Principles Of Marketing Term Report : Honda City Pakistan
PREFACE
The objective of this report is to have a clear understanding of the practical applications of principles of Marketing. The brand that we have chosen for our report is Honda City. The reason for choosing this particular brand is that we have access to sufficient inside information of the strategies applied to market Honda City. Another reason for choosing this brand is that it has fierce direct competition in the market and has to keep its strategies in compliance with the strategies adopted by its competitors. In addition to this, Honda Atlas always aims to keep its brands above its competitors by enforcing demanding and challenging marketing procedures. This report has provided us an overview of the Pakistani automobile industry- its strengths and weaknesses- and how does Honda Atlas cope and adapt with the changing environment. We would like to thank Ms. Sara Khan without whose help this report would not have been possible. Further more, through this report we have realized the importance of teamwork, which will help us throughout our careers.
ACKNOWLEDGMENTS
We would like to thank Dr. Fareed Qasim, Managing Director, Honda Palace, Hyderabad and Mr.Yasin Mujtaba, Service Incharge of the company, for their invaluable help for our research on Honda Atlas. We would also like to acknowledge the kind support given to us by Mr. Tariq Khan, GM Sales Honda South Karachi, and Mr. Ghayasuzzaman Siddiqui, General Manager Honda Shara-e- Faisal for help on their part. This report would not have been possible without their invaluable support and help. Furthermore we should also thank our course instructor M.S Sara Khan for giving us the opportunity to work on this project
COMPANY PROFILE:
Honda Atlas Cars Pakistan Limited is a joint venture between Honda Motor Company Limited, Japan, and the Atlas Group of Companies, Pakistan.
Construction of the factory started on April 17, 1993 and within a record time of 11 months, construction and erection of machinery was completed.
The first car rolled off the assembly line on May 8, 1994. Official inauguration was done by President of Pakistan, Sardar Farooq Ahmad Khan Leghari; Mr. Kawamoto, President Honda Motor Company Limited, Japan, was also present.
Percentage of local parts conforms to government’s policy. Local vendors are continuously patronized to develop local industry. The quality of local parts is thoroughly checked to meet stringent international standards.
Honda always strives to give outstanding service to customers. In addition to providing regular service to customers, it also conducts Service Campaigns, to facilitate customer’s need for service. This has given customers absolute confidence in Honda cars, which is evident from the ever-increasing sale volumes.
It is the constant endeavor of Honda Atlas Cars (PAKISTAN) Limited to achieve No .1 Customer satisfaction. Honda Atlas Cars (PAKISTAN) Limited is committed to meet customer expectations, and to provide good value for money .In 1996 the full model change was introduced, after just one and half year of commencement of production. Three models in Civic VTI, EXI and LXI with 1.6L and 1.5L engines were introduced in VTI and EXI models respectively. In 1997 Honda CITY 1.3L car in Et and EX models and Honda City NEO EXI with 1.5L were launched.
HONDA CAR ASSEMBLY PROCESS
Different stages of the assembly line of Honda are:
EnginesShop
Engine Shop
Welding Shop
Paint Shop
Assembly Line
Quality Control Unit
Principle Activity
The principle activity of the company is the import of completely knocked down parts, assembling and marketing of Honda passenger-cars. The company has a sponsoring share in Honda Atlas Ltd., which assembles Honda passenger cars. It manufactures these passenger cars under a Technical Assistance Agreement with principles M/s. Honda Motor Company Ltd., Japan, which is the second largest automaker in Japan.
Vision and Philosophy
The Honda Atlas Ltd. vision and philosophy puts forth:
“Excellence in quality and precision in operations.”
It aims at business growth through cost effective operations. Significantly, focus is also on human resource development through respect for the individual, team action and the provision of a wholesome and safe working- environment. The staff and workers of Honda Atlas’s plant have received assembly training in Japan and Malaysia as well as on-job training with Japanese engineers. Honda Atlas offers nation-wide “3 S Dealership” of vehicle Sales, Spare Parts and Service as one window retail operations.
