any Honda brand automobile at a single Honda dealer and to maintain a continuous relationship with the same dealer for future sales and service needs as a means to achieve a high level of satisfaction.  In addition, Honda announced plans to introduce its luxury brand, Acura, in Japan, by fall 2008.  The Acura brand will offer distinctive products with a core focus on advanced, leading edge technologies that are always ahead of the times.

 

 

 

The goal of sales channel strategy are to maintain Honda’s ability to respond to changes in society and the automobile market and to continue to provide the diverse values desired by customers and meet increasingly sophisticated customer needs.  In turn, this will enable Honda to maximize the joy and satisfaction of existing customers earned through the three channel structure in Japan as Honda aims to restructure and strengthen its domestic automobile dealer network by creating new value for the customer through Acura brand products and through efforts, Honda steadily increased the number of Honda customers and made significant progress in achieving the autonomy of its dealers. The Japanese automobile market has now entered a stage of increasing maturity, and the surrounding society and marketplace are in a transition stage as well. In this increasingly competitive environment, the most important factor is to always continue improving the lifetime satisfaction level for the customers who have already chosen the Honda brand. Honda decided to integrate its existing channels into one Honda channel where customers will be able to purchase and service any Honda brand automobile and to continue receiving high quality sales and service from the same dealer for future needs whether that be replacing their current vehicle or adding another one. Honda also aims to build a dealer network that places the Honda brand at the forefront by maximizing use of existing facilities and manpower and by optimizing the location of sales facilities.

 

 

 

Aside, introducing Acura to create new value for the customer and to continue to achieve further growth and to take a big step forward in Japan Recently, the values desired by the customer have become even more diverse and customer needs are becoming increasingly sophisticated in the automobile market and will enable Honda to achieve further growth and take a big step forward in its home market of Japan as well as accelerate its effort to maximize customer joy and satisfaction and by challenging, Honda will pursue the goal of consistently achieving annual sales of more than 800,000 units.

 

 

 

 

Corporate December 14, 2005

Honda Announces New Automobile Sales Channel Strategy and Introduction of Acura(*1) Brand to Japan
— Focus will be on maximizing customer joy and satisfaction and creating new value –

 

 

 

Source of Competitive Advantage

 

Honda conducts its operations in Japan and throughout the world, including North America, Europe and Asia. A continued economic slowdown, recession or sustained loss of consumer confidence in these markets, which may be caused by rising fuel prices or other factors, could trigger a decline in demand for automobiles, motorcycles and power products that may adversely affect Honda’s results of operations. Prices for automobiles, motorcycles and power products in certain markets may experience sharp changes over short periods of time. This volatility is caused by many factors, including increasingly fierce competition, short-term fluctuations in demand from underlying economic conditions, changes in import regulations, shortages of certain supplies, high material prices and sales incentives by Honda or other manufacturers or dealers. There can be no assurance that such price volatility will not continue or intensify or that price volatility will not occur in markets that to date have not experienced such volatility.

 

 

 

Overcapacity within the industry has increased and will likely continue to increase if the economic downturn continues in Honda’s major markets worldwide, leading to further increase price pressure. Price volatility in any or all of Honda’s markets could adversely affect Honda’s results of operations in a particular period. Honda has manufacturing operations throughout the world and exports products and components to various countries. Honda purchases materials and parts, and sells its products in foreign currencies. Therefore, currency fluctuations may affect Honda’s pricing of products sold and materials purchased AS currency fluctuations have an effect on Honda’s results of operations and financial condition, as well as Honda’s competitiveness, which will over time affect its results. Thus, regulations regarding vehicle emission levels, fuel economy, noise, safety and noxious substances, as well as levels of pollutants from production plants, are extensive within the automobile, motorcycle and power product industries. These regulations are subject to change and are often made more restrictive. The costs to comply with these regulations can be significant to Honda’s operations.

