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Instructor

Barbara Parker, PhD

Le Thanh Long

Ho Chi Minh City, Vietnam

May 1, 2008

HO CHI MINH INTERNATIONAL UNIVERSITY

BUSINESS ADMINSTRATION DERPARTMENT

STRATEGIC MANAGEMENT PROJECT

Members of group

Ton That Hue Tri BA060113

Le Minh Hai BA060089

Vo Le Duy BA060087

Nguyen Thi Kim Thao BA060105

Le Thi Kim Tuyen BA060114

Doan Thanh Phuc BA060099

Nguyen Thanh Phuong Thuy BA060106

Table of Contents

A. INTRODUCTION ................................................................................................................................ 1

History ......................................................................................................................................................... 1

Describe the firm today ................................................................................................................................. 2

The size and revenue of Honda Group ........................................................................................................... 3

B. APPLY 5 LEVELS OF STRATEGY TO YOUR COMPANY ................................................................................ 7

Enterprise Strategy ........................................................................................................................................ 7

Corporate Strategy ........................................................................................................................................ 7

Business Strategy .......................................................................................................................................... 8

Operational Strategy ..................................................................................................................................... 9

The Individual Strategy.................................................................................................................................. 9

C. DECISION MAKER .............................................................................................................................. 10

D. THE SIX EXTERNAL ENVIRONMENTS .................................................................................................... 10

Natural environment: .................................................................................................................................. 10

Cultural environment: ................................................................................................................................. 11

Economic environment: ............................................................................................................................... 12

Political/ Legal environment: ....................................................................................................................... 13

Technological Environment ......................................................................................................................... 14

Business and industries............................................................................................................................... 14

E. GLOBAL CHALLENGES ........................................................................................................................ 16

Challenge 1: Problems that cannot be solved but must be managed. ........................................................... 16

Challenge 2: Managing intangibles. ............................................................................................................. 17

Building relationships ............................................................................................................................... 17

Business Transactions: ............................................................................................................................. 17

Relationships with Governmental Agencies: .............................................................................................. 17

Honda is reliant on the protection and preservation of its intellectual property .......................................... 18

Challenge 3: Managing diversity .................................................................................................................. 18

Challenge 4: Addressing new issues for which managers and organizations are ill-prepared. ....................... 18

Climate change and the increasing demand for mobility ........................................................................... 18

Products: improving global average fuel economy ..................................................................................... 19

F. ANALYZE THE FIRM‘S STRUCTURE ....................................................................................................... 19

Basic Positive .............................................................................................................................................. 19

Analyze advantage and disadvantage of Board ............................................................................................ 20

Analyze advantage and disadvantage of structure ....................................................................................... 21

Advantages .............................................................................................................................................. 21

Disadvantages .......................................................................................................................................... 22

G. ORGANIZATIONAL PROCESSES ......................................................................................................... 22

The First analyzed process is the Organizational Culture. ............................................................................ 22

Ho Chi Minh City, Vietnam

May 1, 2008

The second process analyzed is Innovation Management ............................................................................. 24

Developing new technologies of manufacturing systems ........................................................................... 24

Building environmentally responsible, people-friendly plants. ................................................................... 24

H. LOCATE YOUR FIRM'S POSITION ON THE SOCIAL RESPONSIBILITY .......................................................... 25

Honda social overview .............................................................................................................................. 25

Honda philanthropy activities ................................................................................................................... 25

Honda philanthropy achievements ............................................................................................................ 26

I. MANAGING PEOPLE ........................................................................................................................... 26

J. EVALUATIONS AND CONTROLS ........................................................................................................... 29

REFERENCE .............................................................................................................................................. 31

STRATEGIC MANAGEMENT

Page 1

A. INTRODUCTION

History

After World War II

Japanese market was in miserable condition because of the shortage money and fuel, but Japan

was still in need of basic transportation. Honda, utilizing its manufacturing facilities, attached an

engine to a bicycle that created a cheap and efficient method of transport. Since the foundation of

Honda Motor Co. Ltd. in 1948, Honda has grown to take a leading position in the fields of motorcycles,

automobiles and power products.

In the global market, Honda is the world‘s largest engine manufacturer and market leader in

motorcycles. Honda has been operating 120 manufacturing facilities in 29 countries and employs

167,231 people worldwide. Honda has expanded in main markets following:

1959 American Honda Motor Co., Inc. established (Honda‘s first overseas subsidiary).

1964 Asian Honda Motor Co., Ltd. (Thailand) established

1965 Honda (U.K.) Limited established in London (the first market of Honda in Europe)

1971 Honda Motor does Brazil Ltda. established in Sao Paulo (presently Honda South America Ltda.)

The key point lead to Honda‘s success is the continuous innovation that was found by Mr. Honda as a

basis. Today Honda stands as the largest motorcycle manufacturer and the 9th largest automobile

manufacturer in the world. The market share of Honda until now is 10.2 percent and it is ranked as No.

5 in U.S (the most particular/ fastidious market). Honda Company also becomes a technological force

in the motorcycle and automobile industries in Asia, Europe, and North America.

In 2006:

Honda Aircraft Company begins sales of its HondaJet Advanced Light Jet. HondaJet was also selected by

Popular Science magazine as the winner of the publication's 2006 "Best of what‘s New" Award in the

Aviation & Space category.

Honda Philippines begins mass production at new motorcycle plant

Integrated three dealer channels into one Honda brand

Honda establishes subsidiary in Ukraine


New automobile plant in Vietnam begins operations (Civic) and flexible car at Brazil...

Launched the Gold Wing Airbag, the first mass-market motorcycle with an airbag system

New company to conduct solar cell business established

In 2007:

Honda stated it is going to launch low-priced hybrids and advanced diesel technology in the near

future, they were also voted the number one car manufacturer in the world for the third period.

In February 2008:

Honda announced that it would cease production of motorcycles in the United States in spring 2009.

Describe the firm today

For over sixty years, Honda hasn't stopped evolving and innovating. Today, Honda has released

the four main segments following

Operating Data


Depend on Operating Data, we can calculate that The Percentage of revenues/profit of each portfolio in

2007:

Motorcycle Business: 13.44%

Automobile Business: 78.46%

Financial Service Business: 4.01%

Power Product and Other Business: 4.09%

The size and revenue of Honda Group


Number of Employees worldwide

In the Global Scale, Honda had 144,785 in 2006 and this number increases more than 20,000

in 2007; there are more than 167,231 associates in Honda group.

The Financial Data and Operating Data has showed that Honda‘s consolidated net sales and

other operating revenue for fiscal year 2007 grew 11.9%, compared with fiscal year 2006, to ¥11,087.1

billion.

In Japan, because of the negative impact of currency effects caused by the depreciation of the

Japanese Yen, increasing price of raw material, etc…the unit sales of Motorcycle Business and Power

Business declined 6.4% and 3.4%. However, there is an optimal signal that the Power Product and Other

Business is continuously increased.

In Foreign market, the unit sale grew up 7.7% on Automobiles and 9.3% on Power Product. This

year is the successful year of Honda in Other Regions because all of the Honda‘s businesses were grew

up. However, this year was not really good for the motorcycles market of Honda in North America,

Europe and Asia.

Here are some index figure out the Honda‘s performance in Global Market.

