Marketing of Honda motorcycles

Marketing of Honda motorcycles in the USA

The American Honda Motor Company was established as a subsidiary

by Honda in 1959. During the 1960's the type of motorcycles

brought by Americans underwent a major change. Motorcycle

registrations increased by over 800,000 in five years from 1960.

In the early 60's the major competitors were Haley - Davidson of

U.S.A, BSA, Triumph and Norton of the UK and Motto - Guzzi of

Italy. Harley-Davidson had the largest market share with sales in

1959 totalling a6.6 million dollars. Many of the motorcycles

produced were large and bulky and this led to the image of the

motorcycle rider as being one who wore a leather jacket and went

out to cause trouble.

The Boston Consulting Group ( BCG ) report was initiated by the

British government to study the decline in British motorcycle

companies around the world, especially in the USA where sales had

dropped from 49% in 1959 to 9% in 1973. The two key factors the

report identified was the market share loss and profitability

declines an the scale economy disadvantages in technology,

distribution, and manufacturing. The BCG report showed that

success of the Japanese manufacturers started with the growth of

their own domestic markets. The high production for domestic

demand led to Honda experiencing economies of scale as the cost

of producing motorbikes declined with the level of output. This

provided Honda to achieve a highly competitive cost position

which they used to penetrate into the US market. " The basic

philosophy of the Japanese manufacture is that high volumes per

model provide the potential for high productivity as a result of

using capital intensive and highly automated techniques. Their

marketing strategies are therefore directed towards developing

these high model volumes, hence the careful attention that we

have observed them giving to growth and market

share." (BCG p.59 ).

The report goes on to show how Honda built up engineering

competencies through the innovation of Mr Honda. The company also

moved away from other companies who relied upon distributors to

sell their bikes when the company set up its headquarters in the

west coast of America. The BCG found that the motorcycles

available before Honda entered the market were for limited group

of people such as the police, army etc. But Honda had a "policy

of selling, not primarily to confirmed motorcyclists but rather

to members of the general public who had never before given a

second thought to a motorcycle"( SP p.116 ). The small,

lightweight Honda Supercub sold at under 250 dollars compared to

the bigger American or British machines which were retailing at

around 1000 to 1500 dollars. In 1960 Honda's research team

comprised of around 700 designer and engineer staff compared to

the 100 or so employed by their competitors showing the v alue

which the company placed on innovation. Production per man-year

was 159 units in 1962, a figure not reached by Harley-Davidson

until 1974. Honda was following a strategy of developing region

by region. Over a period of four to five years they moved from

the west coast of America to the east coast. The report showed

the emphasis which Honda paid to advertising when the company

spent heavily on the advertising theme " you meet the nicest

people on a Honda" thereby disassociating themselves from the

rowdy, hell's angels type of people.

Essentially the BCG is portraying Honda as a firm dedicated to

being a low cost producer, utilising its dominant position in

Japan to force entry into the U.S market, redefining that market

by putting up the nicest people image and exploiting its

comparative advantage via aggressive advertising and pricing.

Pascale tends to disagree on many points of the BCG report. The

report suggests that there was a smooth entry into the U.S market

which led to an instant success. Pascale argues that Honda

entered the American market at the end of the motorcycle trade

season showing their impotence to carry out research in the new

market. As they entered the market at the wrong time sales were

not as good as they should have been and any success was not

going to be instantaneous. Pascale also criticises the

assumption that Honda was superior to other competitors in

productivity. He says that Honda was successful in Japan with

productivity but circumstances indicate that the company was not

superior. The lack of funding from the ministry of finance and

the ploughing back of profits into inventory meant they had a

tight budget to follow.

The BCG report shows that Honda had a smooth policy of developing

region by region, moving from the west to the east. Pascale

response is that this is partly true but reminds that Hondas

advertising was still ...

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