 

 

 

Honda’s financial services business offers customers various financing plans designed to increase the opportunity for sales of its products. However, customers can also obtain financing for the lease or purchase of Honda’s products through a variety of other sources that compete with its financing services, including commercial banks and finance and leasing companies. The financial services offered by us also involve risks relating to residual value, credit risk and cost of capital. Competition for customers and/or these risks that are specific to the financing business may affect Honda’s results of operations in the future. Honda purchases raw materials and certain components and parts, from numerous external suppliers, and relies on some key suppliers for some items and the raw materials it uses in the manufacture of its products. Honda’s ability to continue to obtain these supplies in an efficient and cost-effective manner is subject to a number of factors, some of which are not within Honda’s control. These factors include the ability of its suppliers to provide a continued source of supply and Honda’s ability to compete with other users in obtaining the supplies. Loss of a key supplier in particular may affect our production and increase our costs. Honda conducts its businesses worldwide and in several countries through joint ventures with local entities, in part due to the legal and other requirements of those countries.

 

 

 

These businesses are subject to various regulations, including the legal and other requirements of each country. If these regulations or the business conditions or policies of these local entities change, it may have an adverse affect on Honda’s business, financial condition or results of operations. Honda conducts its businesses worldwide, and its operations may variously be subject to wars, use of force by foreign countries, terrorism, multinational conflicts, natural disasters, epidemics, labor strikes and other events beyond its control which may delay or disrupt Honda’s local operations in the affected regions, including the purchase of raw materials and parts, the manufacture, sales and distribution of products and the provision of services as delays or disruptions in one region may in turn affect Honda’s global operations and Honda’s business, financial condition or results of operations may be adversely affected.

 

 

Configuration of resources

 

Business organizations have been subject to enormous pressures over the past few years, with major underlying structural changes in industry sometimes concealed behind the short-term issues of recession. There will be no simple solutions and success will depend on the soundness of the strategic decisions taken by top management and the ability of the organization to implement those strategies and would push the human resource aspects of the business to the fore, even without the added complication of continued change and the pressures that this brings.

 

 

 

Honda Motor Co., Ltd. operates under the basic principles of “Respect for the Individual” and “The Three Joys”, commonly expressed as The Joy of Buying, The Joy of Selling and The Joy of Creating. Respect for the Individual” reflects our desire to respect the unique character and ability of each individual person, trusting each other as equal partners in order to do their best in every situation. Honda Motor Ltd. has remained on the leading edge by creating new value by providing products of the highest quality at a reasonable price for worldwide customer satisfaction. The Company has grown to become the world’s largest motorcycle manufacturer and one of the leading automakers. Honda develops, manufactures and markets a wide variety of products ranging from small general purpose engines and scooters to specialty sports cars, to earn the Company an outstanding reputation from customers worldwide. Honda has introduced an operating officer system, aimed at strengthening both the execution of business operations at the regional and local levels and the supervision by the Board of Directors. The term of office of each director is limited to one year, and the amount of remuneration payable to them is determined according to a standard that reflects their performance in the Company. The goal in doing this is to maximize the flexibility with which directors respond to changes in the operating environment. With respect to business execution, Honda has established a system for operating its organizational units that reflects its fundamental corporate philosophy. For example, separate headquarters have been set up for each region, business and function and a general manager from the Board of Directors or an operating officer has been assigned to each headquarters and main division. In addition, the Management Council deliberates important matters concerning management, and regional operating councils deliberate important matters concerning management of their respective regions. Honda’s basic policy emphasizes the appropriate disclosure of company information, such as by disclosing financial results on a quarterly basis and timely and accurately giving public notice of and disclosing its management strategies. Honda will continue raising its level of transparency in the future.

 

 

 

Market Research

 

Creating advanced new technologies and products

Through leading-edge research and development, Honda continuously creates original technology that opens up new possibilities in mobility. Honda is always tackling new challenges for the current and future benefit of individuals, society and the environment.

 

Research and Development for the future

Honda is constantly involved in the research and development of technology that will benefit people in the future. These technologies range from new materials and new sources of energy, including mass-produced solar panels, to new power trains that maximize joy while minimizing environmental impact. They also include advances in biotechnology, such as Honda’s work in decoding the rice genome for application in various fields. Honda is studying human anatomy and physiology, as well, in its efforts to produce innovative products that enhance safety in various ways.

 

ASIMO lends a hand

In 1986, Honda began conducting original research and development toward the creation of biped humanoid robots that will serve society in harmony with humans. The latest ASIMO, introduced in 2005, employs new posture control technology that allows it to run and move in concert with a human partner. Able to carry objects, it can also handle various reception and delivery tasks. ASIMO continues to evolve and will soon acquire the abilities to turn around and run 6km/h, making it an even better partner for humans.