Product Line
In Pakistan, Honda Atlas Limited at present produces only two brands of automobile – the Honda City and the Honda Civic. There are, however, six different variants of Honda Civic and three variants of Honda City. The cars have a power ranging from 1400CC – 1600CC. The product is hailed by its sellers as a miracle of modern engineering. In addition to the standard features of a 1400 cc car, the City includes new feature such as:
- Multi-Beam Suspension – This feature is guaranteed to provide the smoothest ride in its class of cars. The car body, as a result, does not shift laterally when the suspension moves up and down.
- PGM FI This feature results in the most efficient fuel consumption in its class of cars. Honda Atlas also claims that the feature reduces air pollution. Thus, the above feature results in great savings for the consumer and the environment. We feel that this is the most important feature of the car and it should be promoted strongly.
These features are no surprise considering the fact that Honda is known worldwide for its superb engineering.
| Model | Engine/Fuel | Transmission | |
| Honda City | EXi | 1.4 L Gasoline | Manual |
| Honda City | Exi-S | 1.4 L Gasoline | Manual |
| Honda City | Exi-S(AT) | 1.4 L Gasoline | Automatic |
AUTOMOBILE INDUSTRY
Macro Environment
The automobile industry of Pakistan is not a recent creation and has been present in Pakistan for about a quarter of a century. National Motors, a public limited company that is said to be the pioneer in the industry, came into existence in the 50s. Established by General Motors of USA in 1953, National Motors assembled passenger cars as well as commercial vehicles carrying General Motor’s brands such as Bedford, Vauxhall, Chevrolet and Holden before being bought over by Pakistani entrepreneurs. It was subsequently nationalised and was once again bought over by Ghandhara Nissan Industries Limited.
After that, others like Hinopak Motors, Naya Daur Motors, Pak Suzuki Motors, Sindh Engineering Limited, an arm of Pakistan Automobile Corporation and assemblers of Mazda Pickups and Indus Motors, assemblers of Toyota cars have come to enter the local market. The most recent entrant being Dewan Farooq Motors introducing Daewoo and KIA, which they have recently purchased from Naya Daur Motors.
A regular car industry started in the country in 1983 with the introduction of Suzuki car with the commitment of providing an affordable car for the middle-income groups that constituted the larger segment of the society.
Different policies were introduced by different governments at different times but the latest one — imposition of ban on import of used cars — was introduced in February 1994 on the insistence of local assemblers that such imports were killing the local industry. On their part, they assured the authorities that there would be no increase in prices. Since then, the prices (of automobiles) have been increased eleven times with a total average of about 85 per cent over the prices
During 1998, the production of passenger cars in Pakistan during 1998-99 increased only marginally by 1.5 per cent, if the production volumes of three most active car assemblers— Suzuki, Toyota and Honda — are any indication. The three companies produced a total of 48,457 cars during 1998-99 as compared to 47,457 units in the previous year as 43 per cent of their collective production capacity remained under-utilized.
The future of the automobile industry is very unsure. Demand has not really shown a growing trend while the number of competitors is increasing. The main demand is for the smaller car segment that is catered to by Pakistan Suzuki only. However, Indus Motors have launched Daihatsu Cuore and Dewan Motors have also come up with KIA Pride. This move will bring about an interesting competition between Suzuki Mehran, Daihatsu Cuore and Kia Pride and will hopefully provide much needed respite to the customers. It may also prompt Pakistan Suzuki to wake up from its monopolistic attitude and will help to improve the quality of small cars in the market. Other than this, the market does not really show signs of growing. Due to the economic downturn in the country, sales have more or less remained the same (registering only a marginal increase in total sales). In such conditions, it is up to the marketers of the respective companies to win customers over with better designs, performances and after sales-service.
Micro Environment: Market for Cars
The automobile sector in Pakistan basically comprises of four major players namely:
- Indus Motor Company (Toyota)
- Honda Atlas (Honda Civic and City)
- Pak Suzuki (Suzuki Baleno, Cultus, Mehran etc.)
