Republic of the Philippines

BATANGAS STATE UNIVERSITY

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND
INTERNATIONAL HOSPITALITY MANAGEMENT
CITE Building, Pablo Borbon, Rizal Avenue, Batangas City

HONDA MOTOR CO., LTD.

A Strategic Cost Management Paper

In Partial Fulfilment of the

Requirements for the Course
ACC 206 – STRATEGIC COST MANAGEMENT

Submitted by:
ATIENZA, Mary Roshielle T.
CLAVERIA, Robert John A.
MARCELLANA, Lovely Anne R.
MENDOZA, Carlos Miguel A.
RELATIVO, Caesar Dominic B.
GROUP 7 - BSA 2205

Submitted to:
Ms. Sharmaine Pauline Lacorte
Professor

MAY 2022
 I
INTRODUCTION
As the world continues to modernize, humans are continually seeking for more
comfortable lives. They purchase the products and services that satisfy their everyday
needs and wants. In today's society where time is considered as the most precious
resource, faster transportation is necessary. The introduction of automobiles and
motorcycles greatly influenced the purchasing habits of many individuals. Consumers'
favorable attitudes of these products result in increased market competition among
companies selling the same products and services.
There are four Japanese brands leading in motorcycle innovation and global
sales namely Kawasaki, Suzuki, Yamaha, and Honda, sometimes referred to as “The
Big Four.” For the past few decades Honda Motor Co., Ltd. has become the leading
manufacturer of automobiles and motorcycles in the world among the four (New World
Encyclopedia, 2018).
This paper aims to analyze and evaluate the strategic management philosophies
and cost accounting method techniques adopted by Honda Motor Co., Ltd. It will serve
as an analytical instrument to assess how the leading motorcycle and automobile
company manage their operation to achieve competitive advantage in its respective
industry.

Company Profile
Honda Motor Co,. Ltd. is a leading Japanese multinational conglomerate
corporation. It was established by Soichiro Honda on September 24, 1948 in Tokyo,
Japan. Honda group of companies have 415 domestic and overseas affiliated companies
as of March 31, 2021. Honda is known for manufacturing and selling automobiles,
motorcycles, and power products.

Illustration 1. Honda Motor Co., Ltd.

Core Values
The Honda consist of fundamental beliefs including Respect for Individuals and
The Three Joys. These philosophies serve as the basis for all company activities, and
establish the standard for all Honda Group associates' behavior and decision-making.

1. Respect for Individuals

 Initiative
 Equality
 Trust
2. The Three Joys
 The Joy of Buying
 The Joy of Selling
 The Joy of Creating

Mission Statement
Maintaining a global viewpoint, we are dedicated to supplying products of
highest quality, yet at a reasonable price for worldwide customer satisfaction.

Vision Statement (2030 Vision)

We will bring the universal passion of Honda to “serve people worldwide with
the joy of expanding their life’s potential.” And towards the end, we will “lead the
advancement of mobility and enable people everywhere in the world to improve their
daily lives.

Company History
“How easy would riding a bicycle be if it had an engine?”
In 1946, the bicycle was the most popular means of transportation. Soichiro
Honda came up with the idea of employing generator engines to power bicycles after
seeing them being used by the Imperial Army to power wireless radios. Honda had built
and sold bicycles with auxiliary engines after modifying the 500 or so engines. Because
the new bicycle was such a success, with orders pouring in and supplies running out,
Honda decided to create a unique engine. The A-Type engine, which was the first to
bear Honda's name, was finished in 1947.
The Honda Motor Co.,Ltd was incorporated in 1948 with 34 employees and 1
million yen capital. Honda began as a bicycle auxiliary engine manufacturer in
Hamamatsu. Then,the power products business began in 1953 where they introduced
the H-Type farming engine ushers in a new era.
In 1958 they introduced to the market Super Club, the friendly and convenient
scooter that became a huge hit. American Honda Motor Co., Inc was established in Los
Angeles in 1959- the first overseas subsidiary of Honda. Honda’s first overseas
production began in1962 in Belgium. Also during 1962, The Suzuka Circuit was
completed, it is known as the first born international-class racing track in Japan. In
1963, Honda started automobile production.
In 1981, Honda became the first manufacturer in the world to fully comply with
the Muskie Law, the most stringent emission regulations in 1972. Honda invented the
first car navigation system that displayed the vehicle's current location on a map. In
1982, Honda introduced Japan’s first automobile equipped with the Franz System, a
system that supports disabled drivers. And Honda made a remarkable history by being
the first Japanese manufacturer to produce vehicles in North America.
Another notable remark was Honda’s invention of ASIMO, the humanoid robot
in 2000. Power products of Honda reached 100 million accumulated production
milestones in 2012 and the motorcycles reached 300 million accumulated production
milestones in 2014. Honda introduced the HondaJet deliveries in 2015, they acquired
the US Federal Aviation Administration certificate to allow HondaJet deliveries to
customers.
In 2016, the automobile cumulative production reached the 100 million
milestone. Honda reached another milestone for the 100 million unit production of
Super Club globally in 2017. In addition, in 2020, the Honda e was launched as their
new electric vehicle.
 II
DISCUSSION
This chapter contains the presentation and evaluation of the company as to the
strategic management philosophy and cost management technique that the firm
adopted. It includes the discussion on how those techniques were employed and its
significant effect for the attainment of the company’s competitive advantage.

