SWOT Analysis of Honda | Honda SWOT Anaylysis
When it comes to the largest motorcycle, aircraft, engine, and automobile manufacturer, only one name comes in our mind: Honda Motor Company. In September 1948, Soichiro Honda and Takeo Fujisawa founded this company. They started the company by selling automotive parts, and later the company became the biggest manufacturer of motorcycles in the world in 1959. Moreover, it was the first company considered a luxury brand due to the launching of the Acura model in 1986. As of today, the company tops in the ranking of the world’s largest automobile manufacturers.
Honda has achieved immense success not just because of its automobile business, but its engines are the main business core. Apart from manufacturing motorcycles, cars, and other automotive items, the company has stepped into various industries, and it is also manufacturing robots, jets, and aircraft. Wanna know more about Honda? This SWOT analysis will help you understand the internal as well as external business scenarios of Honda by providing complete information on its strengths, weaknesses, opportunities, and threats.
Company Name: Honda Motor Company, Ltd.
Founders: Soichiro Honda, Takeo Fujisawa
Founded: Sep 24, 1948
Headquarters: Minato City, Tokyo, Japan
Parent Company: Honda Motor Company
CEO: Toshihiro Mibe (April 2021-)
Type: Public
Sector: Automobiles
Tagline: The Power of Dreams
Unique Selling Proposition: Honda provides luxury and comfortable vehicles at attractive prices.
Customers: The middle-income group
Target Consumers: Young people from the upper-middle class
Annual Revenue: 123,803 million USD dollars (2021)
Net Income: 6180 million USD dollars (2021)
SWOT Analysis:
Strengths of Honda – SWOT Analysis of Honda
Engine Manufacturing – Honda’s Core Product: Honda’s main business revolves around the engines, its core product in the industry. They manufacture engines for electric equipment, motorcycles, marine vehicles, and cars. Right now, Honda is the biggest engine manufacturer in the world and produces millions of engines every year. Its state-of-the-art engines are a combination of manufacturing quality and experience. Fuel efficiency, durability, ease to start, reliability, and quietness are some features for the popularity of Honda’s engines. According to the report of Reliability Index, the engines from the Honda Company are considered one of the most reliable in the world. For any automotive product, engine is the main or key part, and Honda has the capability to build some of the matchless engines. It gives a competitive advantage to the company and is one of its biggest strengths.
Strong Product Portfolio:
Currently, Honda is operating in various fields and industries, but we are categorizing its business into 4 major sections: automobile business, power products, motorcycle business, and financial services. These four businesses help the company to earn major revenues. Its diversified product portfolio is the key strength as it offers cars, robots, motorcycles, gardening equipment, jets, engines, generators, and other power products. Motorcycles and cars are the main sources of generating revenue for Honda. That is why Honda is giving tough competition to other automakers like Volkswagen, General Motors, Toyota, and more.
High Brand Awareness:
Honda is a dominating company in some markets of Asia due to its motorcycle business and engines. Even though it operates in every corner of the world, it has such a strong position and brand awareness in the Asian markets. It manufactures and sells engines for commercial, residential, and other applications in Asian markets. The main popularity of the company in Asia is because of its motorcycle business. That is why its brand reputation and recognition are unbeatable in Asia. As a result, Honda is beating its rivals at every stage in terms of profit, revenue, and brand awareness.
Robust Hold in Asia:
Due to the largest population in Asia, Honda’s motorcycle business is flourishing at a fast pace. Every year, the company generates millions of dollars from this single product portfolio and attracts customers. This thing makes the company highly competitive and strong in the eyes of customers. Honda has a stronghold in India, Pakistan, Malaysia, China, Thailand, Indonesia, and other Asian countries.
