Business Strategy

Porter’s Five Forces Model

Honda is one of the leading car manufacturers in the world today. They provide quality and price that is suitable for the “average joe”. With their reliability and good reputation, Honda continues to thrive in a very delicate market. Using the Five Forces Model, created by Michael Porter, Honda is able to analyze their standing in their industry and seek to make their ways better. The Five Forces are Bargaining Power of Customer, Bargaining Power of Supplier, Threat of Substitution, Threat of New Entrants, and Rivalry.

Bargaining Power of Customers

The bargaining power of Honda’s customers is set to be medium. It can become complicated since the customer is usually looking for a specific make and model and are at the Honda for a specific reason. Right off the bat, the customer is at a slight disadvantage because Honda has something that not many others have. The only reason the bargaining power of the customer is medium and not low is because the customer does have the bonus of being able to purchase from a private seller. The only bargaining they may have is threatening to go with the private seller instead of the Honda retailer in Pompton Plains.

Bargaining Power of Suppliers

The bargaining power of Honda as a supplier is high because they are selling a product that people seek. The customer is looking for something specific and not many other places or people have the exact product the customer is looking for. Because of this, Honda has most of the control when selling a vehicle. They have something the customer wants and not many other places have it. Because of this, their bargaining power is high.

Threat of Substitution

The threat of substitution for Honda is low because at the current moment, there are limited modes of transportation. Since people will continue to drive cars for many years to come, Honda does not need to worry about a substitution for their market of cars. Fortunately for Honda, cars seem to be the only personal mode of transportation at the moment and because it does not seem like that is changing any time soon, the threat of substitution for Honda is low.

Threat of New Entrants

The threat of new entrants for Honda is low. The reason is because the car market is very difficult to get into and be successful. Not only is it difficult to get in the market, it is also very difficult to be successful consistently. Since people need cars and it seems the suppliers seem to be set in stone at the moment and the way the market is, Honda should not be threatened by the idea of new entrants any time soon. Honda’s only worry should be other car manufacturers.

Rivalry

Honda’s competition is very intense and can be brutal at times. For this reason, the rivalry rating for Honda is high. Their industry is very unique and really there are not many choices of car manufacturer. Because there are not a ton of car companies and the demand for cars is so high, the competition and rivalry if unbelievable. There are certain levels of quality of cars and certain categories that the manufacturers split their companies into. For example, Honda competes with Toyota, Ford, and Nissan. They are in the same category of quality and price. Since there are not many options but the demand is through the roof, the rivalry is very high.

Competitive Strategy

Along with the Five Forces, Porter established four competitive strategies to really break down the arrangement of the industry.

The competitive strategy that Honda follows is Industry-Wide Differentiation because they are looking to create the highest quality car in the car industry. Although they are cost conscious, they are mostly focused on making the safest and best working vehicle in the car market.