The Challenges Honda Company Encountered During Globalization

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Table of contents

  1. Introduction
  2. The Change in Global Business Environment
  3. Conclusion

Introduction

Globalization is the combination of everything with everything else. An increasingly complete definition is that Globalization is the incorporation of business sectors, fund, and innovation such that contracts the world from a size medium to a size little. Globalization empowers every one of us, wherever we live, to stretch the world over more distant, quicker, more profound, and less expensive than any time in recent memory and in the meantime enables the world to venture into every one of us more distant, quicker, more profound, and less expensive than any time in recent memory (Waters, 2001, p.5). In 1984, Honda Motor Company Ltd. (HMCL) entered the Indian bike advertise through a joint endeavor with Kinetic Engineering Limited (KEL). KEL propelled a useful bike demonstrate Kinetic Honda. It presented current highlights in its bikes like variomatric gearless transmission, self-begin, and other easy to use highlights. That year, HMCL went into another joint endeavor with the India-based Hero Group and framed HeroHonda Motors Ltd. (HeroHonda) with a 26% value stake in the collective attempt. Throughout the years, the connection between the Hero Group and HMCL reinforced with the expanded offers of bikes. In 1993, HMCL expanded its stake in the Hero-Honda joint dare to 50.92% (Icmrindia.org, 2013).

In the mid-1990s, its achievement in bikes prompted KEL choosing to go into the bike business. In any case, KEL was not permitted to do as such as HMCL as of now had a joint endeavor with the Hero Group. In 1998, HMCL stripped itself of its valuable stake in KEL. Honda Motor Company of Japan decides to re-enter the scooter market in India. After finishing its joint venture with Kinetic Engineering Limited (KEL), Honda Motor Company of Japan re-entered the Indian scooter market with HMSI (Honda Motorcycles and Scooters India) with the potential of capturing the market of gearless scooter’s which they made with Kinetic and now when the venture is over, Honda re-entered to dominate the market with the technology available with them and taking the advantage of launching Honda Activa as the first gearless scooter of modern times with the fuel efficiency better than a four stroke scooter which were sold by their rival Bajaj Auto ltd. It was a table turning moment for Honda in India, as there was nothing new going on this sector and people were shifting their focus from scooters to the motorcycles, so with the launch of Activa the market gained something new and people adopted the change (Businesstoday.in, 2016). Also in older times we haven’t seen many women riders but with the launch of Activa a lot of women riders got attracted as it was gearless and easy to ride so this Automatic transmission was the key to success for Honda in India.

  • Political Factors

Being one of the highest vote put together frameworks concerning the planet, India continues running on an authoritative kind of government. The political condition is extraordinarily affected by factors, for instance, the government's methodologies, official's interests, and the conviction frameworks of a couple of political get-togethers. The Indian government has changed his job from controller to facilitator with a prime spotlight on giving better framework, development situated financial strategies and right condition to draw in ventures. The advancement steps, for example, unwinding of the foreign trade and value controls, decrease of duties on imports, and refining the keeping money approaches, have played a similarly crucial job in conveying the Indian Auto-motive industry to incredible heights. Institutionalization of automobile finance has further paved the way to sustain a long-term high growth for the industry.

  • Economic Factors

Rising GDP consecutively for the last 5 years has led to increased purchasing power and hence the automobiles. Per capita Income is rising, which is affecting the segments of automobiles being ventured into. There is ferocious challenge among numerous players in market. Expanding urbanization of provincial India likewise has offered ascend to increment in deals. The idea of administration in car industry has changed into client care now, in this manner en-compassing the more prominent incentive into it.

  • Social Factors

As with the change in time,the joint family concept is growing old and the families are increasingly becoming nuclear. With the time people’s income are also increasing so their potential to spend more is also increasing, as the cities are growing bigger the distance to work from home is also increasing so people will be requiring a vehicle to cover the distance and plus in modern times women are equally working as men are so the level of income potentially as increases as there are more earning people in a family then used to be.

  • Technological Factors

The two wheeler industry in India was very stagnant at that time where players like Bajaj and LML were dominating the Indian market with their 4 stroke geared scooters and nothing new in the sector since last two decades and then Honda comes up with the gearless scooter technology which boomed up the market for two wheelers in India and gained a lot a lot of attention when people were shifting their focus from scooters to motorcycles. Honda Motorcycles and Scooter India Ltd. (HMSI) develops a new engine in Indian Market, Honda Eco Technology (HET). Today’s generation in India wants sporty like bike with more mileage. Remembering this Honda has framed vital methodology of Mileage Up for boosting consumer loyalty, Honda propelled the all new Honda Eco Technology in 2013, making the Most Fuel Efficient 2-Wheeler in India (Honda Annual report 2013-14). In regard to the rising fuel prices in the country people want a vehicle that is more fuel efficient and give them the best level of satisfaction when they purchase the vehicle. Honda Motorcycle & Scooter India Pvt Ltd (HMSI), has completed its most successful year with domestic sales of 37,21,935 units as compared to 27,54,685 units during the last fiscal year, which means an increase of a mind boggling 35.11 per cent (Overdrive, 2013). With the introduction of HET (Honda Eco Technology) engines in one day alone i.e., March 31 it sold an amazing 55,000 units. Honda was leading the two wheeler market since its launch of the gearless scooters in India and has been increasing its portfolio since then with the introduction of new models in its line-up. HET (Honda Eco Technology) was not only limited to scooters but also for the motorcycles in its portfolio, depending upon the needs of the buyers.