A. STRATEGIC MANAGEMENT PHILOSOPHIES

Automotive industry has changed our society. It plays an important role in
human’s life. It also has a huge impact on economic, environment, and social activities
throughout the world. In this modern day, the competition became stronger because of
the innovation made by the companies like introducing new models, unique features,
brand positioning in the market, quality product and cost.
As the changes in the contemporary business environment occurs due to the
paradigm shift brought by the technological era, almost all the existing business entities
contemplated different techniques in order to resemble the efficiency of their operation.
Different strategic management philosophies, as well as costing mechanisms, were
formed and eventually adopted based on an entity’ nature, purpose, goals and
objectives. In line with this, the Honda Motor Co., Ltd. assures the applicability of the
going concern principle as the company embraces such philosophies and techniques on
the entity’s management and operational activities.
Honda, as being part of the Big Four in the automobiles and motorcycles
industry in the world, was able to establish an advantageous position over its
competitors by adopting different strategic management philosophies including Total
Quality Management (TQM), Kaizen, and Environment Management Accounting
(EMA).

HONDA AND THE TOTAL QUALITY MANAGEMENT

Total Quality Management is a customer-focused organization's management
system that incorporates all employees in continuous improvement. It integrates the
quality discipline into the organization's culture and activities via strategy, data, and
effective communication. Originating in the 1950s, its popularity has increased since
the 1980s. Its quality management concepts have been implemented by automotive
companies such as Ford Motor Company, General Motors Company, Toyota Motor
Company, and the Honda Motor Co., Ltd. (Mallen, 2020).
Soichiro Honda defines the company’s fundamental approach to quality by
maintaining a 120% product quality consistently. The Honda Quality Cycle was
created to continuously ensure product quality at all stages of planning and
development, production preparation, production, sales and service, and Analysis and
Quality Improvement in order to meet or exceed customer’s satisfaction. Their primary
objective is to be number one in customer satisfaction in all points. To ensure the utmost
product quality, Honda has implemented different evolving activities such as the
introduction of driver-assistance technology, collision free mobile society, and creating
mobility that incorporate the Internet of Things.
Another quality management approach used by Honda is the G-HQS
established in April 2005, aims to improve the quality of a manufactured and sold
Honda’s product around the world which was stipulated by global function. This
principle promotes the ideals of a quality product awareness that leads to the personal
growth of the company’s associates.
Honda established challenges based on quality targets specified in company-
wide policy, which were then amended to reflect issues discovered in various areas,
with countermeasures formulated under the Global Meeting Structure quality
management strategy. Honda has developed a customer-focused action philosophy in
order to deliver value through service and a sense of satisfaction in continuing to utilize
Honda products in their customer service. The implemented global benchmark by the
company was based on the productive measures and initiatives shared at the meeting
held under this approach.
Another strategy implemented by the company is Quality Management
Education. It is a management technique that aims to improve associates’ quality
assurance skills by undergoing training such as in-house qualifications, quality level
control responsibilities, and teaching trainees to resolve issues in their own department.
In Japan, the training curriculum has four courses divided into basic training and
specialized training. The Honda QC Basic Course (HBC) focuses on training experts in
all aspects of Honda Quality management, which is open for associates and suppliers.
Outside Japan, the basic training offered to its associates are the QC Junior (QC J)
Course and the QC Foreman (QC F) course. The said training is a preparation ground
to produce quality control training experts with practical skills.
Some strategic quality initiatives made by Honda are the following: critical
quality issues exhibition hall, overseas partnership’s analysis, and proper handling of
quality issues with the same goal of strengthening the company principles “maintaining
a 120% product quality consistently.”
Total Quality Management (TQM) is a corporate strategy that aims to satisfy
customers with high-quality goods, products and services while decreasing waste and
empowering workers and suppliers. In the case of Honda, TQM became an effective
tool for their strategic management techniques in incorporating their business principles
while ensuring that the products they manufactured and sold had a good quality within
a reasonable price. Honda's advanced product range, which includes aircraft,
motorcycles, and power equipment, enabled them to strengthen their market position.
Along with its other strategic management techniques, the company was able to rise in
the 20th place in the Best Global Brands in the World in the Interbrand study, its brand
value increased to $22.696 billion and recognized as the fourth biggest global
automotive brand in the world.
Honda has also received numerous awards for its high quality products and services to
its consumers. It is recognized not only in Japan but also in other countries. When it
comes to quality management control, Honda is one of the top companies in the world
(Honda Motor, Co., 2008).

