Honda RBV Case Analysis 2013: This is the final presentation prepared after a group collaboratation in OU MBA Strategy course. The case was asking us to analyse Honda's strategy past, present and future utilising the RBV of the firm and attempt to identify Honda's strengths and weaknesses and the resources Honda possess, while evaluating Honda's strategy. We analysed and evaluated Honda's resources and capabilities and matched weaknesses, strengths and oportunities to industry key success factors for the period 2007-2013. A brief analysis of automobile industry market trands is also included.

1. +5%
+39%
+18%
+8%
+12%
+40%
+1%
+19%
Euromonitor Research 2012-2020, accessed September 1st 2013
2012-2020
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

2. Somboon Advance Technology Pcl (2013) ‘Car Statistics for Japan & Thailand 2013-2018’, accessed via ReportLinker September 7th 2013
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

3. IHS Forum (2013) ‘Automotive Outlook & Review: New Signals of Change’, accessed via ReportLinker September 7th 2013
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

4. 2012 Figures
Growth: +8.9%
Market Value: $1563,9B
Cars Segment: 55.9%
, MarketLine (2013) ‘Honda SWOT 2013’, accessed via EBSCO 25th August 2013
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

5. LMC Automotive (2013) , accessed via ReportLinker September 1st 2013
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

6. Key Auto Market Trends 2013-2018
KPMG (2013) ‘Global Automotive Executive Survey 2013’
• Consumers will base purchasing decision on fuel efficiency, they will prefer plug-
in hybrids
– City dwellers: wider mobility concept, alternatives to car ownership, added
value services & design
– BRICS go for SUVs & same levels quality, safety & reliability as TRIAD
– TRIAD consumers prefer basic cars
• R&D: ICE downsizing, plug-in hybrids; 18% do not know how budget is allocated
• Rising competition from ASPAC manufacturers, VW/Toyota market leaders
– BRICS manufacturers: best growth areas South East Asia & Eastern Europe
– BRICS manufacturers: best hubs Mexico & Eastern Europe
– BRICS will be major exporters so trade barriers for Honda will rise
• Future Success: New product development, corporate JVs, supplier expanding
value chains & diversification; vehicle manufacturing
• Suppliers: online dealership on the rise, multi-brand dealership, financing key
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

7. Example: Rising Demand of Plug-in Hybrids in US
LMC Automotive (2013) , accessed via ReportLinker September 1st 2013
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

8. Example: Honda’s Response
LMC Automotive (2013) , accessed via ReportLinker September 1st 2013
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

9. Honda Motor Co.: The Firm
• Founded in 1948 in Tokyo, Japan
• ‘The world’s largest motorcycle manufacturer and one of the leading
automakers. The company develops, manufactures and markets
motorcycles, automobiles and power products’ (Datamonitor, 2012)
• An exemplar of business strategy for the:
– Cost-based advantage developed from scale & learning to occupy
UK’s motorcycle segment retreat
– Competitive product it developed to sell successfully in
US, based on superior design & learning from mistakes; ‘Honda
Effect’ [1974-1990]
– Ability to turn emergent to deliberate strategies based on
internal strengths of the firm [1974-mid 90s]
• Defines itself around its expertise in developing and manufacturing
engines
• As of March 31st 2013, 369 subsidiaries & 86 affiliates
• In this report, we focus on Honda Automobile business division
Honda Annual Report, 2013; Datamonitor, 2012; BCG Report, 1975; Mintzberg, 1985; Hamel & Prahalad, 1990; Rumelt, 1995; B835 DS2 Group 1 wiki
Resources Section
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

10. Honda Motor Co.: R&D Milestones
Source: Grant (2013) Contemporary Strategy Analysis, Chapter 5, p. 114
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

