INTRODUCTION

A company operating in the global market can gain competitive advantage through a
continuous focus on technology change, innovation and the firm's ability to concentrate on
the mass market. Companies focus on adopting different global strategies that help them
mitigate the different trade barriers faced by firms. A firm operating in the global market
needs to maintain a strong focus on change and change its strategy and operations with
changes in the global environment. In an ever-changing environment, companies need to
focus on applied strategies rather than focusing on a single strategy. Applying different
strategies helps improve the company's performance.

Different strategies are used by companies to achieve competitive advantage, to

provide different products to consumers. The Company focuses on adopting different
strategies adopted at various levels of the company - Corporate Strategy and Business
Strategy.
 3.0 CORPORATE STRATEGY OF HONDA

Corporate strategy involves business decisions related to the choice of participating

companies and the selection of tactics for business continuity in the industry. The strategy
focuses on the development of different strategies and functions so that the company can
meet the needs and expectations of its stakeholders. This includes increasing the company's
competitiveness in the market (Harrison and St. John, 2013). Few companies in the global
business community can take pride in applying the right corporate strategy to maintain
profitability in a competitive environment. Honda's ability to maintain sustainable
profitability since its inception in 1948 has been an impressive driver of many automotive
companies seeking to succeed with its management strategy by producing cost effective cars
in more than 100 locations in 33 countries around the world. In addition to localization, the
company uses three approaches to corporate strategy to maintain its position as the most
innovative car maker in a sector dominated by big players like GM and Toyota. Honda
Motors focuses on growth strategies below.

The company focus on growth strategies through horizontal integration that focuses
on integrating with companies operating at the same level and vertical integration that
focuses on integrating with them as distributors or suppliers through a focus on backward or
forward integration.

Firms also focus on diversification strategies, which focus on resources and synergies.
This is a strategy that helps reduce company risk and provides different opportunities for
companies to operate in the market. "The relevance or potential for synergy is one of the key
considerations in formulating diversity strategies." (Hitt, 2009). Another way in which a
company focuses on diversification strategies is through mergers and acquisitions.

Mergers and Acquisitions are also one of the key factors that can be considered by
organizations that focus on diversity (Hitt, Hoskisson, Ireland, 2013). The key to Honda's
strategy in this global environment is to have the agility to simultaneously grow locally and
internationally, as it will have companies responding quickly to regional priorities while
improving operational tactics and increasing manufacturing worldwide. To accelerate
innovation and diversify their strategic moves will benefit Honda as a leader in the industry.
 3.1 Vertical Integration at Honda

Vertical integration is a corporate-level strategy whereby large firms seek to reduce costs and
improve quality by accessing and controlling the value chain. Therefore, companies can try to
control their suppliers through acquisitions so that the organization becomes its customer, in
the form of a vertical integration called backward integration. The firm can also control their
sales in order to gain greater market share and increase the scope of the economy. Honda has
successfully used vertical integration to market its brand as a cheap car manufacturer and to
gain customer loyalty. For example, unlike major American, European and Asian competitors
like Ford and Kia, Honda is directly responsible for the production of engines mounted on
their cars and motorcycles. In fact, according to Rothfeder (2014), the company is the world's
leading producer of combustion engines, through factories set up in various locations across
29 countries. In addition, the organization has adapted to the vertical integration of operations
through sales and marketing-based integration. The company markets it through ownership of
showrooms and subsidiaries in most European countries, as well as close monitoring of brand
traders in major cities such as Bangkok through the 4S support framework, thus gaining more
control over the retail chain (Mullins, Walker, and Boyd, 2012).

