major research paper the penetration strategy of honda to vietnam market

As of now, with three motorcycle factories and a total production capacity of 2.5 million motorcycles per year, Honda Vietnam has become one of the largest motorcycle manufacturers in th

NATIONAL ECONOMICS UNIVERSITY

SCHOOL OF ADVANCED EDUCATIONAL PROGRAM

Class: International Business Administration Advanced 62B

Lecturer: Nguyen Thu Nga

Abstract

Honda Vietnam Company was established in 1996 as a joint venture partnership between three major partners: Honda Motor Corporation (Japan - 42%), Asian Honda Motor Co (Thailand - 28%), and Vietnam Engine and Agricultural Machinery Corporation (30%) The company targeted the Vietnamese market, a new and promising market, with motorcycles as its initial product At a time when the demand for transportation among the population was increasing, motorcycles emerged as a suitable choice to address transportation issues for the public When first established, the company merely sold products from its partner companies After two years of operation, the first motorcycle manufacturing plant began operations, promising strong growth for the company To date, the company has become a leader in the motorcycle manufacturing industry, occupying more than 60% of the motorcycle market share, with over 7 million units sold The company has recently entered the automobile market and has already achieved impressive accomplishments The success of the company is due in part to its well-defined strategies For each stage, the company sets short-term strategies that are suitable for the current business environment In the present phase, to align with the current business environment, the company also needs to develop specific strategies

As a Japanese company that has been very successful in the US and European markets before entering the Vietnamese market Honda has gradually gained market share in Vietnam in many fields, especially the market share of cars and motorcycles The experiences and lessons of Honda's business strategy in international markets, especially in the Vietnamese market, are worth considering, evaluating and learning Honda's international business strategy: Honda is a major brand in the automotive and internal combustion engine manufacturing industries With huge profits, Honda

is the preeminent engine manufacturer in the world and is known to have never lost a business in its history Its profit margin from its auto business is about 5%, always leading the industry Honda's share price has nearly doubled since September 2008 when the global economy collapsed In addition, Honda is also known to be the most durable vehicle of any car company with 75% of cars and trucks sold during 25 years but still running on the market

region 2008: The second motorcycle factory specializing in producing high-end scooters and motorcycles with a capacity of 500,000 motorcycles per year went into operation with a total investment of $65 million 2011: The capacity of the second factory was 1ncreased to | million motorcycles per year 2014: The company officially put its third motorcycle factory into operation in Ha Nam The designed capacity of this factory was 500,000 motorcycles per year October 2016: The company reached a milestone of producing 20 million motorcycles over more than 20 years of development in Vietnam

As of now, with three motorcycle factories and a total production capacity of 2.5 million motorcycles per year, Honda Vietnam has become one of the largest motorcycle manufacturers in the region and the world With relentless efforts, Honda Vietnam is not only known as a prestigious motorcycle manufacturer but also a leading and reputable automobile manufacturer in the Vietnamese market

Mission- Vision- Corporate Value

Mission

“A dynamic growth oriented company through market leadership, excellence in quality and service and maximizing export, ensuring attractive returns to equity holders, rewarding associates according to their ability and performance, fostering a network of engineers and researchers ensuing unique contribution to the development of the industry, customer satisfaction and protection of the environment by producing emission friendly green products as a good corporate citizen fulfilling its social responsibilities in all respects.”

Vision

Serve people worldwide with the joy of expanding their life s potential - Lead the advancement of mobility and enable people everywhere in the world to improve their daily lives —

Corporate Value

® The Honda Philosophy

e Total Quality Management

¢ New Honda Circles

Product Lines

As everyone knows, each Honda’s motorbike has different characteristics to suit all customer requirements A typical example is the Wave motorbike — a long-term motorbike in Vietnam For customers who prefer simple, unfussy designs, they choose Wave Alpha In contrast, Wave S has a more powerful design and fuel-efficient, etc Therefore, creating for users to have many choices in the same product line In addition, Honda's product lines are also aimed at people with an average income, completely suitable for every Vietnamese people Honda has motorcycles with an average price from

