BỘ GIÁO DỤC VÀ ĐÀO TẠO BỘ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN Analysis of Honda''''s business strategies in Vietnam market 1 HANOI, 2023 TABLE OF CONTENT I Company overview 3 1 1 About 3[.]
BỘ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN Analysis of Honda's business strategies in Vietnam market Members of the group Trần Thị Thúy Hiền: Chu Gia Huy: Nguyễn Đương Duy: Trần Phương Anh: Nguyễn Bùi Gia Huy: 11201446 11205463 11204967 11204528 11205473 HANOI, 2023 TABLE OF CONTENT I Company overview 1.1 About 1.2 Missions .3 1.3 Visions 1.4 Introduce company in VietNam market .4 1.5 Main products .4 II Analysis of the environment affecting Honda's business strategy in the market 2.1 Honda’s macro environmental 2.1.1 Political factors 2.1.2 Economical factors 2.1.3 Social factors .6 2.1.4 Technological factors 2.1.5 Demographic factors 2.1.6 Environment factors .8 2.2 Honda’s micro environmental 2.2.1 Supplier power 2.2.2 Purchase power 2.2.3 Threat of Substitutes 2.2.4 Threat of new entrants 2.2.5 Competitive rivalry 2.3 Internal environment of Honda 10 2.3.1 Human resources 10 2.3.2 Financial .10 2.3.3 Technology 10 III SWOT and Honda's market strategies 11 I Company overview 1.1 About Established in 1996, Honda Vietnam is a joint venture between partners with a total investment capital of 209,252,000 USD: Honda Motor Company in Japan (42% capital), Asian Honda Motor Company in Thailand (28% capital) and Vietnam Engine and Agricultural Machinery Corporation (30%capital) with two main product lines: motorbikes and cars After nearly 30 years of presence in Vietnam, Honda has constantly developed and become one of the leading companies in the field of motorcycle production and a prestigious automobile manufacturer in the Vietnamese market The company currently has motorbike factories and car factory in operation, with more than 8000 employees Operating capacity is 2.5 million motorbikes/year and 23,000 cars/year The main business lines of the company include: - Producing, assembling, trading motorcycles and cars under the Honda brand, - Provide warranty, repair, maintenance and after-sales service for cars and motorbikes - Export and import of motorcycles and cars, complete units, components and spare parts to serve the production of automobiles and motorcycles 1.2 Missions Honda Vietnam is proud to bring customers high quality products, dedicated services and contributions to a healthy traffic society With the slogan "Power of Dreams", Honda wishes to share and realize dreams with everyone by creating new joys for people and society 1.3 Visions Vision 2030 of Honda : Bringing everyone “Thejoy of expanding life potential”.Leading the way in advancing “mobility” and improving “Quality of Life” for everybody all over the world 1.4 Introduce company in VietNam market In March 1996, Honda marked its official launch in Vietnam market Before that, many Vietnamese people knew Honda through the legendary Cub car, a symbol of beauty and fashion combined with durability and convenience It is not unusual for Honda to keep an eye on the Vietnamese market Like many other developing countries, nearly 74 million people in Vietnam have chosen motorbikes as their main means of transportation A market with such a large population is really potential The reality has proven that Vietnam has quickly become the world's leading motorcycle consumer In addition, the low transportation costs as well as the Japanese automaker's experience in similar markets (such as Thailand) help them quickly access the market 1.5 Main product Honda's auto products are now quite diverse and have affirmed their name in the world market, such as Civic, CR-V In Vietnam, a car factory with a capacity of 10,000 cars /year launched the first model in 2006 After just over years, Honda Vietnam is the first automobile manufacturer in terms of customer satisfaction for sales and after-sales services in Vietnam market Honda's motorcycle products are also diverse, including: Wave 110, Air Blade, Wave RS, Wave S, SH, Lead, Click, PCX Along with product development, Honda has continuously expanded its network of distribution and service outlets in most markets In Vietnam, Honda's network of 437 distribution and service stores authorized by Honda nationwide (Head) In this presentation, our group will focus mainly on Honda’s motorcycle products II Analysis of the environment affecting Honda's business strategy in the market 2.1 Honda’s Macroenvironmental 2.1.1 POLITICAL FACTORS REGULATORY REQUIREMENTS Vietnam has its own legal framework and regulatory requirements that Honda must comply with The country has trade agreements with other countries, such as the ASEAN Free Trade Area, that can impact Honda's supply chain and operations In addition, the government has regulations on labor, safety, and intellectual property that can impact Honda's reputation and operations in the country ELECTRIC CARS The growing trend of clean energy and environmental sustainability is putting pressure on the government to introduce new laws in order to decrease pollution That’s why many countries are promoting electric vehicles Many automotive companies have been spending a lot of resources on the development of electric batteries and electric vehicles However, Honda has already launched a few models of hybrid vehicles and the company is introducing a new electric vehicle model II.1.2.ECONOMICAL FACTORS GDP Vietnam has experienced strong economic growth in recent years, with a stable GDP growth rate of around 6-7% per year However, the country also faces challenges such as high inflation and fluctuating exchange rates These economic conditions can impact Honda's sales and profitability in Vietnam According to an estimate, Honda’s annual revenue was 122.122 billion US dollars in 