MAN4720 | Strategic Plan of Honda Malaysia

osts in recall of cars are the financial costs as Honda needed to repair the manufactured costs. The recall’s cost per vehicle is relatively low and Honda Malaysia faced the issue of legal liabilities. Lawsuit for the recall of Honda can be potential damage for the organisation and Honda Malaysia spent cash to fix the blemishes. One of the biggest costs that Honda Malaysia had to bear is to manage the brand image. The brand damage equates the serious opportunity cost. Therefore, recall of the cars translated into significant sales loss.

Figure 1: Numbers of cars recalled by Honda Malaysia

(Source: Thestar.com 2018)

Mission, Vision and objective statements 

Mission statement

The mission statement of Honda is to maintain a global viewpoint as the organisation is dedicated to supplying the products of the highest quality, yet at the reasonable price for worldwide customer satisfaction (Honda.com.my 2018).

Therefore, Honda Malaysia reveals about company's products for with the highest quality and the price of the products are reasonable. This statement reveals about company's competitive advantage is the quality and price. However, this mission statement does not tell about the employees, social responsibilities, customers and self-concept. Therefore, Honda's philosophy tells about the respect for the individuals and Honda believes in three joys; the joy of purchasing the products, joy of selling and joy of creating. Therefore, Honda Malaysia's mission statement is customer oriented and it defines the organisation's purpose in satisfying the needs of the customers.

Vision statement

Discovery is the acronym for Honda and it believes in definition, identification, conveyance of values. The vision statement of Honda is to harmonise the human activities from the perspectives of a different field.  

Objectives of the organisation

Objective 1: To expand the business with a determined method to reach a large customer base

Specific	To expand the business with a determined method to reach a large customer base
Measurable	This objective can be measured by calculating the numbers of sales of the cars in Malaysia
Achievable	This objective can be achieved by taking the growth strategies
Realistic	This objective is realistic as the sales of the cars in Malaysia has not increased considerably
Time-bound	This objective can be achieved within 12 months

Objective 2: To promote the business taking innovation as the cornerstone

Specific	To promote the business taking innovation as the cornerstone
Measurable	This objective can be measured by calculating the revenue and the social media engagement. In addition, the innovation implementation can be measured through engagement of the senior executives in the annual report
Achievable	This objective can be achieved through social media engagement for promotion and innovation can be gathered through investing more in Research and Development
Realistic	This objective is realistic to overshadow the competitors in the market as the innovation strategy works to improve the car
Time-bound	This objective can be achieved within 12 months

Environmental analysis

Micro trend analysis

PESTLE analysis

Political condition in Malaysia is stable. The political scenario in Malaysia takes place in the federal representatives in the form of democratic constitutional monarchy. However, in recent time, the politics in Malaysia are heating up and getting nastier with scandal ahead of the election. In automobile industry; the companies can expect the help from the government. Government’s initiative of open economy will help Honda to import new cars with brand new models.

The economic condition of Malaysia is improving and the current GDP growth in Malaysia is 5.9%. GDP in Malaysia in recent time is USD 1.002 trillion and the GDP per capita in Malaysia is USD 30,800 (Lucas and Verry 2017). In addition, the labour force in Malaysia touched the figure of 15 million. Recent time, the FDI flows in Malaysia dropped to almost USD 9.9 billion due to the general decline of the investment (Asymawi and Rosli 2017). This economic condition will provide the organisation to invest more on business when the economy is booming. Therefore, Honda has been enjoying the positive economic boom as the more number of customers will be able to purchase the cars.

Social condition in Malaysia is improving with the time and the country has curtailed the poverty rates and they have reduced the income inequalities. The choices of the people are changing with the time and Malaysian economy has been on the upward trajectory. The preference of the people is changing and they opt to take to buy new cars as the customers will spend more on purchasing the cars when the disposable income of Malaysian is increasing.

Technological factors that can affect Honda is regarding the show of trends that can help the business. Honda manufactures the cars that have the location tracking and navigation technologies with the advancing the technologies. Honda advances in the technology and they have the commitment to exploring the ideas with technology like a Humanoid robot, ASIMO, Honda HA-420 and HondaJet. The customers like the new technology in cars as the innovation can attract the customers to purchase new cars.

