PESTLE Analysis for Honda Motor Co.,LTD.
Arcilla, Carla Denise
Cruz, Ezekiel
Dela Cruz, Iris
Geronimo, Princess Shaira
Gestiada, Jessica
Pinca, Rommel
Ramos, Vianca Denise
Santos, Maria Cassandra
Submitted to:
Professor Joyce Colcol
BSA 1-2
Honda Motor Co., Ltd
Background of the Study
The company was founded in 1946 and is based in Tokyo, Japan. Honda Motor Co.,
Ltd. is formally established on September 24, 1948 by co-founders Soichiro Honda and
Takeo Fujisawa.
Four years later, American Honda Motor Co., Inc. is established in Los Angeles,
California in June 11, 1959.Honda’s first automobiles debut in October 1962 at the 9th Japan
National Auto Show. The cars on display are the T360 mini truck, S360 sportscar, and S500
sportscar.
In April 2005, Honda reaches the milestone of 100,000 hybrid vehicles sold
worldwide. Honda improves the safety of its cars as the company introduces the “Honda
Sensing” advanced driver-assistance system.
In December 2016, Honda reaches its 100 million worldwide automobile production
milestones.
Notable Products:
A year later, in August 1949, Honda introduces its first original designed and
engineered product dubbed as the Dream D-Type motorcycle. The Dream D-
Type is regarded by Honda as a revolutionary motorcycle since it is designed
to eliminate the manual clutch operation. In other words, the Dream D-Type
has no manual clutch lever on the handle bar. The rider needs to press down
and forward on the change pedal to operate the clutch.
In October 1951, Honda introduces the Dream E-Type, which is the
company’s first four-stroke motorcycle. The Dream E-Type is well-received in
the market and allows Honda to have a positive momentum. Honda wants to
maintain its momentum as the company launches a new motorcycle in 1952,
the Cub F-Type. It is a small, lightweight motorcycle that’s powered by a 50cc
2-stroke engine. The Cub F-Type is also known as a bike that women as well
as men could ride.
After seven years, the N600 is the first Honda vehicle offered in the United
States. In 1973, Honda introduces the Civic in the United States. This car is
received positively since it is more fuel efficient compared to American cars.
In January 1954, Honda debuts the Juno K-Type, which is said to be the most
advanced scooter during this time.
After a decade, Honda unveils its first fuel-cell electric vehicle—the FCX-V3.
Honda debuts the ASIMO humanoid robot in November 2000. ASIMO stands
for Advanced Step in Innovative Mobility. This robot is used to promote math
and science education.
Honda Philippines
Prestige, reliability, safety, and quality of engine performance are the top traits that
Honda is widely recognized for. Honda aims to provide people the joy and freedom of
mobility. In the Philippines, Honda is one of the very few global brands with local
manufacturing operations for automobiles, motorcycles, power products, and parts and
components. Honda Cars Philippines, Inc. (HCPI), the automobile business unit, has been in
the Philippines for 28 years and counting.
HCPI proudly manufactures the Honda City and Honda BR-V at its plant and head
office in Laguna Technopark, Sta. Rosa City, Laguna. Established on October 1990 under the
Philippine government’s Car Development Program, production operations commenced on
February 1992. To date, HCPI is a team of over 600 Associates, working with 38 Dealers
nationwide and about 60 parts and materials suppliers. HCPI is a partnership among Honda
Motor Co., Ltd., AC Industrial Holdings, Inc., and Rizal Commercial Banking Corporation.
PESTLE ANALYSIS
Honda Motor Co., Ltd. PESTEL analysis is a strategic tool to analyze the macro
environment of the organization. PESTEL stands for - Political, Economic, Social,
Technological, Environmental & Legal factors that impact the macro environment of Honda
Motor Co., Ltd..
Changes in the macro-environment factors can have a direct impact on not only the
Honda Motor Co., Ltd. but also can impact other players in the Auto Manufacturers - Major.
The macro-environment factors can impact the Porter Five Forces that shape strategy and
competitive landscape. They can impact individual firm’s competitive advantage or overall
profitability levels of the Consumer Goods industry.
PESTLE analysis provides great detail about operating challenges Honda Motor Co.,
Ltd. will face in prevalent macro environment other than competitive forces.
Political Factors that Impact Honda Motor Co., Ltd.
Political factors play a significant role in determining the factors that can impact Honda
Motor Co., Ltd.'s long term profitability in a certain country or market. Honda Motor Co.,
Ltd. is operating in Auto Manufacturers - Major in more than dozen countries and expose
itself to different types of political environment and political system risks. The achieve
success in such a dynamic Auto Manufacturers - Major industry across various countries is
to diversify the systematic risks of political environment.
Though Honda does not have its own internal political party lobbying committee, it does
exhibit a certain level of influence on certain governments.
Honda Motor Co., Ltd. can closely analyze the following factors before entering or
investing in a certain market-
Political stability and importance of Auto Manufacturers - Major sector in the
country's economy.
