The Honda Motor Company first entered the European mar- company is best summarized in its mission statements, “plea- ket in the early 1960s by selling motorcycles. The company’s sure in buying, selling and producing,” and “Beat GM, not automobiles were introduced to Europe much later. Despite Toyota.”
Honda in Europe
Task:
Read the case file: Honda in Europe
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to answer any questions that are assigned at the end of each case. You can also use these questions as a guide to develop
the other sections of your case summary/write-up.
In the analysis section, you can also write about the company’s* internal strengths, weaknesses, and external threats and
opportunities (SWOT).
*the company which is the focus of the case.
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HONDA IN EUROPE (2016)‘
The Honda Motor Company first entered the European mar- company is best summarized in its mission statements, “plea- ket in the early 1960s by selling motorcycles. The company’s sure in buying, selling and producing,” and “Beat GM, not automobiles were introduced to Europe much later. Despite Toyota.”
its success in North America and the rest of Asia, the company Honda currently has 33 automobile manufacturing Mac- has not achieved a strong foothold in the European market. tories located in 17 countries around the world. Honda’s In fact, its sales had been declining until 2013 although it has opcrations cover automobiles, motorcycles, financial services, edged up somewhat since then. power products, power tools, jet aircrafts, and robotics. In the
Source: Honda Worldwide Homepage, world.honda.com. 2016.
HISTORY OF HONDA fiscal year 2015, 76.6 percent o1 Honda’s revenues came from In 1946, Souichiro Honda founded the Honda Technology Íts automobile sector, as outlined in the table below.
Institute in Hamamatsu City, Shizuoka. The company started as a motorcycle producer with a single small factory in an empty lot in Hamamatsu City. From this simple beginning,
HONDA FINANCIAL YEAR CLOSED MARCH 2015
(IN BILLION YEN)
Honda became an incorporated company in September 1948 Net Sales & Other
and, by the 1950s, had become extremely successful in Japan. In 1956, Honda entered the U.S. market and was able to posi- tion itself effectively, selling small motorcycles. In the early 1960s, the company commenced automobile maiiufacturing and participated in Formula 1 (F-1) racing to assist its technol- ogy development. Thanks mainly to its success in F-1 racing, Honda became recognized around the world as a technologi- cally savvy company.
Up to the early 1990s, the company suffered irom orga-
FY20I5 Twelve
nizational mismanagement that came from tension between its technology and marketing departments. The situation
AUTOMOBILE INDUSTRY
became so serious that the president and founder, SouichirO The automobile industry worldwide is in the mature stage of its Honda, was forced out for ignoring Honda’s marketing. life cycle. By the 1990s, the surplus of motor vehicles became After Souichiro Honda’s departure, the company was bet- such a big industry problem that a number of mergers and ter able to balance its technology and marketing depart- acquisitions (M&A) and alliances took place. Industry experts ments and, by 1999, was second in sales only to Toy- had stated in the late 1990s, only 6 or 7 companies would ota in the Japanese market. The underlying success of the remain global players while other companies would be forced
to sell in niche markets. Indeed, many mergers and partner- ships had been established in the 1990s and in the first decade
*This case was prepared by Slasaaki Kotabe based on its earlier version
by Jon Pt›ntius, Jared Winans, Tram Nguyen, and Sun Pravichpibul of the University of Hawaii at Manoa for class discussion rather than to illus- trate either effective or ineffective management of a situation described (2016).
of the 21st century. For example, Daimler acquired Chrysler in 1998, and then DaimlerChrysler acquired a major share of Mitsubishi in 2000, GM became the controlling shareholder of Fiat and Saab in 2000, Ford acquired Jaguar in 1990, Volvo in
1999, a major share of Mazda in 1996, and Land Rover from BMW in 2000. Renault became the controlling shareholder of Nissan with over 40 percent ownership in 1999. Global-scale production and sales became important as a way to cut cost through developing common parts and engines and improving procurement.
However, many of these corporate marriages did not last long, and quite a bit of realignment o1automobile mergers and partnerships have taken place in the past 15 years or so. Daim- ler and Chrysler divorced in 2007. General Motors wound out Fiat in 2005, and right after General Motors’ bankruptcy in 2009, Saab was sold to the Dutch automobile manufacturer 5pyker Cars but could not avoid insolvency later on. Now Fiat acquired Chrysler in 2004. The Indian automobile manufac- turer Tata Motors acquired Jaguar and Land Rover in 2008. The Chinese automobile manufacturer then acquired Volvo from Ford in 2010. The only major partnership that has remained intact in the past 20 years is the Renault-Nissan alliance.
