Mazda's Business Strategy Essay: A Comparative Analysis With Honda And Toyota.

For this task The chosen company is Mazda Malaysia. You need to do a deep business analysis on this company and benchmark with Toyota Malaysia and Honda Malaysia.

Mazda: Company Overview

Purpose of the report

This report throws light on the business strategy of the selected company Mazda. This has been achieved by pitting the performance of the brand against its competitors Honda and Toyota. The idea behind conducting this analysis is to effectively evaluate the brand’s current position and benchmarking the same against Toyota and Honda by comparing various attributes of all the three brands as well as their market shares in the industry. The report highlights various facets of Mazda as an organization including its structures, policies, and operations. Recommendations for future growth have been made in order to analyze growth opportunities for Mazda. The report is also expected to assist stakeholders of the business to achieve proficiency.

Mazda Motor Corporation or better known as Mazda is a leading automobile manufacturer based out of Japan. Mazda was founded in 1920 and serves customers worldwide (Mazda, 2018). Mazda has been in partnership with Ford Motor Company from 1974 to 2015 (Auto News 2015). Mazda has a large customer base across the globe and has adopted innovative marketing and public relations strategy to sustain its goodwill in the market. The brand is well known for the quality of automobile it manufactures as well as the efficiency of its after-sale service. In the year 2015, Mazda manufactured 1.5 million vehicles for global sales. The same year, Mazda was declared as the fifteenth largest automaker in the world in terms of production (Car Covers, 2016).

The rationale behind this report is to benchmark Mazda’s competitive advantage against two of its leading competitors including Toyota and Honda. In terms of total sales, Honda ranks first while Toyota ranks third all over the globe (Forbes, 2017). Until 2017, Mazda ranked 10^th in the Malaysian market in terms of Car sales value (Paultan, 2017). Clearly, there is significant room for improvement for Mazda in terms of increasing the number of manufactured units and hence total sales.

	Toyota	Honda	Mazda
Local distributors	UMW Toyota motors is an assembler and exporter of Toyota vehicles in Malaysia.	DRB Hicom and Kah Motors showroom are leading Honda distributors.	Bermaz auto Berhad is the distributor of all Mazda vehicles based in Malaysia (Mazda 2018).
Listing (KLCE)	TM	HMC	MZDAF
Target customers	Toyota targets high and middle-income groups. For Sedan sales, families are targeted. The younger generation is targeted through SUVs.	Honda targets all income groups. The brand has mid-sized sedans that help in target families. Solar cars have also been developed to target environmentally aware and conscious people.	Mazda targets premium customers. Instead of demographic, Mazda targets its customers by psychographics and hence appeals to people who share the same love for driving (WARC, 2017).
Benefits offered	High-quality cars. Superior design. Reliable.	Excellent after sale service. Strong and sturdy exteriors. Performance driven vehicles.	Top quality customer service. High-speed vehicles. State of the art designs.
Price	5% - 10% above premium including TCO for five years.	1% - 3% at the premium including TCO for five years.	10% - 12% premium including TCO for five years.

Mazda has a solid portfolio of strong automobiles. The brand also leverages on its positive brand image and goodwill in the market. However, over a period of time, it has been observed that the market share of the brand has been unable to grow in the Malaysian market. The share of Mazda automobiles slid to 1.7% in 2017 from 2.2% in 2016 (Paultan, 2018). The customers have also complained over failed clutches and reduced quality of after-sale service (Mazda Problems, 2017).

Benchmarking Mazda's competitive advantage

The new prices introduced by Mazda post government's GST announcement have reduced the cost to the customer for Mazda vehicles (The Sun Daily, 2018). The reduced price may attract more customers but will also create pressure on the brand for bringing an increase in the sales. Even though prices of other automobiles will also go down, it is important to note that Mazda adopts a premium pricing strategy. And the price drop of a premium brand will have a larger impact and attract more customers.

The major factors which can affect the company’s performance or the competitive advantages are observed and detected under this strategic management tool that is strategic analysis (Abam,  2018).