2006 2007

Return on Investment (ROI) 5.616% 4.921%

Profit Margin 6.00% 5.30%

Market Share 9.30% 10.2%


Debt to Equity 6,418,190(million yen) 7,430,982(million yen)

Earnings per share 260.34(million yen) 324.33(million yen)

Sales Growth (based year

2005)

14.54% 28.17%

Asset Growth (based year

2005)

13.48% 28.48%

MOTORCYCLE BUSINESS

Net Sales ¥1,370.6 billion (11.8%)

Operating Income ¥100.6 billion (–11.7%)

Revenue from unaffiliated customers increased 11.8%, to ¥1,370.6 billion, from the previous

fiscal year, due mainly to increased unit sales and the positive impact of currency translation effects.

Operating income decreased 11.7 %, to ¥100.6 billion, from the previous fiscal year, due mainly to

increase SG&A expenses (Selling, General and Administrative expenses), increased R&D expenses and

the gain on the return of the substitutional portion of employees‘ pension funds to the Japanese


government recorded in fiscal 2006. This contributed to offsetting the positive impact of increased

profit attributable to higher revenue and the currency effects that were caused by the depreciation of

the Japanese Yen.

AUTOMOBILE BUSINESS

Net Sales ¥8,889.0 billion (11.0%)

`Operating Income ¥599.5 billion (–4.6%)

Revenue from unaffiliated customers increased 11.0%, to ¥8,889.0 billion, due to increased unit

sales and the positive impact of currency translation effects. Operating income decreased 4.6%, to

¥599.5 billion, due mainly to the negative impact of changes in the model mix, substantially increased

raw material costs, increased SG&A expenses, increased R&D expenses and the gain on the return of

the substitution portion of employees‘ pension funds to the Japanese government recorded in fiscal

2006, which offset the positive impacts of increased profit attributable to higher revenue, continuing

cost reduction effects and the currency effects caused by the depreciation of the Japanese Yen.

POWER PRODUCT AND OTHER BUSINESSES

Net Sales ¥417.7 billion (12.7%)

Operating Income ¥36.1 billion (0.6%)

Revenue from unaffiliated customers in power product and other businesses increased 12.7%, to

¥417.7 billion, due mainly to increased unit sales of power products and the positive impact of


currency translation effects. Operating income was ¥36.1 billion, an

increase of 0.6% from the previous fiscal year, due mainly to the positive

impact of increased profit attributable to higher revenue and the currency

effects caused by the depreciation of the Japanese yen, which offset the

negative impact of the increased SG&A expenses and the gain on the return

of the substitution portion of employees‘ pension funds to the Japanese

government that was recorded in fiscal 2006.

FINANCIAL SERVICES BUSINESS

Net Sales ¥409.7 billion (33.5%)

Operating Income ¥115.5 billion (27.6%)

Revenue from unaffiliated customers in our financial services business increased 33.5%, to ¥409.7

billion. Operating income increased 27.6%, to ¥115.5 billion, benefiting from increased profit

attributable to higher revenue and positive impact of currency effects caused by the depreciation of the

Japanese yen, despite higher interest rates to raise funds.

B. APPLY 5 LEVELS OF STRATEGY TO YOUR COMPANY

Enterprise Strategy

The Mission Statement of Honda is try to maintain a global point of view, with the dedication to

supply the highest quality products at a reasonable price for worldwide customer satisfaction.

Moreover, taking new challenges with the pursuit of Initiative, Technology and Quality, Honda is

pursuing their 2010 Vision: Striving to be a company society wants to exist through creating new value,

globalization, and commitment for the future.

Corporate Strategy

Honda‘s portfolio includes three businesses: Automobiles business, Motorcycles business,

Power business. Even though stepping into Automobile industry rather late at 1963, Honda quickly

leads the industry with characteristics like superior fuel economy, optimum safety, and driving

pleasure. Honda‘s sales and production in this industry prove successful steadily not just in U.S. but

also in many regions worldwide.

Meanwhile, motorcycle business is the first business of Honda, from 1963 with the event of the

first oversea plant in Belgium, Honda has devoted in one basic rule: build products close to the

customer. Honda has operated successfully in 28 motorcycle plant in 21 countries, as well as Honda

R&D operations in the U.S., Italy, China, Germany, Thailand, and India. In 2005, the 150-millionth

Honda motorcycle created, its business goal is to make Honda cycles more popular than ever.


The first Power Product engine started in 1953, and now has expanded - includes tillers,

portable generators, outboard engines, lawn mowers, power carrier… Cumulative production of power

products has exceeded 70 million units (May, 2006). Power Products are produced at 11 plants in 9

countries worldwide, sold in 156 countries, and used by around 5.5 million people annually. Honda is

now expanding into robot industry with ASIMO, reaching the sky through Hondajet, providing financial

services worldwide to enhance sales increasing. They all create a very promising and potential Honda in

the future.

Business Strategy

R&D is sharpening the business advantage of Honda, together with the fierce competition

between Honda and competitors, and they all define the Business Strategy of Honda. One of the

proudest things about Honda is its R&D system. With the systematic way of approaching, focus on

durability, reliability and basic performance to establish a creative and innovative technical foundation.

With the wisely approach to the future, the Honda products do care about the economical,

environmental, and social issues – This leads to a increase steady in American and Europe recently

meanwhile the whole industry is going down by some external factors such as U.S.D. depreciation, Oil

price raising, political recession … Honda is keeping involving in the research and development that

benefit people in the future through leading-edge technology and commitment to innovation that

opens up new possibilities in mobility.

With ―The Joy of Selling‖ – The dealership of Honda is also one of its strengths. Through

creating products and services that provide the core values that make Honda unique, the Honda‘s

associates around the world keep creating such inspiring experience for its customer. Honda put

heartfelt endeavors into services, responding to changing values and increasingly complicated needs of

customer worldwide. Its services focus on improving customer relations, with friendly and attentive

sales, responsive service support, thorough maintenance and repairs. ―Life with a Honda‖ – Honda

began unifying its multiple dealership channels into a single Honda sales channel, seeking to

strengthen the Honda brand, enhance customer satisfaction, and help ensure lifetime customer loyalty.

The manufacturing and distributing system of Honda are also sources for the succession of

Honda. With the global network, Honda‘s global strategies somehow include the globalization

characteristic. Honda has established independent local operation around the world and pushed local

autonomy and proactive efforts to localize the needs regional with mutual understanding.

The competition between Honda and others speed up year by year. This is somehow carry the

win/lose characteristic.


The world Automobile market is being taken by

Asian Brands. In the U.S. market, the foremost

threat to U.S. car makers is the emergence of

Toyota, Honda, and Nissan that are threatening

directly to the wealth being of these Big Boys

here, General Motors – the world‘s current

largest car manufacturer, Ford – the pioneer of

automobile industry, and some others big boys

of Detroit. The raise of Honda and Toyota hit

General Motor the most because they came so

strong many years ago.

Honda‘s greatest competitor of all time

worldwide is Toyota Motor, but the competition around the world involve Hyundai, Volkswagen, Nissan,

General Motor, Ford, Kia, Mazda… The rivalry against these top car manufacturers in the world has

created a work ethic that is unmatched in the American auto scene. With their constant improvement

on their cars, the healthy competition – that mostly in Japan - leads the way for the production of

vehicles that gets more and more miles per gallon.

