Honda and the US motorcycle market in the 1960s: emergent or prescriptive strategy?

There are different explanations of how successful strategies develop. In 1984, Richard Pascale published a
paper which described the success Honda had experienced with the launch of its motorcycles in the US market in
the 1960s. It was a paper that has generated discussion about strategy development processes ever since. First
he gave explanations provided by the Boston Consulting Group (BCG):

‘The success of the Japanese manufacturers originated with the growth of their domestic market during the
1950s. This resulted in a highly competitive cost position which the Japanese used as a springboard for
penetration of world markets with small motorcycles in the early 1960s. . . . The basic philosophy of the Japanese
manufacturers is that high volumes per model provide the potential for high productivity as a result of using capital
intensive and highly automated techniques. Their market strategies are therefore directed towards developing
these high model volumes, hence the careful attention that we have observed them giving to growth and market
share.’

Thus the BCG’s account is a rational one based upon the deliberate building of a cost advantage based on
volume. Pascale’s second version of events was based on interviews with the Japanese executives who launched
the motorcycles in the USA:

‘In truth, we had no strategy other than the idea of seeing if we could sell something in the United States. It was a
new frontier, a new challenge, and it fitted the ‘success against all odds’ culture that Mr. Honda had cultivated. We
did not discuss profits or deadlines for breakeven. . . . We knew our products . . . were good but not far superior.
Mr. Honda was especially confident of the 250cc and 305cc machines. The shape of the handlebar on these
larger machines looked like the eyebrow of Buddha, which he felt was a strong selling point. . . . We configured
our start-up inventory with 25 per cent of each of our four products – the 50cc Supercub and the 125cc, 250cc and
305cc machines. In dollar value terms, of course, the inventory was heavily weighted toward the larger bikes. . . .
We were entirely in the dark the first year. Following Mr. Honda’s and our own instincts, we had not attempted to
move the 50cc Supercubs. . . . They seemed wholly unsuitable for the US market where everything was bigger
and more luxurious. . . . We used the Honda 50s ourselves to ride around Los Angeles on errands. They attracted
a lot of attention. But we still hesitated to push the 50cc bikes out of fear they might harm our image in a heavily
macho market. But when the larger bikes started breaking, we had no choice. And surprisingly, the retailers who
wanted to sell them weren’t motorcycle dealers, they were sporting goods stores.’

Two very different accounts, yet they describe the same market success. Since the publication of the paper, many
writers on strategy have hotly debated what these accounts actually represent. For example, Henry Mintzberg
observed: ‘the conception of a novel strategy is a creative process (of synthesis), to which there are no formal
techniques (analysis)’. He argued any formal planning was in the implementation of the strategy: ‘strategy had to
be conceived informally before it could be programmed formally’. He went on to add, ‘While we run around being
“rational”, they use their common sense . . . they came to America prepared to learn.’ Michael Goold, the author of
the original BCG report, defended it on the grounds that:

‘its purpose was to discern what lay behind and accounted for Honda’s success, in a way that would help others
to think through what strategies would be likely to work. It tries to discern patterns in Honda’s strategic decisions
and actions, and to use these patterns in identifying what works well and badly.’

Richard Rumelt concluded that:

‘the ‘design school’ is right about the reality of forces like scaled economies, accumulated experience and
accumulative development of core competences over time . . . but my own experience is that coherent strategy
based upon analyses and understandings of these forces is much more often imputed than actually observed.’

And Pascale himself concluded that the serendipitous nature of Honda’s strategy showed the importance of
learning; that the real lessons in developing strategies were the importance of an organisation’s agility and that
this resides in its culture, rather than its analyses.

Source: Johnson, Scholes & Whittington (2008) Exploring Corporate Strategy, Pearson, London. Based on R.T.
Pascale, ‘Perspectives on strategy: the real story behind Honda’s success’, California Management Review, vol.
26, no. 3 (Spring 1984), pp. 47–72; and H. Mintzberg, R.T. Pascale, M. Goold and R.P. Rumelt, ‘The Honda effect
revisited’, California Management Review, vol. 38, no. 4 (1996), pp. 78–116.