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  • Political Factors

Indian Government auto policy aimed at promoting an integrated, phase and conductive growth of the Indian automobile industry. Allow automatic approval for foreign investment, with no minimum investment criteria, and allowance for tax deduction in Research and Development activities. Honda’s HET (Honda Eco Technology) engines were research and developed in India itself, taking care of the needs of the Indian buyers and low taxation on research and development activities Honda made the India’s most fuel efficient two wheeler engine and presented it to the whole world.

  • Economic Factors

Minimal effort of work combined with neighbourhood accessibility of crude materials like steel, normal elastic has set India among the ease creating focuses on bikes. Many Auto finance organization laid simple portion rules with less interest makes greater section individuals put it all on the line. With the cheap availability of raw material and labour in India it is very easy to set up the manufacturing plants for the companies who use to outsource their parts are now able to manufacture in India itself that’s what Honda did they opened up their new factory in Gujarat in 2012 with a capacity of manufacturing 6600 vehicles per day (Honda timeline 2013).

  • Social factors

In India there are numerous cultures, and motorcycle and scooter being the primary means of transport. Two wheelers gave a great advantage to the specified destination where other things cannot enter. Most of the Indian population is middle class and it has doubled from 300 million in 2004 to 600 million in 2012 (World Economic Forum). Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money, and being a very populated country people prefer two wheelers for shorter distances over cars as they are very time saving and convenient.

  • Technological Factors

Two wheeler construction is the engineering, manufacturing and assembly of components and systems for two wheelers which results in performance, cost and aesthetics designed by the designers. The business utilizes producing innovation that is the forefront of science. Yet at the same time, the potential for creating coordination abilities, scholarly capacities and enthusiastic sensitivities through electronic innovations stay a long way from completely abused. There are various extra close term innovative chances to adjust the car to changing vitality accessibility. The conceivable outcomes propose that car innovation is suddenly strong and gives an incredible guard against vitality starvation regardless of whether the genuine cost of oil climbs relentlessly amid the following couple of decades.

The Change in Global Business Environment

Eventually the nature of global business environment has changed since India has entered the Indian market after it has broken its collaboration with Kinetic Engineering Limited (KEL) and entered India on individual basis in 1999. This example epitomizes how the developing economies like India were benefitting from globalization at this specific moment in time. Thus, it was of no surprise that India relaxed legislation and offered incentive to investors, in order to promote the country as a prime location for FDI (Foreign Direct Investment). It is of interest to note that India came up with a LPG (Liberalization Privatization and Globalization) policy in 1991. Crucially, certain countries embraced globalization earlier than others.

Therefore, they reaped the benefits of a world where boundaries were being eradicated and cultures were becoming homogenized at a rapid rate. It is evident that in the mid- 1990s, the focus was on the developed economies and forward- thinking nations. Honda’s expansion into India replicates the nature of the global business environment at the same time. India is a very big market and has a lot of potential in it, it is all about grabbing the right opportunity and which Honda did very wisely as the two wheeler automotive industry was at a very stagnant stage after there was nothing new coming from the manufacturers, and Honda came up with the gearless scooter and very soon captured the people’s attention and the market as well. Population in India is very distinctively moving as they’ll always follow the trend so this technology has become the new trend for the people in India and gained popularity very soon and as there were no competitors in the market with same technology at that time so Honda was basically the dominating the market with their product at that time.

Honda’s development of new engine i.e., HET (Honda eco Technology) engines in India highlights the potential for change in the attitude towards the globalization. This example reveals an important aspect of the process of globalization. When analyzing globalization, often the process is viewed only through an economic or political lens. However ‘people become increasingly aware’ (Waters, 2001, p.5) too. The development of engine in India portrays the easy laws that Indian Government made regarding the Research and Development facilities in India and automatic approval for FDI in automotive industry in India. Even after the entry of many significant players in the market like Yamaha, TVS, Suzuki, Hero Moto Corp. Honda has managed to remain no.1 selling two wheeler brand in India just because of the trust and reputation it has built in the market and mind of the public. The new Honda Eco Technology boosts fuel efficiency of Honda's products resulting in a Dream Mileage, this revolutionary mileage benchmark is yet another milestone from Honda (Honda2wheelersindia.com, n.d.). In 2011 Honda ended it years long venture with Hero Moto Corp. The companies decided to part ways owing to unresolved disputes like issue of exports, board representation, investment in R&D and direct competition from their Indian subsidiary HMSI (Honda Motorcycles and Scooters India), and their own plans for the Indian and international markets. Honda decided to exit the venture by selling its 26% stake to the Munjal family, the owners of Hero Moto Corp.

Conclusion

To sum up, in a truly international industry as that of two wheeler, for the past two decades Honda has been under immense pressure from the international business environment. In particular, political factors have been of great importance for the company’s competitiveness on the market. Due to the liberalisation of the industry, Honda was faced with greater competition from its own Japanese rivals which has forced the company to adapt its strategy. Furthermore, in more recent times other factors in the form of international and national legislations regarding the sustainability of the two wheeler market required the company to once again rethink its operations with regards to the new trend of the two wheeler automotive industry.n Overall, the effects of globalisation in the industry, and specifically the intensified international collaborations and R&D opportunities are noted to have greatly influenced the decision- making process. In both the examples in which Honda was involved, the company made use of the opening of markets and the liberalisation of the industry, in order to stay competitive on the international market and together with other key players, such as Hero Moto Corp., TVS & Yamaha lead the new wave of innovation.

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