2020, and it has declined by 13.73% Out of which, the automotive company’s net profit was 3.965 billion US dollars, and it has declined by 8.17% The pandemic of covid-19 has declined Honda’s both annual revenue and net profitability FUEL PRICE Fuel prices in Vietnam have been known to be unstable, with fluctuations in global oil prices and government regulations being the main drivers of these changes These price fluctuations can have a significant impact on both consumers and businesses, as fuel is a crucial input for many industries and a major expense for individuals who own cars or motorcycles Additionally, unstable fuel prices can also lead to inflation and have an overall negative effect on the economy As such, companies like Honda operating in Vietnam must take into account the potential impact of fuel price fluctuations on their business operations and develop strategies to mitigate these risks II.1.3.SOCIAL FACTORS CUSTOMERS’ EXPECTATIONS When automobile users buy a certain brand, then they expect various qualities from various brands It could be in the form of fuel efficiency, convenience, or comfort The label customers give to different brands is the years of experience of using different brands They impact the growth and performance of the company SOCIAL MEDIA Social media has had a significant impact on Honda's marketing strategies in Vietnam As social media platforms have grown in popularity, Honda has recognized the importance of having a strong online presence to reach and engage with potential customers The company has invested in creating a robust social media strategy, using platforms such as Facebook and Instagram to showcase its products and connect with consumers Honda has also utilized social media to promote its community engagement initiatives and highlight its commitment to sustainability With the continued growth of social media in Vietnam, Honda must continue to refine its social media strategies to effectively engage with consumers and maintain a competitive edge in the market Social media has become an important tool for Honda to reach its target audience and build its brand in Vietnam II.1.4.TECHNOLOGICAL FACTORS TECH UPGRADE The tech industry is growing every day and Honda is investing a plethora of resources to keep up with the technology For instance, the company has installed a GPS, updated v-tech engines, and iv-technology The tech upgradation is making the company’s products efficient and decreasing the carbon emission rate RENEWABLE ENERGY TECHNOLOGY Honda has been at the forefront of the transition towards clean energy in Vietnam, utilizing the latest technologies in the production of electric scooters The company has combined various cutting-edge technologies to create a unique and enhanced experience for its customers This shift towards clean energy has been significant, with an estimated 60% of clean energy used in the manufacturing of Honda's products This commitment to sustainable practices aligns with the Vietnamese government's promotion of electric and hybrid vehicles as a means to reduce pollution As a result, Honda may need to continue to invest in new technologies or modify its existing models to meet the government's requirements and stay competitive in the market By leveraging the latest technology and embracing sustainability, Honda is well-positioned to meet the evolving needs and preferences of Vietnamese consumers II.1.5.DEMOGRAPHIC FACTORS INCOME LEVELS Vietnam's demographic environment provides both opportunities and challenges for Honda With a population of over 97 million people and a relatively young population, the demand for motorcycles is high, particularly among younger consumers However, while Vietnam's economy is growing, income levels remain low, which could impact sales of Honda's higher-end products Additionally, as urbanization continues, demand for cars may increase, while rural areas remain focused on motorcycles LOW-COST LABOR Despite this, Vietnam has an abundant supply of low-cost labor, with over 60% of the population in the working age group This provides an opportunity for Honda to tap into a large pool of potential employees for its operations in the country Overall, Honda must navigate Vietnam's demographic factors to effectively target its products to the appropriate segments of the population, while also considering the availability and affordability of labor for its business operations II.1.6.ENVIRONMENTAL FACTORS SUSTAINABLE APPROACH Honda’s sustainable statement is as follows; “Realizing the job and freedom of mobility and a sustainable society where people can enjoy life” As concerns over climate change and sustainability grow, governments and consumers in Vietnam are demanding more environmentally friendly products and processes Honda must comply with regulations on emissions and fuel efficiency and invest in clean technologies to reduce its carbon footprint and maintain its social responsibility 2.2 Honda’s micro environmental 2.2.1 Supplier power - Low Honda has a worldwide supply chain and distribution network The company has partnered with several global suppliers to obtain raw materials Each Honda car is made from 20,000 to 30,000 parts The brand has formed long-term partnerships with a number of suppliers that can provide good quality raw materials for the production of its cars However, the pressure from suppliers is low because there are many suppliers who can supply materials to Honda, moreover the suppliers are scattered all over the world and not have enough power Financial Moreover, Honda holds the strength in bargaining power because of its large scale and financial strength In addition, other factors that give this brand a higher bargaining power are the image and credibility of the brand 2.2.2 Purchase power - High