Report on Honda's latest strategy
07-28-2003, 01:27 PM
#1
Thread Starter
Report on Honda's latest strategy
Honda's quest for profitability leads back to the drawing board
source: The Asahi Shimbun
Every spring, Honda Motor Co. holds a secret meeting at its research arm, Honda R&D Co.
Behind locked doors and drawn blinds, the white coats from research labs lift the veil on their latest ideas. From these embryonic sketches, officials from production and sales divisions start making selections that will determine what goes into production and what remains a pipe dream.
The excitement of these meetings is part of the Honda mystique. More than any other large automaker, Honda is a name for technology lovers.
Innovative ideas have been part of the company tradition since its founding by engineer Soichiro Honda, and the R&D subsidiary is where it all starts.
Lately, it's also where the problems begin.
So says Honda's new president and chief executive officer, Takeo Fukui.
``We have to revitalize (our research operations),'' says Fukui, who took over in June. ``Even if we come up with good products, our rivals will soon respond with similar models, unless we equip our vehicles with unique technology that can stand out as their key feature. We need to go back to basics.''
For the current fiscal year, the company is forecasting its first year-on-year decline in consolidated operating profit in three years.
While the rest of the nation's major automakers posted year-on-year increases in domestic vehicle sales in the first six months of the year, Honda alone sputtered, with sales falling as much as 20 percent.
A slew of new models are due for release in the second half of the year. And the president is sticking to the company's sales goal of shifting 850,000 units this year.
But he is the first to admit the company needs to work on more than its sales operations.
In an attempt to catch the latest consumer wave, Honda seems to have shifted away from its traditional strength-introducing innovative stylish autos packed with whizzbang technology.
While marketing based on industry trends has enjoyed some success, particularly in the small car segment, the push to broaden its consumer base carries the risk of alienating Honda's long-term fan base.
The difficulty of trying to go toe-to-toe with the likes of Toyota in the mass market became apparent last year.
Honda launched an all-out effort in 2002 to best Toyota in sales of small cars, leading the charge with its popular Fit subcompact. When buyers got tired of subcompacts in favor of minivans, the breathless Honda was blindsided.
As the Toyota juggernaut wheeled out its next best-seller in January, the Wish minivan, Honda sales went into decline.
``Our strength lies in our ability to observe our customers closely and grasp their potential demand and apply it to product development,'' says Fukui. ``From now on, we intend to gradually launch innovative new products that directly reflect our research effort.''
To do this, the Honda supremo says a reform plan is needed to translate the firm's traditional strength in technology into sales and profit.
Some executives point out that Honda's marketing strategy also needs reconsideration.
``Not many product ideas in research labs actually materialize,'' said former President Hiroyuki Yoshino, who is now a director and advisor at the automaker.
While Honda was the first company to develop a car navigation system, its lack of strategy for setting a global standard allowed electronics manufacturers to take over the market.
In the all-important, next-generation eco-friendly vehicles, innovative ideas and a large R&D budget hold the key.
For Honda, which lacks the financial resources of larger global automakers, a comprehensive strategy encompassing all three fields of development, production and sales is all the more imperative.(IHT/Asahi: July 26,2003)
source: The Asahi Shimbun
Every spring, Honda Motor Co. holds a secret meeting at its research arm, Honda R&D Co.
Behind locked doors and drawn blinds, the white coats from research labs lift the veil on their latest ideas. From these embryonic sketches, officials from production and sales divisions start making selections that will determine what goes into production and what remains a pipe dream.
The excitement of these meetings is part of the Honda mystique. More than any other large automaker, Honda is a name for technology lovers.
Innovative ideas have been part of the company tradition since its founding by engineer Soichiro Honda, and the R&D subsidiary is where it all starts.
Lately, it's also where the problems begin.
So says Honda's new president and chief executive officer, Takeo Fukui.
``We have to revitalize (our research operations),'' says Fukui, who took over in June. ``Even if we come up with good products, our rivals will soon respond with similar models, unless we equip our vehicles with unique technology that can stand out as their key feature. We need to go back to basics.''
For the current fiscal year, the company is forecasting its first year-on-year decline in consolidated operating profit in three years.
While the rest of the nation's major automakers posted year-on-year increases in domestic vehicle sales in the first six months of the year, Honda alone sputtered, with sales falling as much as 20 percent.
A slew of new models are due for release in the second half of the year. And the president is sticking to the company's sales goal of shifting 850,000 units this year.
But he is the first to admit the company needs to work on more than its sales operations.
In an attempt to catch the latest consumer wave, Honda seems to have shifted away from its traditional strength-introducing innovative stylish autos packed with whizzbang technology.