Operational Strategy

Honda operates in the worldwide market – with 134 production facilities in 28 countries and at

31 R&D facilities in 15 countries, about 167000 Honda employees and associates serve 23 million

customers worldwide annually. Honda‘s global operations are divided into 6 administrative regions

responsible for operating. Hiring and engaging the people and philanthropic initiatives locally in the

communities that Honda operates. Honda is pushing the independence of their local management and

sales operations, at the same time with integrating and forward-looking plan for each region. They

operate under the conduct guidelines that help member companies and associates in evaluating and

managing risks, complying with laws and regulations, keeping a high level of transparency in

operational level, that‘s all to maximize the worldwide customer satisfaction.

The Individual Strategy

The individual strategy of Honda is reflected through the Honda‘s philosophy – ―The Three Joy‖

– The Joy of buying, the joy of selling, and the joy of producing. With the joy of buying, the Honda‘s

associates must try their best to exceed the customers‘ expectation. Meanwhile, with the joy of selling,

which concern not only about the relationship between the dealers and their customers, but they also

feel the pride of having a positive relationship with their customers. And the last one, the joy of

producing comes from manufacturing, research and development… by producing quality products that

satisfy customers worldwide, the Honda‘s employees can experience pride in exceeding the

Source: Honda Annual Report 2007


expectation of their customers. That all bring the strategies of Honda from their enterprise level,

through corporation, business, operational level, to individual strategy level, that spread the Honda‘s

strategic spirit throughout the company.

C. DECISION MAKER

In the global business, many top managers still centralize their authority; make most of decisions of

the company. In contrast, Honda follows a different way; most of decisions are made by a group of

responsible persons, including Board of Director, outside directors, outside auditors. Honda decentralizes

authority to their associates to maximize the flexibility and diversity in decision making process, and well

adapt to the changes of global market.

Making group decision of responsible persons in Honda is extremely effective. The theoretical

advantage of this strategy is improving innovation and reducing risk, biased thinking. In fact, this strategic

leadership style leads Honda to today success. For instance, the organization of Board of Directors or Board

of Auditors includes not only inside company‘s employees but also external appointees. This feature helps

Honda to make the distinction in global performing and competing.

Outside company appointees play the role as supervising the execution of each board. As the result,

the performance of each board becomes effective and efficient rather than organization with entirely inside

company employees. By this strategy organizing, the company can ensure that working environment will be

fair and strong without dubious cooperation.

With the human assets style of leadership (according to Parker's text book), Honda manages its employees

through promoting programs, principles and policies in supporting its organizational human resources.

Honda especially focuses on human factors.

According to Maslow's theory, when people's needs are satisfied, they are well motivated, resulting

in being eager to contribute more to organization. With the Human Assets leading style and geocentric

human resource management, Honda satisfies not only low needs (physics, safety, belongings) but also high

needs of employees (esteem and self actualization). Therefore, Honda is more effective than a lot of other

companies in motivating people, resulting in efficient, effective performance of employees and firm as well.

D. THE SIX EXTERNAL ENVIRONMENTS

Natural environment:

The more industry develops, the more the environment is negative affected. Among the

environmental problems, Global Warming and Pollution Level are the problems that take the most

concern of community. Many Non-Government Organizations has requested industrial firms to

reduce CO2 emission and toxic wastes. To deal with this problem, Honda continuously researches

and develops new technologies involving hybrids and fuel cell vehicles. Moreover, they also

recognized that its CO2 reduction efforts needed to include development of the diesel engine‘s

potential. To achieve this goal, Honda has developed three solutions:


Further improvements in the reduction of emissions from internal combustion engines and

improvement of fuel efficiency

Evolution of hybrid vehicles

Promotion of alternative fuel-powered vehicles

Besides that, Honda puts endeavor to create better, cleaner and more fuel-efficient engine

technologies, and to further improve recyclables throughout its product lines. The Company also plans

to make further progress with fuel cells and solar cells, and to promote commercialization of solar

cells. In addition, Honda has been further put its efforts to minimize its environmental impact. To this

end, Honda sets global targets to reduce the environmental burden as measured by the Life Cycle

Assessment, in all areas of business, spanning production, logistics and sales.

Natural Disaster Affects Demand in the ASEAN Market, such as the shortage of oil affected to

soaring gasoline prices. It has caused the price of almost the businesses -which need to

transportations and vehicles- go up. Thus, the result was the automobile market to shrink

Cultural environment:

In 1969, the first automobile of Honda, imported to the United States, was N600. Because this

model was built for Japanese market, while the American buyers prefer cars with bigger and stronger

engine, resulting in failure of this product in American market.

As a developed industrial country, The Japan Government attaches special importance to the

Public Health Care. Besides that, Japanese tend to Declining Birthrate which led to Aging Population.

The declining number of youth in the population leads to the declining number of licensed motorcycle

drivers of Honda. In 2006, demand of Japanese consumer in the motorcycle market for motorcycles

under 50cc of engine was displaced. The recent trend of Japanese is traveling, thus automatic-only

vehicle licenses have been introduced, and the ETC(1) system has been expanded to include

motorcycles. Each of these innovations has helped to improve the riding environment, the best years of

effort. As a result, demand stopped dropping in certain categories during fiscal 2007. In 2008, Honda

expects demand to shrink slightly to approach 720,000 units. To meet anticipated increases in the

diverse recreational mobility needs of Japanese customers, Honda will work to meet customers‘

demand focusing on customers‘ satisfaction, developing ―Dream Shops‖ in Japan which offer products

and services of high value, concentrating on sport models (to satisfy the youth ones).

As you know, Honda is the popular trademark in motorcycle market. One of the main point‘s

leads to the Honda‘s success is segmented right market. Depend on gender and their demand Honda

1 ETC System (Electronic Toll Collection System) This system for paying expressway tolls without stopping at toll booths uses a

wireless system for toll collection by communicating between the antenna of a vehicle-mounted ETC unit and a toll collection

machine.1


had a researching about ―Consumer behavior in category‖ to focus on what products will suitable with

whom: Men and women have different style in vehicle of demand states and thus their needs from a

scooter differed too:

Men who carry load (carrying family, delivering goods, etc…); there are reasons why they

preferred a scooter that was strong, sturdy and powerful. Depend on those factors, Honda produced

Honda Active with its metal body and > 100cc power to serve this segment.

Women who likes move around with ease and comfort, they preferred a scooter with great

mileage, fashion model, easy to maneuver and safe to ride. Depend on those factors, Honda produced

Scoot Pep / Pep + with ABS (plastic) body and <100cc power was perceived as the best choice. This

was reinforced by the fact that the dominant age band in the <100 cc segment was 18-24 year old

young women.

Economic environment:

Honda conducts its businesses in Japan and throughout the world (including North America,

Europe and Asia). A continued economic slowdown, recession and the 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

U.S financial crisis has affected the economics over the world. Some commentators argue that

Japan is already in recession—an appraisal that was reinforced by the biggest fall in five years in

corporate capital spending for the last quarter of 2007. Shares in Japanese manufacturing corporations

dropped sharply. Not only Honda lost 4.1 percent but also Toyota lost 5.1 percent too.

Soaring gasoline prices and rising interest rate affect deeply in North American Market.