Honda's vertical integration has benefited the company a lot. First, the company
reduced the costs associated with the supplier of the engine potentially transferring higher
costs to the buyer. As such, the company continues to build on its reputation as a low-cost
automotive manufacturer, allowing Honda to survive in the competitive motor vehicle
industry, both in Japan, and overseas markets such as the United States (Rothfeder, 2014). In
addition, the firm has been able to control product quality due to its vertical integration. This
close control saw Honda emerge as the first company to produce engines compliant with the
Clean Air Act, a success that other motorists could not achieve due to their dependence on
suppliers for engine production (Rothfeder, 2014). In addition, the close control provided to
Honda through vertical integration enables the company to incorporate more innovation into
the manufacturing process, establishing a reputation as one of the most innovative brands
worldwide. Most importantly, the company has succeeded in establishing consumer loyalty
because of the strategies it embodies in its vertical integration, such as 4S that puts customers'
interests at the forefront of the retail process.
 3.2 Strategic Outsourcing at Honda

Strategic outsourcing in business is the optimum use of key competencies in organizations

while at the same time looking for skills that are outside of the firm. The identification of key
competencies often begins with an evaluation of the technology, knowledge, skills, and other
operational capabilities available to a firm in a particular business area. When key
competencies are identified, they are integrated to give organizations a competitive advantage
in the market. Honda is one of the organizations that has reaped huge rewards from strategic
outsourcing based on the introduction of key competencies. In the competitive automotive
industry, the company's decision to focus on the key business competencies of combustion
engine manufacturing (Rothfeder, 2014). Therefore, the company uses non-core outsourcing
strategies such as the production of car body parts, and retail sales that are in the hands of
independent dealers, despite the support of the company. Therefore, the company focuses on
what it does best: producing fuel efficient engines and cheap cars.

The firm has benefited greatly from its strategic outsourcing that has enabled it to
compete in the global market with some of the largest car manufacturers. First, the focus on
its core competencies has enabled greater innovation in the company, given the quality
assurance of the supply of non-material external materials (Rothfeder, 2014). Second, Honda
has been able to reduce the overhead costs associated with non-core activities, thus
translating lower costs to reduced prices for its users. As such, the firm maintains a
competitive edge in the marketplace where most western manufacturers are burdened by high
overhead costs that prevent them from competing sufficiently. In addition, strategic
outsourcing allows Honda to optimize both its core competencies and the non-essentials as
the firm can select the best supplier for some of the manufacturing materials the company
does not manage, allowing Honda to use external innovations. Finally, companies reduce
investments in non-core activities that can only raise costs while not providing a favorable
return.
 3.3 Diversification at Honda

Diversification is a corporate strategy that involves exploring the market through more than
one product or service. In many industries, firms tend to diversify related products to
maintain their brand image in a particular business area. Honda is a great example of a
company that has succeeded in the global market through the use of both of these related
varieties (Harrison and St. John, 2013). The diversity attributed to Honda stems from its core
competencies in the production of combustion engines. Initially, the firm specialized in
motorcycle production. Business expansion to markets outside Japan saw the company's
efforts in the manufacture of motor vehicles equipped with combustion engines that the
company has built a reputation for. Finally, Honda is also exploring production machines
using conventional mechanisms such as motorcycles and motor vehicles. Such power tools
include lawn mowers, superbikes, HondaJet aircraft, and boat engines (Harrison and St. John,
2013).

Diversification has played a major role in enabling Honda to navigate competition in

the global market. Some of the benefits that the firm derives from its diversification strategy
include rapid growth in the global market, the creation of stronger brands, and the ability to
mitigate the risk of loss arising from the fluctuations in demand for a single product. First,
Honda's local production strategy enables it to grow rapidly. Honda, for example, is a leading
motorcycle manufacturer in South Eastern Asia and India for its successful scooter and
motorcycle success (Rothfeder, 2014). Second, the company has created a stronger brand
through diversification, given the positive reputation it has created in its motorcycle business
in Asia that has enabled it to maintain a loyal customer base in the region while capturing
other markets such as the United States through fuel efficiency and low-cost vehicles.
Finally, Honda's diversification has reduced the risk of major losses as fluctuations in one
market can be covered by sales in other markets, as well as products. For example, Honda
largely survived the 2008 economic crisis due to diversification into a variety of cheap cars,
with its two models showing positive results in the American market (Masood and Sajid,
2013).
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http://www.businessinsider.com/strategies-that-make-honda-innovative-2014-7
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