HONDA AND THE PHILOSOPHY OF CONTINUOUS IMPROVEMENT

The Honda Motor Co., Ltd. has adopted a system that facilitates the continuous
improvement through the direct involvement of the Associates. It encompasses and
integrates all the individual and group instruments as well as the moments of life in the
company, which suggest improvement ideas, report problems and propose
countermeasures.
Honda has a formal system for encouraging employees to make improvements
to their workplace. Honda's affinity with the Kaizen philosophy has been apparent since
1984, when a Honda pamphlet stated: “Above all, a policy of strong emphasis on the
human worker, through voluntary fostering of human resources by the workers
themselves, is vital to quality.” The manifestation of the principle of continuous
improvement is in Honda's REACH program: Recognizing Efforts and Associates
Contributions at Honda. Associates can make formal reports in this program under the
headings, Kaizen, Safety Awards, and Hawkeye, for which they can receive points if
their contribution is deemed worthy. The Kaizen components are for making
modifications to work processes or equipment to improve a job in some way.
In addition, Honda established the Business Ethics Kaizen Proposal Line as a
structure for improving corporate ethics issues that addresses corporate ethics issues
involved in cases of actions that violate laws or internal rules. This allows the company
to accept proposals and, from a fair and impartial perspective, advise employees who
face obstacles in improving or resolving workplace issues, for example due to difficulty
in consulting with managers. This hotline also provides consultation and responds to
inquiries about the details of internal rules and engages in fact checking related to such
cases. Proposals are accepted in different forms, whether by email, letter, telephone or
fax from all subsidiaries and suppliers in which Kaizen proposers and anonymous
proposals are accepted. Moreover, the company established a point of contact within
an external law office, as for overseas, local points of contact have been established in
all Regional Operations, and, some subsidiaries set up their own points of contact to
facilitate associates to submit their proposals

Evaluation in the Philosophy Employed

The majority of participants interviewed had contributed to Honda’s REACH
program. Associates interviewed appreciated the opportunity to improve the workplace
through Kaizen, but participants' identification with the whole REACH program is
more tenuous. In addition, one associate reported greater job satisfaction through
participating in a more extensive Kaizen, conducted by a select team of associates.
Overall, participants responded positively to making visible changes to the workplace,
suggesting that these limited instances of participation are constructing more fulfilling
employment for production workers.
Moreover, in FY 2021, 350 proposals and consultations were handled by the
Business Ethics Kaizen Proposal Line in which 167 concerned the parent company, 172
concerned subsidiaries and 11 concerned other matters. Following investigations of the
proposals and consultations submitted, disciplinary action was taken in two cases in the
parent company and nine cases in subsidiaries. One case involving a subsidiary resulted
in punitive dismissal. In order to raise internal awareness of the points of contact, Honda
provides notice on its intranet, distributes information cards to all associates, including
fixed-term employees and temporary workers, and displays information posters in each
workplace. These tools clearly state that the Kaizen proposers are protected. In addition,
Honda observes how well these points of contact are recognized through associate
surveys conducted once every three years for all associates. For departments found in
these surveys to have low recognition of the points of contact, the Company makes
additional efforts to increase their awareness.

Role of the Philosophy in Gaining Competitive Advantage

The instances of continuous improvement at Honda suggest that an employee
has to be persistent, assertive and ready to confront or even humiliate their superiors to
try to get their suggestions implemented or rewarded. The cost-benefit balance for
participating in Kaizen seems to be weighed heavily on the cost side because associates
are supposed to complete the reports on their own time, and as the above instances
demonstrate, there is no certainty that management has to fulfill their obligations under
the program. If associates choose to be adamant and follow their reports up the chain
of command, they will be stepping on someone and risk losing the favor of immediate
supervisors. Moreover, because the rewards for participation are remote, there is little
incentive to participate in the first place. The modest rewards and instances of the
uneven administration of the program suggest that the know-how and assets of
associates are not considered equally, and that Honda's intentions underlying the
REACH are less than sincere. The formal mechanism for encouraging and
administering employee participation in the REACH program permits more positive
work experiences. Honda's implementation of the Kaizen philosophy is facilitating
limited instances of the reunification of mental and manual labor. Through kaizen,
associates can use their innate ability to conceptualize new devices and procedures to
make their job either faster, safer, or both. Even if the day-to-day work is still
physically demanding, associates reported increased job satisfaction and pride in
making visible changes to the workplace, especially changes that made a job safer and
easier. The team model at Honda accentuates greater inter-worker tensions and
competition on the line, at the point of production.

Other Relevant Data

Honda is trying to convey that its belief in continuous improvement exists in
everything, from design and production to the finished product. Honda doesn’t only
want to showcase the latest example of its innovation philosophy but embrace other
dreamers and doers who share their same way of thinking. Kaizen may best be known
for its use in manufacturing practices, but it can also be used in other ways, whether it's
personal development or product design. Yesterday’s achievement may be celebrated,
but there is no resting place because the best never rests. Kaizen is a guide in finding
new ways to improve. The first step of Kaizen is to document how a process really
happens, take a moment to document all the variations of a process to identify waste.
Once wasted effort has been identified, eliminate as many unnecessary steps as possible
and this will increase efficiency. Once the improved process makes progress,
standardize the changes as the new way to conduct operations. Continuous
improvement is necessary to prevent falling behind.