Level of corruption - especially levels of regulation in Consumer Goods sector.
Bureaucracy and interference in Auto Manufacturers - Major industry by
government.
Intellectual property protection
Trade regulations & tariffs related to Consumer Goods
Favored trading partners
Pricing regulations – Are there any pricing regulatory mechanism for Consumer
Goods
Taxation - tax rates and incentives
Wage legislation - minimum wage and overtime
Work week regulations in Auto Manufacturers and Mandatory employee benefits
Industrial safety regulations in the Consumer Goods sector.
Product labelling and other requirements in Auto Manufacturers
Economic Factors that Impact Honda Motor Co., Ltd.
The Macro environment factors such as – inflation rate, savings rate, interest rate,
foreign exchange rate and economic cycle determine the aggregate demand and aggregate
investment in an economy. While micro environment factors such as competition norms
impact the competitive advantage of the firm. Honda Motor Co., Ltd. can use country’s
economic factor such as growth rate, inflation & industry’s economic indicators such as Auto
Manufacturers - Major industry growth rate, consumer spending etc to forecast the growth
trajectory of not only --sectoryname-- sector but also that of the organization. Economic
factors that Honda Motor Co., Ltd. should consider while conducting PESTEL analysis are –
Type of economic system in countries of operation Government intervention in the
free market and related Consumer Goods
Exchange rates & stability of host country currency.
Efficiency of financial markets – Does Honda Motor Co., Ltd. needs to raise capital in
local market?
Skill level of workforce in Auto Manufacturers Education level in the economy
Labor costs and productivity in the economy
Economic growth rate
Discretionary income
Unemployment rate
Inflation rate
Interest rates
Social Factors that Impact Honda Motor Co., Ltd.
Society’s culture and way of doing things impact the culture of an organization in an
environment. Shared beliefs and attitudes of the population play a great role in how
marketers at Honda Motor Co., Ltd. will understand the customers of a given market and
how they design the marketing message for Auto Manufacturers - Major industry
consumers.
Honda has a good opportunity to expand its market by utilizing renewable energy to run
its automobiles. The company is thinking about venturing into electric scooters. Though it
may seem risky initially, but for a company like Honda it will be easier to convince the
customer to invest a little more for the betterment of the society as a whole. The company
has been working on manufacturing cars indigenously for regions that do not believe much
in an imported car, eg. The UK. Honda uses English majorly to remove the language barriers
worldwide.
Social factors that leadership of Honda Motor Co., Ltd. should analyze for PESTEL
analysis are -
Demographics and skill level of the population
Class structure, hierarchy and power structure in the society.
Education level as well as education standard in the Honda Motor Co., Ltd. ’s
industry
Culture (gender roles, social conventions etc.)
Entrepreneurial spirit and broader nature of the society. Some societies encourage
entrepreneurship while some don’t.
Attitudes (health, environmental consciousness, etc.)
Leisure interests
Technological Factors that Impact Honda Motor Co., Ltd.
Technology is fast disrupting various industries across the board. Transportation industry
is a good case to illustrate this point. Over the last 5 years the industry has been
transforming really fast, not even giving chance to the established players to cope with the
changes. Taxi industry is now dominated by players like Uber and Lyft. Car industry is fast
moving toward automation led by technology firm such as Google & manufacturing is
disrupted by Tesla, which has stated an electronic car revolution.
Honda believes in creating a one of a kind experiences for the consumers and thus tries
to fulfill all the needs of the consumers. With an increase in the need to switch to renewable
energy sources, Honda has utilized proximately 60% of the total energy required for
manufacturing from renewable sources, thus itself promoting the need for people to switch.
The company installed GPS in its latest models. It has come up with new iv
technology which is an upgraded version of its v-tech engines. This will help the company
make its contribution towards reducing the amount of carbon in the atmosphere.
A firm should not only do technological analysis of the industry but also the speed at
which technology disrupts that industry. Slow speed will give more time while fast speed of
technological disruption may give a firm little time to cope and be profitable. Technology
analysis involves understanding the following impacts –
Recent technological developments by Honda Motor Co., Ltd. competitors
Technology's impact on product offering
Rate of technological diffusion
Level of Innovation
Legal Factors that Impact Honda Motor Co., Ltd.
In number of countries, the legal framework and institutions are not robust enough to
protect the intellectual property rights of an organization. A firm should carefully evaluate
before entering such markets as it can lead to theft of organization’s secret sauce thus the
overall competitive edge.
In many countries, the rules for hybrid and completely electric vehicles have not yet
been defined appropriately which poses a further threat to the company. A change in any of
the legalities, will lead to the implementation of major changes and thus affect the
profitability as well as the day to day operations of the company.
Beyond the legal difficulties faced, Honda also needs to work on the pricing policy
according to the different countries it operates in. It also needs to keep a tab on the policies
related to the working hours of the employees as well as minimum wages it needs to
provide to its employees working in these countries.