 

Reaching for the skies

One of Honda’s earliest dreams was the development of jet planes. In pursuit of this dream, Honda recently established Honda Aero Inc. and developed a compact jet engine that has passed the experimental stages. The manufacture and procurement of components for this jet engine will be handled by a joint venture between Honda and General Electric.

 

Next-generation power trains

Honda’s Automobile Research and Development Center in Japan includes research facilities dedicated to the development of next-generation power trains. Here, Honda engineers are developing new means of propulsion that may one day contribute to human mobility.

Consistent quality worldwide

Honda is a global company with manufacturing operations and sales networks all over the world. Furthermore, our products are enjoyed by people in numerous countries. This global success is built upon the renowned quality of Honda’s products and made possible by the passion and dedication of Honda associates everywhere. Wherever you are, you can always count on the quality of Honda products.

Localizing production to meet local needs

Honda began manufacturing motorcycles in Belgium and became the first Japanese automaker to produce passenger cars in the U.S. Since then, Honda has established independent local operations around the world for research, development, marketing and production. Through the introduction of Honda’s flexible manufacturing system, Honda continues reducing the time and resources necessary to launch new models into production and improving the efficiency of manufacturing operations that meet regional needs. Moreover, the grouping of production processes into cohesive units has improved the working environment, raised product quality, and further accelerated production. In the future, Honda plans to further localize the production of engines and key components for automobiles, motorcycles, and power products, while simultaneously raising quality and efficiency and accelerating our response to the dramatically changing world.

 

Inspiring their customers

By creating products and services that highlight the core values that make Honda unique, we would like to provide our customers with joy and excitement beyond their expectations. Honda will continue to create such inspiring experiences for our customers by offering mobility that is always ahead of the times. In this way, Honda products will be loved and enjoyed by customers of all generations.

Expanding New Values for customers worldwide

The ultimate goal of Honda’s sales activities worldwide is to satisfy our customers so that they will continue to come back for more Honda quality products. That’s why they put heartfelt effort into our services, responding to changing values and increasingly sophisticated needs. They’re always working to improve the quality of our customer relations providing friendly and attentive sales, responsive service support, thorough maintenance and repairs so customer satisfaction constantly grows. Honda also continues to develop sales and service systems best suited to community needs. In that way, “life with a Honda” brings new joy to people and places worldwide. Starting in Japan in 2006, Honda will unify our multiple car-dealership channels into a single Honda sales channel seeking to strengthen the Honda brand, enhance customer satisfaction and help ensure lifetime customer loyalty.

 

 

Business Format and Structure

 

Considering that Honda is encountering a number of organizational issues, changes in its operations should be done to overcome them. In order to carry these out, change management should be done. This concept is defined as the development and integration of organizational change in a systematic process. Change management can also be defined as the response of different business to various pressures brought about by environmental influences in which organizations have minimal or absolutely no control over. The main purpose of conducting organization changes is to introduce innovative means and systems in the organization. This can similarly be compared to the application of certain information technologies in the company or the adoption of new marketing strategies. Businesses must normally undergo change in order to evolve to a higher level of stability, management or production. While change is induced to bring better business outcomes, introducing change is a challenging task. This is due to the number of factors that could hinder its successful induction. One of which is the hesitance of some employees and managers in considering change within the company. Among various reasons, the most common of which is that some employees are afraid of risks and are already comfortable with their current status. Other managers on the other hand, feared the lost of control over the changed management and the responsibilities it will entail.

 

 

 

 

Management Organization of the Company’s Corporate Governance for Decision-Making, Execution, Supervision and Others

 

 

 

SOURCE: (2006)

 

There are approaches that are more focused on what is needed to be changed; others emphasize on how change can be accomplished. Leavitt had defined three approaches to organizational change management, which includes structure, technology and people (Leavitt 1964). New formal guidelines and procedures like organization chart, budgeting methods, rules and regulations can be considered as structural approaches on inducing change. On the other hand, rearrangements in work flow through new physical layouts, work methods, job descriptions and work standards are examples of technological approaches. Some organizations stress on inducing organizational change through the people approach which includes alterations in attitudes, motivation and behavioral skills. This can be done through new training programs, selection procedures, and performance appraisal schemes. Other approaches to manage change had also been introduced.  These approaches had been categorized into three: the unilateral power, which focuses on changing a component of the organization; shared power that emphasizes on addressing change through group discussion and agreement; and delegated power in which certain change catalysts or agents are in charge of disseminating change. It has been mentioned that change management is done order to improve specific organizational aspects.

