BICOL UNIVERSITY

College of Business, Economics, and Management

Business Administration Department

A Case Analysis on Case Study: The Honda Way

Submitted by:
JONELA B. LAZARO
Bachelor of Science in Business Administration
major in Marketing Management

Submitted to:
PROFESSOR JIDDEH N. SELDA

A case analysis submitted in partial fulfillment to the

requirements for the subject course of

ADVERTISING

Submitted on:
November 20, 2021

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 TABLE OF CONTENTS

Title Page i
Table of Contents ii

I. Viewpoint
II. Problem Identification
III. Areas of Consideration
A. Strength
B. Weaknesses
C. Value Chain Analysis of Honda
IV. Objectives
V. Alternative Formulation and Evaluation
A. Alternative Courses of Action
B. Evaluation of the Alternatives
VI. Decision/Recommendation
VII. Operational Plan
VIII. Full-back Position
References iii

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I. VIEW POINT

Tohihiro Mibe

II. PROBLEM IDENTIFICATION

This case study concerns with setting up and maintaining a productive, problem-free, and healthy
manufacturing of Honda which is sufficient on rendering quality cars. The advent of setting up an
environment that is productive and efficient, organized and reliable, or through the elimination of any
sort of distractions, associates will have a reliable utilities and comfortable workspace. Thus, helps
them to make a quality vehicles which also the core reason why the company is considered to be one
of the leading engine-making company around the world. (Hinchliffe, 2014)

In lieu of the need to maintain a healthy manufacturing within the company in different locations, they
are in need to establish alternatives in a long term basis that will show the corporate feasibility of
minimizing the quantity and duration of failures due to any sort of distractions in the workplaces and
maintain its healthy manufacturing that can impact their production. Hence, it will be a factor in the
success they are experiencing right now in the automobile industry.
Therefore it has come to mind the following statement of the problem:

1. How Honda would be able to efficiently maintain a working environment that is productive
and efficient, organized and reliable?

2. What would be the best alternatives with a focus on a long term basis that perceives to be
efficient and effective in maintaining productive and problem-free working environment which
will be a factor to the continued success of Honda in the automobile industry?

III. AREAS OF CONSIDERATION

A. STRENGTHS

1. Healthy manufacturing. Honda's manufacturing plant in Lincoln has embraced revolutionary

manufacturing methods shared by Honda sites across the world since the beginning of the company.
For the goal of having no distractions when constructing automobiles, the corporation constantly
considers a problem-free and healthy working environment for its employees. Everything is in general
sense of order and organization. They eliminate all elements of disorganization, untidiness, and
uncleanliness. This is one of the reasons why Honda is the world's fourth-largest automobile
manufacturer. Hondas are created with pride in every factory and assembly plant.

2. Expertise and characteristics of employees. Honda is made up of people who work together for
a same goal. This idea must be translated into deeds by each individual, behaving correctly within his
or her function. The success of the organization is based on the contributions of each employee.
Furthermore, all of Honda's presidents have been engineers.

3. Competence in engine manufacturing. All of Honda's businesses revolve on its primary product,
engines. Honda is the largest engine producer in the world. The firm has a long history of producing
high-quality, high-performance engines. Its engines are acclaimed for their dependability, longevity,
ease of starting, quietness, and fuel efficiency. Honda's automobile engines are among the most
dependable in the industry, according to Reliability Index. Engines are the lifeblood of motor vehicles,

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and the company's expertise in engine manufacture is a competitive advantage few competitors can
match.

4. Focus on plant flexibility. Honda, unlike other manufacturers, can create many vehicles on a
single assembly line in a seamless manner, one after the other, and transition a line to a newly
designed vehicle in hours. Honda's competitors, on the other hand, can take months to retool a facility
for a new model. Honda does this in part by having in-house engineering co-located at each major
manufacturing location, which functions as a separate organization focused primarily on local needs.
Any issues that develop in the flexible factory may be resolved instantly by this team, which is usually
located near headquarters and reports to corporate top executives, ensuring that the smooth flow of
autos moving through the line is not disrupted. For many automakers, having such an efficient and
agile plant is the Holy Grail, and Honda has received high praise from auto analysts for its smart
handling of this difficulty. In terms of globalization, Honda obtains the benefit of being able to change
production and capacity of specific models at any time, based on local sales patterns and competing
brand performance.