6 - 20 million VND, targeting low-income people who need a means of transportation or for a living (Wave, Future, etc.) The next segment is people with stable and fairly high incomes, or young people looking for their own style and showing personality This segment includes both manual transmission and auto transmission motorcycle with prices ranging from 20 -50 million VND (AirBlade, Lead, etc.) Besides, Honda also targets the high-end segment with luxurious, classy cars that also partly show their social status These cars often cost over 50 million VND, for example: SH, Vario, PCX,

Motorcycles and scooters: Honda Vietnam is a leading player in the motorcycle and scooter market, offering a wide range of models to suit various customer needs Popular models include the Honda Vision, Honda Air Blade, Honda SH Mode, Honda Lead, Honda Winner, and Honda Wave

Automobiles: Honda Vietnam also sells automobiles, although this segment is smaller compared to motorcycles The company offers several models, including the Honda City, Honda Civic, Honda CR-V, Honda HR-V, and Honda Accord

Power products: Honda Vietnam offers a limited range of power products, such as generators and water pumps, which are primarily used for agricultural and industrial purposes

Business philosophy

The Honda Philosophy consists of Fundamental Beliefs Gncluding "Respect for the Individual" and "The Three Joys"), the Company Principle, and Management Policies This philosophy is not only shared by all associates, but also forms the basis for all company activities and sets the standard for the conduct and decision-making of all associates throughout the Honda Group Driven by its dreams and reflecting its values, Honda will continue taking on challenges to share joys and excitement with customers and communities around the world to strive to become a company society wants to exist Oriented Development

The Honda Vietnam Corporation (HVN) is a joint venture between Honda Motor Company of Japan, Aslan Honda Motor Company of Thailand, and the Vietnam Engine and Agricultural Machinery Corporation With modem production lines and advanced assembly technology, Honda Vietnam is proud to contribute to the development and prosperity of Vietnam by promoting the localization process, creating jobs for workers, contributing to the state budget, and actively participating in social and humanitarian activities HVN has continuously strived to provide Vietnamese customers with Honda's globally recognized quality products that are stylish, affordable, and exceed customer expectations This has contributed to the development of Vietnam's industry through technology transfer, localization, exports, job creation, and human resource training The goals and development direction of the Honda Group by 2025 are:

In the motorcycle business, continuing to consolidate the leading position

In the motorcycle sector, Honda Vietnam continues to consolidate its leading position in the market by focusing on the following three points:

- Expanding production and enhancing production capacity to serve the domestic and export markets through the operation of the fourth motorcycle factory, which started producing complete motorcycles in June 2015

- Maximizing sales volume with the goal of achieving 2 million motorcycles Gncluding exports), introducing 10 new models and versions to provide customers with more options

- Boosting exports and gradually turning Vietnam into a motorcycle export hub in the region The estimated export market will be expanded to 22 countries, aiming

to achieve an export turnover of about 247 million USD

In the automotive business, creating new values that exceed customer expectations Always considering customer satisfaction as the ultimate goal, Honda Vietnam Automobile Company (HVA) strives to become a brand that is constantly innovating to create new standards to meet the highest level of customer satisfaction

- Introducing new generations of cars with outstanding design and notable quality that meet the needs and tastes of customers, aiming to increase sales volume by 9% compared to the same period last year

- Starting to apply the "EARTH DREAMS" technology (a package of solutions that improves operation and fuel efficiency at a low level, enhances combustion efficiency for internal combustion engines) from the new generation Accord to provide better fuel efficiency and increase driving pleasure

- Continuing to expand the dealer network to bring genuine products and services to more customers, maximizing customer demand

Continuing to implement safe driving activities towards a safer traffic society

With the goal of "Safety for Everyone," Honda Vietnam will continue to strengthen traffic safety training and awareness for all ages, especially focusing on youth training activities HVN plans to increase the number of trained individuals by 8%, equivalent to nearly 1.3 million people through safety driving training activities at the Safety Driving Center HVN will continue to collaborate with the Vietnam Register and government agencies to provide driving license training for students, customers, and local residents To enhance the effectiveness of training, HVN will organize training courses to improve the skills of safety driving instructors and coordinators at the Safety Driving Center, as well as continue to improve supporting materials

In addition, Vietnam will be featured on television through the "10 Years I Love Vietnam" contest By organizing this contest, Honda Vietnam aims to enhance the effectiveness of

the program and actively contribute to the goal of promoting traffic safety awareness for the community