Japanese automobile companies, like their European and
American counterparts, did attempt an M&A strategy. Nissan acquired companies in Spain and later partnered with Renault and Daimler while Toyota had deals with distributors from the early l9b0s and later would merge with its Belgian dis- tributors. Honda, unlike its counterparts, chose to avoid an M&A strategy with the exception of an attempted joint ven- ture project with Rover from 1951 until 1994. To remain a global competitor, Honda expanded its operations by setting up plants in regional markets. As of 2016, Honda is currently “the number 8 car company” in the world in terms of sales
PRODUCTION
2014 January February March
and is the fifth largest car company in the United States with a 9 percent market share.
HONDA IN EUROPE
Currently, Honda has operations in North America, Japan, Asia-Oceania, Europe, Africa, and South America. The European operation covers Europe, the Middle East, and Africa. Honda began its automobile production in Europe in 1986 by manufacturing engines in the United Kingdom. Six years later in 1992, Honda launched a manufacturing fac- tory in Swindon, Somerset, the United Kingdom. Several years later, Honda opened production facilities in Turkey in 1999 to target the Middle East and Eastern European market.
The Swindon plant in the U.K. accounts for a small por-
tion of Honda’s global production. The facility has two assem- blies, one with a capacity of 100,000 units/year and another with 150,000 units/year. As a note, the plant in Turkey can produce 50,000 units/year. The Swindon facility pro- duced 166,000 units in 2012, yet over 75 percent (187,500 cars) of’ capacity must be achieved to break even. The sit- uation has been especially unstable in recent years, with a low of 97,000 produced in 2011. In 2008, 230,000 cars were produced there.
As of 2015, 50 percent of Honda’s cars purchased in Europe were produced in Europe. That year, the company set a tar- get to increase the figure to 80 percent and hired 500 new employees at the Swindon facility. However, a year later,
April May June
the company cut 800 jobs (25% of its workforce) at Swin- don. In January 2013, citing low demand in Italy, Spain, and Greece, Honda Europe’s Executive VP Ken Keir claimed that no growth was expected in the coming 4 years. Sales did tem- porarily increase from 2013 to 2ñ1 S, largely due to the release of the new CR-V and diesel engine. However, with a reduced workforce, Swindon appears to have little chance of breakin•q even in the future.
An interesting implication in Swindon’s reduced role in European car sourcing is that cars may be increasingly pro- duced in Asia or other regions. This could potentially affect the amount o1 options made available to specific Euro- pean countries and may intensify Honda’s pan-European approach.
HONDA’S GLOBAL SALES BY REGION
There are a multitude of reasons ler thc low sales Honda has experienced in Europe. Honda entered the European market later than its competitors. In fact, its first production facility in Europe was established as late as 1992, at a time when Honda was still only a minor player in the Japanese market and its stronger Japanese competitors had been active in Europe since the early l9hUs. Prior to 1992, Honda Europe had been forced to import its vehicles from the United States. These imports were subject to quota restrictions. This made it nearly impos- sible for Honda to aggressively enter the European market.
Honda’s inability to enter the European market aggres-
sively continued despite an attempted joint venture with Rover. This joint venture was pursued in order to help Honda gain distribution channels and obtain market expertise in Europe. Unfortunately, Rover had a poor image in Europe and had very little knowledge or the market.
Although Honda was able to improve sales slightly, in the end, its image suNered irom its association with Rover. Fur- thermore, unlike its competition, Honda waited until 2003 to invest in research facilities in Europe. However, one of the most fundamental reasons for Honda’s lack of suc- cess was the popularity and saturation of locally owned car manufacturers that can be found in the European market. Companies such as Volvo, BMW, Audi, Volkswagen, DM, Opel, Renault, Peugeot, and Fiat have been dominating the European market for a considerable number of years. In addi- tion to these local companies, other foreign companies such as Toyota, Nissan, Ford, and Hyundai have gotten footholds in the European market. As a result, the European market is extremely competitive.