HONDA AND THE ENVIRONMENTAL MANAGEMENT ACCOUNTING

The Honda Motor Co., Ltd. recognizes that environmental issues such as
climate change, and energy and resource issues, which demand global response, are
important issues that affect Honda's operations. In making environment-related
management decisions, the company implements Environment Management
Accounting (EMA) as its strategic management philosophy.
As defined by Chartered Global Management Accountant, Environmental
management accounting (EMA) is the process of identifying, collecting, analyzing, and
applying two types of data to make internal decisions. The first is physical data on
energy, water, and material use, flows, and rates (including wastes). The second type
of data is monetary data on environmental costs, incomes, and savings.
Honda has been actively attempting to solve environmental issues since the
1960s. In 1992, it released its Environment Statement which is composed of four
principles that serves as the company’s guideline in its environmental initiatives
through the life cycle of its products, from product procurement to design, development,
production, transportation, sale, use and disposal stages. Moreover, in 2011 the
Company established the Honda Environmental and Safety Vision to ensure that each
of its global business sites whether production-based or corporate activities is engaged
in reduction of environmental impacts such as Greenhouse Gas (GHG) emissions, use
of resources and suitable processing and reduction of waste. Honda established its
Environmental Committee headed by the Chief Executive Officer (CEO) and composed
of members of company management who are responsible for discussing and
formulating plans for environmental protection activities worldwide. The Company
handles the major environmental issues by setting improvement goals, assigning duties,
ensuring emergency response capability, self-correcting and assessing, and conducting
internal reviews.
Honda has acquired the ISO14001, an international certification for
environmental management system for its vehicle and product assembly plants. To
minimize its impact with the environment, each of Honda's plants is implementing
environmental management systems to strengthen their abilities to preserve the
environment and more effectively mitigate the environmental impact of substances of
concern. The Company uses Life Cycle Assessment (LCA) in identifying opportunities
on how they can lessen the environmental impact on their operation starting from
development to purchasing, manufacturing, sales and service, in-use and at the end of
the product’s life. The Company actively promotes the 3R
(Reduction/Reuse/Recycling) activities with the whole life cycle of their product as
well as with the corporate activities. Honda is also working on increasing its use of
renewable energy and introduces their electrified products that aim to lower
the emission. Additionally, the Company executes tree planting and water-recycling
initiatives at its plants. In 2021, Honda invested 10,000,000 Japanese Yen and spent
206,513,000 Japanese Yen with its environmental conservation activities. Currently,
Honda is still making progress in its environmental performance, guided by its own
environmental standard that is more strict than that of national or local.

Evaluation of the Philosophy Employed

From the 2021 report of Honda Motor Co., Ltd. it states that in 2021 the
Company was able to lower its direct emission of Greenhouse gas from 124 t- in 2020
to 112 t-, this direct Greenhouse gas emission are from business activities (e.g.,
combustion of fuel oil at a manufacturing plant, emissions from work vehicles and
company cars). Moreover, the Company’s indirect emission of Greenhouse gas was
able to lower from 379 t- in 2020 to 338 t- in 2021, the indirect Greenhouse gas
emission were from the company’s use of energy (e.g., electrical energy used by a
manufacturing plant of office). In total, the emission by Honda was able to decrease
by 9.1% due to a decrease in production at the plants. Additionally, the Company’s
total energy consumption was able to lower by 9.29%, from 46,300 TJ in 2020 to 42,000
TJ in 2021. The amount of water intake was able to decrease by 14.08%, by which in
2020 Honda consumed 34,100 and in 2021 it decreased to 29,300 . Furthermore, the
wastewater volume was able to reduce by 14.50%, from 20,000 in 2020 to 17,100 in
2021. Waste generated for the year declined by 12.26%. The atmospheric pollutants
like the sulfur oxide dropped by 10.14% and the nitrogen oxide decreased by 8.76%. In
addition, Honda was able to accumulate 4,345,000 Yen from the sale of valuable waste
materials. The cost reduction from saved energy from installed energy was 36,000,000
Yen and 55,000,000 Yen from behavioral changes, etc.
Observing the given environmental data by Honda, we can conclude that the
Company’s environmental management system fulfills its duty in reducing
environmental impacts such as Greenhouse Gas (GHG) emissions, use of resources
such as water and energy and suitable processing and reduction of waste. Moreover, it
also provides business economic benefits that affect the Company’s revenue and
expense.

Role of the Philosophy in Gaining Competitive Advantage

The current condition of the automotive industry worldwide is at oligopolistic
competition. According to Monash University, oligopolistic competition is a
competitive situation in which there are just a few sellers of products that can be
differentiated but not significantly and where each seller controls a significant portion
of the market and cannot afford to ignore the actions of the others. Within this type of
competition, the firms strive to provide cheap and innovative products that their
competitors cannot provide. The success by Honda can be attributed to their new, cost
efficient and diverse product by which in these innovations they are following their
initiatives toward their environmental measures.
As environmental standards like ISO govern different industries such as the
automobile industry, clean diesel became popular in the market. In response to the
demand of the customers, Honda adopted the Environment Management Accounting
where it seeks to make its production and corporate activities reduce environmental
impacts. The Company innovates vehicles that use alternative sources of fuel and low
emission, example of this is the Gyro-e which is a scooter that does not emit and uses
electric motors. Honda’s environment-friendly products gained competitive advantage
internationally and globally. Moreover, the Company’s initiatives allow the stakeholder
to recognize Honda’s Corporate Social Responsibility (CSR) which creates a good
image for the company and helps in gaining the trust and confidence of the stakeholders.
Having the reputation and trust from the public, Honda can maximize and increase
income by potential investors.