It stands for Political Economical Social Technological environmental and legal.

Environmental Factors	Ratings
Political	Favorable
Economical	Favorable
Social	Very-Favorable
Technological	Favorable
Environmental	Un-Favorable
Legal	Favorable

Political: Malaysia has a codified constitution and the governing system is based on Westminster system. Political support and less interference of governing authorities will aid the business firm. All the mentioned factors will prove beneficial for Mazda and will reap various other benefits (Armstrong, Kotler, Harker and Brennan, 2015).

Economic: Based on the research it is inferred that, the region is economically stable. Malaysia’s main attraction as a location for business is its vibrant economy and over last 10 years the growth is also averaged at 7% per year. Economic stability is a very strong pillar that will support the growth and development of Mazda.

Social: Malaysian population consists of three main groups Malay (60%), Chinese (30%), and Indian (10%) and as the economic stability of the region is good the consumers are having good purchasing power and is a plus point for the development of the organization.

Technological: All of the above-mentioned elements are contributing in making the region technologically advanced and same will be proven beneficial for Mazda. But economy still needs to update technologically so as to compete in international markets.

Environmental:  Malaysia is a mega diverse nation with a bio diverse range of flora and fauna found in various Eco regions throughout the country. These are some of the environmental conditions that will affect the business operations of Mazda and hence the entity will require develop the operations accordingly. .

Legal: The law of Malaysia is based on a common legal system and hence there are less complications and normal governing interferences and same are required to be handled by the Mazda for surviving in the competitive environment.

Summary
The whole analysis shows that Mazda possesses a very strong competitive advantage and can also improve its shares in the market (Arrawatia, 2018).

Industry Analysis (Porter 5 forces- modified)

Industry Analysis (Porter 5 forces- modified)

Forces model was given by Michael Porter to analyze where does the company stand in the terms of competition.

In Malaysia the entry barrier is strong but it gives the competitive advantage to Honda
Competitive Rivalry

Toyota and Mazda give a tough competition to Honda.

Car buyers possess a very high bargaining power which creates the competitive advantage for the vendors (Baker and  Saren, 2016).

For Toyota and Mazda, the bargaining power is low but neutral for Honda.

A threat from substitute is moderate and therefore it is not suitable for all three brands.

Disruption force is high for Toyota, Mazda, and Honda but especially for Honda.

Financial Analysis

Analyzing the existing position in respect to financing between Toyota, Honda, and Mazda

Financial performance can be analyzed in the following terms (Brand and  Rolland, 2018)

Comparing total assets of the company with relation to the complete liability

The below presented is the Gross Profit Margin of Automobile industry:

 

Figure: Gross Profit Margin

[Source: Gross Profit Margin of Mazda, 2018]

In 2015 Honda made a huge profit but Toyota and Mazda failed to do so but later in 2016 Honda’s profit dropped too because of less demand (Burch, 2018).

ROCE explains the use of available capital by the company with respect to other companies or rivalries. In 2016 all three brands made an investment but Honda was successful to get 51%.

It specifies performance of the brand in relation to the competitive brand

TIV states the number of car sales among all the auto manufacturers at a particular place (Caroline, Compte, and  Leite, 2018). In 2015 due to a poor economy, the sales declined but later Honda invested in its expanding production capability and was able to double the production capability.

It states the complete market sales that have been earned by the organization and also compares the former's growth with its competitors. By launching hybrid cars Honda’s sales increased tremendously as compared to Toyota and Mazda.

Limitation of Strategic Analysis

PESTEL

In macro environment, the factors under PESTEL can be easily affected by any kind of change or interruption this is the reason why the macro-environment under which PESTEL take place is dynamic in nature (Chaffey, 2016). Economic factors like currency rates, a power of purchasing etcetera influences the car sales heavily. Another example can be taken from technological factor like the weak technology in any company gives the competitive advantage to its competitors same is in the case of Honda, who possesses a great technology as compared to Toyota and Mazda.