Firstly, the reason for the declining sales of motorcycles in Vietnam can be attributed to the widespread availability of product information on the internet Customers can easily access all the necessary details about the product, making them more informed about their purchasing decisions Additionally, while the demand for personal motorcycles among Vietnamese people remains high, their income levels are relatively low This has resulted in customers becoming more cautious and selective when making purchasing decisions, often opting for more affordable options Moreover, the level of competition in the market is increasing day by day with many products for customers to compare and choose Not only that, in every category, other brands also have a number of products from low prices to luxury cars Brands are investing in marketing as well as product safety to make better cars and attract customers Several brands are competing for the same customers, which also makes customers more valuable and gives them more bargaining power over the brand This way, the customer's overall bargaining power will be higher 2.2.3 Threat of Substitutes - High The availability of alternative products or services makes the competitive environment challenging for Honda Motor Co Ltd and other existing competitors The high threat of substitution indicates that customers can use substitute products/services from other industries to meet their needs The threat of a substitute product or service is very high if it provides a value proposition that is radically different from the industry's current offerings However, there are a number of factors that help reduce this threat Threats from this substitute product are brand image, marketability, large product distribution range as well as customer trust in advertising 2.2.4 Threat of New entrants - Low That's because the barriers to entry and exit are high For any brand entering the automotive industry, they will have to make huge financial investments in infrastructure as well as supply and distribution networks In addition to these, technology and a highly skilled workforce will also require a huge investment Furthermore, a new player could not grow significantly overnight It will need to invest in marketing and build trust among customers before it can grow into a big brand with a large customer base All these factors prevent new brands from entering the market and thus minimize the threat from new players 2.2.5 Competitive rivalry - High All competitive rivalries have large product catalogs They invest heavily in marketing as well as in research and development However, there are a large number of factors that affect the competitive strength of a brand These factors include the brand's product portfolio, investment in innovation and technology, as well as marketing and customer loyalty Honda is an innovative brand whose cars as well as motorcycles are quite popular in the global market However, it is positioned ahead of some very tough competitors such as Yamaha, Suzuki, SYM, Piaggio,… which makes the competitive situation stiff The brand remains focused on future and better technologies seeking growth and staying competitive 2.3 Internal environment of Honda 2.3.1 Human resource Honda is one of the leading motorcycle manufacturers in Vietnam, with a strong presence in the market The company has invested significantly in its resources in Vietnam, including its human capital As of 2021, Honda Vietnam had a total of over 8,000 employees working across its production facilities and offices in the country The company has also invested in training programs and employee development initiatives to ensure that its workforce has the skills and knowledge necessary to support its operations and growth in the Vietnamese market 2.3.2 Financial In addition to its human capital, Honda Vietnam also has a strong financial position, with a solid revenue stream from its motorcycle sales in the country In 2020, the company reported revenue of VND 53.4 trillion 10 (approximately USD 2.3 billion), an increase of 3.3% compared to the previous year Despite the challenges posed by the COVID-19 pandemic, Honda Vietnam has maintained its financial stability and continued to invest in its operations in the country The company has also made significant investments in research and development, with a focus on developing new products and technologies that can meet the needs of Vietnamese consumers and comply with the country's regulations and standards 2.3.3 Technology Green Technology The first prominent technology of Honda that cannot be ignored is the electric motorbike model EV Cub, which is inspired by the Cub bike born in 1958 It runs on an electric motor, showcasing Honda's green technology The Honda EV Cub was first introduced at the 2009 Tokyo Motor Show with a simple yet futuristic design highlighted by lighting effects Unlike typical Cub models, the EV Cub is equipped with two motors mounted on each front and rear axle, with the battery pack located in the middle of the frame When the battery runs out of power, users can conveniently charge it directly or remove the battery pack for charging Fuel-saving technology Alongside green technology for the future, Honda continues to bring fuel-saving technology to its current lineup of scooters and motorcycles on the market With the intelligent eSP engine applied to all of Honda's scooters including SH, PCX, SH Mode, Air Blade, LEAD, and VISION, the eSP engine on Honda models helps to greatly enhance fuel efficiency, powerful performance, durability, and smooth operation The eSP engine has an integrated ACG starter system This technology helps the motorcycle to start smoothly and quietly by integrating the starter and generator system, minimizing the number of mechanical