Other Relevant Data

Recently, Honda focused their efforts with the Triple Action to ZERO which
integrates three elements which are carbon neutrality, clean energy and resource
circulation into one concept. The Company aims to reduce its emission throughout the
product life cycle which encompasses not just the products but also the corporate
activities. Furthermore, to address issues with energy, Honda aims to use clean energy
in activities with both product and corporate. And to ensure the effective utilization of
resources, Honda will conduct research in recycling materials including batteries. These
initiatives are targeted to be achieved by the Company by the year 2050.

B. COST MANAGEMENT TECHNIQUE

The allocation of cost to derive accurate, timely, and detailed managerial
information is vital for an entity to effectively determine their status as to the company’s
profitability and sustainability. Through a proper cost allocation, the business firm
would be able to develop appropriate pricing mechanisms that would support the
entity’s operation.
As the Honda Motor Co., Ltd. employs different strategic management
philosophies to resemble the capacity of the entity to meet the varying demands of their
environment, the entity also adopted various costing techniques that are aligned on the
nature of their operation. These costing methodologies, used by Honda, serves as a
mechanism to appropriately allocate cost to derive on much concrete financial and
managerial data that will become significant for the entity’s decision-making. In line
with these, some of the cost management techniques adopted by Honda Motor Co., Ltd.
are the Life Cycle Costing and the Kaizen Costing.

HONDA AND THE LIFE CYCLE COSTING

Life Cycle Costing is one of the costing techniques that Honda is implementing.
It is a management technique that is used to identify and monitor the cost product or
service through its life cycle in order to minimize overall costs. The products of Honda
company are usually for the long term, so it is great that they use life cycle costing.
Unlike other costing techniques that focus only on operating expenses in the short term,
life cycle costing provides a significantly better assessment of the long-term cost-
effectiveness of a project. With the help of life cycle costing, Honda manages to use
their resources efficiently. It also helps them to identify the most profitable product
because it gives the most accurate cost per unit. Total cost over the product’s life cycle
is often broken down into upward. Moreover, Life cycle costing is aligned with Total
Quality Management and Kaizen as their management philosophies.
In summary of Honda financial statements of 2021, it can be interpreted that
using Life cycle costing helps them increase their profit and reduce overall costs.
Research and development expenses decreased by ¥65.2 billion, or 8.1%, to ¥738.8
billion from the previous fiscal year. Research and development expenses are treated
as upward costs in Life cycle costing. There is also a decrease of ¥1,411.9 billion, or
11.9%, to ¥10,439.6 in their cost of sales. The cost of sales are treated as production
cost in Life cycle costing. Moreover, Honda's selling, general and administrative
expenses decreased by ¥309.8 billion, or 18.9%, to ¥1,331.7 billion from the previous
fiscal year. Selling, general and administrative expenses are treated as downward costs
and some part of it as after-sales services in life cycle costing. Unlike other methods
which are mainly focused on their production costs, Life cycle costing focuses on
upward costs, production cost, downward costs and after sales services in order to
reduce their product's whole cost. With the help of Life cycle costing they were able to
decrease their operating costs and expenses by ¥1,787.0 billion, or 12.5%, to ¥12,510.3
billion from the previous fiscal year. They were successful in raising their operating
profit, which increased by ¥26.5 billion, or 4.2%, to ¥660.2 billion from the previous
fiscal year. Taxes are also considered in Life Cycle costing, Honda managed to
decrease their income tax expense by ¥61.3 billion, or 21.9%. Overall profit for the year
increased by ¥185.5 billion, or 36.4%, to ¥695.4 billion from the previous fiscal year to
¥218.6 billion from the previous fiscal year. This shows that through Life cycle costing,
they were able to achieve a tremendous increase in their profit.
Life cycle costing has 5 stages consisting of pre-infancy stage, infancy stage,
growth stage, expansion stage and maturity decline stage. It helps Honda to improve
their strategic pricing approach. In the pre-infancy stage they did their best to reduce
the overall cost of their product. In the infancy stage, we can notice that newly launched
products are set at a relatively high price to recover the costs they incurred and to take
advantage of the new demand for the product and its product differentiation. In the
growth stage, the pricing of their product stays at high but lower than the cost at infancy
stage in order to build profitability in the market. In the expansion stage, most of their
product’s price becomes low but still profitable in order to maintain or increase their
market share. Finally, in the last stage of their product their prices become more
competitive. Honda’s product started with differentiation in early phases to cost
leadership in the final phases.
A great example of how Honda applies the life cycle costing is the product life
cycle of Honda motor scooters in India. Before they launched it to the market, they did
different practices like market analysis, product design, conception, and testing of the
product which can be considered as pre-infancy stage. The infancy stage started at the
period between FY 2001-02 and FY 2006-07 where they introduced the Honda's Moto
scooter segment. Various issues arise in the segment during this period like low average
and sophisticated engine design. The growth stage started from FY2007 and stretched
to 2011. In solving the problems it experienced in the introduction stage, it introduced
the Honda Eco Technology (HET). It also changed the body models of specific
automobiles that had been around for a long time, such as the Activa and Aviator. In
addition, disc brakes and an aviator were added to the Activa, as well as a new 125cc
capacity engine to provide more power. The expansion stage started in 2011 until the
3rd quarter of 2018. Honda has rapidly expanded its sales and service network. To
support the growth in demand in this period, they opened new plants in Rajasthan,
Karnataka, and Gujarat respectively. And finally, the sales touched their peak in FY
2017 like 4,010,980 units of ATSC. This progress was made possible by embracing the
Scooterisation of India idea seriously. The product has been intended to appeal to a
wide range of people with various demographics. Maturity period started in September
2018 after the highest sales record in FY2018. The decline of sales is the result of many
factors, such as increase in insurance premium and installation of Combined Braking
System is mandatory which affected the cost of scooters. The decline in the scooter
market is the result of many factors. The slowdown was noted when insurance
premiums increased significantly and mandatory installation of Combined Braking
System which in turn affected the cost of scooters. Their sales dropped by over 47% in
March 2019, causing them to drop to second place in the two-wheeler industry.
According to LiveMint, the corporation has decided to reduce two-wheeler output by
15-20 percent this quarter. Since it began making scooters in 2001-02, this is the first
time the company has reduced production. The arrival of electric and connected
vehicles such as the TVS Ntroq can also be attributed for the reduction in sales, which
was countered by the company's new product, the Honda GRAZIA. The decline stage
may reveal itself soon.

