Honda's Marketing in US in 1960s

The case describes Honda’s move into the US motorcycle market in the 1960’s. Honda’s strategy was directed towards high volumes per model, providing high productivity, and low costs. Honda succeeded in the US by introducing a new product (small motorcycles, 50cc) that expanded the motorcycle market in the US through price generic competitive strategy. Honda was prepared with capacity, capital and technical capability to enter the US market.

History

• 1946: est. Honda Techn. Research Institute (internal combustion engines)
• 1947: first Honda A-type 2-stroke engine
• 1948: Japan motorcycle market: 247 Japanese players, mainly clip-on engines for bicycles
• 1949: first Honda lightweight 50cc 2-stroke D-type motorcycle (3hp); competition launches first 4-stroke engines 1951: first Honda 4-stroke engine (6hp: same weight), acquired a plant to build these engines; at the same time, Honda was first to (1) offer a multiproduct line, (2) take leadership in product innovation and (3) exploit opportunities for economies of mass production
• 1958: first small, unintimidating Honda motorcycle for local deliveries (50cc, step-through frame, autom.

  Transmission, one-hand controls; Honda builds a plant with 10x the capacity of the current market demand

• 1959: Honda enters the US market (being already the world’s largest motorcycle producer with sales of $ 55mn.

Honda’s strategy to the US market

1. Product: small lightweight motorcycle, 50cc, 5hp (vs. comp. 2.5hp), 3-speed transmission, autom. Clutch, electric starter, step-through frame; mass produced in Japan. Products are updated or redesigned whenever a market
   threat or opportunity is perceived.
2. Price: low-priced; $250 (vs. comp. $1000-1500). Prices are set at levels designed to achieve market share and will be cut if necessary.

   Experience cost curve advantage allows for higher pricing flexibility. US prices are significantly higher than Japan prices.

3. Place: own distributor (American Honda Motor Company), move region by region, west to east, 1961: 125 dealers; later: largest dealer network in the US. Honda dealers were larger than the one from the competition. Honda was willing to take short term losses in order to build a large selling & distribution network. Warranty and service is important.
4. Promotion: 1961: $150’000 for regional advertising; targeting middle-class consumers (“You meet the nicest people on a Honda”; vs. “Wild Ones/motorcycle gang”), thereafter heavy advertising also supported by Yamaha ($1.5mn) and Suzuki ($0.7mn). Promotions. Consistently outspent competition in advertising ever since

Honda invested heavily in R&D and mass production infrastructure. Honda’s productivity was very high compared to competition. They outperformed the western competition by up to 4x (although Japanese labor cost were higher than in the west). Pipeline of new models (“cold storage of designs”) was full. Main goal was to grow market share (“market penetration”) and defend that at any cost.

How well was Honda’s strategy planned

Rather opportunity driven than based on a long term strategy. Based on the success of the 50cc motorcycle in Japan coupled with the belief that mass production will drive down cost and let them move down the experience cost curve, Honda saw a chance to enter the US market. Sochiro Honda was very aggressive when building the big plant in 1958. It appeared to be a mix of gambling and the foresight that he could become the world largest motorcycle company by applying the concept of mass production, moving down the experience cost curve respectively.