11. Honda Automobile Sales 2007-2013
Honda Annual Reports 2007-2013, Core Business Light Vehicle Sales; Honda SWOTs 2010-2013; B835 DS2 Group 1 wiki Resources Section
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
OperatingMargin(%)
NetSales(000s/$)
2
1
3
4
5
6
7
8
0
-2
2007 2008 2009 2010 2011 2012 2013
Economic Crisis
Natural Disasters
in Japan
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

12. Honda Automobile 2007-2013: Expanding in Asia
Japan
19%
US
38%
Europe
7%
Asia
28%
Other
8%
2010 74.6%
Japan
18%
US
49%
Europe
9%
Asia
17%
Other
7%
2007 70%
Japan
16%
US
47%
Europe
10%
Asia
19%
Other
8%
2008 79.1%
Japan
16%
US
42%
Europe
10%
Asia
23%
Other
9%
2009 76.7%
Japan
17%
US
41%
Europe
6%
Asia
29%
Other
7%
2011 74%
Japan
19%
US
42%
Europe
5%
Asia
28%
Other
6%
2012 73%
Japan
17%
US
43%
Europe
4%
Asia
28%
Other
8%
2013 78%
Honda Annual Reports 2007-2013, Core Business Light Vehicle Unit Sales per Region (in thousands): Asia expanding, US/Europe & Japan shrinking
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

13. SWOT Honda 2010-2013
Honda Annual Reports 2010-2013; Datamonitor, 2010-2012; MarketLine 2013; ; B835 DS2 Group 1 wiki Resources Section
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

14. Honda: Tangible Resources
Resources Key Indicators 2010 2011 2012 2013
Tangible Financial Market Cap B US$
Debt/Equity
Free Cash Flow
Credit Rating
70.7
0.95
-2.81
A1, stable
78.5
0.92
-1.94
52.6
0.93
-3.17
64.77
0.97
-1.81
Physical Market Values B US$
Age Capital Equipment %
Scale of Plants
36.33
55.73
39.78
56.63
41.59
56.23
3,660k
45.06
53.7
Net Worth Balance Sheet Annual
Reports 2010-2013 B US$
99.111 94.872 85.887 84.032
Adapted from Grant, 2010 Ou B835 online material; Honda Annual Reports 2010-2013; Datamonitor, 2010-2012; MarketLine 2013; Moody’s 2013;
Ycharts.com for Honda; Stock Analysis on Net for Honda; B835 DS2 Group 1 wiki Tangible Resources Section
• International Presence: 369 subsidiaries & 86 affiliates worldwide
• 47 manufacturing facilities - valuable, organised
• 8 R&D centres – valuable, rare, inimitable, organised
• Wide, heterogeneous distribution network , keiretsu operated - valuable, organised
• Financial assets - valuable, organised
• Operating lease property - valuable, organised
• Flexibility in fixed assets: Honda insists this is a competitive advantage fitting VRIO criteria
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