Other Relevant Data

Honda has launched an interactive whole lifecycle costs calculator, which can
be accessed through the new Honda Fleet website and allows Honda customers to
estimate how much a vehicle will cost over the period of its ownership. The Honda
interactive calculator helps fleet managers analyze all of a vehicle's costs throughout its
lifecycle, including procurement, operational management, fleet management, risk
management, and remarketing. The Honda interactive calculator allows fleet managers
to analyze all of a vehicle's costs throughout its lifecycle, including procurement,
operational management, fleet management, risk management, and remarketing. With
this , the investments of corporate customers are protected. Users can now compare
Honda models to current vehicles and those from other manufacturers to estimate real-
world savings and make informed fleet selections.

HONDA AND THE KAIZEN COSTING

The main objective of the Kaizen Costing circulates on cost reduction over cost
control. It is a cost management technique that employs continuous improvement as to
the totality of the firm’s managerial actions in order to reduce the cost incurred for a
specific period of time. It requires participation of every sub-divisions of a firm to
incorporate different measurements for the improvement of the entire system. As this
costing technique was adopted, the entity would be able to reduce unnecessary cost
leading to an efficient and sustainable business operation.
Provided by Honda’s sustainability report, dated 2021, the financial record
shows that the operating profit generated by the entity in the fiscal year, ended March
31, 2021, was ¥660.2 billion, 4.2 % higher in comparison from the previous year. It is
due on the adoption of two different costing methods that the firm is currently
employing. As the Life Cycle Costing assesses the total incurrence of cost with
consideration on the actual life cycle of the entity’s product, it becomes a reliant
mechanism to accurately determine the total cost to be allocated in a specific product.
This costing method enables the firm to include pre-production and after-sales expenses
that are capitalizable on the total cost incurred in a specific year. Thus, in-depth analysis
on the actual amount incurred in every stage of the business operation is properly
determined. In relation, it expected that the entity would incur higher total cost due to
the inclusion of various kinds of costs in the computation for the total expenses incurred
in the period. However, as Honda Co., Ltd. employed the kaizen costing based on the
entity’s philosophy regarding continuous improvement, the firms modulated the
incremental increase through elimination of unnecessary cost that would not add value
to the entity’s product nor operation.
The utilization of the kaizen costing by Honda Company is observable through
the entity’s capital expenditure in the past few years. Accordingly, the company
allocated a significant amount of their capital on various measurements concerning the
improvement of the entire system as to the entity’s operation. The entity acquired
additional properties in Japan including Honda's R&D facilities that initiated various
developments for a subsequent cost reduction scheme. As Honda integrates this costing
mechanism in reducing total cost incurred by the company for a specific reporting
period, treatment in different costs, aside on merely reducing them, was being
employed. The cost of the company’s R&D for the fiscal year, ended March 31, 2021,
was ¥65.2 billion lower from the previous year. It is a result of the cost determination
where the costs that are not directly associated with activities under R&D were
derecognized by the entity as other expenses, while a specific portion was capitalized
as an intangible asset (patents and copyright from R&D functions). Furthermore, as the
costing technique was concerned with the allocation of cost depending on the
performance of the company, it becomes certain, as Honda employs kaizen, that the
cost per product unit is depleted in comparison from the previous year where the entity
operates. The production of Honda, as an automobile manufacturing entity, accelerated
as the entity allocated funds for the improvement, renewal , and rationalization of their
production facilities, introduction of new processing models, and expansion and
reinforcement of the entity’ sales and marketing mechanism.
Honda also integrates the implications of kaizen through the enhancement of
the entity’s procedural approach towards the related-third party transactions. As the
entity secures the quality of the raw material used for the production of the product,
Honda acquires such inputs from the company’s affiliated suppliers in conformance to
the company policy regarding efficient procurement. This policy relied on the
implementing resolution regarding Honda's internal control and principles of Total
Quality Management. Accordingly, under the supervision and participation of the
entity’s management, including the Chief Executive Officer and Chief Financial
Officer, the entity performed an evaluation of the company’s disclosure controls and
procedures to maintain an entity-oriented cost flow.

