សាកលវិ�ទ្យា�ល�យគ្រ�ប់ គ្រ�ង និ�ងសេ�ដ្ឋ�ក�ច្ច�University of Management and

EconomicsSubject:

Comparison of Ford

and Honda SWOT analysis

Pro. Facilitator: PEL SAROEUTH

The following paper offers a comparison and contrast of two of the world’s largest automobile manufacturers, Ford and Honda. Both companies have experienced similar successes in the hybrid vehicle market; additionally they are similar in size, and in revenues. Honda Motor Company, a Japanese company, has its largest customer base is in the U.S., alternatively Ford Motor Company, an American company, has its largest customer base is in Asia. A SWOT analysis has been performed for each company and the paper closes with strategy suggestions for Ford and for Honda.

 

*INTRODUCTION

* COMPARING AND CONTRASTING FORD AND HONDA

Y Ford Honda2005-2009

-Asia/Pacific region, the U.S. market sales of almost 2.5 to 1 -total market share in the U.Swas 15.3% (car:9.8%, truck:5.5%)

-Honda’s sale in the U.S. less than 1 to 1

- was 10.8%, (car: 6.5% , truck:) 4.3%.)

2010

-sells about 20% of their vehicles in its local market

-Then Ford has consistently produced more autos for sale in Asia/Pacific region and Europe.

-Honda sells about 30% of its vehicles in Asia

-Honda’s sales in this market have decreased in recent years from 30% to less than 15%. Honda’s reach into the U.S. and Europe has substantially

Honda, based in Tokyo, currently maintains automobile manufacturing facilities locally and in the U.S. as well as in 11 other countries, while Ford, based in Dearborn, Michigan, maintains manufacturing facilities locally and in over 25 other countries but does not manufacture in Japan. Both supply an extensive network of dealerships numbering in the thousands worldwide. Immediately prior to submitting these annual reports, Ford had 3,297,413,605 outstanding shares of common stock trading at about $6.00/share on the New York Stock exchange, while Honda had only about one half the shares 1,814,602,736, $30.00/share.

Ford and Honda have a similar numbers of employees at 198,000 and 176,815. while American companies generally work for the benefit of their shareholders, Japanese companies work primarily for the benefit of the company and its employees and are generally not concerned with paying benefits to shareholders. Both companies reported similar annual sales for the previous year with Honda reporting $92,552.1M and Ford reporting slightly higher sales of $118, 308.0M, however Honda’s gross profit margin at 27.34.% is substantially higher than Ford’s at 19.29%, .

FORD SWOT:

Strengths: 

1. Growth in Brand Value

Ford’s brand value gained 19% last year globally, despite the fact that brand value dropped overall in the car category by 15%; this was in part due to the fact that they were the only American car company not to accept federal bailout money. (Schept, 2010).

2. Globalization

The Focus, the first American car produced globally, as part of Ford’s strategy to build these automobiles near the markets where they are sold. Ford has restructured itself to become a global corporation through manufacturing hubs in Detroit, London, and Shanghai. (Schept, 2010)

 

 

3. MarketingFord promoted the Fiesta in Europe through social media by giving 100 cars away to bloggers in exchange for them commenting about the car, the promotion generated 50,000 requests for information, (Schept, 2010).

5. Financing

4. CollaborationFord has recently begun collaborating with Microsoft to deliver a voice activated music and information system called AppLink that communicates from the driver’s Smartphone to their vehicle. Through this collaboration Microsoft will be adapting applications directly from the driver’s mobile phone for their vehicles, allowing them to keep up with the rapidly changing technology, rather than Ford owners relying on computers embedded in the automobile’s console. Additionally Ford has engaged in many international joint ventures that produce vehicles on common platforms, (Hoovers, n.d.). 

*Weaknesses:

 1. Security

2. Air Pollution

the 8th of the top 100 most toxic air polluter in MarchFord was ranked of 2010, by the Political Economy Research Institute, PERI, in the United States with 5.09 million pounds of toxic air .

3. Nationalism

Ford is still seen internationally as an intensely American brand rather than an international brand.

4. Shareholder losses

Although they have witnessed a gradual increase per year for the previous five years, at 5.5% in 2009, Ford still has a dismally small share of the U.S. market for automobiles which is a great loss for its shareholders. Additionally the trading value of their stock at $6.00/share upon the filing of their annual report represents additional shareholder losses that the company needs to recover from.