- Ghandhara Nissan (Nissan Sunny )
All these players compete for a very limited market of about 12000-13000 cars. The market for cars in Pakistan is growing at a very slow rate. The result being that most of the local assemblers have large unutilised capacity. The industry’s average capacity utilization is around 43%. Only Suzuki has been able to attain capacity utilization above 50%. The main reason for this is that Suzuki also produces cars like Mehran and Cultus that target the lower middle and the middle class. The remaining three manufacturers however compete for the very limited segment of upper class. This has given rise to intense competition between the players who are positioned to serve this niche. Within this niche Toyota has so far appeared to be the leader.
Competition
Pak Suzuki
Pak Suzuki Motor produces passenger cars, pickups, vans and four-by-four vehicles in the country. It has a production facility at Port Bin Qasim with a capacity of 50,000 units per annum and is the producer of the most popular cars in the country. Today Suzuki is the major car producer in Pakistan with over half-a-dozen product variances.
Until the introduction of Suzuki Baleno, Honda Atlas was not in direct competition with Pak Suzuki as the latter’s best selling car has been the 800 cc Suzuki Mehran, which caters to an entirely different niche. Both the companies had been targeting different consumer segments. However, with the introduction of Suzuki Baleno, competition has been created for Honda City. Therefore, Honda Atlas must keep in view the policies of Pak Suzuki as Pak Suzuki is now catering to the needs of the same consumer segment.
Indus Motor Company
Indus Motor Company, the producer of eight variances of Corolla cars and two variance of light commercial Hilux trucks, is a joint venture between House of Habib, Pakistan, Toyota Motor Corporation Japan and Toyota Tsusho Corporation, also of Japan. Today it is the second biggest car assembler after Suzuki. In 1999, Indus Motor Company has sold 12,225 vehicles as compared to a sale of 9,295 vehicles in 1997-98 and 8,100 in 1996-97. Before, Indus had its highest sales figure of 11,034, in 1992-93 followed by 9,440 units in 1993-94. Indus sales were the lowest in 1994-95 when it managed to sell just 6,802 units. The present production of Indus Motor Company is around 7,500 cars per annum.
As such, Indus Motors is the only direct competitor of Honda Atlas. Toyota is the largest selling car in the 1300 cc and above category. The main strengths of Indus Motor Company lie in their state-of-the-art production facility at Port Qasim. It has direct technical assistance from Toyota Japan and a very efficient and well-trained production staff. The company also plans to introduce the latest model of Corolla in the year 2002, which will provide formidable competition to City.
| Company | Actual Production | Installed Capacity | |
| 1998 | 1999 | 1999 | |
| Pak Suzuki | 31,513 | 30,513 | 50,000 (Double Shift) |
| Indus
(Toyota) |
7,341 | 7,874 | 20,000 (Double Shift) |
| Honda Atlas | 3,944 | 4,070 | 5,000 (Single Shift) |
| Nissan | 3000 | 6000 (Single Shift) | |
MARKETING AT HONDA ATLAS
The Senior General Manager Marketing heads the marketing department. The Senior Managers of Marketing and Sales report to him. The senior Mangers of both the departments have a deputy manager under them. The next in the hierarchy are the Assistant Managers of Marketing and Sales. On the lowest level are the Marketing executives and the sales executives.
The marketing function at Honda Atlas is different from other organizations in the sense that they are not responsible for directly selling their cars. Honda Atlas has a system of exclusive dealers through which all sales are made. Due to the agreement with the dealers, the company is not allowed to sell the cars on its own. The dealers, on the other hand, undertake to sell only Honda Atlas cars. Thus, if a customer approaches the company for purchasing a car, they are simply referred to the dealers. This fact, however, does not take away from the fact that marketing is an important function and forms an integral part of the company.
The marketing department is responsible for all the promotional activities for the car. The main activities that the department performs are:
- Marketing &Planning
- Sales & Distribution
Marketing & Planning
This system is also called the three S system. The three S’s stand for:
Sales
Service
Spare Parts
The company believes in providing complete service to its customers and therefore ensures consistent and immediate supply of spare parts and efficient after sales service.