In 2001, Volkswagen was ranked number one in Europe with 17.6 percent of the market and Peugeot number 2 with
15.8 percent. Renault, Ford, Fiat, and GM had approximately IG percent of the market each, and Toyota, BMW, and Audi had a market share in the region of 5 percent. Honda cap- tured only 2.4 percent of the European market. In 2013, Volkswagen is firmly in the lead with 24.3 percent of the mar- ket and Peugeot is ranked second with 1.2 percent of the mar- ket. Renault is ranked third with 8.3 percent of the market. GM, Ford, and Fiat come in fifth, sixth, and seventh, respec- tively, with 7.8 percent, 7.3 percent, and 6.8 percent of the market. Honda is tied for 15th with Tata among 19 compa- nies with 1.4 percent of the market. The second largest com- bined force is the joint venture between Daimler, Renault, and Nissan with a combined market share of 17.6 percent.
Honda sales in Europe have declined steadily in Europe from 2009 to 2015, with market share sliding accordingly, to below 1 percent for the first time ever in 2015, compared to 2 per- cent in 2007. Comparatively, Honda’s brand image is weak and its product line is narrow. It is important to note that the German ADAC brand ranking system ranks Honda at the 15th best brand in Europe. As the chart below shows, BMW and DMC (Daimler Motor Corporation) have the highest brand image.
HONDA’S EUROPEAN MARKETING
The four largest markets within Europe are Germany, the United Kingdom, Italy, and France. Honda’s European mar- keting strategy in those four countries is highlighted below.
Product. Honda’s main European manufacturing plant is located in the United Kingdom, and as a result, the coun- try has more Honda models than any other country in Europe. Honda’s standard line of car models such as the Civic and CR-V is generally sold throughout Europe, though different options are made available to specific countries. Honda also develops some European versions of cars that are cosmeti- cally or otherwise different than models in different regions. These European versions are generally sold across Europe and are not made for specific countries. Currently Honda offers eight models.
Price. Thc prices of vehicles in Europe are comparable to those of similar cars produced by local manufacturers and foreign competitors. The following tables compare Honda’s economy models (Table 1), Honda’s new 1.6-liter diesel engine model (Table 2), and sports touring vehicles (Table 3).
As can be seen from Table 1, Honda prices its economy older models higher than the competition.
Table 2 shows that there are far fewer companies that sell quality economical vehicles on the market. We can also see that Honda’s green vehicles are cheaper than the other green vehicles on the market. This is likely due to the fact that Honda has outfitted its old model CR-V models with new green engines’.
Table 3 shows that Honda prices its sports touring vehicles lower than other Japanese companies do, but the vehicles are in general more expensive than those of national European competitors.
Honda primarily focuses on mid-lower priced vehicles, for the most part staying out of Europe’s crowded luxury mar- ket. BMW, Mercedes, and Audi are very popular luxury cars,
TABLE 1
ECONOMY MODELS
Source: Carpages —Information on current and new vehicles U.K.
TABLE 2
DIESEL ENGINE MODELS
Honda Toyota Paris Peugeot Volkswagen
Vehicle CR-V Hybrid Ion EOS
Price (Pounds) 21,505 15,195 26,216 26,140
Source: Carpages—Information on current and new vehicles U.K.
TABLE 5
SPORTS TOURING MODELS
Source: Carpages —Information on current and new vchiclcs U.K.
and Ferrari, Lamborghini, and Porsche compete for the rich- est consumers. As so many luxury car manufacturers exist in Europe, it is difficult for Japanese cars to enter the market at the higher end. Some o1 the rew luxury Japanese cars that have sold well are Toyota’s Lexus, Nissan’s Micra, and Honda’s Jazz.
DLxtrihution. Honda relies on franchises for its distribution in Europe, and offerings at each dealership vary greatly. In general, Honda-specific dealers sell a wide range of Honda products, from cars to motorcycles to lawn mowers. Car-specific dealers tend to sell Honda cars alongside those of other manufacturers. Vehicles produced in the United Kingdom are generally sold in Europe, and those pro- duced in Turkey are mainly sold in the Middle East and Atrica, though there is some cross-over.
There has been a lot of fluctuation in the exchange rate between the British pound and the euro, and this has affected where cars for a given market are produced. As the pound appreciates against the euro, production in the Swindon facil- ities is decreased; when the pound depreciates, production is increased. As the pound depreciates, it becomes a better option for the Swindon facility to produce more vehicles in the United Kingdom and sell them in other European coun- tries or the United States. However, the pound has not always been in a downward trend. In fact, sharp upward swings in the strength of the pound have often cut into the Swindon factory’s profitability.