15. Patents >17, 600 owned + >13,500 applications pending (Japan)
>25,300 owned + >16,200 pending (worldwide)
Copyright & Trademarks >50 TMs, many registered designs (WIPOs); 2010 Gold Award for N-series mini vehicle
Trade Secrets Extended know-how, secrecy may be the reason why Honda does not share production
lines with other manufacturers
Technology Innovation Building on core competence of R&D which numbers numerous , key innovations since
1948 and boosting new product development with the view to moving from the ‘middle-
class, reliable sedan’ brand image, Formula 1 with McLaren 2014; safety aspect 4/5
scoring
R&D Staff as a % total
R&D Investment as % Sales
Number & Location of R&D
Facilities
Direct Presence (No of Continents)
Brand Value (Interbrand/$m)
Brand Value (Brand Finance/$m)
Ranking
Surveys of corporate reputation 2012
Shareholder Return
CSR/Ethics Initiatives
Corporate Transparency Index 2012
N/A
2010:5.6%; 2011:5.7%; 2012:6.5%; 2013:6% - traditionally the highest in the market
14 centres in US alone, but opening around the world to merge with regional
manufacturing, sales and procurement and reduce risks arising from natural disasters in
Japan/Asia Pacific; R&D centres as subsidiaries
Asia, Oceania, Europe, North America, South America, Japan, Middle East, Africa, China
2008:19,079; 2010:17,803; 2011:18,506; 2012:19,431; 2013:17,280 – Rank 21 from 7
AA+:16,114, versus Toyota AA+:25,979 and Nissan AA+:17,430
Brand Finance Top 500(100): 53; Fortune 500(100):45, for 2013; Interbrand Japan’s
No2; Interbrand Best Global Green Brand No3 for 2013
Barron World’s Most Respected Companies No 34; Customer Service Index Rank No 9
Dividend Yield: 2.14% from 1.91%, highest since 2009
Extensive on Diversity, Environment, Community & Education pillars; CO2/heavy
metals/rare & valuable metals reduced; 90% recyclable materials used in cars
1.9/10 with 8% ACP, 50% OT and 0% CBC, 3rd from last of 100 companies*
* ACP = anti-corruption programs, OT = organizational transparency, CBC= country-by-country reporting
Honda: Intangible Resources
Adapted from Grant, 2010 OU B835 online material ; Interbrand Top100, 2012: Honda; Interbrand Sector Overviews: Automotive Industry 2012; Honda
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

16. • Trademarks, patents, technology innovation and traditional R&D culture all
qualify for VRIO criteria and are potential sources of sustainable
competitive advantage
• To definitively allocate sustainable advantage designation for any of the
above resources, information on how they render value for customer is
needed
• Honda brand equity could also be a source of competitive advantage despite
the erosion of brand strength due to SWOT challenges 2010-2012
• However, marketing has been focused on building Honda image as a
technology innovator, so there is room to promote other aspects which
could qualify as USPs for specific customer segments, e.g. Chinese & Safety
aspect; TRIAD & green technologies, etc.
Honda: VRIO for Intangibles
Honda Annual Report 2013; DS2 Group 1 wiki Intangible Resources Section
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

17. Honda: Human Resources
• Honda employs 190,338 worldwide
• Honda invests on average at least 2% new hires per year and, from their
CSR, appears to place much importance in its employees, compared to other
stakeholder groups
• Employee creativity, participation and opinion sharing are encouraged through
the NH circles to support continuous learning
• Rate of employee suggestion implemented: 90%
• Highly trained employees may be considered a VRIO asset to Honda, which
traditionally promotes from within to senior positions
• Strong R&D culture, extensive training throughout and collaborative
environment leading to hugely successful learning organization
• Good employee relations seem to nurture emergence of an "organizational
culture" in line with the corporate culture and that can be considered a resource
and when this is not the case, like in 2010-2011, it may lead to R&D void and
sluggish cash flows – VRIO
• Opportunity for more transparency in diversity, employee disputes and female
workforce numbers
Honda Annual Report, 2013; Honda 2012 Report; 2012 Transparency in Corporate Reporting; Honda SWOTS 2010-2013;
B835 DS2 Group 1 wiki Human Resources Section
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