connections, and saving fuel through intelligent electronic controls III SWOT and Honda's market penetration strategies III.1 SWOT Strengths Honda is a well-established brand in Vietnam, trusted and used by the Vietnamese people Green and modern technology, fuel-efficient, and using assembly lines from Japan 11 Strong financial resources from the parent company and stable revenue from the company Large workforce, fully trained with skills and knowledge to support the company's operations and growth Weaknesses Limited supply sources Investing heavily in R&D and the latest technology, the input costs of the products will make the cost and price of the products high Honda's vehicles are only for the middle class The average products provided by the company not meet customer demand Easy to copy the brand Low ability to control retail dealers Opportunities With stable politics in Vietnam, this is seen as a very favorable factor for the development of all industries such as services, industry especially the automobile and motorcycle industry Vietnam and Japan have signed many economic cooperation agreements since 1973, creating opportunities for Japanese companies to participate in the Vietnamese market The trend of clean and sustainable energy in the environment is putting pressure on the Vietnamese Government to enact new laws to reduce pollution This could create many opportunities for Honda's environmentally friendly products The young population and high demand for motorcycles, among young consumers in Vietnam, provide opportunities for Honda to target these demographic groups As the Vietnamese economy develops over the years, the income level of the people is also higher, meeting the mid-range to high-end segments of Honda's motorcycles Vietnam's abundant cheap labor provides opportunities for Honda to access a large pool of potential employees for the company's operations in this country Threats Unstable fuel prices in Vietnam may affect Honda's sales and profits in the country Government regulations on labor, safety, and environmental protection are becoming stricter 12 Consumers have many product choices There is high competition from other companies, with Yamaha being the most formidable rival to Honda in Vietnam currently III.2 Honda's market penetration strategies Depending on each stage of development, and each type of product, Honda Company has come up with different corporate-level business strategies - Before 1996: Honda Company entered Vietnam market by exporting Super Cub and Dream cars Honda used this form of penetration because at that time, Vietnam's legal corridor for foreign companies was still high and cumbersome Meanwhile, the demand for motorbikes in the Vietnamese market has begun to grow This is the international strategy - International Strategy of Honda - 1996: Honda opened a joint venture company and launched Super Dream motorbike in Vietnam This is the transition to a new strategy of Honda in the Vietnamese market, which is to apply the multinational strategy Multidomestic strategy Honda has predicted that in the near future, the potential market of Vietnam will have many competitors, inevitably a lowcost competition will appear Therefore, building a joint venture factory in Vietnam from now on is a pioneering step and an advantage in the race to reduce costs in the future - After 1996: Honda opened a joint venture company called Honda Vietnam This company was established between Asian Honda Motor (a subsidiary of Honda) and Vietnam Motor and Agricultural Machinery Corporation (VEAM) In addition, the tax rate is up to 60% on complete motorcycles forcing Honda to invest in building an assembly plant in Vietnam Working with the government, Honda received many benefits Specifically, Honda Vietnam has been exempted from tax for years, halved the tax rate in the next years, and 25% tax rate in the following 15 years With the above factors, Honda officially entered the Vietnamese market in March 1996 with an investment capital of 31.2 million USD for the joint venture Of which 70% of shares are held by Honda, and 30% belong to VEAM 3.3 Typical strategies applied by Honda in Vietnam Once these factors are in place, our team will analyze strategies based on the SWOT matrix, with the goal of using strengths to take advantage of opportunities with S.O strategy, using strengths to prevent threats of S.T , address weaknesses by enjoying W.O opportunities, reduce weaknesses and avoid threats W.T 13 SO Strategies Low-cost strategy: As can be seen, the demand for motorcycles in Vietnam is still high, but up to 60% of the population lives in rural areas with low incomes Therefore, Honda's goal is to create a competitive advantage by producing products with the lowest possible cost Moreover, Vietnam is a country with abundant labor but cheap prices, so Honda has focused on developing production plants in Vietnam to take advantage of the economic location advantages of Vietnam In addition, Honda also focuses on the strategy of developing diverse product lines aimed at different target customers, from cheap to high-end motorcycle segments Honda introduced the Wave alpha motorcycle line with a price of 13,000,000 VND (and in 2021, its up to 19,000,000 VND), durable quality, and a compact design suitable for the needs of rural consumers This low-cost competitive strategy has helped Honda dominate the rural market, with about 60% of the Vietnamese population Success: Honda Vietnam has succeeded with low-priced but quality motorcycle models such as the Wave α These models have brought high satisfaction to consumers In the early stage of doing business in Vietnam, Honda faced fierce competition from cheap Chinese motorcycles, but through the low-cost strategy, Honda produced the assembled product in Vietnam, the