Other Relevant Data

In line with the Kaizen Costing adopted by Honda Motor Co., Ltd, the company
preferentially addresses different managerial challenges regarding the contemporary
business environment. Included in such issues to be solved was the preparation of the
company for future growth. Accordingly, Honda, as a company operating in the
automobile industry, would integrate next-generation technologies to achieve
continuous improvement. Since the ability of the company to respond in the
electrification and other technological innovation will be the driver of the entity to
achieve competitive advantage, integration of different innovative programs focused
not only on the actual product but also on the process on how it was developed was
ensured. Moreover, Honda applied the Mono-zukuri reform, a specialized business
strategy, to ensure a lower cost by stabilizing the production process with high precision
while developing new models to improve the company’s global capacity utilization
rate.
 III
CONCLUSION
This chapter includes the presentation of the conclusion generated from the
evaluation conducted by the proponents. It focuses on the discussion regarding the
implications of various management philosophies and techniques that Honda employed
as well as the potential problem that arises in relation with such business strategies.
More so, this chapter would provide the possible solution to address such issues as well
as the specific steps and recommendation to accomplish the proposed solution.

GENERAL CONCLUSION
Upon assessing the strategic management philosophies and cost management
techniques that Honda Motor Co., Ltd. incorporated, it seems like Honda benefited
from its utilization in major aspects of their business operation. As the entity generated
policies, regulations, and practices aligned with the philosophies and costing methods
that the business employed, they successfully dominated the automobile industry in
terms of market shares and brand reputation. Moreover, in general, the entity has been
able to lower down the cost of their operation in the past few years resulting in much
higher income that gives Honda the sustainability to achieve the going concern
principle for an efficient business operation. In broader perspective, this is the
conclusion that is observable upon the group’s evaluation, however, the followings are
the specific ideologies based on the implication of each philosophies and cost
management techniques towards Honda’s existence.

Honda and the Total Quality Management

In the automobile industry, quality products, customer satisfaction, and
product’s price are the essential elements to dominate the market. For the past decades,
Honda was able to build a good reputation among its competitors by manufacturing
durable cars, motorcycles, and power products that perform exceedingly well.
Honda’s implementation of a Total Quality Management became an effective
tool to achieve their principle of producing a 120% product quality consistently. In
terms of technical and practical terms, by using the said approach, the entity was able
to perform well by providing assessments, plans and research, training, and programs
that focused on improving the quality of the product in all associates companies as well
as their suppliers. In the assessment conducted, Honda mainly focused their
philosophies on the product itself, on how to prevent having defective products, poor
quality accessories that contribute to product’s damage, how to manage fuel efficiency,
etc. (Honda Motor, Co., Ltd., 2018).

Honda and the Environmental Management Accounting

As Honda works towards meeting the expectations and needs of the customers,
the company assures that it will not compromise the environment. In achieving
sustainability, the company provides value through its product and services. Equally
important is Honda's fulfillment of its corporate social responsibility, such as assessing
its impact on the environment and society and using its economic activities to contribute
to the resolution of social concerns. (Honda Motor, Co., Ltd., 2021).
In the final analysis on Honda's implementation of Environmental Management
Accounting, the company's 2021 report reveals that with its constant effort to improve
its environmental performance and to lessen its impact, the company was able to
respond to material environmental issues such as greenhouse gas (GHG) emissions, use
of resources, and waste processing and reduction. Honda was also able to generate
additional income and reduce costs, resulting in a financial gain for the company.
Furthermore, the organization created future plans demonstrating their commitment to
improve its environmental management system.
This evaluation shows that the implementation of the company's procedures
contributed to achieve its environmental goals and reduction of cost. Honda may gain
a competitive advantage in the market and increase its business by establishing an
environmentally friendly reputation in the society. Guided by the data and goals
provided by Honda, we may reasonably conclude that Honda is on the right track
toward the sustainability that the company wants to achieve.

Honda and the Kaizen (Philosophy and Costing)

From Honda’s philosophy, we have inherited and taken on board the significant
importance of the Kaizen philosophy: a Japanese method that aims at continuous
improvement for the company and for individuals. Kaizen encourages improvement in
all areas of the company, in terms of production, environmental response, public
relations, staff and customer’s satisfaction, and cost reduction scheme. This is achieved
by Honda through innovative ideas that are put forward by every collaborator. The
physical place where the working processes happen is protected, ensuring cleanliness
and order that are essential for safety and for performing individual tasks, aiming at
perfection and totally eliminating any errors that lessen the overall cost that the business
incurred. Kaizen, in this aspect, is notably as a way of doing improvement activity based
on a deeply-held set of principles. By looking at this and considering its implications,
it can be inferred that Honda benefits from using this philosophy and costing
mechanism.

