The case describes Honda’s move into the US motorcycle market in the 1960’s. Honda’s strategy was directed towards high volumes per model, providing high productivity, and low costs. Honda succeeded in the US by introducing a new product (small motorcycles, 50cc) that expanded the motorcycle market in the US through price generic competitive strategy. Honda was prepared with capacity, capital and technical capability to enter the US market.
Transmission, one-hand controls; Honda builds a plant with 10x the capacity of the current market demand
Experience cost curve advantage allows for higher pricing flexibility. US prices are significantly higher than Japan prices.
Honda invested heavily in R&D and mass production infrastructure. Honda’s productivity was very high compared to competition. They outperformed the western competition by up to 4x (although Japanese labor cost were higher than in the west). Pipeline of new models (“cold storage of designs”) was full. Main goal was to grow market share (“market penetration”) and defend that at any cost.
Rather opportunity driven than based on a long term strategy. Based on the success of the 50cc motorcycle in Japan coupled with the belief that mass production will drive down cost and let them move down the experience cost curve, Honda saw a chance to enter the US market. Sochiro Honda was very aggressive when building the big plant in 1958. It appeared to be a mix of gambling and the foresight that he could become the world largest motorcycle company by applying the concept of mass production, moving down the experience cost curve respectively.
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