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It’s not just about the upcoming Honda Jazz launch (more of that later), as apart from taking the Honda Civic Hybrid off the retail showrooms and launching the all new Accord V6, the company has announced some major production cuts to ensure its smooth drive in the country. When questioned by 4Ps B&M, Masahiro Takedagawa, President and CEO, Honda SIEL Cars India Pvt Ltd, shares, “In the past 60 years, we have witnessed a lot of ups and downs in the global market. And we are all geared to strategically outdo the current slump. We are aiming for lean operations and we have already adjusted our productions.” The company has put the opening of its second plant at Tapukara, Rajasthan indefinitely on hold. Even the current facility at Greater Noida will be operating at a single shift till the end of June rather than two shifts and hence will produce only 200 units a day rather than at a full capacity of 385 units a day. And if the speculations are to be believed, then Honda SIEL is also looking at diversifying into the boat manufacturing business with a motive of de-risking its automotive business like its rival Mahindra & Mahindra.
Notably, the launch of the new Honda city was the main reason behind the success of Honda in this period of downturn. Takedagawa is quite upbeat when he tells us something we already know, “Since last November, when we launched the generation-next model of Honda City, our sales are gradually picking up.” But what gave us a surprise was his frank acceptance of his own target market segmentation being zero-recession proof, “We are focusing more on the so-called premium segment who are quite connected to the global economy.”
Is that why Takedagawa is moving towards what is now known as the ‘Swift’ segment (after Maruti’s unfathomable monopoly in that segment) with the launch of the Jazz? Yes, the launch of Jazz is one bet that Honda is extremely nerved up about. Though Honda is one of the strongest in the sedan segment, the nerves are tensed up because of the heat of the competition Honda is facing of late.
We have already witnessed the launch of Fiat Linea and Skoda Superb’s latest model in the country competing with the Honda City and Honda Accord respectively. Auto expert Murad Ali Baig adds further, “The sedan segment will only get competitive in the coming times making the environment more competitive for Honda.” Given this, can Jazz be a runaway success just because it has got great sales support, a new design and costs around Rs.5.5 lakhs? Uhh, there lies the problem. One cannot assure Jazz’s success in the Indian market blindfolded as this hatchback will face a stiff competition from Skoda Fabia and the recently launched Hyundai i20. Worse, where the Swift rules, the Swift, umm, rules!
With the depreciation of the Indian rupee ensuring that Honda’s input costs have increased manifold (25% of their components are imported), Honda cannot simply ‘hope’ their cars will sell, especially when the competition is Maruti, which is a company that has not been known to take any prisoners. What it requires now for Honda is to understand that in India, if marketing has to work, then what also works is understanding that the Indian customer responds completely different in buying behaviour within different segments. That means that the strategies that they used to sell their Citys, Civics and Accords may definitely not get the ‘rice paddy’ home on time this time. By the way, Honda means rice paddy in Japanese. No, the coke and the junk food have not given us a high yet. And yes, we’re still waiting for the Warren effect to hit us (sleep eating junk food, wake up a rich man...).
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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