Promotion. In the 2002 launch of the Jazz (known as the Fit in Japan), the company relied heavily on word of mouth and
The Euro -British Pound Exchange Rate: 2005—2014
(Euro/Br. Pound)
Source: Yahoo Finance.
on a website created especially for the occasion. The website used the same design for all European countries and promoted the car as suitable for young working women. The website attempted to give the car a cool, “young” image by associating it with Feng Shui, Yoga, and other hip activities. Once inside the Jazz website, a user could easily find the nearest dealership to purchase a vehicle.
Honda used to have its websites localized to individual European countries. However, as of 2016, Honda has decided to standardize its image throughout Europe (except in France yet). Its European websites emphasize racing, high-tech, speed, and engineering throughout. The rrench site is divided into three panels, with automobiles, motorcycles, and power equipment, and emphasizes how Honda cars match various lifestyle needs.
Since 2010, Honda has been pushing for a more
pan-E uropean strategy for video and print advertisements. The company is hoping for a more consistent brand image throughout the continent, where opinions on its automobiles are said to vary greatly between countries. This strategy seems to be in line with that of most foreign manufacturers in Europe. Nissan, for example, created a comprehensive ad campaign for Spring 2013 that was aimed at over 2tJ European coun- tries. GM and Ford have also advertised with one message throughout Europe.
Unlike foreign manufacturers, European automakers are more likely to pinpoint individual European Union (EU) countries in its ads. Audi is one company that does this. One Italian ad, for example, is very human centric, showing Italian architecture and kissing customs, and jealous ltalians chasing an Audi owner down the street. A German ad from the same time period simply features an Audi car speeding through a tunnel in mirror vision. There is even a special German-language catchphrase for Audi, “Vorsprung Durch Technik” (Progress through technology), which has been said to perfectly capture the German ideal for cars. This catch- phrase does not appear in the Italian ad, suggesting that Audi is comfortable with its brand image being different from coun- try to country. BMW and Renault can also be seen using sim- ilar country-specific advertising methods.
Martin Moll, the marketing director for Honda Europe, claims that one of the problems with Honda’s advertising has been its focus on the 5 percent of people who are actively searching for a car. From 2013 on, he hopes to build an emo- tional connection with the brand that will not only pull in cur- rent car shoppers but their friends and family as well.
EUROPEAN SALES
New passenger car registrations in the EU fell each year from 2008 to 2012, though there was a slight increase in 2013 and 2014. As of June 18, 2013 the sale of vehicles hit a 20-year low, falling to a record low of 1.08 million vehicles, less than the 1 million vehicles in recent years. These numbers are represen- tative of the EU, Sweden, Norway, and Iceland. One effect that the recession has had on the EU market is that car owners tend to hold onto their cars longer. Sales in the EU have also been falling due to unemployment and job insecurity caused by the recession. However, sales are expected to rise in the latter half of the year. Daimler CEO Dieter Zetsche states, “The market is bottoming out and a recovery is possible in the second half of the year.”
We can see 2014 EU sales for some of the major
manufacturers in the spreadsheet above. Honda only held 1 percent of the market. Honda’s automobiles have been rela- tively unpopular in the majority of Europe. Although recent data are unavailable, historical data suggest that sales have been lower in France and Italy than in the United Kingdom or Germany.
EUROPEAN CULTURE
One reason for Honda’s poor sales in Europe may be that the company has failed to truly understand the culture of Europe and has treated it as a single market. Although France, Germany, the United Kingdom, and Italy are all Euro- pean, cultural differences exist among them. One theory that explains the differences between the four nations is that of high-context versus low-context cultures. In a high-context culture, the interpretation of messages depends on contextual
European sales
Units
New Passenger Car Registrations in January
Rasults in the EU 2004—2014
Percentage
Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14
EU % change year-on-year
Source: ACEA.
PASSENGER CAR SALES IN EU FOR 2013—2014
January
January—January
18/2/14
%Share Units Units % Chg 14* 13* 14* 13* 14/13
%Shsre L/nits Unit9 % Ckg
J4* 13” 14* 13* 14/13
1VW Group: VW “other” include Bentley, Bugatti, Lamborghini, and since Aug ‘12 Porsche.
2FIAT Group: FIAT “other” include Dodge, Ferrari, Mascrati.
*data for Malta na. “ACEA estimates.
For further information, please contact:
Ms. Cara McLaughini – Communications Directrir E-mail: cmCacea.be – Tel. (32) 2 738 73 45
cues such as gender, age, balance of power, and not on physical written text. In a high-context culture, there are things that are not said but are understood. Countries considered to be high-context cultures include China, Japan, Italy, France, Spain, and Latin American countries.
