Pitfalls in Strategic Planning: What did Honda learn in the US market?
What does it to take succeed in a competitive market? A good product is necessary but not a sufficient condition. You also need to find the right segment where the product needs to be positioned. To achieve this goal, organizations spend considerable time in strategic planning , coupled with vision, mission and goal statements. Quite often such statements look great ONLY ON WALLS is beside the point!
In 1959 Honda Motorcycle Company from Japan decided to enter the US market with its new brand of motorcycles. The strategic planning and the marketing team did a careful market research and came to the conclusion that premium-end motorbikes are appropriate for the US market. Being a highly developed automobile market, the motorcycles were used as fun vehicles where speed , power and long-distance drive on highways were the critical customer preferences. A new design team was put in place for this project, prototypes tested, developed and the bikes were launched.
Back home, in the post-war Japan, Honda had developed a 50cc motorized bicycle called Supercub which was similar to Luna or TVS 5O in India in the 70s. Supercub was primarily used by delivery boys in the congested city areas and also by the general populace. Honda had developed enough expertise for the engines in the 50-100cc range.
Three engineers were sent to Los Angeles to get a foothold for Honda in the US market. The bikes indeed offered a cost advantage in the premium category. However the expertise in the 50cc segment was not transferrable to high-end bikes. There were frequent problems in terms of oil leaks, clutch wire breakages etc. Air freighting the warranty parts also added to Honda’s woes.
Kihachiro Kawashima and his two colleagues had brought their 50 CC Supercub to LA for local commute. He was getting frustrated with the on-going problems and started taking his Supercub for off-the-road dirt biking. It was a stress-buster; he started feeling better. A few days later, his American friends followed suit and they too liked the experience. Customers in LA started enquiring about Supercub. Even Sears company wanted to place orders for Supercub for their delivery/ installation team in the power tool segment. The top management team in Japan flatly refused as it was not as per its business strategy for the US market. Losses were mounting day-by day. After repeated persuasion and arm-twisting from Kawashima and his team, the top management finally relented.
Now the Supercub was launched as a low end off-the-road dirt bike. Initially there were problems in getting dealers but once the problems were overcome, Supercub became a success. Honda later on followed up with superior design and manufacturing practises to introduce new models to gain a considerable share in the US market.
How far Vision , Mission , Goals and Strategic Planning do help is a moot question as long as they are developed in the hallowed portals of corporate offices? While deciding such strategies, do we take into consideration the changing market, the consumer choices and the competition strategies? Later on Honda was able to enter the premium segment. Only BMW and Harley Davidson were able to retain their premium positions. Looking at Honda’s increasing market share, Harley Davidson decided to follow suit. It entered this segment by acquiring technology from an Italian company called Aeromecchanic. Even though the product was good, it did not succeed, the reason, the dealers were not interested in foregoing their high-value commission they were earning for the premium bikes. Ultimately Harley Davidson dropped the project and decided to remain in the premium segment.
Who knows the truth? The front-end salesmen or the corporate planners! The truth is none- instead can they listen to each other and most importantly the target customer?
Expertise in low-end segment does not necessarily guarantee success in the high-end segment. One has to reinvent all the time. So everyday ask yourself what assumptions am I making about myself, my planning, the market and the competition.
Incidentally the Supercub launched by Honda in 1958 had reached a total production of 100 million by 2017 and is the most produced motor vehicle in the history! The advertising campaign, You meet the nicest people on Honda created by an UCLA student after riding the bike in early 60s was a runaway success and had a lasting impact on Honda’s image.
Rajan Parulekar| www.paradigm-info.com|rajan@paradigm-info.com
In 1959 Honda Motorcycle Company from Japan decided to enter the US market with its new brand of motorcycles. The strategic planning and the marketing team did a careful market research and came to the conclusion that premium-end motorbikes are appropriate for the US market. Being a highly developed automobile market, the motorcycles were used as fun vehicles where speed , power and long-distance drive on highways were the critical customer preferences. A new design team was put in place for this project, prototypes tested, developed and the bikes were launched.
Back home, in the post-war Japan, Honda had developed a 50cc motorized bicycle called Supercub which was similar to Luna or TVS 5O in India in the 70s. Supercub was primarily used by delivery boys in the congested city areas and also by the general populace. Honda had developed enough expertise for the engines in the 50-100cc range.
Three engineers were sent to Los Angeles to get a foothold for Honda in the US market. The bikes indeed offered a cost advantage in the premium category. However the expertise in the 50cc segment was not transferrable to high-end bikes. There were frequent problems in terms of oil leaks, clutch wire breakages etc. Air freighting the warranty parts also added to Honda’s woes.
Kihachiro Kawashima and his two colleagues had brought their 50 CC Supercub to LA for local commute. He was getting frustrated with the on-going problems and started taking his Supercub for off-the-road dirt biking. It was a stress-buster; he started feeling better. A few days later, his American friends followed suit and they too liked the experience. Customers in LA started enquiring about Supercub. Even Sears company wanted to place orders for Supercub for their delivery/ installation team in the power tool segment. The top management team in Japan flatly refused as it was not as per its business strategy for the US market. Losses were mounting day-by day. After repeated persuasion and arm-twisting from Kawashima and his team, the top management finally relented.
Now the Supercub was launched as a low end off-the-road dirt bike. Initially there were problems in getting dealers but once the problems were overcome, Supercub became a success. Honda later on followed up with superior design and manufacturing practises to introduce new models to gain a considerable share in the US market.
How far Vision , Mission , Goals and Strategic Planning do help is a moot question as long as they are developed in the hallowed portals of corporate offices? While deciding such strategies, do we take into consideration the changing market, the consumer choices and the competition strategies? Later on Honda was able to enter the premium segment. Only BMW and Harley Davidson were able to retain their premium positions. Looking at Honda’s increasing market share, Harley Davidson decided to follow suit. It entered this segment by acquiring technology from an Italian company called Aeromecchanic. Even though the product was good, it did not succeed, the reason, the dealers were not interested in foregoing their high-value commission they were earning for the premium bikes. Ultimately Harley Davidson dropped the project and decided to remain in the premium segment.
Who knows the truth? The front-end salesmen or the corporate planners! The truth is none- instead can they listen to each other and most importantly the target customer?
Expertise in low-end segment does not necessarily guarantee success in the high-end segment. One has to reinvent all the time. So everyday ask yourself what assumptions am I making about myself, my planning, the market and the competition.
Incidentally the Supercub launched by Honda in 1958 had reached a total production of 100 million by 2017 and is the most produced motor vehicle in the history! The advertising campaign, You meet the nicest people on Honda created by an UCLA student after riding the bike in early 60s was a runaway success and had a lasting impact on Honda’s image.
Rajan Parulekar| www.paradigm-info.com|rajan@paradigm-info.com
For more insights on realty selling please refer Contextual Selling – A New Paradigm for the 21st Century by Rajan Parulekar who has conducted customized training programs for companies like Adarsh Group, Brigade Group, DLF, Karle Infra, Skylark, Puravankara, Vascon Engineers etc.
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