18. Strategic Importance Relative Strength
Strategy Implementation Traditionally a strong feature of Honda, leading to new
market entry, increased profitability and growth ;
ability to merge deliberate with emergent strategies to
fulfil organizational goals (10)
Although still recovering from crisis and
natural disasters and coming second to
Toyota in recovery, capability in place as
evidenced by 2013 sales (8)
Manufacturing Impacts efficiency, quality & flexibility which are
critical to cost and customer satisfaction (10)
Robust, low cost production, but
traditional perception of reliability fraught
with quality problems in 2012 & 2013;
maybe a suppliers’ problem (4)
Design Important, but imitable (6) Less than memorable designs (3)
Engineering Key for new product development (9) Green fuel efficiency and flexibility of
parts, falling behind with market trends
for new technologies (5)
New Product Development Regular launches relevant to customer needs (10) Strong but slow new product
development, not always bringing in the
sales (7)
Marketing Media presence, promotion & community building
important, but imitable (6)
Weak, turning around since 2011; has yet
to build strong customer community and
strong brand equity (6)
Distribution & Sales Critical to customer access & bottom line (9) Keiretsu philosophy with suppliers falling
behind to Toyota & Nissan; although
network robust, sales could benefit from
modern supplier business models (4)
Customer Service Impacts brand reputation (8) Not as strong as Toyota’s (6), e.g. weak in
exploiting financial services to add value
Multidivisional Coordination Critical to successful reinforcement of global presence
and further expansion (9)
Key weakness since Honda grew larger
from 90s onwards, turning around since
2009 restructuring to SED model (6)
Honda: Capabilities
Adapted from Grant, 2013, pp.134-135; Alex Taylor, 2013; Harvard Business Review on Keiretsu: http://hbswk.hbs.edu/archive/4791.html
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

19. 0
0
10
10
RelativeStrength
Strategic Importance
Superfluous Strengths Key Strengths
Key WeaknessesZone of Irrelevance
Manufacturing
Design
Engineering
New Product Development
Marketing Customer Service
Distribution & Sales
Multidivisional Coordination
Strategy Implementation
Interbrand Top100, 2012: Honda; Interbrand Sector Overviews: Automotive Industry 2012; Honda Annual Report 2013; Brand Finance Top500
Honda Capabilities: Key Strengths & Weaknesses
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

20. Honda: Capabilities Activity Map
‘Keiretsu’
Model
Supplier
Business
Model
Time to
market
Manufacturing
Cost
Value-
added
Services
Flexibility
in
Production
Lines
Own
plants for
FIT/Jazz
High
customer
recognition
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

21. Automotive Market
Trends by 2018
Honda Car Industry Key Success
Factors
Top 5 purchase criteria are cost of fuel, ease of
recharging , driving distance, battery lifecycle and
battery management and value added services
(financial sevices, MaaS, customer service, fast
response to product recalls, financing of e-
components)
In Europe, 5-door Civic hatchback with newly
developed 1.6 liter i-DTEC diesel engine , the
lightest in its class; plus financial sevices, MaaS,
service and warranty options; should leverage
finance services to reap opportunities in BRICS
ICE downsizing/hybrids
Enhanced vehicle lifespan
Joint approaches
R&D Management & Funding
New urban mobility concepts
Added value services
Brand Management
Plug-in Connectivity Solutions
Online services
Multi-brand dealerships
Emerging market expansion
Global footprint/expansion
Trade barriers
Capacity management
Module/platform Strategies
Plug-in Hybrids, Non Plug-in hybrids, Battery
electric vehicles with extender, Fuel cell electric
vehicles and Battery electric vehicles
Accord Plug-in Hybrid released boasts the highest
power economy rating of any plug-in hybrid in the
US market; should also invest in Russia for rising
demand in e-mobility
Highest expected vehicle demand will be in
compact, subcompact and SUV vehicles
Falling behind in SUVs and small urban green cars
Environmental challenges push for ICE
downsizing and e-mobility
Lightweight and fuel efficiency technology in place
Growing urbanization push for innovative urban
car design and MaaS
Launch of Nbox+ & N-One mini vehicle models in
Japan with Emergency Stop Signal and ‘excellent
fuel economy’, lightweight technology in place,
limited MaaS
Changing Customer Behaviour demand new
dealership concepts and financial services; online
activity on the rise
Falling behind compared to other brands, but
released Fit EV for lease sales in US and Japan as
an electric vehicle with high power economy,
declining relevance of current model may be a
source of profitability loss
Growth & Globalisation require strong presence in
emerging markets and overcapacity
Strong presence in China & India. How about
Russia?
• Existing dealership model irrelevant to
future success
• Joint Approaches in Manufacturing
favoured
•R&D budget allocation a challenge for
automakers
• Community building with customers and
brand image are key to successful value-
added service strategies
Tying Honda Capabilities with Market Trends by 2018 and KSFs
KPMG 2013 Report This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