Maintaining and enhancing social activities

Honda Vietnam will continue to expand environmental protection activities and support education In 2015, HVN will continue to provide financial and technical support for local people to plant an additional 161 hectares of forest under the afforestation project in Bac Kan

In addition, educational support activities will also be actively promoted through the expansion of the "Young Idea" competition, the continued implementation of the "Honda Award for Young Engineers and Scientists in Vietnam 2015", the awarding of more scholarships and libraries Based on listening and finding necessary needs from society to make timely and practical contributions, Honda Vietnam hopes to become an active citizen of Vietnam

Motivation to enter Vietnam market of Honda

Honda's motivation to enter the Vietnamese market can be attributed to several factors, including the saturation of the Japanese market and the growth potential in Vietnam In Japan, the automotive market is mature and highly competitive, with annual vehicle sales volume reaching around 4.6 million units in 2020 However, the market has been experiencing slow growth or even contraction due to the aging population and market saturation

On the other hand, Vietnam presents a promising growth opportunity for Honda As

of 2021, the country was among the largest two-wheeler markets globally, with annual sales exceeding 3 million units Furthermore, the total number of cars sold in Vietnam in 2020 reached approximately 296,634 units, indicating a growing automobile market

In addition to the market potential, Vietnam's demographic advantage plays a crucial role in Honda's decision Around 65% of Vietnam's population is under the age of 35,

as of 2021, contrasting with Japan's aging population This younger demographic in Vietnam is more likely to purchase motorcycles and cars in the coming years

Entering the Vietnamese market allows Honda to diversify its revenue sources, reducing its reliance on the Japanese market, and mitigating risks related to economic fluctuations and changing market conditions Moreover, Honda's early entry into the Vietnamese market enabled it to establish a strong presence and gain a competitive edge over other international automakers

Reasons for penetration from Honda side — Thrust

Market Diversification: In the fiscal year 2021, Honda's automobile business revenue

in Asia made up 24.7% of the total revenue, while Japan and the United States accounted for 20.8% and 34.4%, respectively (Statista, 2021) Expanding into new markets allows Honda to diversify its revenue streams and reduce dependence on saturated or highly competitive markets

Growth Opportunities: According to the International Monetary Fund (IMF), emerging and developing Asia is expected to grow by 6.5% in 2022 (IMF, 2021) This rapid growth presents opportunities for Honda to capitalize on mereased consumer spending and urbanization in emerging markets

Cost Advantages: Penetrating new markets with lower labor and production costs can help Honda enhance its cost competitiveness For example, the minimum wage in Vietnam ranges from 3.07 to 4.42 million VND per month, lower than in countries like China and Thailand (Vietnam Briefing, 2021) This cost advantage can help Honda improve its profitability in global markets

Reasons of choosing the Vietnam market — Traction

According to statistics from Honda Vietnam, the motorcycle market in Vietnam is growing rapidly, reaching 2.26 million units in 2009, an increase of about 20% compared

to 2008 and becoming the fourth largest motorcycle market in the world after China, India, and Indonesia Especially, the scooter market has made a significant increase, reaching 750,000 units (a 70% increase compared to 2008) - the actual production output

of four FDI companies in Vietnam, not to mention other imported high-end scooters Recognizing this demand, the company always has plans to build more manufacturing plants The motorcycle plants No 1 and No 2, the automobile plant have been put into operation, and another motorcycle manufacturing plant is about to be built

Reasons Honda can choose Vietnam as the ideal market for brand development: Growing Economy: Vietnam's GDP per capita has increased from approximately $2,342

in 2016 to $2,715 in 2021 (World Bank, 2021), reflecting a growing and increasingly affluent population

Favorable Government Policies: In 2020, Vietnam ranked 70th in the World Bank's Ease

of Doing Business index, with significant improvements in "starting a business” and

"getting electricity" indicators (World Bank, 2020)

Growing Motorcycle and Automobile Market: In 2020, Honda held a 75% market share

in Vietnam's motorcycle market, with over 2.5 million units sold (Vietnam Economic Times, 2021) The demand for cars is also increasing, with Vietnam's automobile market registering a 12% year-on-year growth in 2020 (Vietnam Insider, 2021)

Strategic Location: Vietnam shares borders with China, Laos, and Cambodia, and has a coastline of over 3,000 km, allowing easy access to other high-growth markets in Southeast Asia and serving as a hub for exports

