Question

In 5-7 paragraph please do a PEST analysis on Honda Motor Company has within their company?

Answer 1

About the company – Honda Motor Company is a Japanese multinational company that makes and sells automobiles, motorcycles and power equipments.

PEST analysis on Honda Motor Company:

Political factors – The Company has to deal with the trade and domestic trade administration, taxation policies, recruitment laws etc in different countries. Regulatory changes affect the innovation and product pipeline of the company directly. For example in India last year the government had banned the sale of diesel vehicles for a temporary period to control the levels of increasing pollution in its capital – New Delhi. This year the government announced its intention to push sales of electric vehicles going forward. These regulatory changes led Honda to change its product portfolio in the region from diesel to petrol. At a time when sale of diesel cars outpaced sale of petrol cars Honda introduced a slew of diesel models in India. But after the ban sale of diesel vehicles plummeted and Honda took a hit.

Economic factors – Honda sells cars, scooters etc and hence its fortunes are directly linked to the economic scenarios of the markets and countries that it operates in. Economic slowdown in a country will reduce sale for the company as people will postpone the purchase of cars and will spend a higher proportion of their income on necessary items.

Honda is a Japanese company and hence is also exposed to exchange rate fluctuations in Japanese Yen (JPY) with regards to other major currencies like U.S. dollars (USD), euro and pound etc.

Socio-cultural environment – The social factors that affects Honda Motor Company are the different aspects of its external macro environment like the cultural and demographic aspects that it is bound by. In many countries buyers prefer to buy cars that have been manufactured by domestic companies. This is the case with developed countries where home grown car manufacturers produce world class cars. On the other hand in developing countries people tend to buy cars being manufactured by foreign companies as domestic players are not world class in terms of products. This directly impacts Honda as well. Demographic factors and cultural factors differ from country to country and this shapes the needs and requirements of the customers as well. Thus Honda has to ensure that its products are relevant for a particular geography keeping in mind the socio-cultural aspects of that place.

Technological factors – Technological advancements are taking place at a break neck speed. Buyers now demand GPS, air bags, reverse parking sensors and camera, assist parking etc. as standard features. Technology is now shifting to autonomous cars and self driving cars and Honda has to keep pace with these technological developments.

Conclusion – Honda Motors Company will have to determine how the above mentioned factors will affect and shape their strategy, performance, and business processes and activities in the long run. The company will have to consider the various factors affecting it while doing strategic planning and this will help it in making better decisions, identifying opportunities and threats, and reach its goal in an optimal manner.