While marketing based on industry trends has enjoyed some success, particularly in the small car segment, the push to broaden its consumer base carries the risk of alienating Honda's long-term fan base.
The difficulty of trying to go toe-to-toe with the likes of Toyota in the mass market became apparent last year.
Honda launched an all-out effort in 2002 to best Toyota in sales of small cars, leading the charge with its popular Fit subcompact. When buyers got tired of subcompacts in favor of minivans, the breathless Honda was blindsided.
As the Toyota juggernaut wheeled out its next best-seller in January, the Wish minivan, Honda sales went into decline.
``Our strength lies in our ability to observe our customers closely and grasp their potential demand and apply it to product development,'' says Fukui. ``From now on, we intend to gradually launch innovative new products that directly reflect our research effort.''
To do this, the Honda supremo says a reform plan is needed to translate the firm's traditional strength in technology into sales and profit.
Some executives point out that Honda's marketing strategy also needs reconsideration.
``Not many product ideas in research labs actually materialize,'' said former President Hiroyuki Yoshino, who is now a director and advisor at the automaker.
While Honda was the first company to develop a car navigation system, its lack of strategy for setting a global standard allowed electronics manufacturers to take over the market.
In the all-important, next-generation eco-friendly vehicles, innovative ideas and a large R&D budget hold the key.
For Honda, which lacks the financial resources of larger global automakers, a comprehensive strategy encompassing all three fields of development, production and sales is all the more imperative.(IHT/Asahi: July 26,2003)
07-28-2003, 01:47 PM
#2
Thread Starter
Here's some more on the subject:
I finally got a chance to drive Toyota Motor Co.p.'s 2004 Scion xB -- the infamous "black box" -- in early July, and I'm beginning to see what the foofaraw is all about. What a cool vehicle! But I'm still not convinced this is the ideal kid's car.
Moreover, one unintended consequence of the xB -- indeed, of the whole Scion experiment at Toyota -- is that it may help archrival Honda Motor Co. craft a new strategy to help work its way out of the doldrums in Japan.
Curiously, it was a Toyota executive who passed along the rumor that Honda was considering the creation of a youth "sub-brand" along the lines of Scion, presumably in an effort to reach younger buyers. The buzz was ultimately confirmed by a friend inside Honda.
This struck me as ludicrous and amusing, considering Honda's new Element, which allegedly was designed by and for young consumers, is being snapped up by forty-somethings who see themselves as "young in spirit" (to borrow a dubious line from Mitsubishi Motors Corp.'s North American chief, Pierre Gagnon).
As a youth magnet, the Element appears to be a disaster. That's a mighty curious experience for a company whose used cars, especially older Civic coupes, remain tuner favorites with "The Fast and the Furious" crowd.
Which is not to say the Element is not actually quite a nice vehicle -- but that sounds damning, coming from a middle-aged man.
Honda, however, is convinced that Toyota is on to something with this Scion business. Indeed, my partner, Anita Lienert, recently convened a panel of Gen Y/X consumers to sample the xB and Element side by side, and every panel member selected the Scion as his or her vehicle of choice.
A major problem is image: the Element is being driven by too many "elderly persons" (i.e., parents), which is the kiss of death for a product that aspires to attract young customers.
While Honda remains an aspirational brand with a mostly positive image among that crowd, the Element already appears to have been written off, much like the Chrysler PT Cruiser was two years ago, as an "old person's car."
Honda apparently has an even bigger problem at home, where buyers young and old alike are abandoning the brand at an alarming clip.
The bloom has worn off the once red-hot Fit, Honda's innovative and roomy compact, and there seems to be little in the immediate pipeline to satisfy fickle Japanese shoppers.
Perhaps the Tokyo auto show in October will afford Honda the opportunity to unveil some sensational new products to rekindle their interest.
Here in North America the situation is less dire. Honda has focused mainly on an older, mainstream clientele that is more affluent than that of many of its competitors, and sales volumes remain substantial.
Products like the Pilot sport utility vehicle, the Odyssey minivan, and the Accord midsize car all are aimed at middle-aged, middle-of-the-road customers with better-than-average incomes.
The demographics may seem enviable, but the downside is that the Honda brand has lost some zip and appeal with the younger set.
Meanwhile, Japanese competitors such as Mazda Motor Corp. and Mitsubishi have made a concerted effort to woo younger, less affluent drivers in North America, while a rejuvenated Nissan Motor Co. has leveraged hot performance and edgy designs in refashioning a more youthful brand image.
Under former President Nobuhiko Kawamoto, Honda in the 1990s seemed nimble, exuberant and irreverent, churning out a series of amazing and imaginative concepts, many of which found their way into production and further enhanced the already sterling reputation of the company's more mainstream products.