The company has 8 contracts of exclusive dealerships. The company undertakes not to sell any car directly and all sales are made through the dealers. These dealers in return promise not to sell any car other than Honda even if Honda is out of stock or other cars are giving a better margin. With such a dealership network the main purpose of the marketing department is to provide complete sales support to the dealers. The company on behalf of the dealers undertakes all advertising and sales promotions. Similarly printing of brochures and other publicity material is the responsibility of Honda Atlas.
Honda Atlas has a network of 19 dealers all over Pakistan and they are distributed as follows:
HONDA DEALERSHIP NETWORK:
| Honda Atlas Cars Pakistan Limited has Dealership Network covering all of Pakistan, and Dealership are equipped with all the facilities a modern dealership should have. The facilities include Sale, Service and Spare parts. |
| Abbotabad Car tune up centerBahawalpur Rana MotorsFaisalabad Honda FaisalabadHyderabad Honda PalaceIslamabad Honda Classic Karachi Khanewal Lahore Mardan |
Okara Modern AutosPeshawar Honda SarhadQuetta Honda BaluchistanRahim Yar Khan Pak Saudi MotorsSahiwal Jamil Motors Sargodha Sialkot Mughal Engineering Works Swat
|
Positioning of Honda City
Honda City is positioned as the “most fuel-efficient brand in its class, providing comfort beyond belief”. This positioning may be appropriate in the fact that fuel-efficiency is a basic demand by customers due to the high cost of petrol.
Honda City on the BCG Growth Matrix:
Honda that is positioned as a premium class car competes directly with Toyota (the market leader within the niche) and Honda. Overall City enjoys a market share of around 11% that is growing at a rate of approx 13.5%. The growth rate is expected to increase when the company launches its new and improved model in the near future. Thus City, which even though has a modest market share seems to have tremendous growth potential and can therefore be classified as a question mark on the BCG matrix. Now, it is in the hands of the company to capitalise on this growth potential and by using effective marketing techniques convert City from the position of a question mark to the position of a star by increasing its market share. The launch of the new model before the competitors can give the company an excellent opportunity to create mark in the market.
Product Life Cycle of City:
At present City is somewhere in between the stages of introduction and growth. Currently the company is trying its best to increase awareness about the brand with their slogan of economical luxury. The growth rate of City has increased constantly since it started its operations and it has picked up tremendously after the launch of the new City ahead of the competitors.
PLANNING
Planning at Honda Atlas is considered to be an on going process the main purpose of which is to improve the market performance of the car, to improve the growth prospects of the car and once it reaches the maturity stage, to extend this period as much as possible. The marketing department receives complaints and feedback about the cars on a continuous basis from their dealership network. This information is incorporated in the future plans of the company The marketing department at Honda Atlas prepares two types of plans; 1) Strategic plans and 2) Short and Medium term Plans.
Strategic Planning
Strategic Planning at Honda Atlas is done at the highest level. All the functional heads and the CEO of Honda Atlas meet once a year to review and analyse the strategic Plan of the company and to make any necessary changes. The main function of this strategic Planning is that it encourages management to think ahead systematically, sharpen its objectives and policies which ten leads to better co-ordination of company efforts.
Important strategic Planning decisions include the following:
- a) The positioning of the car:
The decision regarding the positioning of the car is taken at the highest level. Inputs and suggestions are however taken from the marketing department. The positioning of the car is evaluated at regular intervals and changes might be made if the performance is not satisfactory. This is how the decision to position Honda City as a luxurious and economical car was decided. Similarly the decision to position City against Corolla’s lower end models was taken.
- b) Price Positioning:
Another important strategic decision that has to be taken is the price positioning of the product. The company has to take the important decision as to where should the brand be positioned in terms of price. At present City is positioned below Toyota Corolla that is considered to be one of the main competitions of City and nearly the same as Suzuki Baleno. Generally the company has a policy of positioning the car below Corolla.