Read Also: In-Depth PESTLE Analysis of Honda For Growth
Weaknesses of Honda – SWOT Analysis of Honda
Heavy Dependence on North America:
Canada and the US are two big markets for Honda. Just like other big businesses and companies, Honda is heavily dependent on North American markets because they generate half of their revenue from this region. Any fluctuation in the economy of this region can disrupt the business of Honda, so it is considered as the biggest weakness of Honda. You can say that the main driver of the company in North America. Plus, these markets are highly saturated and it can create trouble for Honda to maintain quality and growth. In short, Honda is becoming more susceptible to negative situations in the US and Canada.
Low Investments in R&D:
Every year, Honda spends billions of dollars on research and development, but its rivals are spending much more than Honda. So, it is a weakness of Honda and they should invest more money in the R&D sector as they can generate more innovative and reliable products. Low investments in research and development weaken the innovation process and slow down the company’s ability to generate the latest products. It is a big disadvantage of Honda and they should resolve it as soon as possible.
Opportunities for Honda – SWOT Analysis of Honda
Government Regulations:
Many countries are trying to reduce greenhouse gas emissions and support fuel efficiency. Such initiatives from the government provide a great opportunity for Honda to manufacture electric vehicles, hybrid cars, and fuel-efficient products. Honda is working on the models that will run on hydrogen fuel cells. So, these government regulations can be helpful for the company in many ways.
Rising US Economy:
As we have discussed above, Honda is heavily dependent on North America, and the current US economy is rising day by day, which is really good for the business of Honda. Every year, the company’s profit has been increasing and makes its future bright. Honda can grow very well in such economic conditions and establish itself as a number one automotive brand. Also, Honda can gain more market share and profits in the US due to its rising economic condition.
Launching of Latest Models:
The economic stability of the automotive company is mainly dependent on the frequency and timing of the latest model launches. It is imperative to release the latest models every year in the market to gain market share. Minor or major modifications can help to attain more attention from the users. That is why Honda should launch new models with minor modifications every year.
Low Fuel Prices:
The demand for commercial vehicles like sedans, SUVs, and pickup trucks has increased significantly due to the lower fuel prices. So, customers love to buy fuel-inefficient vehicles in this scenario, and it opens the door of opportunity for Honda to manufacture affordable but durable SUVs and pickup trucks. Honda mainly focuses on small cars like Civic but they should pay attention to large vehicles. So, in this way, the company can fulfill the demand of customers. To increase the company’s profit, Honda must launch more new models of SUVs and trucks to get a competitive advantage.
Read Also: Marketing Strategy of Honda and Marketing Mix
Threats for Honda – SWOT Analysis of Honda
Stiff Competition:
Whether in Asia, Europe, or North America, the automotive industry is highly saturated due to the existence of giants like Ford, Volkswagen, Hyundai, Audi, BMW, or you name it. Different players heavily influence this market. In Asia, Honda is famous for its motorcycles and cars. But, there are so many local players in Asian markets that offer the same motorcycles at affordable prices. This can damage the revenue stream of Honda in Asia and is a big threat for the company. China is giving tough competition to Honda in the automotive sector.
On the other hand, its rivals are also a big threat to the company. So, Honda should adjust its prices wisely to win the trust of consumers. Moreover, Google and Tesla are some of the major competitors in this sector right now with their awesome electric and self-driving cars. These competitors are threatening the revenue and profitability of Honda.
Increasing Yen Exchange Rates:
The instability in the exchange rates is also a big threat for the company. The rising Japanese Yen exchange rates could be a threat for Honda. Honda’s revenue and profit are highly dependent on the Japanese Yen exchange rate because it is a Japanese company. So, they have to convert its international profit to Yen to calculate overall revenue and profit. This scenario can decrease the profitability of the company. This thing can affect the company negatively and is a big threat for the company right now.
Disasters:
The company has manufacturing units in Indonesia, Japan, Thailand, and China. These countries are vulnerable to natural disasters. So, this thing can directly impact the manufacturing process of Honda. As a result, it will bring supply chain issues, lower profits, and lower production volumes.
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