Porter 5 Forces

Financial Analysis

Porter 5 forces are very beneficial when it comes to observing and analyzing the existing competitive advantages but it is also limited to some features only (Darrin and Stadter, 2017). The main concerned limitation is the pre-assumption made by Porter 5 Forces that the business is stable and perfect, for instance, in 2015 Toyota made a large profit in its market share and also less fluctuation in the currency but this dynamic is most likely to be changed in 2019 after Toyota will announce the opening of its new factory and will give a strong competition to Honda and Mazda.

On the basis of previous data and after comparing it with the current data, the final financial position is obtained but monetary expansion can be a huge distortion because currency fluctuation can happen anytime and be making the current data irrelevant to past country.

Conclusion Many issues are adversely affecting the sales and the ability of all three brands to expand it can be high competition, poor economic condition, technology advancements provided by other brands, providing the same product in the lower price than other etcetera. Also, Honda is suffering from the drop in quality and has faced a lot of bad reviews because of low quality and therefore affecting the image of its brand and eventually affecting the rate of sales and to overcome all these issues Honda is required to make a lot of advancements.

Potential Strategy Direction

By using the Bowman’s strategy clock it can be determined that whether the strategy will help Mazda to secure its position among all the competition.

Low Price- In order to become the cost leader and gain competitive advantage one has to occupy the low-cost position in the business. Due to a poor economy, it will help Honda to maintain a balance between its prices and economic scale, of course by lowering down the prices and to make changes in the prices Honda must optimize some operational processes. In the beginning, it will look positive but later this low-cost strategy can affect the brand to invest for future. Also reducing the prices can announce a war between its competitors like Toyota and Mazda.

Differentiation- competition occurs when the products are better in quality, possesses better features and also unique in every way possible because most of the relevant items are almost comparable in the market with respect to price and other features. In order to be differentiated from others, the products are required to be of high quality and the consumers should be delivered with what they were promised to maintain the brand image and loyalty.
and to cross all the barriers (Gregory, 2018). Honda is required to bring innovation and creativity along with the improvement of products but too much of it can even lead to failure by spending out of a budget.

all these features will help Honda to achieve a new level of recognition and increase its growth along with its potential but to execute this strategy Honda is required to increase its price and it might not be an ideal option according to consumer’s point of view in poor economic conditions.

Hybrid- the main challenge is to provide affordable factors and features among all the rivals  and unique that too at the same time. But it can be accomplished by hybrid strategy which allows one to improve the ability to avail all the present options like, brand image, latest technology, creativity and innovation and also its global firm footprint and this can be achieved by improving the services and optimizing the options available in technology field and by this Honda will be able to lower down the prices and it will also not affect the profit margin and therefore ensuring the ability to make investment in future. This way the hybrid strategy will allow Honda to deliver the quality product with low prices along with fulfilling the need of innovative product by a consumer and that way it will also achieve the competitive advantage among all the competitors like Toyota and Mazda.

PESTEL

By using simple scoring matrix, the evaluation is done, initially. In order to remain competitive, Honda needs to address some challenges and on this basis the evaluation is done and the end result will decide that what would be the best strategy for the brand and after thoroughly examining everything the outcome is that the hybrid strategy is best for Honda in order to achieve the required quality of product at affordable price along with that helping the brand to grow by differentiating it by others.

Strategy evaluation is further done through JSW model which include sustainability, feasibility, acceptability.

Suitability

Suitability option evaluates the changes and progress made by the hybrid strategies and if the hybrid strategy was successful to achieve the required price, unique quality and all the challenges related to technology and innovation for achieving the competitive advantage.
Due to the affordable price and competition more and more customers will choose Honda which will solve the problems related to economy and society and in order to solve quality concerns, the innovation capabilities will be required.

6M model is required to evaluate feasibility.

