Are you a car or motorbike enthusiast? If yes, then you will enjoy reading this article. Today’s article is very special. It is about an automobile brand that we all love. The comfort you get in its automobiles is unmatchable.
Can you guess what brand we are talking about? Did you say Honda? That’s correct! What other automobile brand can provide such comfort and luxury? None.
Honda is one of my favorite automobile brands due to the quality of its products. Moreover, Honda isn’t only a car or a motorbike manufacturer. Besides manufacturing cars and motorbikes, Honda also manufactures marine engines, garden equipment, power generators, robots, and more.
After looking at the diverse nature and vast portfolio of Honda, we have decided to conduct a Honda SWOT analysis. Some of you might be aware of what SWOT analysis is, while others might be thinking, what am I talking about? Well, don’t worry, I’ll tell you.
SWOT analysis is a tool used by businesses for evaluation. It identifies the external and internal factors that impact the operations of a business. A SWOT template highlights the strengths, weaknesses, opportunities, and threats organizations face from the external environment.
In this article, we will conduct a SWOT analysis to highlight the internal and external factors impacting the operations of Honda. However, before proceeding to the SWOT analysis, let’s look at the history of Honda.
Honda is one of the most renowned brands in the automotive industry. But did you know how it got established? I’ll tell you. Honda was a dream of a mechanic named Soichiro Honda, who used to work in a car garage.
The story of Honda began in 1946 when that Soichiro Honda took over a factory that was ruined due to the bombing of world war 2. He then transformed that factory into Honda Technical Research Institute.
In this institute, Soichiro Honda manufactured a motorbike engine that was considered an enormous success. These motorbikes were really admired by the customers, so Honda Motor Company was registered.
The company made motorbikes and engines using all the latest technologies. In 1959, Honda expanded its operations and opened its first subsidiary in Los Angeles.
After a decade, Honda sold its first car, N600, in the US. This was a transition of Honda from selling motorbikes to cars. Now Honda was selling both. Finally, in 1974, the brand achieved a remarkable milestone when it manufactured the CVCC engine that made the Honda Civic the first environment-friendly car that met the emission standards of the US.
Honda was now focusing on motorbikes and cars simultaneously. In 1977, Honda launched the GL1100 Gold Wing motorcycle, the most fuel-efficient motorcycle then. In 1979, it launched the Honda Accord car that shook the entire car industry.
Soon Honda started manufacturing cars and engines in the US. In 1988, the Honda Coupe was the first ever US car exported to Japan. The Honda Accord gained great popularity in the US. In 1989, the Honda Accord became the first international car in the US that was recognized as the best-selling car in the US.
Years went by, and Honda kept innovating. In 1996, Honda manufactured its first automatic transmission car. A few years later, it also launched a gasoline-electric hybrid car. Over the years, Honda kept expanding its US manufacturing plants.
In 2006, Honda established its aircraft company under the name of Honda Jet. In addition, the brand kept innovating by researching and adopting the latest technologies in the coming years. As a result, Honda soon became one of the largest automobile companies in terms of revenue.
The brand generated revenue of $129.5 billion in 2022. The company operates all over the world. There would hardly be any country where automobiles manufactured by Honda are not on the roads. To manage such vast operations, Honda employs 211,373 workers.
Now that you are aware of Honda’s history and current operations, you must have realized how big of a company Honda is. So without wasting time, let’s proceed further and conduct a Honda SWOT analysis.
Strengths of Honda
Every organization possesses some strengths and some weaknesses. Organizations focus on attaining strengths since they provide a market advantage and competitive edge. Let’s look at some of the strengths that Honda possesses.
Large Global Presence
Brands always try to increase their global reach to target more customers. However, to do that, it is important to produce amazing quality products and first get famous internationally.
Honda is one of the automobile companies that is known globally. Honda operates in 150 countries. Therefore, it covers every region of the world. Such a vast geographical presence helps Honda in generating huge revenue.
A very famous saying goes like “Never keep all the eggs in one basket.” You might have heard this saying before, but have you ever seen it? Honda is one of the companies that applies this saying to its operations.
Honda doesn’t rely on one product for revenue generation. Instead, over time it has developed new revenue streams to ensure its business’s smooth running. Initially, Honda started by manufacturing motorcycles, then shifted its operations to cars.
Currently, Honda is also manufacturing power, marine, and aerospace products. Such a diverse portfolio protects Honda from suffering financially in case the sales of one segment go down.
High Spending On R&D
To compete in today’s market, brands must innovate and adopt the latest technologies. Honda is one of the brands that spend a lot on R&D. In 2021, the automobile brand spent 7 billion on R&D
Such high spending on R&D helps the brand to come up with the latest technologies that give Honda’s products a competitive advantage in the market. For example, with the help of R&D, Honda managed to manufacture the most fuel-efficient motorcycle in 1977.