 

 

 

In the case of Honda, strategic innovation is necessary in order to help the company adapt to various environmental pressures and to improve its human resources. The need for the retailer to implement changes is the same reason for implementing a change concept known as reengineering. Reengineering is a strategy for organizational change done for a number of reasons. Higher performance, acceptance of new techniques, greater motivation, more innovation, increased cooperation and better employee relations are some of the common purposes for organizational reengineering. However, the conduction of reengineering in a company has two main goals as organization management cannot entirely control its environment, they constantly induce internal changes to enable them to overcome new challenges including competition, advances in technology, new government legislation, and pressing social demands. Organizations do not operate through computers but through people who can make decisions and every organization has its unique patterns of decision-making behavior. These patterns stem from both formal and informal ground rules which indicate how an effective manager or employee should behave in dealing with others and in making decisions. The learning experience of the personnel also helped the company in improving its image to the consumers. With improved services, competent staff and more organized systems, customers are able to recognize the efforts of the business to serve its targets better. As a result, the employees were able to help out the company’s profit growth.

 

 

 

Management/ Personnel qualities and experience

 

The romantic image of the founder-millionaire wearing overalls. tinkering visibly with some mechanical marvel in workshop or lab, is often reality. So it was with Soichiro Honda, in many ways the least typical of the post-war Japanese economic victors: but simultaneously the most visible archetype of the success of Japanese business culture, though an eccentric one. ‘Mr Honda’, said one baffled journalist, ‘ is a management executive who always wears red shirts and tells naughty stories when drinking.’ The drinking was important to Honda. In his early sixties, the great man admitted that he didn’t understand computers. The fact that he couldn’t keep up with the technology was only one factor in his decision to take relatively early retirement. Five years later, Honda came of technological age with the Japanese market in recession, Honda invested in German, Swiss and American machine tools, reckoning that they were the best in the world. He then ‘reverse-engineered’ the European bikes he was copying – taking them apart to see how they were made: and discovering that their best was simply not good enough. European manufacturers believed it was impossible to run motorcycle engines with even faster bursts. Honda not only proved that you could, but also started to win Grand Prix races all over the world. Super-design went with super-efficiency in production engineering. At Honda’s motorcycle plants not a single storeroom existed for parts, raw materials, or finished machines; deliveries went in at one end, and finished bikes, up to one every seven seconds, moved straight on to double-decker trucks at the other.

 

There are few places where an organization can shelter from competitors, and many industries have been shaken up because their competitors have taken a global view of their markets. The demise of the motor cycle industry was in a large part due to the inability of the firms to imagine that anyone could gain great production advantages by thinking of manufacture for a global market, instead of the traditional approach of producing for the local market and the exporting of any surplus where there was a protective customs tariff. More organizations are compelled to think of Honda’s business in global terms and most others are subject to ever increasing intensities of competition. Aside, technology advances bring opportunities as well as threats. One example close to the hearts of managers is the new opportunities offered by advances in computer technology, making e-learning a real option and providing opportunities.

 

 

 

 

Financial Forecasts

 

Honda Motor Co., Ltd. announced that in the third quarter of the current fiscal year, it realized an all-time record for consolidated net sales and other operating revenue for any quarter due to increased sales in all business areas. Honda also realized an all-time record for consolidated operating income for the fiscal third quarter, mainly because of increased revenues, cost reduction effects, positive effects from the depreciation of the Japanese Yen. Income before income taxes decreased by 11.6 percent due to a negative effect from rapid depreciation of the Yen which caused difference in the exchange rate applied for transactions rate and sales rate, and a change in fair value of convertible bond and others. Net income for the period decreased by 11.7 percent, although an all-time record for any quarters in income of affiliates was realized.