According to Honda‘s annual report, The US market is divided into motorcycles and ATVs. In calendar

2006, Honda witnesses remained demand approximately on par with the previous year. It‘s the results

of expanding on road models and declining in off road models. At the same time, however, ATV

market still held fast in the sport category, in response to the appearance of new designs. The situation

has gone bad in 2007, the affect of two things we mentioned above become profoundly. In fiscal 2007,

Honda‘s unit sales in North America fell 18.2%, to 503,000 units. The shifts in market environment

makes a change in motorcycles market, sales of new sports and off-road models were strong, but

endure models experienced a sales decline. The same plight for ATV market, sales were just strong for

new models. However, overall sales were caused to decline by shifts in market environment.

Moreover, Total demand in the United States in calendar 2006 fell 2.6% from the previous year.

Soaring gasoline prices in the summer buying season pushed up demand for fuel-efficient cars. This


trend enhanced demand for subcompact cars and crossover-utility vehicles (Cubs), which aim for SUV(2)

utility and are based on passenger car platforms.

Political/ Legal environment:

In 1965, the U.S. was heavily engaged in the Vietnam War. Many young American men,

representing the core market for the Honda 50, went off to battle in the jungles of Southeast Asia.

Society showed signs of confusion as the financial markets began to wobble, and soon it was difficult

to finance even a smaller purchase like a motorcycle. By the spring of 1966, sales of the 50 and other

American Honda products were in a decline.

Honda has a trouble with the problem with Chinese manufacturers-who have made the most

motorcycles in Southeast Asia -that have trademark of Japanese manufacturers by violating Japanese

intellectual property. Consumers in this region do not have enough money to buy pure Honda‘s

motorcycle. Therefore, they usually buy imitation by Chinese manufacturer because the price is less

than a half of Honda‘s motorcycle and its quality do not different much. To deal with this problem,

Honda figured out an alliance strategy with Chinese manufacturers by producing copies instead of

fighting. Utilizing this strategy, Honda has made new model ―Wave‖ in 2002 that has a reasonable price

and high quality. This model is suitable with the Vietnamese‘s Income so it has become very popular in

Vietnam. The result was number of copied motorcycle has decreased dramatically. Nowadays, the

illegal imitation in Southeast Asia still exists- it causes a serious damage for the authentic

manufacturers. Thus, fight for eliminating copied products is still on the way.

In fall 2005, the Indonesian government raised interest rates in an effort to curb the climbing

rate of inflation initiated by rising gasoline prices. This move, in turn, caused a credit crunch that

dampened consumer purchasing power. In fall 2006, interest rate policy and rate policy returned to

single-digit levels. In calendar 2007, overall motorcycle demand is expected to return to 2005 levels.

As in India, economic expansion in Indonesia is expected to continue prompting high rates of market

expansion. Astral Honda continues to promote sales growth by launching new models and

strengthening its sales promotion efforts. The company is also encouraging rider safety through an

enhanced riding trainer at its dealerships to create an environment that promotes motorcycles

In fiscal 2007, Political uncertainty affected Demand in Asian Market such as political instability

in Thailand caused the automobile market to shrink.

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.

2 Sport-utility vehicle (SUV): A vehicle designed and developed for recreational purposes


The costs to comply with these regulations can be significant to Honda‘s operations.

As we know that Middle East Areas play a very important role to supply the fuel for many

industry activities. But the Policy situation in there is not stabilized and the war has occurred for a long

time. Therefore, the gasoline price was instability -sometime increasing rapidly- so the customer has a

confused attitude and not willing to purchase the products that used gasoline. As a result, it will

heavily affect to the manufacturers like Honda, Toyota, and Ford…

Technological Environment

Utilizing the most advanced information technologies, Honda has developed and innovated

itself continuously. The changes in IT lead to almost Honda‘s operation were controlled more effective

such as:

On the production process: by using the innovation means of production and mode of

production, like the auto fit machine, Honda can mass product to reduce the cost, save the time and

increase the capacity

On the Marketing process: Internet came on scene in 1995 and the innovation of multi media

have replaced the mode of original marketing. Around twenty years ago, When Honda had a new

product, how could Honda announced for the customers? Banners along the streets or adverting on

new papers, magazines, etc…then waiting until customers pay attention to them. It was entirely

positive way to approach. In term of customers, when you want to buy an automobile, you must go

around many Automobile stores to get information about it. This way was not convenient and waste a

lot of time to make decision. Nowadays, the time of Internet and Multimedia, everything becomes

easier. Just one lick you can see what the world is going on, by this way Honda can build an

information system to approach their customer effectively. Besides that, Honda can not only attract

intention of the ones who need car but also the ones have not plans to buy it.

Business and industries

Along with the five environments above, Porter‘s Five Forces is a good framework to analyze the

business and industries of a company. It encourages the strategic managers and marketers not only

look outside the current competitors but also has a concern with potential competitors. Moreover, it

helps the company understands what its customers want and control its supplier more effective. Now

we utilize Porter‘s Five Forces to analyze Honda Company.

The threat of substitute products:

That is defined as the existence of close substitute products increases the propensity of

customers to switch to alternatives in response to price increases (source from Wikipedia.org). This

does mean that when a Honda‘s competitor can produce with high performance and economical price


rather than Honda‘s. This product will replace Honda‘s product in the market. Hence, simultaneous

reducing market share and profit of Honda are the results. For example, for the product line of sport

motorbike, R6 of Yamaha is the close substitutes of Honda‘s F4. If Yamaha can achieve an innovation

to produce R6 with the lower price against F4, It can actually replace Honda‘s F4 on the market

because customers have the same expectation on both two products.

The threat of the entry of new competitors.

The theoretical meaning is that in marketing with many competitors existing, the profit of each

company will be lower than the maximum level. American Market as an example, Ford and Honda

aggressively compete together in this market. Honda cannot get the maximum profit in this market

because of the policies from American Government protecting domestically Company. Additionally,

Honda has to spend money on accessing to distribution in American market. Moreover, it also finds

difficulties in adopting the culture differences, etc…. those reasons will reduce the Honda‘s profit level.

Rivalry among existing competitors:

Among five characteristics important to the automobiles industry analysis is the competitive

rivalry. Three main rivals that Honda has to compete fiercely are Toyota Motor Corp. (TM), Ford Motor

Co. (FM), and General Motor (GM). Whatever change in strategy of one of these competitors can have

influences on performance of Honda. At the end of fiscal year 2007, FM reported 172,455 million

dollars of sales and 16,418.5 million dollars of market capability, while GM experienced 181,122

million dollars of sales and 11,853.3 million dollars of market capability. Toyota with 299,394

employees generated 202,864 million dollars of sales in the fiscal year 2007. Honda as well as its three

rivals always keeps on innovating, improving, researching and developing to compete effectively in this

auto industry. For example, whenever one of these four company releases a new model, the others will

catch up and have similar products to compete. Like when Honda has just released its FCX Clarity, the

next generation of its fuel cell vehicles, GM put their fuel cell platform into the body of a Chevy

Equinox SUV.

A famous model of Honda, Accord, has been competing with its chief rival, Toyota Camry since

its first appearance. Accord was released into market in 1976, and until 1983, Toyota introduced its

Camry. Since then, these two models have kept on competing with each other. GM Malibu and Ford

Fusion are also two models that GM and Ford use to compete with Accord and Camry. For, Toyota, and

GM all can replace Honda in this auto industry. So, what Honda has to do is trying to improve its

technology, research and development to create a competitive advantage, maybe as a Greenest

automaker.