B. WEAKNESSES

1. Low investments in research and development leading to fewer innovative products.Honda

has spent US$5.4 billion for Research and Development in 2015. This amounted to 4.5% of the
company’s total revenue.

Figure 3. Comparison of R&D expenditure – Honda and selected major competitors (in US$ billions)
2015 - Research & As a % of As a % of
Company 2014 R&D
Development revenues revenues
Honda 5.4 4.5 5 4.5
Toyota 8.4 3.7 7.6 3.5
Volkswagen 14 6.9 14 7.1
General
7.5 4.9 7.4 4.7
Motors
Source: The respective companies’ financial reports

Low R&D spending leads to fewer new goods and a considerable reduction in the company's future
competitiveness. The corporation should devote its US$5.4 billion R&D budget to certain sectors (like
Hyundai does), which would compensate for the company's modest R&D expenditure and result in
new goods.

2. Organizational structure and bureaucracy. Honda's complex organizational structure and red
tape are the most serious of all the significant issues it has faced for numerous years. Internal red tape
has mostly prevented the company from investing in new breakthroughs and cutting-edge technology.
Honda's current CEO had raised this issue a few years ago. He has been working on it for the past
two to three years. However, unless Honda streamlines its organizational structure and eliminates red
tape, its bottom line would suffer sooner than predicted. Honda's luster faded over the course of a
decade due to internal bureaucracy and the company's inability to take the necessary actions to
maintain its place in the car market. The environment is becoming increasingly difficult, and the

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 organization must be very adaptable in order to respond to the rapidly changing climate. A more
streamlined organizational structure will make it more nimble, allowing it to take on new tasks and
adapt to changing consumer demands more quickly.

C. VALUE CHAIN ANALYSIS OF HONDA

To understand how Honda became one of the leading manufacturing firm in the automobile industry.
With that, we will use Porter’s Value Chain Analysis in assessing its manufacturing and operating
activities that helps them to deliver quality cars to the customers. The activities contained within the
value chain are classified as primary activities and support activitiess.

S Firm
U Infrastructure: Administrative, legal and accounting tasks managed systemwide
P
P Human Supplier and Virtual teams; Oversee Oversee Oversee
O Resource management union relations; personnel marketing service
R Management: personnel oversee involved in personnel personnel
T workers distribution
Streamline Invest in new Streamline Work with Improve
A Technology turnaround time engine shipping time; dealers to service turn
C Development: with suppliers to designs , bike web-based improve around time;
T ship parts models: new inventory selling tools and
I factories tracking product mix tackles
V Streamline Source parts Purchase Buy media Source
I ordering and components: capacity on time; work spare parts
T Procurement: documentation partner with key railroads/trucks with and tools;
I systems suppliers advertisers partner with
E key
S suppliers

Adapt faster Make and Ship to dealers Advertise; After sales

PRIMARY means to order assemble using promote service;
and receive components railroads/truck; product to spare parts
ACTIVITIES components into autos deliver public; work availability
with
dealership

Inbound Operations Outbound Marketing/ Service

Logistics Logistics Sales

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IV. OBJECTIVES

The case study objectives are as follows:

1. To understand and asses how Honda achieves having a healthy manufacturing through various
determinants which will bridge the gap on the problem identified.

2. To identify the best alternatives with a focus on a long term basis that perceives to be efficient and
effective in maintaining productive and problem-free working environment which will be a factor to the
continued success of Honda in the automobile industry.

V. ALTERNATIVE FORMULATION AND EVALUATION

A. ALTERNATIVE COURSES OF ACTION

1. Real change in working culture. Policies and procedures alone will not build a strong culture in
terms of work. Real change in Honda working culture comes from focusing first on the visible actions
and examples of leaders. Leaders can then take steps to look for and understand the roots of at-risk
conditions and behavior through proactive checks in the workplace and proper incident investigation. A
strong culture of work exists when every person in an organization approaches everything they do with
the necessary work methods, because they want to, rather than because they have to. At this level of
organizational performance, it is ingrained in each person as a value that guides that way in which we
approach all tasks.