- c) Launch of New Models:
Another important strategic decision that has to be taken is when to launch new models and what model to launch. These decisions are taken after taking into consideration the financial implications, the demand of the car, the performance of the existing model and the plans of the competitors regarding launch of new models. When the decision to launch a new model is taken the process of planning starts from the very beginning and all the steps discussed before are redone
d) Short and Medium Term Planning
The company prepares a number of short and medium term plans, which can be categorized under
Weekly Plans
Monthly Plans
Quarterly plans
Annual Plans
All the functional heads and the CEO of the company meet every week to discuss the performance of the company and any other important developments, which need attention. Similarly monthly meetings are held in which the performance for the last month is evaluated and plans for the next month are approved.
The company also reviews its performance on a quarterly basis and in case of poor performance tries to determine reasons for such poor performance. Environmental conditions, Market demand and Governmental Regulations are also taken into consideration before making plans for the next quarter.
The most important among all these plans is the Marketing Plan, which is prepared on an annual basis. The preparations for this plan start from the month of April and end in the month of June. Towards the end of the year the marketing department gathers all the information about the companies performance during the year. The trend in Market Demand is also analysed. The production and sales of all the major competitors are considered along with the expected changes in Governmental regulations. Based on their experience during the last year the marketing department proposes the next year’s sales target and the activities associated with it. These are exhaustively discussed in the meeting and efforts are made to arrive at a consensus. Once the committee reaches a consensus a marketing plan for the following year is approved.
The preparation of the company’s strategy for the year and the Marketing Plan is a two way process wherein the marketing department initially proposes the strategy for the year. This is then reviewed in the meeting of the functional heads and explanations are sought from the department, taking into consideration the suggestions of the marketing department and the company’s goals and objectives the marketing plan is approved and sent to the marketing department for implementation.
Sales and Distribution:
The main purpose of this division is liaison between the company and the dealers. This division is continuously in touch with the dealers and ensures that all their problems are solved as and when they arise. It is the responsibility of this division to take orders from the dealers, inform the production department of the demand of the dealers and ensuring timely distribution of cars to dealers. This division also takes feedback from the dealers about the features of the cars, their performance. This feedback is then passed on to the relevant department.
Marketing Strategy:
The strategies designed to achieve the marketing objectives of the company are called marketing strategies. The main purpose of these strategies is to out perform the competing products and brands. These strategies are formulated taking into consideration the market conditions within which the firm operates, the type of products being offered and the strategies and positioning of the competitors.
In its efforts to increase its market share Honda Atlas follows the following three marketing strategies to improve its market share:
a) Market Development Strategy
Honda Atlas was the first company to introduce 1400 cc Honda City petrol cars that contained all the accessories of luxurious cars thus developing a new market for 1400 cc cars in Pakistan. Efforts have been made at all levels to develop a market for this car. The Institutional Selling Team, Sales task Force Team, Event Sponsorships etc are all part of the market development strategy.
b) Product Development Strategy
The company keeps on incorporating various features in the products according to customer’s needs and wants. In Pakistan the company started operations with only two variants (CivicEx and Exi) but within a year a new variant (civic Vti) was added to meet the demands of the customers. Similarly after three year, when City was launched in 1997, it came up with two variants (Exi and Exi-s). Now the company offers another variant of City (Exi-s, automatic).
c) Niche Marketing
Honda City has been positioned as a prestigious car with a core target market comprising the upper class. This is a very limited niche.
The Marketing Function:
Demand Forecasting:
The demand forecasting at Honda Atlas for different brands, basically depends on past performance of the company as against the industry. The marketing department gathers data on the sales of various competitors. Trend analysis of the performance of the company, with regards to specific brands, for the past years is prepared and compared against the trend analysis for the industry. The dealers of Honda Atlas also develop their demand forecasts independently. These forecast are also developed simply on the basis of previous trends and future sales forecasts and are then handed over to the marketing department, which adds them to reach a total demand figure. On the 20th of every month, a meeting is held between the managers of the Marketing, Finance and Production Planning and Materials Control departments to study these forecasts and decide upon three things:
- The planned production for the next month. This includes the model mix and the colour. The line in/line off plan is prepared on the basis of this data.