Conversely, a low-context culture emphasizes distinctive written text or spoken words, where ideas are communicated
explicitly. Low-context cultures expect others to say what they mean and do what they say. There is far less empha- sis on contextual cues such as ranking and balance of power. Examples of countries that fall within this category are the United States, the Scandinavian nations, and Germany. The following figure presents a graphical view of high-context and low-context countries.
CULTURAL CONTEXT
The optimal approach to advertising differs between low- and high-context cultures. An advertisement for a high-context culture is based on an implicit style where the emphasis is on the overall feel and outlook rather than the feeding of pure information. In this type of advertisement, the actual prod- uct may not even be shown. The audience may be only given implied images and subliminal messages. Honda’s Jazz web- site contained a large amount of information which would have been too much for high-context cultures such as France or Italy.
for a high-context culture would be effective in a low-context culture country and vice versa. Since Europe consists of both high-context and low-context culture countries, companies such as Honda should take into consideration these separate market segments.
France. France is a high-context culture where style and image are of the utmost importance. The image of Japanese cars in France is relatively poor, dating back to the 1930s when Japanese manufacturers entered the European market with low-quality products and Japanese automobile manufacturers learned how to build vehicles through the emulation of Euro- pean automakers. Since that time, Japanese manufacturers, in particular Honda, have rai-ely emphasized style and image in marketing. Japanese manufacturers tend to only show a car in
High context
IMPLICIT
Japanese Arab
Latin,Arfierican
a factual way, which is low context.
Today, France’s image of Japanese cars, especially those made by Honda, is that of a small, low-quality car, only suit-
Low context
Spanish
yltalian
English (UK)
French English(US)
Scandinavian
German
able for a second car. Most buyers of Japanese cars in France are young career women who have just entered the workforce and housewives with limited cash. The main family car is likely to be a Renault or Peugeot and is driven by the man in the fam- ily. In addition, the French are risk averse people, who dislike trying new things. They are also highly nationalistic, support- ing and purchasing their national products, such as Renault
t Swiss EXPLICIT
An advertisement for a low-context culture includes the actual product, together with a large amount of information. Low-context nations such as Germany would have most likely bcen able to appreciate Honda’s Jazz website. It is therefore unlikely that an advertisement/promotion campaign created
and Peugeot cars.
French nationalism and risk aversion, together with a low image of Japanese cars and the large number of other Euro- pean automobiles available in the market, makes it extremely difficult for Honda to be successful in this market.
Italy. Italy, like France, is a high-context culture where a great deal of emphasis is placed on feeling and style. The Ital- ian culture is reflected in the people’s daily lifestyle, which gives a sense of romance to the people living there. As in
100%
90%
80%
70%
60%
50%
a 40%
20%
New passenger cars: Market share diesel vehicles by Member State
10% “
0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
France, the Italians view Japanese cars as small, low-quality vehicles, suitable only as a second family car. The most pop- ular automobile in Italy, especially for families, is the Fiat. The dominance of the Fiat is due to the Italians, like their high-context cousins the French, being very nationalistic.
Italians are also risk averse and are not adventurous in sampling products outside of Europe. Italians,1ike many Euro- peans, also love to drive diesel automobiles. However, Honda was slow to introduce diesel cars to Europe and did so first in the United Kingdom where they are not as popular. The fol- lowing graph shows the market share for diesel cars among new registrations.
The reason for the huge popularity of diesel cars could be due to the high gasoline price in those countries. Diesel engine cars are also cheaper to maintain in the long run, compared to gasoline engine cars. Honda seems to have finally caught on to the diesel trend, as will be explained later, but its slow intro- duction may have left the manufacturer at a disadvantage both in past sales and image.
Germun y. Oi the four main European countries that Honda is sold in, Germany has had the second highest sales volume. Germany is a low-contest culture where practicality and dura- bility are the main concerns customers tend to have for a prod- uct. Consumers are interested in every detail of a product and wish to know all relevant information before making a pur- chase. Honda’s information-rich website in Germany seems to be an appropriate form of promotion for the low-context nature of the Germans.
Another factor that should place Honda’s products in a better position in Germany is that Germans are more willing to take risks and purchase new products. As a result, Honda would not have to spend additional resources to chanp•e the image of its vehicles in Germany, as it should probably do in France and Italy. The company should promote its qual- ity because competitors in Germany such as Mercedes, Audi, Volvo, Jaguar, and Volkswagen are seen as high-quality man- ufacturers.