Honda uses a strategy of adapting products to each individual market and has been very successful with the countries that Honda has penetrated, especially Vietnam Previously, Honda's policy was to use a single technical standard for the worldwide market, but now has been replaced by a policy of product localization That is true to the definition of international marketing “Think Global, Act Local” Just a few years ago, Honda was hailed as a manufacturer of the best motorcycles in the world and as such has always won

a permanent position in the hearts of customers Vehicles sell in any region will be designed to suit only that region Honda has been present and successful in more than 30 countries with its international marketing objectives, typically countries such as Canada, the United States, and Vietnam With a developing country like Vietnam, a traffic system

as well as a habit of traveling mainly by motorbike, Honda is the most successful Japanese company here producing both motorbikes and cars The name Honda has gone deep into the minds of consumers as a brand that provides a diverse and durable means of transport that can be used for many purposes by Vietnamese people Besides, the cost of marketing Honda's motorcycles is also insignificant because people have been used to thisprestigious brand for a long time Honda's objectives in the coming years are to continue to launch motorcycles that are not only durable but also fashionable, constantly changing designs, creating more new hot colors for motorcycles, creating a unique personality for each motorcycle design While other motorcycle brands focus on stylish design or quality for their vehicles, Honda has always been a pioneer in creating the best gadgets to serve its customers Some examples include always being at the forefront of saving fuel, not being able to start the engine without pushing the kickstand, automatically turning off the engine when stopping for 5 seconds, or locating a motorbike It is clear that these utilities bring safety to users, friendly to the environment, and the result of those marketing goals is consumer acceptance

With the local vision of a multinational company, grasping the market and understanding the needs of customers in different countries is the key to Honda's success today The objectives of continuously improving products to grasp the times, promptly respond to thechanging needs of customers in each period; constantly researching, launching new inventions that are more convenient than the old one, etc are the right objectives to createmaximum profit for Honda

Analysis of business environment of Honda

Power

Finance:

Honda has a strong financial position, with global revenue of approximately $121 billion

in the fiscal year 2021 (Statista, 2021) Its diverse product portfolio, mcluding automobiles, motorcycles, power products, and aircraft, provides a stable financial base Honda also maintains a healthy cash flow, enabling the company to invest in new markets, R&D, and marketing initiatives

Marketing:

Honda employs a multi-faceted marketing strategy, emphasizing innovation, reliability, and environmental responsibility The company focuses on building brand awareness through sponsorships, advertising, and digital marketing campaigns Honda's marketing initiatives have helped to establish a strong brand reputation and customer loyalty Research and Development (R&D):

Honda is committed to R&D, investing approximately $6.5 billion in the fiscal year 2021 (Statista, 2021) The company's R&D efforts focus on developing advanced technologies

in areas such as electric and hybrid vehicles, robotics, and artificial intelligence Honda's commitment to R&D has enabled the company to maintain a competitive edge and adapt

to changing market conditions

Human Resources:

Honda has a skilled and diverse workforce of over 210,000 employees worldwide (Honda, 2021) The company emphasizes a strong corporate culture that values teamwork, innovation, and customer satisfaction Honda invests in employee training and development to ensure its workforce is equipped to meet the demands of the evolving automotive industry

Manufacturing:

Honda has a global manufacturing network, with production facilities in Japan, the United States, China, Europe, and Southeast Asia This extensive manufacturing network allows Honda to produce vehicles closer to the markets they serve, reducing logistics

costs and lead times Honda also employs flexible manufacturing processes that enable the company to adapt to market fluctuations and changing consumer preferences Current Strategy:

Honda's current strategy is focused on three key areas: electrification, mobility, and robotics The company aims to have 100% of its automobile sales from electrified vehicles by 2040 (Honda, 2021) Honda is also investing in mobility services, such as ride-sharing and autonomous vehicles, to meet the changing needs of consumers In addition, the company is expanding its robotics and AI capabilities to develop new products and solutions for various industries

SWOT model

Strengths

Honda's strengths are reflected in the company's business principles:

- The message "I love Vietnam"

- The company strives to provide globally standardized products at reasonable prices for the highest customer satisfaction

- Expanding production capacity, developing training programs, transferring technology, implementing localization, exporting, and many other activities to meet customer needs and contribute to the development of the country's industry

