Michel porter(1998) provided a frame work that models an industry as being influenced by five forces. This simple tool that supports strategic understanding where power lies in a business situation. It also help to understand both the firms current competitive position, &strength of a position that the company looking to move in to. Five forces diagram in the (Appendices 1.
1). Threat of new entrants:Profitable markets that yield high return will attract new firms. This result in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will fall towards zero. Though the Honda motors leading the market at the present, its market share was affected by the new entrants Toyota &Nissan, in early days. On the other hand Honda struggled when it was tried to land in the European market.Now the threat of new entrants is low because of the high barriers to entry. E.
g. cost &capital The intensity of competitive rivalry: for most industries this is the major determinant of competitiveness of the industry. it’s based on price, quality &innovation. This competitive rivalry is high in Honda motors, because most countries manufacturing own brand vehicle. E. g. maruthi by India. Not only that the international automobile companies are also the competitors for Honda motors.
The threat of substitute:The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. Threat of substitute is high for Honda because the availability of non Honda products is in the market. So its lead the customer for more option about the product. Bargaining power of buyers: This means to what degree can customer push the price of new vehicles down. For Honda the bargaining power of buyers is low, because not a huge successful automobile companies in the world.
But there are billion of customers for successful automobile companies such Honda as well. But the fact is people like to buy the vehicle which are more fuel-efficient, safe &environmentally friendly vehicle. Which is what Honda doing. Bargaining power of suppliers: This is described as the market inputs, suppliers of raw materials, components, labor &services to the firm that can be a source of power over the firm, when there are few substitutes. E. g- they may charge high prices for unique resources.For Honda motors bargaining power of suppliers is low, because suppliers relay on the automakers &could not manufacture vehicle themselves. More over the raw materials are almost commoditized.
To better understand the activities through which a firm develops a competitive advantage &creates shareholder value, it is useful to separate the business system in to a series of value generating activities referred to as Value chain. The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in the profit margin.Hondas Logistics strategy is JIT(Just-in-time) process. Which mean suppliers &ware housing facilities for manufacturing product, finished product &distribution are easily to assessable.
The reason for this is to maximize cost effectiveness. TDG company is doing the ware housing &distribution facilities over 25 years to Honda motors. Honda target market is young generation which are young professionals couples & same older couples. They are doing after sales service such as free delivery, guarantee &repair services for certain period.Supported activities- Honda motors goal is to maintain organizational structure &personal policies in area such as recruitment, training, evaluation &assignment that foster a free &open atmosphere, encouraging each associate to face new challenges & face new successes.
What is the technology support to Honda is, they are using 3rd wave distribution soft ware by Blinco system assures parts quality, controls availability &provide consistent material pricing. Grade cards for suppliers. Honda trading America is a purchasing group which help the Honda procurement process.This company using a soft ware to provides inventory management, tracks the various type of materials in the system & their location, maintain database of customers also providing profit details & delivery reports. Honda gain efficiencies in procurement, distribution, production &retail.
Current technologies used &the main technology adopted by Honda in pursuing their e-commerce /e business strategies is the internet. Honda’s organizational structure shows in the diagram. Appendices(1.