The bargaining power of customers

In business, if a company wants to exist it must create a good relationship with customers. Honda is a

global company, it means Honda have a lot of competitors. So customers will confuse when they make


decision for what Brand will be the best choice. It depends not only the famous company but also the

price and quality. For example, In Vietnam on April 2007, Honda introduced Air Blade Scooter with

functions like sport and fashion model, more fuel-efficient engine technology. It rapidly attracted the

youth , the supply was not enough for demand. Then it made the shortage of Air Blade in the market

and pushed price higher. Customer want to buy it must order and wait around one to two months. No

longer after, Suzuki has utilized maximize the advantage of its competitors to its product. On July

2007, Suzuki introduced new model - Hayate Scooter - that have the same functions of Air Blade but

set the amazing price (lower than 23%) and customer can take their product immediately. As a result,

many customers change of their mind, therefore the market share of Honda to shrink.

The bargaining power of suppliers

One of the factor helps the company competes against with other companies is the ability to reduce

the cost. Therefore, suppliers plays an important role to make the company‘s success. Suppliers may

refuse to work with the firm or increasing prices for unique resources. Realizing the serious element,

Honda purchases raw materials and certain components and parts, from numerous external suppliers.

Moreover, Honda relies on some main suppliers for the items and raw material that use in the

manufacture of it products. Honda has ability to obtain these supplies in an efficient and cost-effective

manner is subject to a number of factor. Some of which are not within Honda‘s control, these factors

include the ability to provide a continued source of supply and ability to compete with other company

in obtaining the supplies. If Honda loss a key supplier, it may affect the capacity and increase the cost.

There are some key suppliers of Honda in term of Metal Stamping Part : Takao Kinzoku Kogyo Co.,Ltd;

Hirata Technical Co.,Ltd; Hongo Co.,Ltd; Kikuchi Co.,Ltd; Marujun Co.,Ltd, ect,…Among these

companies, Kikuchi Co.,Ltd deal with not only the supplier of Honda but also Nissan‘s supplier. If

Nissan was willing to purchase with higher price or had some benefit promotion than Honda, Honda

might be affected on the capacity and increase the cost.

E. GLOBAL CHALLENGES

In this globally competitive business world, every firm has to face many challenges, and Honda

does, too. There are four common challenges that Honda has to face: problems that cannot be solved,

managing intangibles, managing diversity, and addressing new issues for which managers and

organization are ill-prepared. In this part, we will discuss more about these challenges of Honda.

Challenge 1: Problems that cannot be solved but must be

managed.

Honda has to face some challenges that cannot be solved completely; they just can be

managed, like these two examples below.


In Europe, several factors negatively impacted automobile operations of Honda during fiscal

2001, including the appreciation of the yen, the weakness of the euro against the sterling pound and

pricing pressure in the United Kingdom. Due to this business environment, Honda's automobile unit

sales in Europe declined 23.3%, to 191,000 units, and net sales declined 30.8%, to ¥311.2 billion

($2,512 million).

Because of the Asian currency crisis in 1997, Honda had to streamline local operations to

ensure profitability within a small-scale production volume. These efforts include cost reductions,

technology transfers, human resource development and exports to other regions. These efforts have

allowed Honda to enhance its profitability and presence in this region.

Challenge 2: Managing intangibles.

Building relationships

Most of firms that want to become industry leadership or be competitive globally must have strategic

partners, and Honda is not an exception. Building relationship (with business partners and

governmental agencies) is a challenge that Honda has to face to successfully compete globally.

Business Transactions:

To maintain a fair and sound relationship with business partners, Honda conducts fair and

sound transactions. Honda starts with the selection of business partners. When they need to purchase

products or services, they will select a business partner by comparing and evaluating in an impartial

manner the terms and conditions offered by various business partners. After selecting, in their

dealings with business partners, they will neither offer nor accept gifts or benefits beyond that

normally considered appropriate. In addition, they also prohibit on improper exercise of positions and

authorities. They will not exercise positions or authorities inappropriately to exact improper benefits

from business partners; nor will they give business partners improper benefits.

Relationships with Governmental Agencies:

To build strategic relationships with governmental agencies, Honda abides laws and regulations

for ethics. They act in a manner that recognizes government officials‘ ethics and what are considered

conflicts of interest under the relevant laws and regulations. Furthermore, prohibition on excessive

gifts and benefits is also conducted. They do not offer government officials any gift or benefit

exceeding the social custom or socially accepted limits.


Honda is reliant on the protection and preservation of its

intellectual property

Honda owns rights in a number of patents and trademarks relating to the products it

manufactures, which have been obtained over a period of years. These patents and trademarks have

been of value in the growth of Honda‘s business and may continue to be of value in the future. Honda

does not regard any of its businesses as being dependent on any single patent or related group of

patents. However, an inability to protect this intellectual property generally, or the illegal breach of

some or a large group of Honda‘s intellectual property rights, would have an adverse effect on Honda‘s

operations. So, managing these intellectual properties is also a challenge for Honda.

Challenge 3: Managing diversity

Honda is a global organization. Its associates come from many places all over the world, so

diversity certainly occurs and needs a lot of attention. How to deal with diversity is really a difficult

challenge for Honda.

Respecting diversity- an open-door employment policy, is the policy that Honda choose to manage its

diversity. Even since the days when Japanese corporations tended to favor employing only graduates of

a few elite educational institutions, Honda has had an open - door employment policy, hiring the most

capable and motivated individuals available. In addition to hiring new graduates, they also welcome

talented individuals in mid-career, enriching the company with a diverse mix of personalities and

experience.

Challenge 4: Addressing new issues for which managers

and organizations are ill-prepared.

Some problems have just occurred recently, but did not in the past, give Honda‘s managers

considerable difficulties, because they are not well-prepared for them. Climate change is a good

example for this situation.

Climate change and the increasing demand for mobility

The problem of climate change is of global scope—it cannot be solved through isolated regional

measures alone. The entire world must work together to face this problem. However, there is still a

significant gap between developed and developing countries in terms of access to convenient

transportation. Improvement in the quality of mobility is indispensable to the betterment of people‘s

lives. Consequently, the demand for automobiles and other means of transportation will likely continue

to increase. Honda is working to apply advanced technologies to help resolve the conflicting issues of

climate change and the growing demand for mobility.


Products: improving global average fuel economy

Since the internal combustion engine seems likely to remain the primary source of power for

human mobility until at least 2020, improving its fuel economy and overall efficiency is an issue of vital

importance. In the US, Europe and other regions, automakers are being required to improve the

average fuel economy of their products through compliance with tough standards like the US Corporate

Average Fuel Economy (CAFE) regulations. However, climate change is a global issue and needs to be

addressed on a global level. Honda is shifting from a regional strategy to one based on a global

perspective; and from fuel economy targets for product by weight or model to worldwide targets for all

product categories.

F. ANALYZE THE FIRM‘S STRUCTURE

Basic Positive

In 2003, Honda corporate governance system had reformed more effective, flexibility and

satisfies customers, society, shareholders with their objective is becoming "a company that society

wants to exist". Honda makes a clear understanding of the respective roles of the board directors,

senior management and their relationships with others partners of company structure.

In corporate management, Honda not only uses internal people but also they cooperate with

external facts such as outside directors and outside auditors that supervise and audit company

activities. Term of official of each director is only one year, directors have compensated by their

endeavor and accomplishment. Therefore, Honda could be change flexibility and quick with the

environment is changing in the world.