The United Kingdom. The English are part of a moder- ately high-context culture with a focus on tradition and class Accordingly, the type of advertising and marketing promotion that will appeal to the English is similar to that popular in France and Italy but more conservative in nature. On the other hand, the English are more individualistic and less risk averse than the French and Italians. Hence, it should be easier for Honda to introduce its range of cars in the United Kingdom and improve sales. The fact that Honda’s main EU manufac- turing plant is located in the United Kingdom helps in the promotion of its cars there.
COMMON PROBLEMS IN THE EU
Honda’s lack o1 understanding of Europe has been a huge problem for Honda in the EU. However, this lack of under- standing does not only apply to Honda. Honda’s contempo- raries such as Nissan and Toyota saw similar problems when they first ventured into the EU. However, Nissan and Toyota have dealt with the problem of culture by establishing research facilities and putting resources into the EU in order to gain a greater understanding of the market and needs of Europe. Nissan, for example, built research racilities in Europe as early
as 1992. On the other hand, Honda has exacerbated its prob- lems by having a lack of research in the EU. In fact, Honda opened its first research facility in 2003.
Honda’s research facilities are aimed to work with its American and Japanese research facilities in order to cre- ate new innovative products. These research facilities, unlike Nissan’s or Toyota’s, are devoted to creating innovation for the world as a whole. Consequently, they are not focused on the development of unique items for Europe or to study what European consumers want in pt oducts. Projects in Europe are aimed at safety and emissions and universal projects that can be applied to all vehicles. However, what Honda is not doing is studying what citizens in specific European countries want in its vehicles.
TECHNOLOGY-RELATED POSSIBILITIES
While Honda shows little sign of rethinking its distribution and marketing strategies in Europe, the company is putting a lot of effort into leading the field in engine technology. Some technology-related opportunities exist in Europe that could give Honda a technological advantage over its competition.
The European Union has set a goal to reduce CO2 emis- sions to an average of 95g/km by the year 2020. This puts Peugeot and Honda in a unique position as the only two companies that possess engines that already meet these stan- dards. In addition to this, 200 cities and towns in 10 coun- tries in Europe have started to put into place low-emission zones (LEZs), areas that have strict penalties for owners of cars with high CO2 emissions. Initially, these LEZs were aimed only at vans and larger polluting vehicles but are on a sched- ule that will slowly aifect more and more vehicles, forcing them to meet higher emissions standards. By 2015, all vehi- cles will need to be up to emissions standards or the own- ers will be forced to pay a fee to drive their high-emission vehicles. These LEZs aim at lowering emissions to 95 g/km by the year 2020. As an inccntive for individuals to drive low-emission cars, special tax breaks will be given to drivers of low-emission cars.
In an independent report in 2012, of the top 10 cars with the
lowest CO2 emissions in Europe, Honda’s Insight was ranked 8th with 111 g/km. In first was Peugeot’s iOn with 88 g/km, and others on the list came from VW, Vauxhall, Smart, Nissan, Toyota, and Audi. The Insight was surprisingly similar to the popular Toyota Prius, which came in 10th place. The two cars had the same CO2 Output level and a very similar design. Honda is competing on price against the Prius, offering the Insight at 18,825 British pounds (GBP) while the Prius is 23,400 GBP. However, the Prius is the clear winner in terms of sales, at least worldwide, selling 17 times as many units as the Insight. According to a review, although the Insight is better in CO emissions, it is not as fuel efficient as the Prius.
Recently, in 2013, Honda introduced a new engine called the 1.60-liter i-DTEC Diesel which is being promoted as ahead of its time in terms of miles per gallon and emissions technol- ogy. The new diesel engine emits CO2 at 94 g/km placing it below the average CO2 Emissions that the EU is targeting by 2020 (95 g/km). This also places Honda’s new Diesel engine as the second most “green” engine in the EU attcr Peugeot’s iOn that sports emissions of hh g/km. This makes it the number one diesel engine on the market for emissions, since Peugeot’s engine is electric. It also meets the standards set by the EU
for 2020 for emissions. This new technology is the lightest and fastest engine on the market, boasting 78.5 miles per gallon and accelerating quickly. This low-emission engine is available in all of the Honda models, making its vehicles some of the greenest in Europe.