- CKD orders for the n+2th month where n is the month for which the production plan, referred to in point 1, is being made. Estimated orders are also placed for the n+3 and n+4 months. When the next meeting is held, the CKD order for the n+3 month is finalized and placed while the estimated orders are also placed for the n+4 and n+5 months. For example if the meeting is being held on the 20th of February, then the CKD order for May would be decided and placed. Estimated orders would also placed for June and July. When the next meeting is held on the 20th of March, the CKD order for June would be finalized and placed while estimated CKD orders for July and August would be placed. These estimated orders would be adjustable to a limit of +-10%. In this way the company uses the simple moving average method.
- Orders to be placed with the local vendors. These suppliers have to be well informed in advance regarding the expected demand of their merchandise so that they can prepare the goods in time. Thus demand forecasting takes in an additional objective.
An important factor that is taken into consideration while preparing demand forecasts is the expected changes in government policies. A good example of the effect of change in government policies is when the Pakistan Government banned the import of second-hand “reconditioned” cars. As a result of this action, the demand for locally produced cars increased manifold. Thus, the company has to keep in view the expected changes in the government’s policies so that it can prepare an accurate demand forecast.
The reason forecasting of demand accurately is important is that the company is very dependent on imports of CKD kits from Honda Motor Corporation, Japan. The lead-time for the delivery of these orders from Honda Japan is around 2-3 months. This high lead time means that the company has to be very efficient in forecasting accurate demand so that opportunities are not lost to competitors due to non-availability of finished products or that the company does not incur high stock-holding costs due to sudden fall in demand.
Since the product is high involvement merchandise, customers take their time in deciding to purchase a certain brand of vehicle. New product development, new launches or sales promotion schemes by the competition may result in high amounts of lost sales. The marketing department at Honda Atlas, thus, keeps its eyes and ears open for any movement in the competition. It is imperative that news of competition’s planned activities be paid careful attention and responses be prepared. In a market that is hardly worth 12,000-13,000 cars a month, such an activity is very important for the survival of the company. Thus, the sales forecasts being prepared take into consideration the expected effect of such competitor activity.
SWOT ANALYSIS: (Honda City)
STRENGHTS:
- Lower fuel Consumption through PGM-FI Technology
- Economical as compared to other luxurious cars such as Toyota Corolla
- Full range of luxuries such as Power Steering, Power Windows, Centralised Locks, High quality stereo systems, RPM, power side view mirrors and power antenna. Although these luxuries vary version to version.
- Efficient network of 3 S Dealers who provide Sales Service and Spare parts, all under one roof, spread all over the country
- Available in manual and automatic modes
- Elegant exterior as well as interior with a wide range of colours
- Availability of Different Car leasing schemes in collaboration with major leasing companies such as ORIX Leasing, City Car Financing etc.
Weaknesses:
- Only available in Petrol versions which results in ever increasing operating costs of the car as petrol is getting more and more expensive day by day not only due to fluctuating exchange rates but also due to increase in the gasoline prices, the world over
- The initial acceleration is not as good as Toyota or Suzuki Baleno.
- The chassis of the Car is not as strong as it should be which results in customer complaints
Opportunities:
- A lot of market potential, still to be capitalised as the market has not yet reached its saturation point and there are still market segments left to be exploited.
- Reduction in the prices through local manufacturing of parts that have to be imported at present such as CKD Kits which is one of the main component of any Car.
- Expanding their market through reduction in prices as it will increase its target market which is only limited to the upper class uptil now
- Further expansion in sales and distribution network. Although has a wide spread network but there is always room for improvement
- Increase the range of models such as introducing it in the 1600 CC Class.
- Although Honda only manufactures Petrol Cars but there is an opportunity of increasing its market share by introducing Diesel and CNG models
Threats:
- Unstable Economy which results in fluctuating Dollar Exchange Rates which affects the import expenses because nearly 70 % of the parts used in assembling the cars are imported.