In business execution, separate headquarters have been setup base on geographic, business

and function. General Manager or operating officer appointed to each region but some senior manager

responded responsibility more than region or function. In important matters, executive councils deal

with regional managers before making decision. So, system is working effectively and efficiently,

Honda can adapt quickly in each region.

In internal control activities, Honda has built systems that include the formulation of behavioral

guidelines and procedures for self-assessment. The Company also has a system to support initiatives

of each division such as Business. Honda enhances the trust and understanding of investors and

shareholders by which Honda makes clearly and disclosure activities such as quarter report timely and

accurate.


Analyze advantage and disadvantage of Board

The important role of the board of directors these supervise and evaluate management

performance on behalf of stockholders. Board of directors primary duties are to select well qualified

and ethical CEO who, with senior management, runs the corporation on a daily basis, and to monitor

management's performance and adherence to corporate standards. Effective corporate directors are

diligent monitors, but not managers, of business operations. The working environment is friendly and

cooperates between top managers and board of directors. It also is ―Founding Spirit‖ of Honda.

There is no special treatment for position or status of associate in company; every employees receive

the same treatment, opportunity to develop their potential. The Honda's founders believed that this

policy not only enhances the strength of human resource but also encourages the cooperation between

Honda's associates. By this way, employees freely exchange ideas, enthusiastically contribute to

organization, resulting in increasing innovation and information flow in company.

CSR Report 2007

Honda had been coordinated relationship between internal and external manpower in board of

directors and auditors because it not only is required of Japanese government law but also they expect

them to:


(1) Ensure rationality in general managerial decision; provide beneficial information in personal

managerial decision;

(2) Judge the usefulness of business decision;

(3) Ensure efficient management and audit with high validity; and (4) function as an audit of

management legality

TLCCL, 2001

However, everything always have two faces, that mean this model have little advantage.

(1) Because Honda uses director‘s room that means it is more expense time and difficult to

make decision than small group.

(2) Directors of board are often respond is more than one function that they need more

knowledge and skills.

(3) Directors and managers could be overload in job; they don‘t have time for other social

activities.

Analyze advantage and disadvantage of structure

Honda use matrix organization structure that combines geographic, business and functions.

Honda separate to six basic regions that is Japan, China, North American, Latin American, Europe and

the Middle & Near East and Africa, Asian and Oceania. The Company‘s four business operations—

motorcycles, automobiles, power products and service parts. Some functional operation—such as

Customer Service Operations, Production Operations, Purchasing Operations, Business Management

Operations and Business Support Operations—supports the other functional operations, with the aim

of increasing Honda‘s effectiveness and efficiencies. Research and development activities are

conducted principally at the independent subsidiaries of the Company.

Advantages

The basic advantage of a matrix structure is that it facilitates rapid response to change in two

or more environments. For instance, when some changes occur in American market, the local company

freely makes decision in order to immediately adapt to the market. Instead of waiting the decision from

Parents Company, it has authority to themselves decides, resulting in saving time, cost and reducing

risk!

Matrix structure is flatter and more responsive than other types of structures. Hence, it permits

Honda's associates efficiently, effectively exchange information together.

In addition to speed and flexibility, matrix organization may result in a more efficient use of

resources than other organic structures. Because highly specialized employees and equipment are

shared by departments. For example, if the expertise of a computer programmer is needed in another

department, he or she can move to that department to solve its problems, rather than languishing on

tasks of low priority as might happen in a no matrix setting.


Other benefits of matrix management include improved motivation and more adept managers.

This is useful for long term performance of company

Disadvantages

Despite their many theoretical advantages, matrix management structures have been criticized

as having a number of weaknesses. For instance, they are typically expensive to maintain, partly

because of more complex reporting requirements. In addition, many workers become disturbed by the

lack of a chain of command and a seeming inability to perceive who is in charge. Indeed, among the

most common criticisms of matrix management is that it results in role ambiguity and conflict. For

instance, a functional manager may tell a subordinate one thing, and then a product/project boss will

tell him or her something different. As a result, companies that change from a comparatively

bureaucratic structure to matrix management often experience high turnover and worker

dissatisfaction.

G. ORGANIZATIONAL PROCESSES

Along with organization and structure component, process plays an important role in company‘s

achievements. Process is the set of continuous activities of company in achieving its goals.

In global business environment, Honda‘s processes uphold the Honda‘s competitive advantages,

two important processes of Honda are Organizational Culture and Innovation Management

The First analyzed process is the Organizational Culture.

Mr. Soichiro Honda and Mr. Takeo Fujisawa, the founders of Honda, had built up the

organization philosophy which serves as the basic endeavors now and in the future. In global trend of

business nowadays, company‘s philosophy somehow has been changed. But in general, the philosophy

still remains the two fundamental belies, which are ―Respect for the Individual‖ and ―The Three Joys‖.

Respect for the Individual means that company considers every associate be important,

respected; should be given opportunity to develop, should be expected to contribute and honored for

his or her efforts. This was based on: Initiative, Equality, and Trust.

In terms of Initiative, the company encourages employees to think creatively, and act on their

initiative and judgment.

Equality means to recognize and respect individual differences and treat them fairly. The

company creates same opportunities for each associate without discrimination on gender, age,

nationality, status…


Finally, Trust offers the meaning that relationship among associates is based on mutual trust.

Every individual recognizes and helps each other when he or she is deficient, shares knowledge to

complete responsibilities.

Respect for the Individual also based on how to satisfy customers, business associates, and

society.

―The Three Joys‖ - Because of believing in the individuals‘ value, Honda believes that each

associate relates to Honda business would share a sense of Joy. This was named ―The Three Joys‖.

The first one is ―The Joy of Buying‖ offer for every Honda‘s customer. There are four steps to

create this Joy. At first, customer must understand the products. Then customer accepts and decides to

buy products. Third, customer must be satisfied. And finally, the customer will experience The Joy of

Buying if products or services exceed their expectations.

Secondly, ―The Joys of Selling‖- Because intermediaries directly respond to customers‘ needs

and wants. Thus, they play an important role in distributing products from Honda to end customers.

When Honda products‘ or services‘ quality is high, the intermediaries will be proud to represent

Honda‘s products to customers. And when offering them the positive relationship, Honda can increase

the intermediaries‘ Joy of Selling.

The last one is ―The Joy of Producing‖ which includes manufacturing, production engineering,

and research and development. Producing quality products exceed customers and dealers‘ expectation

leads to experience of pride of Honda‘s associates.

From the above factors (―Respecting for the Individual‖ and ―The Three Joys‖), Honda had come

up with The Honda Co. principle including ―Maintaining an International Viewpoint‖, ―we are dedicated‖,

―the supplying products of the highest efficiency yet at a reasonable price‖ and ― for worldwide

customer satisfaction‖.

Maintaining an International viewpoint means that the Honda Company should always keep

understanding their position in the global scale to adapt to the continuous change of market.

We are dedicated means that every associate in company has to continuously contribute to

organization performance.

The supplying products of the highest efficiency yet as a reasonable price means that Honda

continuously research and develop new technology to bring customers products with excellent,

efficient performance, as well as reasonable price.

For worldwide customer satisfaction. Honda keeps awareness of being ahead of time. This

means the company must spend all effort to meet the customers‘ needs, anticipate the trend of global

market. Thus, the can satisfy each and every customers‘ expectations throughout the world.