*5. Product Diversification

While other automobile manufacturers gain brand recognition from producing other motorized vehicles in addition to automobiles, Ford currently produces only cars and trucks. There are a myriad of motorized products that Ford could use their technological know-how to produce including, but not limited to, recreation vehicles, all terrain vehicles, golf carts, motorcycles, scooters, water vehicles, and snow vehicles.

*Opportunities:

 

1. Government Regulations

 

Continued government intervention internationally regarding safety issues is likely to increase growth in the automobile manufacturing industry. U.S. has 100% penetration of air bags and other safety devices many other countries do not and the governments in mature markets (Haelterman, 2010).

2. Environmental Issues

 

Ford is generally seen as an environmentally friendly company due to the success of their hybrid vehicles, however there is much more that they be doing to decrease their environmental impact. Following GM’s lead and introducing zero-landfill manufacturing facilities would be a noteworthy start. Ford has recently secured the approval for low interest loans from the U.S. Department of Energy to begin reengineering their U.S. plants to make them capable of producing cleaner and more efficient engines, transmissions, and vehicles, (Hoovers, n.d.).

3. Luxury Hybrids

Ford has a substantial investment in and considerable knowledge of hybrid automobiles. should be an opportunity for Ford to increase its market share.

4. Electric Vehicles

As Ford has successfully introduced electric delivery vehicles into Asia, the development and introduction of electric delivery vehicles suitable for other markets, including the U.S., would seem to be a significant opportunity for Ford especially as many companies in major American cities could take advantage of off-market utility prices to charge their fleets. 

5. International Growth

Threats:

2. Fuel Pricing

Oil prices have resumed upward movement since early 2009, from a low of less than $40.00 per barrel to the current price of over $80.00 per barrel, (USEIA, 2010).

3. Unions

Ford has taken steps to drastically reduce its inventory in 2010 to match lower demand as consumers are keeping their cars longer to save money.

*4. Bailouts

*The government bailout of Chrysler and General Motors could upset the competitive playing field for Ford in the coming years as each of these companies had a significant amount of debt forgiven. While Ford negotiated with creditors to reduce their debt, their positioning as a competitor with these two American companies as well as with foreign automobile manufacturers is still at a disadvantage as these obligations still exist. 

*5. International CompetitionAmerican automobile manufactures face increased competition from international companies in other countries in addition to the competition that they have faced in the past from Japanese automobile manufacturers. By 2006 Ford only had a 16% market share in the U.S. and had lost share to Japanese competitors each year for the previous decade, (Kundnani, 2006). 2009, in fact, was Ford’s first profitable year in over five years. Now Korean brands are keeping pressure on American mid-level automobiles as well, (Schept, 2010)

*FORD STRATEGY:

Scent recognition is the most powerful memory aid. In order to more fully gain acceptance into international commercial markets Ford should consider infusing their automobiles with scents that appeal to local nationals. Ford can take a lesson that perfume companies have already learned that modification of fragrances to suit a regional market is necessary. Although this might be a radically different approach, rather than equipping new cars solely with a “new car” smell, Ford should consider equipping their automobiles lightly fragranced with a barely detectable base scent that will appeal to potential customers regionally. Ford could ultimately make their cars seem less American and more local by adopting this strategy.

* HONDA SWOT:

*Strengths: 

*1. Brand Value

*Despite a decrease of 2% in the last year in brand value, Honda still has the third highest brand value of all automakers and is 46th overall in BrandZ’s list of Top 100 Global Brands, with their brand value estimated to be worth $14,303M. (Schept, 2010) 

*2. Engines

*Honda is noted for their ability to produce highly efficient gasoline powered engines that are economical to run. The innate ability of this company to produce highly fuel economical engines, combined with the introduction of hybridization of the automobile engine has made them a market leader for hybrid automobiles.

*3. Product Diversification / varieties

*Not only manufacturing automobiles, Honda also is the world’s largest manufacturer of motorcycles, in addition to manufacturing all terrain vehicles, personal watercraft, and a myriad of power products. This type of product diversity under the Honda brand name increases consumer awareness of the company and can buttress diminished automobile sales in a downturned economy.

4. Employee Loyalty

5. Customer Satisfaction

Weaknesses:

1. Higher End Pricing

Although their vehicles are noted to retain their value better than other brands, Honda’s pricing is still at the high end of the mid-level market despite the fact that their styling is rather middle of the road, making the purchase of similarly sized and equipped, but less expensive automobiles, an obvious choice for recession-minded consumers.

 

2. Recent Quality Issues

Honda has recalled more than 1.2 million automobiles in the U.S. since January of 2010 due to problems with air bags, electric switches, power steering, and brake pedals, (Hoovers, 2010).