 

 

 

Results for third quarter ended Dec. 31, 2005

 

 

Yen ( billions )

 

 

3rd Quarter ended
Dec. 31, 2004

3rd Quarter ended
Dec. 31, 2005

Difference
(% change)

Net sales and other operating revenue

2,133.8

2,472.0**

+ 338.1 (+15.8)

Operating income

157.6

194.9*

+ 37.3 (+ 23.7)

Income before income taxes

187.9

166.0

- 21.8 (- 11.6)

Equity in income of affiliates

29.3

29.6**

+ 0.2 (+ 1.0)

Net income

150.7

133.1*

- 17.6 (- 11.7)

 

Basic net income per common share

JPY 161.78

JPY 144.81

JPY -16.97 (- 10.5)

 

( Honda’s average rates:  JPY 117 = U.S. dollar 1    JPY 140 = Euro 1 )

 

 

 

Motorcycles: 2.788 million units (+12.3%); mainly due to an increase in sales of parts for overseas production bound for affiliated companies in Asia and finished products in North America.
(Approximately 600,000 motorcycles with local procurement rates of 100% which were procured and sold by affiliates in China and India are not included in the financial results, in conformity with Generally Accepted Accounting Principles in the U.S.)

Automobiles: 816 thousand units (-0.1%); almost the same level as the corresponding period in 2004 was realized by the increase in the overseas sales which offset the decrease in the domestic market.

Power Products: 1.134 million units (+8.6%); the increase was due primarily to sales growth in Europe and Japan.

 

Consolidated net sales and other operating revenue increased to JPY2,472.0 billion (+15.8%) , an all-time record for any quarter, and a sixth consecutive all-time record for the third fiscal quarter were attributable to the increase in all business areas.

 

Consolidated operating income totaled JPY 194.9 billion (+23.7%), an all-time record for a third quarter, mainly consisting of increased revenues, cost reduction effects, and positive effects from the depreciation of the Japanese Yen. These factors offset an increase in selling, general and administrative (SG&A) expenses and research and development (R&D) expenses. Income before income taxes decreased to JPY 166.0 billion (-11.6%), primarily due to a negative effect from difference in the exchange rate applied for transactions and the sales rate, and a change in fair value of convertible bond, held by Honda for the purpose of onboard telecommunication services. Equity in income of affiliates increased to JPY 29.6 billion (+1.0%), an all-time record for any quarters, and fifth consecutive all-time record for the third fiscal quarter.

 

Forecasts for Fiscal Year Ending March 31, 2006

 

A sixth consecutive all-time record is forecast for consolidated net sales and other operating revenue based on the unit sales plans of 10.38 million motorcycles, 3.425 million automobiles and 5.73 million power products. (Unit sales of motorcycles, with local procurement rates of 100% which are produced and sold by affiliates in China and India, are expected to increase by 1.69 million units to a total of 2.69 million units, but are not included in the sales plan total and financial forecasts to be in conformity with Generally Accepted Accounting Principles in the U.S.)

 

 

Honda aims to set an all-time record for operating income, income before income taxes, equity in income of affiliates, and net income.

 

The consolidated forecast for the fiscal year ending March 31, 2006 is as follows:

 

Yen (billions)

 

 

Year ended
March 31, 2005

Current forecast for year ending March 31, 2006

Difference
(% change)

Oct 27, 2005
forecast

Net sales and other operating revenue

8,650.1

9,740.0

+1,089.8 (+12.6)

9,600.0

Operating income

630.9

860.0

+229.0 (+36.3)

675.0

Income before income taxes

656.8

825.0

+168.1 (+25.6)

655.0

Equity in income of affiliates

96.0

99.0

+2.9 (+ 3.1)

94.0

Net income

486.1

605.0

+ 118.8 (+24.4)

490.0

 

(Honda’s average rates for the FY2006:

JPY 112 = U.S. dollar 1 JPY 136 = Euro 1)

(Honda’s average rates for the fourth quarter of FY2006:

 

 

Corporate January 31, 2006

Consolidated Financial Summary for the Fiscal 3rd Quarter Ended Dec 31, 2005 & Revised Forecast for Fiscal Year
All-time quarterly records for net sales and other operating revenue and net income, and equity in income of affiliates. Record as a third quarter for operating income. Fiscal year forecast revised upwards.

 

 

 

 

 

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