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During the 1960s, when it was a small manufacturer, Honda
broke out of the Japanese motorcycle market and began
exporting to the US. Taking Honda’s story as an
archetype of the smaller manufacturer entering a new market
already occupied by highly dominant competitors, the story
of their market entry, and their subsequent huge success
in the US and around the world, has been the subject of
some academic controversy. Competing explanations have
been advanced to explain Honda’s strategy and the
reasons for their success. The first of these explanations
was put forward when, in 1975, Boston Consulting Group
(BCG) was commissioned by the UK government to write a
report explaining why and how the British motorcycle industry
had been out-competed by its Japanese competitors. The
report concluded that the Japanese firms, including Honda,
had sought a very high scale of production (they had made
a large number of motorbikes) in order to benefit from
economies of scale and learning curve effects.
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It
blamed the decline of the British motorcycle industry
on the failure of British managers to invest enough in
their businesses to profit from economies of scale and
scope. The second story is told in 1984 by Richard Pascale,
who had interviewed the Honda executives responsible for
the firm’s entry into the US market. As opposed
to the tightly focused strategy of low cost and high scale
that BCG accredited to Honda, Pascale found that their
entry into the US market was a story of “miscalculation,
serendipity, and organizational learning” –
in other words, Honda’s success was due to the adaptability
(and hard work) of its staff, rather than any long term
strategy. For example, Honda’s initial plan on entering
the US was to compete in large motorcycles, around 300cc. |
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