MONEY	For reinvesting in capabilities and gaining improvement in it, it is required to make more and more money from the previous profit and through this, the chances of bankruptcy will be minimum or almost zero.
MACHINERY	After expanding the business or opening many service centers in the different area, the need of more service centers to guard all the sales earned to improve the economy and complete all the processes and at the end eventually achieving the goal
MANPOWER	To support the employee's training and improving their skills, the brand is investing in some resources in order to refurbish the capabilities through HR team (Haight, 2017).
MARKETS	Expanding the business in different areas to hold the market apart from just focusing on increasing the capabilities by marketing digitally and also focusing on the different segments of the product that has to be offered.
MATERIALS	Mazda can manufacture its own part as well as have contact with the other provider who can provide the source part. This makes the firm unique from every other brand and makes it specific. And if the business entity is encouraged to export the parts then it can gain additional profit from it.
MAKE-UP	Mazda focused on its goal as specified by its structure of the organization as well as the cultural motives.

To review this strategy the stakeholder and financial components are analyzed
Stakeholder-  The strategy made by Mazda attracted so many people including, dealers, partners, the government, suppliers, customers etcetera along with that Honda only plans on dealing with those who believe in supporting the market by expanding it.

Financial- From last few years Mazda has grown financially because of adopting hybrid strategy but further there was a slight drop in the profit because of some economic challenges like a poor economy (Dobbs, 2014). But later the business corporation took an initiative to improve its current position with the help of modifying the price strategy as compared to competitors, introducing the new and innovative technologies; the whole new way of marketing etcetera all these factors added to the improvement in Mazda’s financial position and showed a positive growth back in 2017.

Financial data modeling help to evaluate the outcome of the comparison between previous financial logs and the current financial logs with the help of observing the changes occurring in the market along with some set of assumption. On the basis of a financial position of Honda, in order to improve and predict the position of Honda in a market and among competitors, the financial model is required.

Pre-assuming that there will be no changes occurring in the business and also in the environment, the immoderate changes can be avoided or ignored.
Past Trends

Financial Indicators	2013-06	2014-06	2015-06	2016-06	2017-06
Gross Profit Margins (in%)	26.5	26.13	26.81	27.65	28.61
Net Profit Margin (in%)	6.59	5.03	3.45	6.01	5.43
Return On Capital Employed	346.62	282.66	191.16	342.1	590.79
Return on assets (in%)	3.92	2.99	1.88	3.32	5.53
Sales	12,506.09	13,328.10	14,601.15	13,999.20	15,361.15

Porter 5 Forces

it is reviewed on the basis of 4 conditions

Scenario	Trending	Justification
Best case	In the first year, the increase is 3 percent. With continuous increase by 3 percent, it is expected to grow by 9% in 2019	With the help of optimization and innovation, there is an increase in productivity along with the use of hybrid strategy the continuous growth can be seen which helps to meet the requirements of a market

Moderate	No change in trend is seen.	Honda kept its strategy neutral and therefore no change detected in the strategy and continued using the current plan (Grant, 2016).
Worst case	In the first year there can be a decrease of 3 percent, and if it continues to decrease by 3% every year then it will come down to 9 percent in 2019	In the worst case, the possible scenarios can be that the hybrid strategy failed to meet the requirement and the strategy implemented and therefore the profit dropped down to 9 percent and hence there is a loss in financial advantage.

Current Ratio There would be the best return in the case of best scenario in the terms of a long time. It happened because Honda achieved a large profit contributing to its liquidation position in a positive manner.

In 2019 Honda’s position almost increased by 78 percent even in the worst case scenario the situation still persists but with a little deviation. And if the growth does not occur by 40% as compared to current growth in next year then Honda should evaluate. The hybrid strategy maintains a balance between profitability and spending the amount of money on innovation and technology.

Net Profit Margin from 2018 to 2019 the hybrid strategy is best in terms of providing the competitive advantage by increasing the profit by 13%  in respect to net profit margin along with continuing the operations efficiently while making investments in the capital.

With hybrid technology, Honda has achieved more than 50% sales in the last 3 years, Honda captures 40% of the market shares while Toyota and Mazda captures around 18% of the shares that make Honda the leading brand in Malaysia and therefore hybrid strategy is best for Honda because with this progress Honda will achieve the economy of the scale and hence strengthening the Honda’s position.

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