2. Solve Problems Completely. All too often, manufacturing quality improvements fix the symptoms
of failure rather than the root cause. This can be done by adding quality inspection steps or rework
stations that make it more efficient to fix defects. Instead, a true understanding of the root cause
should be developed within the teams. When teams develop the ability (through Ishikawa, fault tree, or
five-why analysis) to ascertain root cause of defects in the manufacturing process along with a “killer
test” that verifies the ability to turn-on and turn-off the problem in the manufacturing process, true
solutions to problems will be created that will not allow the return of the issue.

3. Update Processes and Technology. Once you have reviewed and mapped your existing workflow,
start identifying areas where processes and/or technology could use some updating or changing.
Processes that have been in place for a long time may be riddled with workarounds as new equipment
was added or production methods changed.
- Automation is a powerful tool for increasing efficiency and reducing error.
- New software solutions can help with scheduling, inventory, and monitoring workflow.
- Improvements in equipment can improve production speed and quality.

4. Give a prime importance to its Management Information System (MIS). With the augmentation
of Business processes in Honda, there is requirement of more well-organized production processes.
With the improved and better information and data on the business processes, there is a quicker
approach to improve the supply chain management which comprises all the processes ranging from
the sourcing of the raw materials to the production and allocation of the finished products. As a result
of the enhancement in management of supply chain, Honda is capable to respond efficiently to the
variations in market. With the effective and efficient implementation of MIS, Honda is capable to
respond swiftly to the external environment as well as MIS made the organization able to deliver
efficient service and products and is giving a tough competition to its competitors. While MIS is very

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useful to generate data analysis and statistical reports, furthermore it is very helpful for creating
Management by Objectives tool. SMART i.e. specific, measurable, agreed, realistic and time-specific,
approach is used to set the objectives. The main purpose of this approach is to evaluate the
employees’ performance. For its success there is a need to keep a constant track of progress rate. For
this MIS proves to be best because it provides management reports to the policy makers and all the
relevant information required.

5. Produce a manufacturing calendar. A production calendar may be used to establish a monthly

production order for each plant once it has been published in Honda. Each manufacturing assembly
plant must develop a preliminary operations plan that details the number of units of each model that
will be manufactured, as well as important choices like engines and gearboxes. Furthermore, each
unit factory develops an operations plan outlining how many engines, transmissions, and other
alternatives it can make.

B. EVALUATION OF ALTERNATIVES

1. Real change in work culture

ADVANTAGES:
• When knowledge is gained from incidents, that “know how” must be shared with all associates
to foster their awareness and prevent recurrence. By sharing our experiences, we further
reinforce our own learning, and help others avoid experiencing the same incident.
• Better work environment
• Increased efficiency in manufacturing
• Improved organizational agility
• Encourages innovation
DISADVANTAGES:
• Massive changes that could compromise the production process
• Failure of the changes
• Focusing on working culture instead of performance
• Changes that miss the target

2. Solve Problems Completely

ADVANTAGES:
• True solutions to problems will be created that will not allow the return of the issue.
• Better risk handling
• Increased number of solutions
• Greater productive output
DISADVANTAGES:
• Lack of objective guidelines
• Time constraints

3. Update processes and technology

ADVANTAGES:
• The performance state of manufacturing equipment can be monitored and predicted on the
basis of operation data.
• Stay compliant with the regulatory requirements
• Empower associates to update and improve manufacturing processes
• Minimize or reduce risks

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DISADVANTAGES
• When identifying new technology and equipment, keep in mind the total cost of ownership and
how the bottom line will be affected. A high initial expense is worth it if the total cost of
ownership is lower than the technology or process you are replacing and if it solves a problem
such as a clearing a production bottleneck or reducing scrap.

4. Give a prime importance to its Management Information System (MIS)

ADVANTAGES:
• Permits Honda's associates efficiently, effectively exchange information together thus,
minimize the occurrence of the same failures in other location.
• Helps assist in identifying the production problems and their solutions
DISADVANTAGES:
• Less useful for making non-programmed decision making
• Effectiveness decreases due to frequent changes in operational team
• Not substitute for effective production process and manufacturing
• May not have requisite flexibility to quickly update itself with the changing needs of time,
especially in fast changing and complex environment.