22. Example: Honda’s Marketing and Distribution & Sales Capabilities
Honda’s strong sales in China can be partly explained by the fact that they
have tapped into consumers preferences for safety and comfort. This is a
classic example of Honda leveraging distribution and sales with marketing
capabilities to solidify their presence in China.
BrandZ Top100 for Car Industry, Section on Chinese Consumer preferences
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

23. Example: Honda Diverse Supplier Network keiretsu Capability
Keiretsu means ‘headless combine’, literally layers of organizations linked with
business ties, a characteristic of Japanese automakers. Toyota and Nissan have
modernized their keiretsu in the last 10 years, while Honda seems to be falling
behind. This is an example of how capabilities may come together in supporting
the structure and systems to effect a change that would benefit and strengthen
supplier networks according to market demands
Harvard Business Review, September 2013 on keiretsu
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

24. Example: How is Honda poised to face BRICS competition?
Market Insights predict that BRICS manufacturers will be major
automobile exporters in the next 3-5 years, from Eastern Europe and
Mexico hubs. Honda is strengthening its presence in Mexico by opening a
new production plan for FIT/Jazz best selling cars to US, thereby being
perfectly poised to face imminent BRICS competition. Honda is leveraging
market sensing with distribution & sales and manufacturing capabilities to
produce superior offering to customers, thereby preparing to face
imminent BRICS competition successfully.
KPMG 2013 Report
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

25. • Honda has tangible assets deteriorating in value 2010-2013 from 99.111 to
84.032 B US $, including 369 subsidiaries and 86 affiliates worldwide as of
March 31
st
2013, with the R&D centres fitting VRIO criteria
• Intangible assets including trademarks, patents, technology innovation and
traditional R&D culture all qualify for VRIO, but to allocate sustainable
advantage designation for any of the above resources, information on how they
render value for customer is needed
• Human resources include 190,338 employees. Honda places high importance on
hiring, training and developing staff in an internal environment that fosters
creativity, R&D culture, diversity, inclusion and where the opinion of employees
matter. Highly skilled employees are VRIO, while senior managers are promoted
from within. HRM results in strong corporate culture and a learning
organization
• Honda capabilities include Strategy
Implementation, Manufacturing, Design, Engineering, New Product
Development, Marketing, Distribution & Sales, Customer Service and
Multidivisional Coordination
• Honda’s key weaknesses include Design, Manufacturing, Distribution & Sales
and Engineering
• Potential activities rendering sustainable competitive advantage if running
efficiently are SED business structure, a strong and diverse supplier network and
processes favouring low manufacturing cost and customer service
Conclusions
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.

26. • Honda is matching industry KSFs for medium term by expanding its
automobile business and by focusing on new technologies and new
product development, but seems to be missing out on flexible
manufacturing opportunities via corporate JVs and on modernizing
supplier business model. Risk should be assessed on not pursuing
the latter 2 strategies
• New product development should focus promptly on consumers’
preferences of the markets with the highest demand for
automobiles, like e.g. SUVs for China. Capabilities like R&D
management and budget control, brand management and leveraging
sales networks to effectively gauge consumers’ preferences come
into play
• There are opportunities to market unused product attributes, like
e.g. green technologies, safety and awarded design to specific
customer segments. There is room to exploit strong brand for
developing customer community further in view of successful value-
added strategies. Strategies like these will improve customer
satisfaction and loyalty and thus lead to increased profitability
Recommendations
This analysis was prepared by Urania Coumis. It is intended as a basis for class discussion and not as an illustration of good and bad practice. © Urania Coumis 2013. Not to be reproduced without permission.