Weaknesses of Honda
Every organization has some weaknesses. However, organizations need to have fewer weaknesses than strengths. This section of the SWOT analysis will look at some of the weaknesses that Honda possesses.
High Reliance on North American Region
Businesses look for ways to expand their operations across the globe so that they don’t have to rely on one region for sales. If we look at the revenues Honda earned from different regions, we can clearly see that Honda highly relies on the North American region for revenue.
This acts as a weakness of the brand since any blow occurred to the brand in North America can make the entire company suffer.
Businesses mostly try to keep the prices of their products low so that more people can buy them. As a result, customers are automatically drawn toward low-priced products. Unfortunately, Honda is one of the brands that offer expensive products compared to its competitors.
One of the reasons why Honda automobiles are expensive is that it has manufacturing plants in Japan, Mexico, and the US. The manufacturing cost in these countries is high. As a result, the price of Honda products is also high.
Lawsuits affect the reputation of any company adversely. As a result, they do suffer financially too. Honda has faced multiple lawsuits over the years. Honda was recently sued for putting defective airbags in some of its vehicles.
This lawsuit not only damaged the reputation of Honda, but it also affected Honda financially. The automobile brand had to pay $85 million to settle this lawsuit. Similarly, Honda was recently sued for hiding the defects in its vehicles. This damaged the image of Honda and people started looking for alternatives.
Opportunities For Honda
Every company is given the opportunity to grow at any point in time. However, to avail of any opportunity, it is essential first to identify it. In this section, we will highlight some opportunities Honda has to grow.
Start Manufacturing In Developing Economies
Businesses often establish their manufacturing plants in developed economies. However, they don’t realize that the production costs in developed economies are much higher than in developing economies.
Honda has manufacturing plants in Japan, the US, and Mexico. However, the labor in all these countries is very expensive. Therefore, Honda can shift its operations to developing economies such as India, where the labor is extremely cheap. This will cause the operational cost of Honda to fall, and the brand will enjoy high profits.
Increase In The Demand For Automobiles
As the population is increasing daily, the demand for automobiles is also increasing with time. Currently, there are around 1.4 billion cars worldwide. However, with time this number will increase.
This increase in the demand for automobiles acts as an opportunity for Honda. Since people will be willing to buy more Honda cars in the future, this will increase the sales and revenue of Honda.
Governments and environmental pressure groups are paying great attention to mitigating carbon emissions. Governments are currently encouraging companies that manufacture electric vehicles.
Honda can benefit from this wave of electric vehicles by manufacturing an electric vehicle like Tesla. This will improve the image of Honda since everyone will recognize Honda as an environmentally friendly brand.
Moreover, currently, people are looking for electric vehicles, but there aren’t many options. If Honda can manufacture an average-priced electric vehicle, its sales will increase massively.
Threats Faced By Honda
Every organization faces threats from the environment. Multiple factors in the external environment impact the operations of businesses. Let’s look at what external factors affect the operations of Honda.
Actions To Protect The Environment
Governments all over the world are taking measures to protect the environment. For example, some governments plan to impose heavy taxes on combustion engine vehicles to discourage their sales.
Such measures taken by governments to protect the environment can negatively impact Honda’s operations. Moreover, people are getting aware of how much carbon emissions impact the environment. As a result, people are trying to shift to electric vehicles. This will also result in the sales of Honda dropping.
The war between Russia and Ukraine has been going on for months, and in between, many countries have suspended their operations in Russia. Honda has also suspended the sales of its vehicles in Russia.
This is impacting Honda adversely since Russia is a big market. Honda can manage the losses for some time. However, if the war continues for a long time, Honda will suffer severe financial losses.
Businesses never want to compete in highly competitive industries because the companies in such industries fail to make abnormal profits. Moreover, businesses in a highly competitive environment continuously have to innovate to stay ahead of competitors.
Honda has to survive in a highly competitive industry where it has to compete with companies like Toyota and Nissan. Therefore, Honda must keep innovating to stay ahead of its competitors. However, Honda faces a threat from its competitors that they might snatch Honda’s share in the future.
Honda SWOT Analysis: Final Word
Honda is one of the most renowned brands in the automotive industry. We all are familiar with the cars and motorcycles manufactured by Honda. However, the company also manufactures marine engines, garden equipment, power generators, robots, etc.
In this article, we decided to conduct a Honda SWOT analysis, but before doing that, first, we discussed the history of Honda so that our readers know how a mechanic established a company nearly 76 years ago, that is now one of the most selling automotive companies in the world.
After that, we informed our readers how to conduct a SWOT analysis and conducted the Honda SWOT analysis. This SWOT analysis identified the strengths, weaknesses, opportunities, and threats that Honda faces. The internal and external factors affecting Honda can also be represented with the help of a SWOT Matrix or SWOT table. Now that you are done reading this article, we assume you know what SWOT analysis is. However, to know more about SWOT analysis, look at some more SWOT examples.