5. Produce a manufacturing calendar

ADVANTAGES
• Determine the number of production workdays in a production month thus increase in
productivity in work
• Organization
• Continuous improvement processes
• Forecast production expectations
• Manufacturing control
• Standardized steps in time
DISADVANTAGES
• Lack of flexibility
• Production calendar can be complex

VI. DECISION/RECOMMENDATION

DECISION MATRIX:

CRITERIA ACA 1 ACA 2 ACA 3 ACA 4 ACA 5

Increase efficiency in 1 4 3 2 5
production
Focusing on a long-term 2 1 5 3 4
basis
Organization 1 2 5 3 4
Improve in production 2 3 1 4 5
result
Increase productivity 1 2 4 3 5
TOTAL 7 12 18 15 23

Legend: 5 being the highest; 1 being the lowest

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CONCLUSION: Based on the decision matrix, having the highest score among the alternatives, ACA
5, produce a manufacturing calendar, will address the problem and meet the objectives.

RECOMMENDATION

The amount of production workdays in a manufacturing month must be determined before the
production plan can be created. One of the reasons that a production month differs from a calendar
month is that some manufacturing processes are based on a weekly cycle. The notion of a
manufacturing month was introduced, with each month consisting of four or five full weeks. A
production calendar is produced every year based on the following rules:

1. Each week is given a number ranging from 1 to 53.

2. The first week of the year is always the week that contains the first day of production. For example,
if January 1 falls on a Wednesday and the first workday falls on January 2, the week will be known as
production week 1. This week will really include two days in December in this situation. Although this
violates the next criterion, it is not considered a problem because the last week of the year is a non-
production week in the car sector in the United States.
3. Except for January, the month whereby each Monday falls is utilized to decide which weeks are
considered as production months. If April 30 falls on a Monday, for example, the full week is included
in the April production month.

Because there are 52.2 weeks in a standard 365-day year, certain years will have 53 weeks.
The manufacturing calendar is issued prior to the start of the calendar year and contains the
categorization of working weeks as well as company holidays observed by each facility. The use of a
production calendar eliminates planning confusion between calendar months and keeps the weekly
planning process intact.

VII. OPERATIONAL PLAN

ACTIVITIES TIME FRAME PERSONS RESPONSIBLE

Continually invest in research continuous Research and Development
and development to stay ahead department
of and lead productive
manufacturing that will meet the
needs of producing quality cars
Deliver training to employees 2-3 weeks HR Department
Production planning process 6 months Production Planning Department
Develop 1 month Design and Software
manufacturing/production Engineering
calendar
Annual planning process to yearly Production Planning Department
establish production forecast and
to forecast possible risks
Digital reporting and checklist weekly/monthly Design and Software
Engineering
Monitoring and control continuous CEO

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VIII. FULL-BACK POSITION

li ty THE GOAL: Val

t Qua Healthy Manufacturing
u e
Bes

PEOPLE Flexible CONTINUOUS

Production IMPROVEMENT

Empowerment Eliminate destruction

Training Focus on process
Spread knowledge Detect abnormalities
No wasteful work Immediate Response
Best engineers R&D
Build Partners

Culture of continuous
improvement

Standard Work Full Management Support Organization

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References:

Retrieve from: https://www.reliableplant.com/Read/5198/case-study-honda

Retrieve from: https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2
Retrieve from: http://www-ns.iaea.org/downloads/ni/training/man-sys-mod5.pdf
Retrieve from: https://www.integrify.com/business-process-reengineering-bpr-definition/
Retrieve from: https://www.oneaccord.co/blog/a-balanced-scorecard-5-steps-toward-operational-
excellence
Retrieve from: https://www.honda.com/history
Retrieve from: https://motorbikewriter.com/honda-successful/
Retrieve from: https://www.honda.co.uk/cars/world-of-honda/present/honda-in-the-world.html
Retrieve from: file:///sysroot/home/user/Downloads/242276052-Honda-Value-Chain.pdf

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