Legal contract of business in Malaysia is called contract of employment that helps the employees to start the work and there are two laws applicable to the contract; one is Civil Law Act 1956 and other is Contract Acts 1950. The corporate tax standard rate in Malaysia is 24% and for the outsider in Malaysia; the companies have to pay the tax for 9 times in each year (Jomo 2016). 10% of tax relief of the foreign companies can attract the foreign companies to do business in Malaysia.

Environmental factors are associated with the climate changes and efficient solutions can surely eliminate the heated engines that can improve the performances of the cars. Honda produces the eco-friendly cars also and the traditional cars can impact on the global warming. Honda Jazz launched in 2017 and this car is electric vehicle which helps the environment to be sustainable.

Industry competitiveness

Porter’s Five Forces Analysis

Bargaining power of customers: (Medium)

Gross National Disposable income in Malaysia was 1,176,656 MYR in 2016 and it shows that the customers have bargaining capability (Othman et al. 2016). The customers in Malaysia often look for the specific model and Honda provides the right model with good pricing. In Malaysia, the customers can have different options for cars and Honda provides competitive pricing. The customers of Honda need to buy the cars from the private sellers and the switching power of customers is medium as customers can switch to any other brands. The customers have the ability to squeeze industry margins by pressuring organisations to reduce price in Malaysia.

Bargaining power of suppliers: (High)

In Malaysia, the suppliers of Honda are less and Honda has only three suppliers which distribute the cars at right time. The customers of Malaysia look for specific cars and the suppliers need to deliver the cars on right time (Zulkefli et al. 2017). Honda has control over the suppliers when selling the vehicles. Suppliers switching cost threat is high as Honda has to depend on suppliers in the core. Honda’s suppliers are surrounded worldwide and main auto suppliers are AGC Automotive, Takata, American Mituba, Nippon, Nasco and Automatic Spring Products. These suppliers help Honda to manufacture the cars and these suppliers have high force on Honda.   

The threat of substitution: (High)

The threat of substitution is high for Honda in Malaysia as Honda offers limited vehicles. In this current moment, customers have their preference towards Honda cars. Honda worries about the competition in the market and Honda offers personal cars and the business uses cars. The substitutions in the market are Nissan, Mazda and Toyota. This industry has large numbers of major players as Proton can sell more cars to the middle class. Naza Group is also distributor of Citron and Peugeot cars in Malaysia (Reagan and McCartt, 2016).

The threat of new entrants: (Low)

The car market in Malaysia is very difficult to enter as the starting capital is very high. To get success in consistent way in the car industry, the owner needs to invest a large sum of money. The barriers to entry are related to capital, regulation, the interest of the owners and technology help (Meddour et al. 2016). High skilled employees are needed and the organisation should build trust among the customers. Market is limited in Malaysia and it will take longer time for new comer to build up the trust. ROI is longer in automotive car industry. 

Competitive rivalry: (High)

The automotive industry in Malaysia sees the rapid growth and establishment of car projects like Perodua and Proton can change the scenario of Malaysian automotive industry. The automotive industry in Malaysia has registered the marginal growth of 3.05% in 2017 and the competitive rivalry in Malaysia is high as Malaysian car companies like Proton, Perodua, Bufori, Naza and Inokom are also national players in the market (Ipfs.io 2018). International car manufacturers like Nissan, Toyota and Mazda can provide threat to Honda.