But even Kawamoto has publicly declared that Honda seems to have lost its edge -- and its vision.
I'm not convinced that a Scion-like strategy that blatantly targets younger buyers with quirky designs is necessarily the way back to prosperity, as Honda's initial experience with the Element seems to demonstrate.
The best-case scenario would see the Honda stand at the Tokyo show crammed with exotic designs that are not so far removed from reality as to be unproduceable.
The company needs some new winners in Japan and North America if it wants to re-establish its credibility with younger buyers: consumers who, as they mature and become more affluent, can step into the company's pricier, more conservative models.
You can reach Paul Lienert at plienert@yahoo.com.
I finally got a chance to drive Toyota Motor Co.p.'s 2004 Scion xB -- the infamous "black box" -- in early July, and I'm beginning to see what the foofaraw is all about. What a cool vehicle! But I'm still not convinced this is the ideal kid's car.
Moreover, one unintended consequence of the xB -- indeed, of the whole Scion experiment at Toyota -- is that it may help archrival Honda Motor Co. craft a new strategy to help work its way out of the doldrums in Japan.
Curiously, it was a Toyota executive who passed along the rumor that Honda was considering the creation of a youth "sub-brand" along the lines of Scion, presumably in an effort to reach younger buyers. The buzz was ultimately confirmed by a friend inside Honda.
This struck me as ludicrous and amusing, considering Honda's new Element, which allegedly was designed by and for young consumers, is being snapped up by forty-somethings who see themselves as "young in spirit" (to borrow a dubious line from Mitsubishi Motors Corp.'s North American chief, Pierre Gagnon).
As a youth magnet, the Element appears to be a disaster. That's a mighty curious experience for a company whose used cars, especially older Civic coupes, remain tuner favorites with "The Fast and the Furious" crowd.
Which is not to say the Element is not actually quite a nice vehicle -- but that sounds damning, coming from a middle-aged man.
Honda, however, is convinced that Toyota is on to something with this Scion business. Indeed, my partner, Anita Lienert, recently convened a panel of Gen Y/X consumers to sample the xB and Element side by side, and every panel member selected the Scion as his or her vehicle of choice.
A major problem is image: the Element is being driven by too many "elderly persons" (i.e., parents), which is the kiss of death for a product that aspires to attract young customers.
While Honda remains an aspirational brand with a mostly positive image among that crowd, the Element already appears to have been written off, much like the Chrysler PT Cruiser was two years ago, as an "old person's car."
Honda apparently has an even bigger problem at home, where buyers young and old alike are abandoning the brand at an alarming clip.
The bloom has worn off the once red-hot Fit, Honda's innovative and roomy compact, and there seems to be little in the immediate pipeline to satisfy fickle Japanese shoppers.
Perhaps the Tokyo auto show in October will afford Honda the opportunity to unveil some sensational new products to rekindle their interest.
Here in North America the situation is less dire. Honda has focused mainly on an older, mainstream clientele that is more affluent than that of many of its competitors, and sales volumes remain substantial.
Products like the Pilot sport utility vehicle, the Odyssey minivan, and the Accord midsize car all are aimed at middle-aged, middle-of-the-road customers with better-than-average incomes.
The demographics may seem enviable, but the downside is that the Honda brand has lost some zip and appeal with the younger set.
Meanwhile, Japanese competitors such as Mazda Motor Corp. and Mitsubishi have made a concerted effort to woo younger, less affluent drivers in North America, while a rejuvenated Nissan Motor Co. has leveraged hot performance and edgy designs in refashioning a more youthful brand image.
Under former President Nobuhiko Kawamoto, Honda in the 1990s seemed nimble, exuberant and irreverent, churning out a series of amazing and imaginative concepts, many of which found their way into production and further enhanced the already sterling reputation of the company's more mainstream products.
But even Kawamoto has publicly declared that Honda seems to have lost its edge -- and its vision.
I'm not convinced that a Scion-like strategy that blatantly targets younger buyers with quirky designs is necessarily the way back to prosperity, as Honda's initial experience with the Element seems to demonstrate.
The best-case scenario would see the Honda stand at the Tokyo show crammed with exotic designs that are not so far removed from reality as to be unproduceable.
The company needs some new winners in Japan and North America if it wants to re-establish its credibility with younger buyers: consumers who, as they mature and become more affluent, can step into the company's pricier, more conservative models.
You can reach Paul Lienert at plienert@yahoo.com.