Some of the legal factors that Honda Motor Co., Ltd. leadership should consider while
entering a new market are –
Anti-trust law in Auto Manufacturers - Major industry and overall, in the country.
Discrimination law
Copyright, patents / Intellectual property law
Consumer protection and e-commerce
Employment law
Health and safety law
Data Protection
Environmental Factors that Impact Honda Motor Co., Ltd.
Different markets have different norms or environmental standards which can
impact the profitability of an organization in those markets. Even within a country often
states can have different environmental laws and liability laws. For example, in United
States – Texas and Florida have different liability clauses in case of mishaps or
environmental disaster. Similarly, a lot of European countries give healthy tax breaks to
companies that operate in the renewable sector.
The Sustainability statement of the company states “Realizing the joy and freedom
of mobility and a sustainable society where people can enjoy life” and strives to achieve it.
The company is moving forward through its initiatives to create a zero-impact society. By
aiming to cut total corporate CO2 emissions to half by 2050, Honda will continue its
activities to reduce CO2 “using science-based target setting”. Honda is working to achieve its
Product CO2 Emissions Reduction Targets by 2020 and wish to reduce the intensity of
pollution created by motorcycles, automobiles and power products worldwide by 30%.
Honda actively promotes its electrified products and wishes to convert two-thirds of its fleet
to electric by 2030.
Honda believes in the efficient utilization of resources. The use and depletion of rare-
earth metals, used in various processes, depicts a major problem for the industry. Thus,
Honda promotes the 3R’s of reduce, reuse and recycle throughout its empire. Honda is also
making efforts to reduce the use of water in its processes.
Before entering new markets or starting a new business in existing market the firm
should carefully evaluate the environmental standards that are required to operate in those
markets. Some of the environmental factors that a firm should consider beforehand are –
Weather and Climate change
Laws regulating environment pollution
Air and water pollution regulations in Auto Manufacturers
Recycling
Waste management in Consumer Goods sector
Attitudes toward “green” or ecological products
Attitudes toward and support for renewable energy
To conclude, the above Honda PESTLE Analysis highlights the various elements which
impact its business performance. This understanding helps to evaluate the criticality of
external business factors for any brand.
SWOT ANALYSIS
INPUT
Honda Motors is one of the leading automobiles industries and in couple of years
they have been facing problems as the industry was weakened by the rapid increase in the
fuel prices as well as to energy crisis of 2003-08, which made people to buy less of
automobiles with low fuel economy. In the year 2008 there were some models released by
Honda with fuel efficient models to offer to the consumers, the bigger automobiles
including General Motors, Toyota, Ford, Chrysler, Nissan and Honda Motors experienced
sliding sales
Honda has used PEST and SWOT analysis to work harder to achieve the goal to make
their sales go high, and have worked on the weakness in the market as well. Honda has
studied their PEST analysis and the factors that are affecting their company. Honda being
the leading automobile industry has to know its strengths and weakness, when dealing with
their customer. They need to know their needs wants and demands.
Whittington’s Evolutional and Systemic schools of thoughts are being applied by
Honda Motors to the better development of their strategy and which helps them to know
where they are standing in the market and with the help of the four loops Honda can know
its company better way as they will be able to understand its culture, religion and this will
help to make better strategic decisions for the company.
SUGGESTIONS:
- Honda should develop customer-friendly dealerships based on customer surveys
- Honda should reduce wait times at service shops
- Honda should enhance after-sales service
- Honda should improve availability of service and repair information
Generalizations:
Honda is one of the very few global brands with local manufacturing operations for
automobiles, motorcycles, power products, and parts and components. Prestige, reliability,
safety, and quality of engine performance are the top traits that Honda is widely recognized
for. Honda aims to provide people the joy and freedom of mobility.
Changes in the macro-environment factors can have a direct impact on not only the
Honda Motor Co., Ltd. but also can impact other players in the Auto Manufacturers - Major.
The macro-environment factors can impact and shape strategy and competitive landscape.
They can impact individual firm’s competitive advantage or overall profitability levels of the
Consumer Goods industry.
PESTEL analysis provides great detail about operating challenges Honda Motor Co.,
Ltd. will face in prevalent macro environment other than competitive forces. An Industry
like Honda may be highly profitable with a strong growth trajectory but it won't be any good
for Honda Motor Co., Ltd. if it is situated in unstable political environment.
In accordance with the Honda philosophy of respect for the individual and the Three
Joys of buying, selling, and creating, Honda has always worked closely with its dealerships to
maximize customer satisfaction. Every step of the way, from purchase to after-sales service,
dealerships work hand in hand with Honda to earn and maintain the trust of customers.
References:
https://www.carmudi.com.ph/journal/infographic-history-honda/
https://www.hondaphil.com/our-story
https://www.mbaskool.com/pestle-analysis/companies/17980-honda.html
http://fernfortuniversity.com/term-papers/pestel/nyse4/682-honda-motor-co---ltd-.php
https://www.swotandpestle.com/honda-motor/