Capability analysis 

Value chain analysis 

Primary activities
Inbound logistics	Honda Malaysia takes Just in Time supply chain approach which reduced their operation cost such as less space needed, reduction of aging materials/waste, and healthier cash flow for the organisation. This strategy rewards Honda Malaysia with lower cost along with storage. Material handling and warehousing are good for Honda Malaysia.
Operations	Honda Malaysia uses advanced production and engineering along with capabilities. The organisation does the quality management in order to improve the design and product testing issue. However, Honda does not have the R&D unit in Malaysia which they have a special unit in the US.
Outbound logistics	Outbound logistics of Honda Malaysia is very strong and it has been working with the principle of robust delivery of network. Honda Malaysia does the order processing and distribution through strong logistics software (Natsuda and Thoburn 2014).
Marketing and sales	Marketing and sales team of Honda Malaysia works in two different locations, one is in Alor Gajah and another is in Petaling Jaya and the team provides 24 hours services to the customers in post-order. Communication process and channel management of Honda Malaysia is good so that they can reach the large customers in Malaysia.
Services	Honda Malaysia uses the local customer service team. Honda Authorised service centres in Malaysia are equipped with the tools expertise and parts that are tailored for every Honda car. Honda Malaysia keeps track of every customer and service advisors attend for the issues of the customers.
Support activities
Firm infrastructure	Honda has worldwide production facilities. The manufacturing of the firm is located in Alor Gajah and the company mainly produces the sedans, sport utility vehicles, hatchbacks and electric cars (Honda.com.my 2018). The infrastructure of the firm is handled by the organisation’s staffs’ functions. Manufacturing plant has the capability of manufacturing more than 18,010 units per month.
Human resource management	Honda Malaysia recruits employees who live in Malaysia and the employees operate in experience of cultural diversity. The employees are capable of knowledge capture and they have working practice. The employees are mainly skilled and team relationship is very good. In Malaysia, Honda Malaysia has more than 1,200 employees and basic principles of employees are mainly three; buying, selling and creating.
Procurement	The global presence of Honda enables the organisation to have easy sourcing of automotive parts from anywhere. The organisation has the ability to create synergy with two or three business branches in Malaysia (Othman et al. 2016).
Technology	Honda Malaysia is mainly focusing on pioneering green technology or the eco-technologies which are good for the environment. Honda is passionate in striving to achieve innovation technology and they have challenging boundaries of mobility. Honda has continuous involvement in the joy of mobility.

Table 1: Value chain analysis of Honda Malaysia

(Source: Self-developed)

VRIO framework 

Value chain activities	Value	Rare	Inimitability	Non-substitutability	Competitive consequences
Inbound logistics	Yes	No	Yes	Yes	Sustained competitive advantage
Operations	Yes	Yes	No	Yes	Sustained competitive advantage
Outbound logistics	No	No	Yes	Yes	Competitive parity
Marketing and sales	Yes	No	Yes	Yes	Temporary competitive advantage
Technology	Yes	Yes	Yes	Yes	Sustained competitive advantage
Services	No	Yes	Yes	Yes	Temporary competitive advantage
Procurement	Yes	No	Yes	Yes	Competitive parity
Leadership	Yes	Yes	Yes	No	Temporary competitive advantage

Table 2: VRIO framework

(Source: Self-developed)

KPI Benchmarking

Total units sold

This KPI measures how many vehicles are sold in a given time. This KPI can be calculated by adding the total numbers of cars sold in a year. This metric helps to determine if the companies are keeping up with potential demand. In the last three financial years, Toyota and Honda Malaysia both had gained sufficient demand as the manufacturing units showed the increase in demand. In 2017, Honda Malaysia produced only 109,511 cars and it has been increased to 98907 in 2017; however, the manufacturing units of Toyota have been increased more rapidly than Honda Malaysia. Honda Malaysia has sold almost an average 300 cars per day in the Malaysian market (including all model cars).

Figure 2: KPI based numbers of units sold

(Source: Self-developed)

Revenue 

This KPI measures the revenues of two companies in past three years. Honda Malaysia increased its revenues in past three years and market share of Honda Malaysia covered up 19%. On the other side, Toyota also increased the revenues in past three years; however, Toyota’s revenues are lesser than Honda.

Figure 3: Revenues collected

(Source: Self-developed)

Customer satisfaction

This metric measures the customer satisfaction level for automotive consumers as the variables in this scenario are depended on safety, features and performance. This KPI is measured by conducting the formal satisfaction survey understating the satisfaction level of vehicle consumers. This KPI provides actionable data to the management how the automotive companies can manufacture the cars and provide satisfaction to the customers. Honda uses the survey through online in order to understand the mind of the customers. Toyota advances in the customer satisfaction percentage as Honda Malaysia has been facing the issue of high recall rates and faulty cars (Timmer et al. 2015).

Figure 4: KPI of customer satisfaction

(Source: Self-developed)

Safety incidents per employee

This KPI measures the number of work-related injury incidents within a specific time. The automotive companies have their own manufacturing units and the workers have to work in the manufacturing centres. Safety incidents of employee metric can be calculated by dividing the number of safety incidents during the given time frame (Andre et al. 2015). It is needed to sure that the management of the automotive companies regularly maintain the equipment and technologies so that all the equipment operate properly. Honda Malaysia showed the increase in the incidents in each year as the numbers of employees have been increased with time.

