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VALUE DELIVERY SYSTEM, STRATEGY HONDA

Value Delivery System As one reflects on organizational performance, no one needs to say things have changed - that fact is very obvious for anybody who is running an organization. Competition is fierce in the marketing contests that companies find themselves in and few of these contests end in a tie. The judge of these contests is the customer. They determine whether your products and services provide them value or not. And, they alone decide whether the value found in your companys products and services are superior to their other choices that are offered by your competitor. Typically, the companies that are winning the market game are ones that have systematically assessed, chosen, and communicated their Value Proposition to their customers. But, most important, they are delivering product/service in a manner that is consistent with its value proposition. Positioning The Organization To position an organization so that it is providing superior value to its customers in a profitable fashion, several actions are taken that include: Carefully considering their companys core competencies. Identifying what customers or potential customers would find valuable within current or potential market channels. Assessing the competitions ability to provide value within these different market channels. Studying the profit potential of the product / service offering alternatives near as well as long term. Studying the current infrastructures ability to deliver in a sustainable fashion. After doing the above, these companies deliberately choose, create, and execute a Value Delivery System (VDS) that provides superior value to those customers and that is profitable and sustainable. The VDS they choose to provide and communicate to their target customer increases the probability that those target customers will choose their companys products and services over the customers other alternatives of choice. The Foundation of an Effective VDS An effective VDS is founded on two premises: 1) Customers have the right to choose from a wide variety of alternatives to meet their needs using criteria that is in their best interests. 2) Every company has the right to choose its customer, what benefits it will provide, and at what price it will offer those benefits.

As a company embarks on assessing and improving on its VDS so that it is perceived as providing superior value, several definitions of terms will be helpful. These definitions include: Benefit: The perceived end result of and/or judgment about doing business with your company as perceived by the customer. Price: The total costs to the customer as perceived by the customer that include sales price, costs of using your product and services, degree of ease experiencing transactions with you, etc. Value: The Benefit minus the Price. Value represents a buyers overall evaluation of the utility of a product or service based on perceptions of the net benefits vs. what must be given up. Superior Value Delivery: The customer believes that your company provides a net value that is greater than the other alternatives that the customer presently perceives exist for them. Consider the following examples for a moment. In the 1970s, Honda was providing cars that had benefits perceived to be better as compared to the GM alternatives: gas mileage, options, reliability, etc. Honda was also selling these vehicles at lower prices than the standard GM vehicles. When the benefits minus the price of the Hondas (Honda value) were compared to the benefits minus the prices of the GM vehicle (GM value), Honda was perceived to be providing superior value to the market place. Consequently, GM lost market share while Honda gained.

VDS will be considered competitively superior by the customer depending on the following: 1) The degree to which a company is able to understand that customers will pick the alternative they perceive provides them the most value as compared to the competitor. 2) The degree to which a company is able to target its customers and design its products and services to meet those needs as compared to the competitor. 3) The degree to which a company is able to design, re-structure, and operate its processes and infrastructure to make and provide the needed products and services as compared to the competitor. 4) The degree to which a company is able to communicate to the customer the value, benefit, and price of doing business with the company as compared to the competitor. 5) The degree to which a company is able to execute the above to create a customer experience of value that is superior to the competitor. VDS Types The typical companys VDS falls along a continuum of several VDS types. No company is typically just one of these types, but usually is a composite of several of them. The Value Delivery System types include the following: 1) The Sales Obsessed Organization 2) The Regulatory Conforming Organization 3) The Financial Gain Organization 4) The Mystical Marketing Organization 5) The Manufacturing Efficiency Driven Organization

6) The Technology Driven Organization 7) The Raw Material Driven Organization 8) The Customer Compelled Organization 9) The Market Focused Organization

Value delivery system of HONDA Value proposition offered by Honda: 1. Safety for everyone 2. Environmental leadership 3. Joy of mobility

Safety for everyone: Enhancing safety on the roads is one of Hondas top priorities. Honda's safety philosophy emphasizes the development of appropriate technologies for its products, so as to ultimately achieve maximum riding comfort for its customers. Honda was the first manufacturer in Japan to develop and apply the anti-lock brake system. Educating the world, Honda is actively involved with driving education across the world for promoting traffic safety. Following are a few measures of Honda for safety for everyone proposition: Night vision: Honda commercialized worlds first automobile night vision system to improve pedestrians visibility. Hondas system is far-IR (thermo image) based which does not interfere with headlights from opposite traffic. Adaptive cruise control (ACC) with millimeter wave radar: ACC alerts the driver to a potential collision, applies brakes to slow down the vehicle. Vehicle to vehicle communication: Future Honda cars will communicate with other cars and alert drivers if there is a car in the blind corner.

Environmental leadership: Based on basic goal of reducing environmental impacts at every stage in the life cycles of their products, Honda strives to realize the joy and freedom of mobility and a sustainable society where people can enjoy life. They recognize climate change and energy issues as the greatest challenge to their business, resource problems as a major challenge, and biodiversity as a serious concern. They established a policy to pursue zero CO2 emissions, zero energy risk (through our energy management technologies), and zero waste to tackle these challenges, and announced and are now implementing concrete measures to do this for products and in their business activities.

Hybrid and Super-Clean Diesel: Civic Hybrid travels 49/51 MPG (EPA). Hondas next generation diesel engine is the first diesel engine that met EPAs Tier II Bin 5 regulation without adding urea. Bioenergy: Honda proactively pursues fundamental research on alternative energy that serve as the foundation of Hondas environmental leadership. Solar cells: Honda started CIGS solar cell manufacturing in 2007 (for japan market only)

Joy of mobility: Inter-Navi Probe Car Network Honda introduced worlds first probe car network to gather/broadcast real-time traffic information to connected Honda cars. ASIMO * A mobility company by definition, Honda takes great pride in ASIMO, the world's only humanoid robot with the freedom of mobility to run and climb stairs. HondaJet & Honda Jet Engines HondaJet is a compact business jet that features far better fuel efficiency, more available space, and higher cruise speed. The HondaJet is powered by two Honda HF-120 engines.

1. Inbound Logistics Long term contract with service providers transporters and agents. Personnel at regional offices for over seeing the smooth transit of goods. Transparency and monitoring through deployment of IT all transactions through SAP. DTL supplies for critical high value items. Efficient storage facilities easy storage and retrieval.

2. Operations

Capital Equipment Manufacturing division tooling development capabilities of global standard. Kaizen & TPM team continuous drive to improve efficiencies. Automated manufacturing processes. Distributed manufacturing Assembly units at US, China, India, Japan, Belgium etc. Maintenance technical competence.

3. Outbound Logistics Stockyards, all across the country. Long term contracts with transporters higher volume of business to transporters ensures competitive price. Regional Sales Office and Vehicle Dispatch Section linked through SAP. Efficient security system for prevention of any kind of pilferage.

4. Marketing & Sales Structured approach to understanding the requirements of individual customers QFDs conducted at regular intervals. Clear identification of product requirements, offering innovative products at competitive prices novel promotional campaigns developing an extensive distribution network

5. Service Easy availability of spare parts. Efficient collection of data from field and communication to the respective plants. Pan India presence, as well as global presence.

6. Procurement E procurement initiative. Honda Green Purchasing Guidelines to suppliers in order to gain their understanding of, and support for, hondas philosophy of reducing environmental impacts throughout the product life cycle, and to ensure their ability to supply materials and parts that meet their standards. automobile parts procurement to emerging markets as part of cost-cutting efforts. Long term relationships with a stable and loyal pool of suppliers. Technology driven procurement SAP and VCM.