- Ever changing government policies always remain a threat to the success of ongoing marketing plans and strategies.
- The competition is very fierce, thus Honda City marketers will have to be on their toes to react immediately to he changes in the marketing strategies of their competitors. Their main competitors being Toyota and Suzuki.
- There is always a potential threat of New entrants such as the recent introduction of KIA Classic by Dewan Farooq Motors
- Potential threat of introduction of diesel models from only the present players but also the new entrants.
PLANNING OF THE FOUR P’S
Product
The company regularly receives feedback from its dealers who are in direct contact with the customers. In this way, the suggestions of the customers are incorporated in the product so as to increase customer satisfaction through full integration of their ideas. An instance where such information was used by Honda Atlas to improve upon the product was when one of its customers suggested that the dashboard should have a lamp to assist visibility in the night. This suggestion was incorporated and now all City cars being produced by Honda Atlas have a small lamp in the glove compartment. Honda Motor Company, Japan, has given Honda Atlas limited liberties to modify certain features of the vehicle to suit the demands of the local consumers.
In addition to this, the company also needs to plan which variants to produce and in what colours. This planning is done on the basis of demand forecasts prepared (as discussed before). It is important that Honda Atlas prepares accurate demand forecasts for these variants and colours to be decided and produced in right quantities.
The competitors’ products being manufactured also affect product planning. If, for instance, the Indus Motors introduces a “safety airbag system” in Corolla, the company will feel compelled to do so in Honda City as well so as to not lose its customers. Such planning is necessary so that the company is able to compete on the basis of specifications being offered.
Price
Price of Honda City depends a great deal on the cost of CKD kits being imported by the company. As such, this cost is also affected by the rate of foreign exchange prevalent in the market. The prices of the vehicles are also dependent on government policies. The Pakistan Government is known to change policies at the bat of an eyelid. Duties imposed on CKD kits have a major impact on the end prices of the vehicles. The marketers at Honda Atlas, thus, have to keep themselves apprised of the policies of the government and the expected effect on prices therein.
The sale price of the car is also decided by keeping in mind the prices of the competitors. At present, Toyota is the market leader in direct competition with Honda. Therefore, to be able to penetrate the market in a more effective manner, the pricing policy of Honda City is to keep prices below Toyota Corolla’s prices. As such, Honda is following a policy of “Survival” owing to the fact that its competitors have been in the market for a longer time, have a better reputation in terms of after-sales service and resale value. Thus the planners at Honda City feel they have little choice but to charge a price that is marginally lower than its closest competitor, that is the Toyota Corolla. Therefore, Honda Atlas has to keep in view all the price changes of its competitors to remain equally competitive.
Another aspect of pricing is the current economic scenario. If, for instance, the economy is in a downturn, then it becomes necessary for Honda Atlas to reduce its car prices in order to promote sales. If the economy, on the other hand, is in a boom and people are willing to spend money, which will translate into higher demand that would mean increase in prices.
PRICING OBJECTIVES:
Honda City has set out to meet the very obvious three objectives of pricing, that is:
- Profit oriented objectives
- Sales oriented objectives
- Status oriented objectives
TARGET RETURN & MAXIMIZE PROFITS:
Honda City initially set a return of 10% profit on its sales. Largely because Honda presented City as a car that could compete with Corolla’s latest model at that time, that is 1997, whereas 97’s Civic was the one which competed in the capital automobile market. City 97 lacked the properties and luxuries that could match Corolla, which was at a high those days with its diesel facility and attractive price. Due to all these factors City 97 failed and was never able to achieve its target returns. Honda again launched its City in 2000 with all new features and an overall attractive package. This City was set out to achieve the expected target return ,largely because of the failure of City 97.it has proved to be a runaway success.
Honda has worked hard on reducing the cost so that it can capitalize on the incoming profit generation.