Wave α, with a price equivalent to Chinese motorcycles but higher quality, thereby helping Honda regain and increasingly expand its market share in Vietnam Limitations: The low-cost strategy has brought great success to Honda Vietnam, but there are still many limitations in the implementation process The prices of some products that Honda offers are still high, and the company can further reduce prices by improving cost management and price differentials between proposed company prices and market prices Product diversification strategy Diversification of products is an effective strategy to renew, increase sales, expand market share, and enhance competitiveness With a product diversification strategy, Honda Vietnam has had many motorcycle products suitable for each age group, gender, and economic situation of each family Depending on the needs of each target group, they will choose the appropriate motorcycle model Even within each product line of Honda, each motorcycle brand has a segment from affordable to high-end prices In 14 addition, each type of motorcycle has many colors, and the color reflects the personality of the rider Therefore, Honda's products are favored by many people With such diversification, when someone wants to buy a motorcycle, they immediately think of Honda Because when buying products from Honda Vietnam, it is very easy to choose the type of motorcycle that suits them Success: Product diversification is an effective marketing strategy of Honda Not only renewing itself, but also helping Honda expand its market share, increase sales and improve its competitiveness against many strong competitors ST Strategies Differentiation strategy Honda's products are known for their durability, beauty, strong engines, and fuel efficiency With any product line, Honda always innovates in design and technology to meet the needs of consumers In addition, Honda has introduced high-quality product lines in Vietnam such as the SH motorcycle and most recently the CPX This is a high-end product line with many special, superior features aimed at high-income customers, young people, and those who like trendy, high-class products 15 Success: Honda has introduced a very persuasive differentiation criterion for customers to buy their products, which is "fuel economy." By introducing FI technology and electronic fuel injection into the market, Honda Vietnam has hit on the psychology of customers when gasoline prices are unstable, contributing to rapid market share growth Besides, the company has launched a strategy targeting young people, a population that accounts for a large proportion of the total population Honda takes a very youthful slogan "Be U with Honda" and a vibrant advertising campaign on the media, creating a new youthful image for Honda, which was previously considered a product for the older generation Honda's products are always improved in terms of design, eye-catching colors to keep up with the dynamism of the youth Limitations: Honda's differentiation technology is not a breakthrough, only an improvement on existing technology, so Honda's rapid improvement is quickly replicated by other companies with similar products Distribution strategy Understanding the transportation needs of Vietnamese people, especially with motorcycles, since entering the Vietnamese market, Honda has always focused on building a wide distribution and sales system throughout the provinces, infiltrating every district and town Honda supplies its products through two distribution channels: authorized distributors and authorized dealerships To date, Honda Vietnam has a total of 795 HEADs (as of March 2020) in 63 provinces and cities Honda Vietnam always strives to bring the highest satisfaction to customers through attentive sales and aftersales services Every month, Honda Vietnam will collaborate with HEAD stores to organize service promotion programs for customers who are far away or not have opportunities to go to HEAD for services With a large quantity and high quality of HEAD, it can be said that Honda Vietnam has brought its quality products to the hands of consumers Success and limitations: Honda has succeeded in developing the maintenance and distribution system (HEAD) nationwide However, there are still limitations, as applying a strategy to expand distribution channels throughout the country but not properly controlling its branches, Honda has encountered typical fatal mistakes such as price chaos that has occurred for many years Promotion strategy Honda collaborated with Vietnam Television to launch the "I Love Vietnam" program series (2004) with the aim of increasing awareness about 16 traffic safety in Vietnam The program was heavily promoted on television and on the internet with a large nationwide coverage With this tactic in Honda's marketing strategy, the company aims to create positive sentiment with customers, increase trust and embed the brand in the subconscious as a clean and recognizable brand Along with media advertising on news outlets and billboards, promotional programs are also a strong point of Honda when it continuously offers promotion programs with discounts This is perhaps Honda's most successful promotion campaign Typically in these campaigns, when you buy a Honda motorcycle like a Dream bike, you receive a Hondamanufactured helmet, supported registration fees for the bike's papers, and regular maintenance at Honda centers without charge Mobile service programs to other provinces demonstrate the company's customer care, and each month, activities such as Honda's BeU are often organized for promotion to improve service This strategy is very popular with customers and generates positive feedback from the public Success: Honda's annual sales figures account for over 60% of the motorcycle market share 17