Honda Moto - International Business

Fin 456

Research paper: Honda Moto Co. LTD

1. Introduction:

Honda motor co., ltd. Develops, manufactures, and distributes motorcycles, automobiles, power, and other products worldwide. Honda has grown to become the world’s largest motorcycle manufacturer and one the leading automaker. Honda’s principal executive office located at Tokyo japan.

Honda operates through four segments: motorcycle business, automobile business, financial services business, power product and other business. Honda offer different financial services to customers and dealers through finance subsidiaries (lending, leasing, wholesale finances) in countries including japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand, which help providing sales support for its products. Honda sell variety of power products such as: power carriers, sprayers, pressure washers, general-purpose engines, generators, water pumps, lawn mowers, riding mowers, grass cutters, brush cutters, tillers, snow blowers, outboard marine engines, and cogeneration. And, Honda began deliveries of the Hondajet aircraft in 2015 as other business.

In 2016, there is global network of 368 subsidiaries (89 Japanese subsidiaries and 279 overseas subsidiaries) and 75 affiliate joint ventures accounted for using the equity. There are 21 subsidiaries in north America: 19 subsidiaries in the U.S, 1 in Canada, 1 subsidiary in Mexico. Subsidiaries in south America includes: 3 subsidiaries in Brazil, 2 subsidiaries in Peru, 1 subsidiary and 1 subsidiary in Chile. There’re 11 subsidiaries in Europe, and 26 subsidiaries in Asia. Besides, Honda have many manufacturing operation throughout the world, especially in Asia (Japan, China, Malaysia) and in north America (15 manufacturing in the U.S, 3 in Canada, and 2 in Mexico). North America manufacturing operations of Honda produce automobile and power products export to other countries including Canada, and the U.S.

In the future, it would like strengthen the global models and region models. For global model such as SUV model, civic mode, accord, CR-V (all new cry-v start in the u’s), and hybrid version. For regional model, they will focus on Mobilio and Br-V in Asia, ridgeline and odyssey in north America; Crider and Avancier and UR-V in China; N-BOX in japan.

The breakdown of Honda’ sale by category business and geographic:

Its total assets is ¥18,229.3 billion in 2016, and expect ¥18958.1 billion in 2017. In 2016, Its revenue is ¥14,601.1 billion and net income ¥406.4 billion yen, and capital expenditure is ¥2,860.6 billion. Its current market capitalization is $49.7 billion

Motorcycle revenue in 2015 and 2016 is 14% and 12% of total revenue. Automobile revenue is 72% (2015) and 73% (2016). Finances services revenue is 12% (2015) and 13% (2016). About 98% of Honda’s overseas sales was earned through its principal foreign sales subsidiaries that distribute Honda’s products to local wholesalers and retail dealers. To, success business, Honda consider to various government regulations such as environmental and safety regulations for each product segment: automobiles, motorcycles and power products. Those regulations relate to emissions, fuel economy, recycling and safety. Every country or religion has kind of different regulations.

1. Honda’s foreign exchange (fx) risk management policy

Honda motor co., ltd is a limited liability, joint stock corporation incorporated under the laws of japan. Its head office is located in Tokyo, japan. Honda has manufacturing operations throughout the world including japan, Asia, Europe, north America and other countries; and, it exports and component to different countries. Honda spread out their operation in different countries and foreign currency dominated in sale not only Japanese’s and the U.S but also many foreign currencies in the worlds. And there are variety of finance subsidiaries in different countries. All of that can help it decentralized the risk. Honda conduct the global risk management policy, extent to group subsidiaries, that detail the role of each organization rank, while each organization set its own independent risk management. That helps Honda anticipate and response quickly. Besides, global emergency headquarter will evaluate potential risk and predict magnitude of its impact.

The company expose to market risks in fluctuation of foreigner exchange currency rate, interest rate. Honda buys materials and parts, and sell its products in foreigner currency. Thus, change in foreigner currency greatly impact to products’ cost and price. Although Honda’s revenue in 2016 increases compared to previous year, operating profit in 2016 decreased by ¥167.2 billion (24.9%) compared to 2015. That due to increase in selling, general and administrative expenses including product warranty expenses and negative foreign currency impact. Which was partially offset by an increase in profit attributable to increased sales revenue and model mix as well as continuing cost reduction. Honda estimates that negative foreign currency effects of approximately ¥60.1 billion on operating profit.