The second process analyzed is Innovation Management

Innovation is the key factor for every business firm to compete and survive in the global competitive

environment. Honda has to conform to that rule. In order to meet the growing market‘s demand, society‘s

needs, customer‘s expectations, and dreams of stakeholders, Honda profoundly focuses on Innovation.

The Innovation management of the Honda Company involves 2 two tasks, which are developing new

technologies of manufacturing systems and building environmentally responsible, people-friendly plants

Developing new technologies of manufacturing systems

To deal with the ongoing development of demand of global market, Honda has to strengthen and

expand its production capacity at a fast pace. Thus, the most important mission of Honda is to innovate in

production technology. Hence, the strengthening and expand manufacturing systems in Japan become the

key factor to adopt that goal. Developing new technologies of manufacturing becomes the most reasonable

way for Honda to keep being leader in global market. Because, Honda not only produces products with high

quality, high volume, but also can reduce the price of products. This leads to the competitive advantages of

Honda to compete with other competitors. Hence, Honda comes up with the plan to build new plants in Yuri

and Ogawa in Saitama Prefecture to strengthen its position in the global market.

Building environmentally responsible, people-friendly

plants.

In Honda‘s concepts of leadership, the company focuses not only on the high quality, high efficiency,

and low price products but also on the social and environmental responsibilities. Building a people-friendly

plant is a key factor improve organization performance because of its well treatment policies positively

affect employees‘ attitude. It provides good environment and fairly treatment for every associate in

company, resulting in increasing employees‘ satisfaction and making them to well contribute to

organization. Moreover, since the fact that the global environment is changing negatively, building

environment-friendly manufactures helps Honda develop stably. Actually, it increases the high efficiency in

using energy and material and profoundly reduces the carbon dioxide level simultaneously. This does mean

that, Honda has contributed considerably in saving the environment.


H. LOCATE YOUR FIRM'S POSITION ON

THE SOCIAL RESPONSIBILITY

Honda social overview

Since the company‘s foundation, Honda had been always

building relationships with customers and local markets by

social activities. In the 1960s, Honda had been concerned

philanthropy initiatives. One decades later, Honda began

establishing trusts and foundations around the world. In

1998, on the 50th anniversary, Honda Philanthropy

established basic principles for working. Honda organized

its philanthropy into many kinds of activities, among them,

they focus on 4 major initiatives that are education,

environment, traffic safety and community. Today Honda

continues to keep leading position in pro-activities and

sharing joy with everybody all over the world.

Honda philanthropy activities

Education initiatives: Honda realizes education is one of the

most important backgrounds for the future. Honda

encourages and helps children and youths so that they can create and develop their power dreams.

Since 1998, Honda has organized children‘s Idea Contest in which children could draw a picture that

may be cool and sent to Honda. After selection, some children will present in final round in order to

encourage initiative thinking and confidence. In Thailand, Honda School Environment Challenge Awards

has been held to help children to protect their local environment. Honda not only cares about children,

but also creates career opportunities for students.

1. Environment initiatives.

Working on auto industry, Honda always understands its responsibilities for environment. This does

mean Honda has been developing and innovating technologies to reduce waste and pollution. In

Japan, Honda is pro-activities with many projects such as beach clean-up project. For instance, 19

beaches was cleaned by Honda in 2007. In China, Honda help Chinese to protect agricultural land

before becoming desert. Other projects are Watershed Preservation in Japan, Spring Creek

The key phrase

Together for tomorrow

Honda Philanthropy – Basic

Principles

• As a company with a global viewpoint, we are

dedicated to contributing to the well-being of

local communities around the world through our

products and technologies.

• As a good corporate citizen, we will deepen

our commitment to all local communities where

we do business.

• We will contribute to the nurturing of a

society where caring and energetic individuals

actively participate in socially responsible

activities.

Honda Philanthropy – Vision

Honda enriches the joy of sharing with people

around the world through socially responsible

activities in accordance with the Honda

philosophy of respect for the individual and the

Three Joys. Ultimately, it is our desire that

society will want Honda to exist in every

community.

Global Directions

Striving to create a future society in which

everyone can pursue their dreams, Honda shall:

• Support educating our youth for the future

• Work to preserve global environments

• Promote traffic safety through education and

training


Preservation. , Especially, Honda in New Zealand has TreeFund by which Honda spend money to plant

ten trees for each car sold . As a result, Honda Treefund planted about 83.335 trees at the end of

2007.

2. Traffic safety initiatives. Honda has been promoting traffic safety through high technology,

through training and education programs. As an Example in Vietnam, Honda was very successful

with ―I Love Vietnam‖ campaign with three messages:

3. Safety, Quality and Social Activities. After more than three years, the campaign has been highly

effective thanks to the appreciation and agreement from the Government and community. From the

statistical data, Honda showed that more than 5 million people participating in ―I love Vietnam‖

program.

Honda philanthropy achievements

After Honda activities, their endeavor had been recognized by many nations and organizations in the

world. FORTUNE magazine released a special report - ―Going Green‖, these companies have gone

beyond what the law requires to operate in an environmentally responsible way. In this list, Honda was

the leader among more than a hundred biggest companies throughout the world. Meanwhile, no other

automotive manufactures included in this the ―10 green giants‖ list. Honda was scored a B+ in

February's edition of Globe and Mail‘s ―Report on Business Magazine‖ which is the highest score in

automotive manufactories. In accounting for annual rank business responsibility report of FORTUNE in

2007, Honda ranked at 62nd, lower than last year (44th). In summary, Honda represented its

responsibilities in many ways because Honda was aware the benefits of cooperate social responsibility

no and in the future.

I. MANAGING PEOPLE

No firms can exist and develop without people. Besides processes and structures, people are

factors that can lead organization to success. People are those who can create or destroy the

organizations, so managing people is really an important part of the organizational management. Not

only top managers but also all the employees play important roles in the organizations. They all

contribute to the performance of organizations. Human resource management involves in definite

dimensions like training, hiring, staffing, compensating… or intangible ones like diversity, intellect,

skills, abilities, or attitude at work. In this section, we will concentrate on two ways that Honda

manages people: environmental training and ensuring diversity in employment.

Environmental Training


Honda is one of the organizations that contribute the most to environment. It has committed to

environmental conservation and spent a lot of effort to contribute to human health and the

preservation of the global environment.

To help its associates to have a full recognition of their own responsibilities and be able to

make progress in the company‘s commitment to the environment as an integral part of their own work

tasks, Honda provides them with the environmental training programs, part of Honda‘s training

curriculum. For new associates, this training program helps them deepen their understanding of

Honda‘s basic policy towards the environment. Immediately after entering the company, new associates

visit Honda‘s plants to listen to explanations given by facility managers about Honda‘s environmental

ideas and measures and to get hands-on experience in automobile and motorcycle manufacturing. In

the process, they can increase their understanding of the environmental measures Honda is taking in

its manufacturing process. Training programs are continuously provided to associates soon after they

enter the Company so that they can perform their duties in consideration of the environment. Also,

Honda associates access environmental information via the company‘s intranet.

Honda is aggressively promoting activities focusing on energy and resource conservation and recycling

as part of its efforts to encourage voluntary activities in the workplace. At NH Circle Conventions

(presentation meetings attended by representatives of Honda associates all over the world) and at the

Honda Green Conferences, associates give presentations on environmental problems, cost and

resource savings, and recycling… , successful associate environmental activities are also highlighted as

good examples for all associates. In addition, these activities are promoted companywide and

introduced in other Honda factories and offices.