SALES VOLUME:
The sales of the new City 2000 is expected to be 2000 in the first year of its launch. The reason is that: (a) the new City is launched in comparison to Corolla and against any other petrol automobile of 1200+cc (b) it’s a product for the price conscious people.
Another way of increasing sales is that they offer lower prices for those colours of cars which are comparatively lower in demand.
STATUS ASSOCIATION:
The new sporty look has given it an extra dimension in daily usable automobiles. This product has enticed both elders as well as younger generation because of both of its prevailing features, that is the sporty look as well as the rich luxurious touch.
PRICING STRATEGIES:
MARKET PENETRATION:
Honda city 2000 has used penetration strategy largely to capture the market. It started with a lower price as compared to its competitors, that is Toyota Corolla, Nissan Sunny.
People rated it above the Suzuki Baleno, mainly coz of its brand impression so people who were price conscious, opted for Honda city 2000.
One more reason for Honda’s choice of penetration strategy is the failure of the earlier City 97 and the runaway success of Civic Exi and Vti, Because City 97 left a forgettable image, prices had to be set lower in order to attract the customers back to buying the new product.
ONE PRICING:
Honda city 2000 is sold at one price throughout the country at all the authorized showrooms, like any other automobile product. Only a change in the market prices causes a change in the product’s price. Moreover, fluctuations in prices might also hurt the product’s reputation as a product of a leading automobile manufacturing company. Considering all these factors, city 2000’s best option for pricing strategy is one pricing.
DISTRIBUTION:
TYPE:
Honda city 2000 uses an indirect distribution method, it has its showrooms or authorized dealers in all the important places of Pakistan, thus reaching almost everybody in the country. This shows that Honda uses a middleman or an agent in shape of a dealer, thus making a chain as,
Manufacturer———-agent———–customer
INTENSITY OF DISTRIBUTION:
The product is distributed through a selective channel like any other automobile company. The reason is that it is a shopping good and customers are ready to spend their time and effort to make such a purchase. One more reason for selective distribution is that the company wants to have a command and immediate access over the channel, so that the decisions that are made can be implemented quickly and effectively. Also an intensive screening test is taken before granting the dealership.
Promotion
The planning of promotional activities depends upon the demand forecasts and the targeted sales. The main promotional activities used for Honda City are personal selling, event sponsorships and print advertising. Mr. Mohammad Fareed Qasim, Managing Director Honda Palace Hyderabad, says that due to the small size of the automobile industry in Pakistan, it is unfeasible to undertake promotion at a large scale. The company finds it better to market the product to direct consumers. This activity results in minimum wastage of the marketing resources and highest sales. Honda Atlas has also been using event sponsorships to market Honda City.
The marketing department in collaboration with their advertising agency, namely Asiatic Ltd, does planning of promotional activities at Honda Atlas. This includes media planning and preparation of advertisement. The planning of promotional activities is covered in more detail in the marketing plan.
Like any other automobile company or any other product offering company, Honda tries every possible way to promote its product. Because after the introduction, the company has to make people aware of the product and its different alluring features which would eventually entice the customer into buying it. Large amount of investment is made because further sales are dependent upon this factor.
MODES OF PROMOTION:
Honda is no different. Like others, it also believes in “personal selling prevails”.
Company dealers come in direct contact with the customers and try their level best to convince them into buying the car and giving it preference over the others. These dealers let the people know about the complexities of the product and then later on offer trialability on individual basis.
Advertising is an essential ingredient in the promotional mix. Honda city launched itself with a thundering and attention getting promotional advertising song, featuring the top model Amna Haq.
Perhaps the most intriguing of all was the continuation of 4 advertisements in all the leading newspapers of Pakistan, which signalled the arrival of a new scintillating product.
Honda City was used as sponsors for even daily products like Bata shoes and Bread, so that it may soon become a household name. Many schemes to win city 2000 were introduced.
Moreover, several dinners, briefing, seminars were arranged to make people aware of the new product in the market.
All these factors led to the amazing sales record of the all new Honda city 2000. Hence it will not be wrong ton say that promotion played a leading hand in the success of city 2000.
