External factors at the Honda company

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Information integrating external factors at the Honda company with critical thinking
Information integrating external factors at the Honda company with critical thinking

Currently Automobile market is one of the toughest and competitive markets in the world. Moreover big companies like GM, Ford is into losses. The snapshot of American hybrid car market is given:

Honda is much more efficient and profitable than GM and Ford. They have implemented total quality management which helps in eliminating wastage and improving operating efficiencies. But on the flipside the most important problem that the Honda faces is of lower sales growth. In the last three years the growth is around 5% (See excel file).

Thus the most important problem facing the Honda is of maintaining growth in market share and profitability in the automobile market. Thus it has to introduce new products and reengineer the existing products to maintain its market share. As we are seeing above Honda is only having 9 % in market share in the hybrid car market.
Source: Hybridcars.com
External factors
The changes in the global auto industries and market had been the key factors to influence the changes in business management system. In the US, the country had been able to adapt to the needs of having a more competitive industry by using different management approach. One of the strategic moved made by the US is its membership with the World Trade Organization, as a member US society will undergo deep changes.
The concept of endogenous economic development highlights the US auto industry's need to allow change and make room for the growth of its production system by developing and utilizing the potential of local resources especially its people through the investment of private firms and holdings as well as of the government itself through national economic policies. Kavussanos (2001) discussed that economic growth and structural change are the result of investment strategies and decisions of enterprises operating in the market and integrated into the cultural milieu that conditions economic dynamics of territory affecting the production of the organization, the relational system and innovation as well as the learning process. The country's fast developing coastal areas and main regions distinguished and highlighted the need to extend such economic development in the interior regions.
The US auto industry's capacity to meet the growing demands for automobiles to be exported can be explained by the fact they have the biggest work force in the world and many countries trust them with investment. This fact leads to another fact that the US is the largest manufacturer of automobiles. Because of the efficiency of the US work force are able to produce finished good at a rate that they have a lot of surplus to export around the globe. And because of low workers pay manufacturers are able to distribute their goods at a much lower rate, once these goods hit the market there prices will still be within the reach of the average consumer.
Demographics

For many years now, the baby boomers generation has been the main target market for just about every product. As their generation is getting ready to retire and spend less money, the automakers are looking at the younger generations. Right now, the focus is starting to turn towards the baby boomers children (Generation X) who are in their mid 20's and 30's and Generation Y(Winter, 2002). GenYer's are now hitting the age where they are able to buy cars. According to Drew Winter, "Analysts say that five years from now Gen X and Gen Y combined will account for at least 40% of vehicle sales."

Technology

The internet has affected just about every industry in the world and has also had a huge impact on the automobile industry. A study was conducted by J.D. Power and Associates in 2002 and involved more 27,000 new vehicle buyers. The study showed that 60% of the buyers referred to the internet before making their purchases and out of that 60%, 88% went to the auto websites before going and taking a test drive. Business-to-business marketplaces have given the industry many opportunities because of the internet, such as more efficiency and lower cost. Ford, GM, and Daimler Chrysler announced in 2000 their plans to create a global online exchange for suppliers and the original equipment manufacturers. The exchange was originally called NewCo, and then it was changed to Convisint. According to Motor Vehicles and Passenger Car bodies, "In August 2002 General Motors announced it was about to begin sending requests for quotes to suppliers through Covisint using a tool called Quote Manager."

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