HONDA VS. NISSAN AND TOYOTA
Honda has suffered hard times in Europe and has had difficulty becoming a major player in the European market. However, other Japanese companies that have entered Japan have not only succeeded in the EU but are thriving.
NISSAN
Distribution and Mann ‘acturin g. Nissan entered the Euro- pean auto industry much earlier han Honda. Nissan began importing vehicles to Europe in 1 62. Unlike Honda, Nissan concentrated on automobiles an I on creating distribution chains specifically for its automobi es. In 1980, Nissan pursued an M&A strategy by acquiring a rr ajority equity position in a Spanish company it had been work rig with, in order to acquire a manufacturing and distribution location. Nissan chose to begin its European manufacturing in a less expensive coun- try that was easier to distribute from as compared to Honda which began in thc United Kingdo n.
Nissan used a merger strategy in order to gain insight into
the European market and gain a distribution center. In 1984, it created a new manufacturing center in the United Kingdom capable of producing 500,000 units a year. Since 1984, Nissan has not created any new manufactt ring centers, but it started manufacturing more vehicles in France starting in 2013 through a partnership with Renaul
Taking an Interest in Euroye. Nc t only did Nissan have a first mover advantage over Honda in the automobile indus- try, but it also took the initiative to make Europe a priority early on. In 1989, Nissan established an HQ in Amsterdam and went even further by creating research facilities in 1992 in Ger- many and again in 2003 in London.”these facilities were meant
to study the European market. Thi strategy worked well, as
in 1993, Nissan released a specialty car for Europe that won the car of the year award. These facilities also allowed Nissan to release specialty vehicles to meet the needs of consumers in Europe.
Mergers and Joint Ventures. Unlike Honda, Nissan pursued a series of mergers and acquisition strategies to be success- fu1 in Europe. Notably, Nissan entered a partnership with the French car maker Renault in 1999. Renault purchased more than 40 percent of Nissan’s stock in or‹ler to alleviate Nissan’s debt, allowing Renault to benefit from the quality technology of Nissan and its reputation in other parts of Europe. Nissan received the tools to enter the French market that was tradi- tionally occupied by Renault, the national brand. Renault and Nissan became known as the Renault—Nissan Alliance.
In 2009, the Renault—Nissan Alliancc partnered with Daimler in order to create the Renault Daimler—Nissan alliance. In this alliance with Nissan, Daimler and Renault each own 3.9 percent of each other company’s stock. The three companies combined became the third biggest market share holder in Europe in 2009 and is currently the second biggest market share holder in Europe. Nissan has successfully used
joint ventures and partnerships to become one of the biggest players in the European market today.
Key Difierences between Honda and Nissan. When compar- ing Honda and Nissan, we can see that Nissan had several key advantages when entering Europe that Honda did not. First, it entered the market much earlier in the 1960s by importing cars and in 1980 by acquiring a Spanish manufacturing and distribu- tion company. Second, because of its history in Europe, Nissan had a much better understanding of the European market when it entered the market. It also already had a recognized brand because of its time in Europe. Third, Nissan had the advantage of committing to Europe early by building an HQ, research facilities, and multiple manufacturing areas. Honda on the other hand made its first European research facility in 2003, and even that was not devoted to the European region. Finally, Nissan succeeded because of its strong partnerships in Europe. Nissan had knowledge, reputation, and friends in Europe, where Honda did not.
TOYOTA
Distribution und Munn(acturing. Toyota, like Nissan, entered the European auto industry earlier than Honda. However, Toyota entered the market slightly later than Nis- san, as it began to import its vehicles to Europe in 1963 through Denmark. Toyota quickly elevated itself from an importer in Europe to the top selling Japanese car manufac- turer in Europe. Toyota was the first of the three companies to own manufacturing plants in Europe after it partnered with Salvador Caetano. Toyota and Salvador Caetano worked jointly in a manufacturing facility in Portugal in 1971, 9 years before Nissan and 15 years before Honda. This joint venture, like Nissan’s, helped the company to form better distribu- tion markets and a better understanding ot the European market. It wasn’t until t992 that Toyota would build its first privately run production facility of cars and engines in the United Kingdom. In 1995, plants were established in both Belgium and France. Production grew exponentially for Toy- ota after this, with a new manufacturing plant opening in Turkey in 2002, which became a major strategic manufacturing center in 2004. This was followed in 2005 with manufacturing plants in Poland and the Czech Republic through a joint ven- ture with Peugeot and Citroen. Finally, in 2007, Toyota’s last manufacturing plant to date was opened in St. Pctersburg, Russia, giving Toyota a total of nine plants in seven countries in Europe. This made it the largest Japanese manufacturer in Europe.
