Chapter 01

Key Work feature: Honda's domination of the US motorcycle industry

There is a great deal of debate about how Honda came to successfully dominate the US motorcycle market. What is clear is that before 1960, the main players in the US market were companies like BSA, Triumph and Norton of Great Britain, Moto-Guzzi of Italy and Harley-Davidson of the US. However post-1960s how and indeed why Honda thought it could compete in the US market, which was materially different from its domestic market, is still disputed. Rumelt (1996) argues that Honda’s success serves as the exemplar for three very different views of strategy:

The first strategy revolves around the Boston Consulting Group Report to the British government. Here Honda's success is as a result of its cost advantage derived from its exploitation of economies scale in its domestic market. Aligned to this is the vacuum created by the exit of British and American competitors from the smaller bike segment as they realized they were unable to compete against the Japanese. The picture here is one of British short-termism and unwillingness to invest for the future set against a competitor who will forego short-term profitability to build market share and along-term future through design and innovation.

A second strategy is associated with Richard Pascale and those of the emergent strategy school. Pascale's interviewed the executives who had been responsible for Honda's 1959 entry into the US. According to these executives Honda’s strategy was not to target specific market segments in the U.S. Instead their early failures simply prompted them to experiment, to learn from their mistakes, and to find solutions to design problems. It was this ability to change any preconceived ideas they may have had prior to entering the US market that allowed Honda to find and exploit opportunities. Indeed, its success in Japan resulted from its having a better product that emanated from its design skills.

For Pascale another reason for Hondas’ success was the capabilities of Honda’s leaders, Sochiro Honda and Takeo Fujisawa. Sochiro Honda was a gifted inventor. His technical know how allowed Honda to make powerful and lightweight engines. According to this view the introduction of 50cc Supercub achieved dominant sales not because of strategic planning but because it emerged that the Supercub was perceived as bike that appealed to non-traditional bikers.

A third strategy is attributed to what Prahalad and Hamel’s refer to as strategic intent, and the stretch and leverage of Honda’s core competence across different markets. According to this perspective Honda took on the dominant players in the motorcycle industry not by competing head-on in their established markets but by introducing products that were outside the key players’ product-market domains. This allowed it to build its base of operations in relatively undefended territory and use that base as a spring board for an attack on competitors’ main markets. Indeed Honda's core competence in engines might have alerted competitors that its intention was to leverage these across different markets. For Prahalad and Hamel Honda’s strategy is deliberate and managed based on their long-term vision of global leadership in engines design and manufacture and innovating around competitors' product offerings.

There is agreement on some elements of Honda’s success. The key element of controversy is intentionality: what was planned and what simply emerged?

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Oxford University Press, Online Resource Centre, Chapter 01.

Chapter 01