3. American Dependency: ភាពនៅ�ក្�មចំណុះ� �Honda is overly dependent upon sales in the United States, as witnessed by the recent economic downturn and the decrease in sales since 2007, over dependence in one specific region can result in a loss of growth. 

5. International Luxury Automobile

Although Honda has introduced their Acura in North America they have yet to introduce a higher end luxury vehicle into any other market. Their brand appeal could easily be translated into sales in other markets where there is an emerging middle class. 

Opportunities:

1. Latin America

Honda currently has automobile manufacturing facilities in both Latin America and South America but reported sales in these areas under “other regions”; in both 2008 and 2009 this was their lowest geographical market indicating that there is a lot of room to market and increase sales of their automobiles to these consumers where they are already manufacturing their product.

2. Toyota Customers

With the bad publicity surrounding Toyota’s recent recalls and the company’s unwillingness to acknowledge fault or assume responsibility, Honda as one of the big three Japanese automobile manufacturers could attempt to market directly to Toyota customers who are looking for replacement automobiles and gain market share. 

3. Shareholder Rights

As a Japanese company Honda has no obligation to increase shareholder rights, however, they could voluntarily do so and in making such a commitment, purchasing shares in the company would be more attractive to Americans. 

4. Joint ventures

Honda currently controls almost all of their manufacturing facilities with limited joint venturing predominantly occurring within Asia. As Honda expands into other international markets it could consider joint ventures with a local automobile manufactures that would benefit both companies, allowing Honda to get their newer products into these market more quickly and allowing local manufacturers to capitalize off of their association with Honda. 

Threats:

1. Bankruptcies

As Honda provides financing primarily to its North American customers and dealerships, the increased financial instability of the American population could lead to bankruptcy and debt forgiveness that the company might not be able to easily absorb or have made provisions for. Net charge-offs from sales alone increased from .93% in 2008 to 1.15% in 2009 despite an increase in provisions of 10%.

*2. FOREX

International sales, especially to the United States, are the crux of Honda’s business. As such, fluctuation in the value of the yen against other currencies exposes them to a high level of risk. Specifically, if the U.S. dollar, as this is their largest market, were to gain substantial value over the yen, Honda would experience a rapid devaluation of products already delivered to their dealerships.

3. California

Under the U.S. Clean Air Act individual states are allowed to determine their own emission standards that can be more stringent that federal standards. California is currently attempting to enforce the strictest emission standards in the world and recent legislation in 2009 and 2010 are making their standards even more stringent beginning as early as 2011. As the state represents 10% of the American population this could potentially be a threat to Honda sales, specifically those cars that are already in the pipeline. 

* HONDA STRATEGY:Honda should reduce its dependency upon customers in the United States and focus on increasing sales in other regions. Specifically Honda already has established manufacturing facilities in Mexico yet has limited automobile sales in Latin America. 

Implementation:Honda must develop a strong marketing presence that will connect with consumers in Latin America. Obviously a major restructuring of their production in this region is called for. Honda must reduce or cease the production of vehicles that aren’t selling and increase the production for lines that are experiencing even moderate sales growth. Automobiles currently in production and intended for customers in the U.S. and excess automobiles already at dealerships can easily be redistributed to Mexico via NAFTA on demand from dealerships there; as the U.S. has much more stringent emission requirements there should be no retrofitting required, additionally a minimum amount of other modifications, other than those pertinent to language issues, should be required. Those automobiles currently in production and intended for Mexico can be redistributed to neighboring countries throughout Latin America, (this may require Honda to partner with auto dealerships in countries that they have not already entered). Additionally Honda should extend their financing opportunities to qualified customers throughout Latin America, thereby mitigating the effect of the financing obligations of their dealerships and additionally forgive a certain amount of dealership indebtedness prorated according to the redistribution of automobiles. In exchange for the debt forgiveness, U.S. dealerships should be required to pay the shipping costs to Mexico so that only those dealers truly in need of the alleviation program will participate.

*CONCLUSION

Although both companies are relatively similar and offer similarly featured mid-range automobiles, Honda and Ford essentially appeal to two different customers in the U.S. and abroad. In addition to automobiles each company has developed its own unique strength to further penetrate markets, Ford with trucks and Honda with a variety of other products, most noticeably motorcycles. Together these two companies will continue to be at the forefront of the introduction on new vehicles into their respective markets by capitalizing on the innovation that is inherent in their organizations.