PESTEL also known as PESTLE or PEST Analysis is a strategic tool which has been utilized by the strategists and marketers to determine and analyze the external or Macro-environmental factors that could have positive and negative impact on Organization. This articles will discuss the PESTEL or PEST analysis of Honda to perform analysis of external factors ( Political, Economic, Social, Technological, Environmental and Legal ) that have impact on the Organization.
Honda is a Japanese multinational corporation of manufacturing automobiles, motorcycles and power equipment. It functions as a distributor in North America, Europe and Asia. In addition, the company also deals with motor racing motorcycles and sells spare parts. It produces various automobile products, minivans, water pumps, grass cutters, lawn tractors and mowers, portable generators etc. It provides sale services through retail dealers. The company was founded in 1946 by Takeo Fujisawa and Soichiro Honda. The company headquarters are in Tokyo, Japan. Mr. Honda had no technical education and started his career as garage mechanic. The company builds over 14 million combustion engines every year and is the largest manufacturer in the world. Since 1959, Honda has also been the world’s largest motorcycle manufacturer. (10 fun facts about Honda, 2015)
Several governments have put forward the proposal to limit the number of automobiles used by the people as to minimize the amount of toxic gases released in the air. So Honda is bound by government legislature to cut the amount of cars it produces usually. This will have a negative impact on the sales of the company.
The president of United States, Obama, has announced that there will be imposition of new regulations on the use of gas-mileage of cars. Honda will have to deal with these new rules while losing its revenues and making its shareholders unhappy in the process.
The governments are planning to launch such cars that would consume less or no diesel and consequently Honda has to invest more in its research and development. For example, government of China is investing a fortune in Hybrid technology. Considering Honda is playing an active role in its research and is already producing Hybrid cars, it will help in expanding and increasing the amount of cars to please the Chinese government.
Honda could dominate the economic sector if it treads with clever strategy. The increment in oil prices globally has put the demand of petroleum cars in jeopardy. Soon its consumption will reduce, putting back some major automobiles in rough business. Honda has an advantage of Hybrid technology. While Honda will face the loss of revenues in petrol consuming automobiles, it will definitely shine through its Hybrid technology. To overcome this setback Honda has launched its eco-friendly cars like 1.4 Honda Jazz and Honda Civic Hybrid.
The use of automobiles in China is increased by 1/3 so there is a lot of scope for Honda to expand its growth. As the country has the biggest population, the increase in urbanization means the increase in sales and revenues. Japan endured a setback after being destructed by the earthquake and the tsunami in 2011. Honda has a lot of potential to prosper in the country but there is a chance that it won’t be able to the demands of the industry as the country suffered a severe blow by the natural catastrophe.
The exchange rate of any currency to Yen is not stable so ultimately it would affect the price of Honda’s automobiles in an unstable way.
Honda has invested much to keep the social and demographic trend in its favor. It has produced eco-friendly cars to attract its customers for the customers who prefer the local brand to Honda such as the people of UK. Honda is expanding its business worldwide and prefers to that in English which is the international language.
As the demand of the personalized cars is increasing, Honda is developing cars which can easily be modified according to the demands of the customers. The boost in the desire of city cars has encouraged Honda to produce small economic cars such as Honda Jazz and Honda Beat.
Honda has shown a keen interest in designing sports cars for racing like Formula1. It has devoted a whole huge R&D budget to that cause.
Today’s world relies on GPS (Global Positioning System) while travelling so Honda had to install Satellite Navigation System in its newest models. To fulfill the need to keep the environment safe, Honda has developed iv-tech, which is a follow on from their v-tech engines. This technology offers ample torque, fuel economy and cleaned emanations.
Honda is quite efficient and eager in advancing its technology in safety measures. Its innovative technologies benefit its users and increase its sales. The initiative taken by Honda called Efficient Consumer Response (ECR) provided the necessary budge that is visible in Honda management of industry chain. (Data monitor Report, 2003)
The advanced technology in producing environmental friendly cars has really brought the growth of Honda industry to further levels. With the increasing rates of petrol keep rising in Malaysia, Honda has intelligently invested in the best future venture which is combination of fuel economy and eco-friendly technology.
Car engines tend to behave according to the climate. For example, in hot weather they tend to heat up quickly and in cold weather they tend to face difficulty while starting. Honda has efficiently provided a solution this dilemma by producing different types of engines suitable to the environment of that country.
Honda is a proud producer of environmental friendly cars which are a result of its Hybrid technology. This technology will provide a much cleaner environment to people as compared to petrol cars which release toxic and harmful gases in the atmosphere. Although hybrid cars are a useful entity in future but Honda needs to invest more in its R&D to improve their functionality which is still not as first-rate as petrol cars.
As similar to political reasons Honda will have to endure the strain from the law to restrict its production due to constantly increasing global warming. Government’s law and legislature has a vast impact on the actions of Honda such as asking for payments from suppliers and changing the agreed upon prices with or without notice. (Mintel Report, 2004)
The governments in different countries demand different taxes affecting the sales of the company. In order to imply correct pricing policies Honda propose reduction in prices to its customers on the basis of amount of money spent on groceries. (Business Strategy of Honda Motors, HK, 2012)
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Datamonitor Report (2003) Company Profile: Toyota Analysis, October
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