Because environmental problems are becoming more global, Honda makes associates more

aware of the environment through these measures and encourages them to voluntarily act in an

environmentally friendly manner in their business and personal lives.

Environmental training is based on the Environmental Management System. Every factory and

office develops plans for education and training programs conducted on the basis of the environmental

management system and holds regular training events for general personnel, operators who are

engaged in specially designated works, and internal environmental auditors.

Ensuring Diversity in Employment

Honda is a global company; it has presence in many countries all over the world, from Japan, to

America, Africa, and Asian/Ocean. Operating in a global scale, of course, leads Honda to the diversity

of workforce. Honda believes that diversity of workforce will provide the company with the creativity by

integrating many different perspectives in a unique competitive advantage.

To ensure diversity in employment, Honda provides human rights education, in which When an

individual first enters the company or is promoted to a higher position; he or she receives educational


guidance on human rights based on Honda‘s basic principle of respect for the individual. This helps

employees to know exactly what their benefits and rights are, so that they can freely show their own

ideas, thoughts, and abilities.

While many corporations tend to hire only graduates from a few elite educational institutions,

Honda has an open-door employment policy, hiring based on individual merit, in which the most

capable and motivated individuals available are hired. In addition to hiring new graduates, they also

welcome talented individuals in mid-career, enriching the company with a diverse mix of personalities

and experience. Beginning in July 2007, Honda instituted a policy of encouraging associates who left

the company to care for a family member or accompany a transferred spouse to reapply when it

becomes possible for them to return. Here are some statistics for reference:

Hiring of new graduates

Besides that, Honda also expands its workforce by employing people with disabilities. Honda provides

jobs to people with disabilities at its facilities in Japan in an effort to expand their employment

opportunities. They also offer employment at their affiliates, Honda Sun, Honda Sun R&D and

Kibounosato Honda. They try to create environments that allow those with disabilities to work along

well with those without disabilities. Honda also tries to give equal opportunities to those with and

without disabilities. Employment of individuals with disabilities at Honda factories in Japan currently

stands at some 2.21%, well above the legally prescribed level of 1.8%, the graph below illustrate these

figures.

Reemployment of retirees is also a way that Honda uses to create its diverse workforce. Due to

dwindling birth rates, the need to reinforce the social insurance system in Japan, and the importance of

passing on the technical expertise crucial to the functioning of the workplace, since April 2003 Honda

has had in place policies to create opportunities for those associates who reach the retirement age of


60— even before the introduction of laws governing the employment of retired individuals.

Along with knowledge capital, these are the principal intangible assets used by companies in a wide

range of sectors to establish competitive advantage and to create value. Diversity is beneficial to both

associates and employers. Although associates are interdependent in the workplace, respecting

individual differences can increase productivity. Diversity in the workplace can reduce lawsuits and

increase marketing opportunities, recruitment, creativity, and business image. In an era when flexibility

and creativity are keys to competitiveness, diversity is critical for an organization's success.

J. EVALUATIONS AND CONTROLS

Operating worldwide, one mistake in any kind of strategy: Enterprise, Corporation, Business, till

Operational, and Individual will lead to huge influence to the whole company in the future. That‘s why

the evaluations and controls system of Honda are much attached special important in.

In strategic level, outside directors and corporate auditors are appointed to the Board of Directors

and the board of Auditors to ensure objective control of the company‘s management. Honda also has

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. All of these endeavors is to

maximize the flexibility in which Honda‘s directors respond to changes in the operating environment,

also keep the whole company going in the right track with the rapid changes in the world nowadays.

The control system of the company used to ensure desired outcomes are also effective and efficient

used. With the Internal Control System – Fundamental Position and Implementation Status, Honda‘s

control systems focus on a lot of dimensions on its operational level.

First, with Basic Position, the company‘s divisions are under the guidance of their respective

corporate officers. The systems are placed to ensure a systematic approach to compliance and risk

management.

Secondly, the Group Governance System holds the Behavioral Guidelines and Self-Assessment

Checklist, which formed to guide the behavior of all associates and approach compliance and risk

management in a systematic way.

The third control system is the Compliance System; Honda‘s appointed a Compliance Officer to

take charge of compliance-related initiatives, the compliance control system also include Business

Ethics Committee and the Business Ethics Improvement Proposal Line, which places high priority on

open communication in its division, and keep controlling and enhancing corporate ethics.

Moreover, the Risk Management System prevents and addresses its particular set of risks in each

division. The Honda Crisis Response Rules is designed to address Company-wide crises, such as


natural disasters, economic recession… This management system is in charge of Risk Management

Officer, a director in charge of risk management related initiatives. It also established the Company-

wide Response headquarters to address crisis situations.

The last but not least, Retention and Management of Information on Execution of Business by

Directors Execution of Business by Directors keeps the documents and other information related to the

execution of business by directors are retained and managed appropriately. The Business Audits works

under direct control of the president try to improve the internal auditing of subsidiaries and affiliates in

each region. Meanwhile, the Disclosure Committee which consists of relevant directors care about

matters related to the appropriateness and accuracy of corporate information to be disclosed in

business result announcements and financial reports.

As the internal control of Honda is rather multi-dimension, which covers nearly everything needed,

this internal control and evaluation system is one of the strong factors enhance the Honda‘s successes

in global scale business nowadays.

Honda tracks its progress very good, each quarter, Honda issues fiscal quarter result with not only

quarterly report, but also a lot of evaluating process, analyzing, and interpreting the last term

operating. Based on its portfolio and geographic information, Honda analyzes and tracks its strategic

and operational ways carefully. Moreover, with the session Prepare For The Future, Honda refocuses on

some critical areas, to make sure the success of the current and the next term: Research and

Development, Production Efficiency, Sales Efficiency, Product Quality … are some of them in the last

review of fourth quarter result in fiscal year 2008. In order to make the company run more effectively

and efficiently, each time it evaluates, Honda also has changed some significant accounting policies,

review its long-term and medium-term management strategy and management target, re-identify risk

factors…

With the careful and systematic way of evaluation and controlling, In our opinions, Honda is a very

good company to invest in. Regard to the duration of Honda, we think that with the social

responsibility, operating effectively and efficiently like this, Honda will continue to last for long time.

Everything can change, everything can happen, but with what‘s proved, Honda is in the right track of

not only serve its shareholders, but also serve its stakeholders, share its effort to help build a better

world. Honda is really a company that society wants it to exist.


REFERENCE

Honda Homepages Website: http://world.honda.com/

Honda Philanthropy Report 2007

Honda Annual Report 2007

Honda Philosophy

Honda CSR Report 2007

Honda Strategic Management

Corporate culture and global competition – Umberto Furlan - The Honda philosophy

Principles of Corporate Governance (May 2002) - THE BUSINESS ROUNDTABLE, 2-7

Honda strengthen structure rd operations

Matrix Management and Structure - NEW ORGANIZATIONAL MODELS, MATRIX BASICS, ADVANTAGES,

DISADVANTAGES, AND APPLICATIONS

FORTUNE

T e 2007 Accountability Rating (November 12, 2007). Our annual ranking of business responsibility, 1-

3

Impact of Corporate Governance on Productivity: Asian Experience

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