Honda and the Life Cycle Costing

Life cycle costing is the costing technique that deals with all the costs associated
with the product for its entire life cycle. It is one of the primary reasons why Honda
was able to achieve a high profit margin. In accordance with the discussion, we can
conclude that Life cycle costing is well suited in the operation of Honda Company.
Honda would not be able to achieve a sustainable and profitable operation if not for
their effective and efficient use of this technique as well as the other philosophies
employed. Honda did their best in reducing their upward costs, production, downward
costs and after sales services. They were also able to prolong the life of their products
despite rapid changes in technology and intense competition in their industry. The
implementation of Life cycle costing as one of their costing techniques is extremely
helpful as Honda achieved success through utilization of such costing methods.

A. POTENTIAL PROBLEM AND ITS SOLUTION -TQM

The proponents concluded that improving employees' satisfaction at their
respective workplace by conducting programs based on their companies location could
contribute to the entity’s wider success in all aspects.
As the business paradigm shifted from traditional management, which
emphasizes employee’s individualism, to a strategic way of thinking, it is vital for
business organizations to ensure employee’s state of being. Since the strategic
management under the contemporary business environment focuses on the significant
implication of integration, participation, overall qualities, innovation, and creativity
among the company’s employees, it is important for a business to consider how their
subordinates work not only towards the technical aspects of their job but also on the
behavior they possesses within the workplace.
As an international company that operates within the globe, one of the problems
that Honda have to deal with in applying the standard principles and philosophy of
Total Quality Management is the cultural variation that exists within the workplace.
Since the Total Quality Management emphasizes the importance of employees as an
integral part to achieve optimum quality, it is vital for Honda Company to ensure that
cultural differences and diversity in the workplace would not detriment employee’s
performance and overall productivity. Accordingly, if it is not appropriately managed,
some of the negative effects of diversity include dysfunctional conflict, loss of
productivity, and difficulty in achieving harmony in a group setting (Martin, G.C.
2014). Even though it is a minor concern in comparison with other business issues that
Honda should deal with as to the entity’s business operation, it is notable that the effects
of such occurrence would not only affect the implementation of the TQM. Instead, it
may subsequently hinder the overall operation of Honda that may lead to instances that
are unfavorable for the firm’s operation.
Generally, although Honda’s implementation of the total quality management
is effective, we recommend that the entity could also provide quality strategic
philosophies that mainly focus on the wellbeing of their employees. Given the fact
that most businesses, nowadays, are operated by technological machines, human
resources are still vital to accomplish the entity's goals and objectives. Employees
possessing practical and technical skills at work is considered a strength of most
businesses, however, it can also be their weaknesses if the cultural and traditional
differences are not considered and given an importance. Workplace satisfaction is vital
in order for the employees to become productive and to perform well at their optimum
level (Juneja, n.d.).
B. RECOMMENDATION
The proposed solution regarding the entity’s implementation of the total quality
management circulates on system improvement rather than departure from such
philosophy. As the solution focuses on the enhancement of employee’s wellbeing in a
global and multicultural cultural setting in order to maximize the positive impact of
TQM on Honda’s overall performance, the following strategies and actions are hereby
recommended.
1. Through a resolution or memorandum coming from Honda’s executives and
other top management officials, the entity may create a “Cultural Committee”,
independent from the human resource department, to handle issues and
concerns regarding cultural variation that hinder employee’s workplace
performance. This action would incur additional cost as to the business
operation since additional business function was integrated; however,
unnecessary labor cost, due to employee’s unproductive and idle time, will be
reduced making the operation much more efficient in the long term.
2. Aside from Quality Management Education, which focuses on the improvement
of employee’s technical skills to achieve optimum quality, the entity may also
include Cultural Management Movement in the Honda Quality Cycle. It is a set
of contingency actions and plans, primarily circulated on seminars and
teambuilding, that would ensure that quality that Honda possesses is not only
concentrated on the product but also in the process and component on how those
products are created.
3. The lower management, through the aid of both the Cultural Committee and
Human Resource Department, may conduct a periodic workplace evaluation
that will assess every aspect of the company’s working environment including
the physical workroom, employee-to-employee relation, employee-to-company
relation, etc. to minimize employee turnover rate while maximizing the
subordinate’s capacity to perform well.
4. As to the financial concern and costing mechanism related to the
implementation of the proposed solution through integration of these specific
actions, Honda may allocate sufficient funding in order to achieve the goals and
objectives of the proposed solution.
5. The lower management may attain system improvement by ensuring employee
initiative through corporate encouragement. Through this, internal relations
between the subordinates and the firm are assured.
In the proposed solution, it is observable that the actions to be done are not only
concentrated on a specific segment of Honda Company, instead, it requires the
participation of all the individuals in each level of the organizational structure. This
idea is in line with the concept that the philosophy of TQM employed, where the total
quality will be achieved by having all the members, from low-level up to highest
executives, participate in improving the system to deliver customer delight. It will be
one of the key tools to ensure that Honda will keep its reputation as a leading automobile
manufacturing company that prioritizes quality while securing public interest.

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