 

Figure 5: KPI of Safety incidents employee

(Source: Self-developed)

Proposed strategy 

SWOT analysis 

Strengths  1. Honda Malaysia has the competence in engine manufacturing 2. Diversified product portfolio 3. Strong position in Asian motorcycle markets 4. Dominance in motorcycle and engine industries 5. High technology products	Weaknesses  1. High costs and prices in Malaysia 2. Needs products for the mass people 3. Dependence on North America to generate most of the revenue 4. Low investment in R&D
Opportunities  1. Government regulation 2. Frequency and timing of new model 3. Increasing demands	Threats  1. Increased competition in Malaysia 2. Rising exchange rate

TOWS matrix 

	Strengths	Weaknesses
Opportunities	S-O S5-O2: Product development S2-O3: Market diversification	W-O W1-O3: Lower pricing strategy with the high frequency of car model launching
Threats	S-T 1. Not applicable	W-T 1. Not applicable

Ansoff Matrix proposed strategies 

Product development:

Honda Malaysia has been facing the issues of car quality as Honda Malaysia faced 28,399 units of 2013 cars recalling in 2017. Honda Malaysia had to recall cars for production fault in Malaysia and it could impact on the selling of the cars in Malaysia. Safety of the cars needs to improve. Therefore, Honda Malaysia can focus on product development as the strategy would be to improve the product designing and selling of more quality products. As stated by Su and Tsang (2015), as the part of the successful development of the products; the managers will require doing greater appreciation of the emphasis placed on marketing. Honda Malaysia needs to improve Research and Development team to assess and investigate the use of new technologies, materials and processes which would be helpful to pursue the product development. In the automotive market, the new car models and technologies are being replaced every year. Honda Malaysia can focus more on customer needs while improving the car design. Honda Malaysia will have the advantage to gather the data to meet the customers’ needs. In addition, Honda Malaysia can launch new car range which will play the role of brand extension. Honda Malaysia can hope to leverage its existing customer base along with brand loyalty through brand extension.

Diversification:

Honda Malaysia mainly sells the four wheeler cars; however, in global perspective; Honda is a mobility company. Honda Malaysia needs to make new product ranges for Malaysian people. It is risky than the product development strategy as the company does not have experience in new market. Honda Malaysia can make new product ranges in Malaysia apart from four wheeler cars; Honda Malaysia can manufacture Honda Powersports, Honda Jet, Honda Power Equipment and Honda Engines. Honda Malaysia is doing great in Malaysia; however, it could fall into trouble if it is not improve the quality of the cars. Diversification strategy will enable the company not to reliable more on four wheelers. It will increase the brand loyalty of the customers as the customers will find different ranges of products from Honda. Honda Malaysia will diversify into products those will relate to later state which follow the current offering.

Evaluation of proposed strategies 

Suitability	Acceptability	Feasibility
The current issue of Honda Malaysia is high recall rates. Market share of Honda has been increased by 19% in 2017 (Paultan.org 2018). Product development strategy will be suitable for Honda Malaysia as it would help the organisation to have a large customer base with proper using of advertising. Environmental suitability comes with market penetration as it will help Honda Malaysia to drive out the competitors. Expectation suitability can be met through product development strategy as they will improve the distribution channel and lower pricing strategy. Product development will enable Honda to research more on quality of cars, assessing the needs of customers and increase brand extension. Diversification will make not to depend more on four-wheeler cars only.	Honda Malaysia will meet the expectation of the customers and other stakeholders of the organisation. Honda Malaysia is expecting the positive response from the different market. Diversification and product development both will be acceptable for Honda Malaysia to reduce the risk of lower revenue. Revenue of the organisation can be increased through diversifying the products to the different customer segment. The profit attribution of the company can be increased by retaining and increasing the product market share. Forward diversification is acceptable for the organisation as it will enable the brand to employ new skills and develop operation.	Honda Malaysia has right set of resources, financial, human and technologies. Financial feasibility of the organisation is large as Honda is a global organisation with the right set of cash-flow, break-even analysis and other financial tests. The current workforce will be insufficient when the organisation is going to develop the market. Resources and competencies of Honda will be helpful to expand the business in different in different product categories of Malaysia. Resources, both tangible and intangible help the organisations to implement the product’s quality development (Savino et al. 2015). Honda Malaysia made revenue of MYR 826,47,000 in 2017 (Paultan.org 2018). The organisation wants to improve the revenue through product innovation.

Reference List  

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