Taking an Interest in Europe. Toyota, much like Nissan, took an interest in Europe very early on and established a varicty of offices and development centers in order to meet the needs of European clients. Toyota established a European headquar- ters office as early as 1970, before acquiring its first manufac- turinp• system in Brussels, Belgium. Belgium has remained an important location for Toyota. In 1987, the Toyota Technical Center of Europe was completed in Belgium. This site was cre- ated in order to facilitate research and development aimed at the European market. The site was further expanded in 2006 to better meet the needs of European consumers. In 1959, another facility was opened in Belgium called the Toyota Tech- nical Center of Europe in order to train service instructors and
engineers from all of Toyota’s European distributors. Another facility opened in France in 2000 in order to learn more about the French consumer and create new innovations for Europe. This center produced Toyota’s first Formula-1 engine in 2001. Toyota continued to invest in Europe by cxpanding its R&D centers in 2006 and opening part centers in 2007 as well as investing in diesel engines in 2005. These expan- sions have allowed Toyota to have models named car of the year in 1992, 2000, and 2004. Since 1990, Toyota has invested more than 7 billion Euros in Europe, showing its dedication to the market.
These developments continued in Europe in 200b as Toyota
sought to meet the European market’s need for sustainable energy by creating sustainable manufacturing plants. These facilities attempted to use less water and create less pollution. Toyota also plans to sell more than 1 million Toyota and Lexus hybrids per year. It will also make all Toyota retail- ers in Europe ISO 14001 certified by 2015. Such a certifi- cation indicates high environmental standards. Toyota will additionally offer hybrid technology on all or its models by 2020. Looking at both Toyota’s manufacturing development and Europe-focused research centers, this company appears dedicated to this region.
Merger.s and.joint Ventures. Toyota, like Nissan, has entered into mergers and joint ventures with companies in Europe. The most notable joint venture occurred in 2005 when Toyota joined Peugeot Citroen of France. The deal was officially signed in 2001—2002 between Peugeot and Toyota to produce mini-cars for Kolin, Czech Republic. The vehicles were cre- ated with parts shared between Toyota and Peugeot Citroen, and Toyota was responsible for running the factory. Together the companies produced the AYGO which at the time had one of the lowest emissions rates in the world, 109 g/km. The joint venture continues to this day and Peugeot still helps Toyota create the AYGO as well as other vehicles in the Czech Republic.
Key Diff’erences between Honda and Toyota. Toyota had many of the same advantages over Honda that Nissan did. First, Toyota entered the market much earlier than Honda and
created its first manufacturing plants in Portugal through joint ventures. Second, Toyota created many facilities in Europe, establishing its headquarters in Brussels, Belgium, in 1970, a full year before acquiring manufacturing plants. Toyota made it clear that it was entering Europe for the long run early on. Third, like Nissan, Toyota created a number of research and training facilities in order to better understand its customers in Europe. This enabled Toyota to create vehicles that appealed to European sensibilities and that were differentiated between the countries in Europe. Much like Nissan, Toyota developed relationships, fostered friendships, and developed a reputation from the ground up.
Hondv, Nissan, and Toyota. The main differences between Honda and its Japanese counterparts can be seen above. First, Honda entered the market later than its compatriots. Honda also took a softer stance when entering Europe. It opted to use its motorcycle distribution lines and later allow distribution at dealerships that carried other brands. Toyota and Nissan on the other hand made the effort to buy manufacturing plants in locations in Europe as well as create headquarters, research facilities, and training facilities. Honda did not invest in such facilities until much later and at a much smaller rate. Honda also has a tendency to rely on its technological advantages rather than meet the wants of its European customers. Nissan and Toyota have found strength in customizing vehicles to meet the unique needs of customers in each major country in Europe. Toyota and Nissan made connections in Europe when Honda simply went for the sale.
The Issue. Honda has been experiencing dramatic declines in sales revenue in Europe. Just as the company experienced dif- ficulty in reconciling technology and marketing in Souichiro Honda’s time, the company does not seem to have a uni- fied vision for Europe. Honda has made some changes to its diesel and low-emissions technology offerings. However, aside from its website, Honda’s advcrtisements are not localized. Its distribution strategy continues to lack clarity. Honda also has to deal with continued capacity issues. How should Honda turn itself around in Europe? Can it save itself with technology?
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