- Actively participating in many social activities such as supporting students, organizing cultural programs, and promoting safe driving education

- Honda's products emphasize durability, diverse designs, reasonable prices, and environmental friendliness

*® Honda Vietnam has always been a leading company in the motorcycle manufacturing industr

Over the past 10 years, the company has invested nearly 194 million USD in business

operations As of the present time, the company has remained at the forefront in supplying motorcycle products to customers In 2009, the total number of motorcycles in the entire market reached 2.75 million, an increase of 8% compared to the previous year Honda's

market share also increased, estimated at around 60% Honda Vietnam's sales reached 1.43

million units of all kinds of motorcycles (an increase of 18% compared to 2008), achieving the highest sales record since its establishment

¢ Loved and trusted by consumers

Honda Vietnam has overcome the difficulties of 2009 with sales of 4,215 cars, and then became the leading car manufacturer in terms of customer satisfaction with sales and after-sales services in the Vietnamese market The company always strives to apply advanced technologies and equipment in production, develop a network of local spare parts suppliers and actively contribute to the overall development of society in

various fields Honda Vietnam has a business philosophy that is closely linked to social safety and has achieved many successes in traffic safety activities as well as supporting other social activities such as education, culture, arts, and charity

e The company has a team of highly skilled technicians

Honda Vietnam places great emphasis on training and developing its workforce through regular in-house courses and traming programs abroad The company regularly organizes skill competitions to enhance knowledge and experience for its technicians Honda Vietnam focuses on finding suitable positions for each employee and nurturing talent while using young researchers to develop new products and adapt

e A proper pricing strategy

Honda's success in capturing the market not only relies on the design and quality of their products but also on the company's pricing strategy Honda's products are priced

to suit their customers, from affordable products that meet basic transportation needs

to high-end products with high prices to satisfy the needs of users and demonstrate their social status Currently, only the high-end imported Honda motorcycle models, such as the @, SH, PS, and Dylan, have high prices on the market Most of Honda Vietnam's product lines are affordable and suitable for the needs and payment ability

of the majority of Vietnamese people

¢ Honda's distribution system is widespread throughout the country and always

aims to protect the environment

Honda Vietnam distributes its motorcycle products through a network of authorized Honda dealerships and service centers (referred to as HEAD) All HEADs use exhaust gas suction machines for motorcycles, oil waste recovery systems during repairs, and waste sorting for household waste, industrial waste, lubricating oil, and other types of

waste Honda's authorized automobile dealerships are equipped with waste treatment devices such as oil separation tanks for wastewater, refrigerant recovery devices for air conditioning, waste sorting and recovery systems for waste, airbag recovery, waste oil, chemical waste, and airbags to ensure a clean environment

Weaknesses

Due to the company's reputation, the situation of product flickering and duplication of designs still occurs because there are still some shortcomings in regulations on intellectual property rights Quality products combined with many innovative features in technology, so the price of the product is higher than other models on this general market This makes it more difficult for the customer to own the product

The recent pandemic has reduced demand for non-essential items The company's sales revenue reached more than 3.2 million vehicles, down about 3.1% compared to the previous period Opening the market to attract foreign investment, leading to the birth of cheap Chinese cars This significantly affects the development of Honda's market share Opportunities

Honda is a famous brand that always puts product quality first, and is trusted and greatly interested by Vietnamese consumers Besides, Honda also produces products according to different market segments, always meeting all the needs of users The demand for using motorbikes of Vietnamese people still has a very high potential for development With the culture of using motorbikes, compared to other types of personal vehicles, motorbikes are always the first priority choice of Vietnamese users Sales thinking and customer care are still low, because too many distribution agents lead to inadequate control over how to take care of customers Environmental issues have always been of great concern to society, so Honda has produced environmentally friendly vehicles that limit emissions and save raw materials The quick grasp of market demand, helped Honda get a lot of attention With Honda's ongoing efforts in robotics research and development, the company is able to create new mnovative products that can help improve the lives of people around the world

Threats

The business has been hacked on June 8, 2020, the company's system was hacked This brought the company's operations to a standstill The popularity of electric vehicle products has increased with low cost, saving money and protecting the environment Product competition in the market is strong with big reputable brands Therefore, consumers tend to compare products between brands in terms of price, quality, and service