07-28-2003, 03:36 PM
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:climbsonsoapbox:
This is more information that supports my theory that Honda blew it with the S2000 by not making it a high production model and giving it the marketing budget it deserves.
Had Honda entered the market on the premis that the S is state-of -the -art technology and planned it's evolution through 3 generations they would have captured the younger market with overwhelming success! Why NOT market this vehicle? It was produced to demonstrate Honda's technology.
There doesn't seem to be a lack of creativity or technical genious at Honda. However, there seems to be a gaping VOID in leadership.
:climbsoffsoapbox:
This is more information that supports my theory that Honda blew it with the S2000 by not making it a high production model and giving it the marketing budget it deserves.
Had Honda entered the market on the premis that the S is state-of -the -art technology and planned it's evolution through 3 generations they would have captured the younger market with overwhelming success! Why NOT market this vehicle? It was produced to demonstrate Honda's technology.
There doesn't seem to be a lack of creativity or technical genious at Honda. However, there seems to be a gaping VOID in leadership.
:climbsoffsoapbox:
07-28-2003, 04:36 PM
#4
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[QUOTE]Originally posted by MyBad
[B]:climbsonsoapbox:
This is more information that supports my theory that Honda blew it with the S2000 by not making it a high production model and giving it the marketing budget it deserves.
[B]:climbsonsoapbox:
This is more information that supports my theory that Honda blew it with the S2000 by not making it a high production model and giving it the marketing budget it deserves.
07-28-2003, 05:23 PM
#5
I think Honda made a few mistakes when they got rid of the Prelude and then renamed the Integra. Those two nameplates, to me, has always been looked at by 'youths'. When I think of Integra or Prelude, I think of high school kids driving them. They always had the right appeal. I think Honda needs to create an 'edgy' type of car close the price of the Scions. I actually like em. I have been tempted to test drive one and maybe getting one as my new beater and selling my S4 and S2K to help with my deposit on a house.
07-28-2003, 06:16 PM
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s2kpdx01,
I wasn't referring to "kids" when I said "younger" market.
I was refering to the majority of buyers who have actually purchased the S. My take on this is they are between 25 and 35.
You are absolutely right about the no interest financing being a force to reckon with. However, I bought the S in spite of other bargains because I wanted the S. My point is that the S would have sold itself with decent marketing, and perhaps would have outsold its competitors even without zero percent financing.
Boxters sold without it.
I wasn't referring to "kids" when I said "younger" market.
I was refering to the majority of buyers who have actually purchased the S. My take on this is they are between 25 and 35.
You are absolutely right about the no interest financing being a force to reckon with. However, I bought the S in spite of other bargains because I wanted the S. My point is that the S would have sold itself with decent marketing, and perhaps would have outsold its competitors even without zero percent financing.
Boxters sold without it.
07-28-2003, 06:31 PM
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Originally posted by MyBad
s2kpdx01,
I wasn't referring to "kids" when I said "younger" market.
I was refering to the majority of buyers who have actually purchased the S. My take on this is they are between 25 and 35.
You are absolutely right about the no interest financing being a force to reckon with. However, I bought the S in spite of other bargains because I wanted the S. My point is that the S would have sold itself with decent marketing, and perhaps would have outsold its competitors even without zero percent financing.
Boxters sold without it.
s2kpdx01,
I wasn't referring to "kids" when I said "younger" market.
I was refering to the majority of buyers who have actually purchased the S. My take on this is they are between 25 and 35.
You are absolutely right about the no interest financing being a force to reckon with. However, I bought the S in spite of other bargains because I wanted the S. My point is that the S would have sold itself with decent marketing, and perhaps would have outsold its competitors even without zero percent financing.
Boxters sold without it.
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07-28-2003, 06:33 PM
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The lease on my Prelude is up in the spring 2004. Unless I can afford an S, as much as I would like to get a Honda I will not be getting one as my next car. Honda simply doesn't offer what I want in my budget: a RWD, light sports coupe/car with great handling in the $30-40K Cnd range. All of its offerings, either Honda or Acura are FWD and too heavy for my taste. The Honda "fun" philosophy from the 80's and 90's seems to be gone, except for the S2000 and NSX. I don't like the RSX-S, Accord is too heavy and family like, ditto for TL and TSX. It seems to me that Honda in North America anyway has decided to "play safe" for the most part and produce nice, predictable somewhat fun cars. Sorry, not good enough.. A lot of my fellow club members feel the same way and they are all in the 20-30 demographic. They think Honda exterior designs are boring and derivative and are not planning to buy a Honda as their next car. I'm not sure if Honda realizes this shift is happening.. maybe they do and don't care and are content on producing safe Civics and Accords with some Type-S/R models here and there.. 
