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What Marketing Strategies should Honda Generators use in order to

increase the sales of its generators in the context of changing socio-

economic situation and increasing competition in Nepal?

Shrisha Pradhananga

Mr. Sanjeev Lama

Business and Management Extended Essay

Date: 31/10/2012

Word count: 3480

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Introduction :

Marketing is everywhere. It is used by smaller businesses to larger

businesses to promote and sell their products or services. Good marketing is

very important for a business because it helps a business to enhance their

brand and create value for their products.

‘’Any organization needs strategy when resources are finite, when there is

uncertainty about competitive strengths and behavior, when commitment of

resources is irreversible, when decisions must be coordinated between far-

flung places and over time, and when there is uncertainty about control of the

initiative.’’

Marketing of a product gets a consumer interested in it. Marketing is done

through research of consumer needs, promotion, selling, and distribution of

products. Businesses need to ensure that their products will sell in order to be

successful. Improving the quality of the product and selling it in a more

reasonable price might increase the number of sales of the product.

Honda is a Japanese public multinational corporation. It is the world's

largest manufacturer of engines, producing more than 14 million internal

combustion engines each year. It is a US $ 84.3 Billion Enterprise with over

19.6 million products sold

annually. Lightweight, compact Honda generators produce between 1,000

and 10,000 watts of power, providing dependable power for recreation,

construction, rental, and emergency use. It has 95 Production Facilities in 34

countries. Over 5.9 million Portable Power Products is sold annually and over

46 million Portable Power Products exist worldwide. 2

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Honda started distributing their generators in Nepal since 1990. There are

only two distributors of Honda generators in Nepal. Honda produces mainly

household generators which are portable, super silent, Eco friendly, durable

and customer friendly. Honda’s main competitors in Nepal are Yamaha,

Suzuki and Elemax generators. They are all made in Japan and also produce

mainly household generators. Honda charges minimum of 60000 thousands

for a generator and maximum of 2 lakhs. Whereas, Yamaha, Suzuki and

Elemax charge slightly higher in comparison to Honda with a minimum price

of 50000 thousands and a maximum of 1 lakh 90 thousands.34

The number of sales of generator has decreased this year by 20%-25%

from the last year. The main reason for this decrease in sales is because the

hours of load shedding has decreased this year and more and more

consumers are looking for a cheaper yet eco friendly generators which

requires lesser amount of fuel.

This paper aims to assess and provide various level of planning to the price

strategy which helps Honda to increase the sales level by lowering the price

of the product to the market level while try to make the quality of the generator

to remain the same as much as possible. This will help Honda to stay in

competition with its competitors as well as increase profitability which would

lead to increased competitiveness. Thus my research question is to

investigate what pricing strategy should Honda apply to stay in competition

with more cheaper and eco-friendlier substitutes in Nepal.

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FINDING AND ANALYSIS :

Social Factors :

In case of social factors, due to increasing pollution as well as population,

there is a shortage of petroleum in Nepal’s market. Not only is it hard to find

but it is very expensive to consume also. So, every company should be well

aware of this problem and try to avoid petroleum products as much as they

can. Companies should keep in mind that now-a-days people are getting

more and more aware of their environment. So, environment friendly

generators must be provided to them before they start opting for invertors or

diesel generators rather than petrol generators.

People are also being highly quality conscious. They want products that are

highly durable and consumer friendly so that they would not have to buy that

same product again or waste their money on future maintenance. Honda

generator is excellent in quantity but it is rather expensive. Bringing their

products to a reasonable price might be very challenging for them.

The means opted by Honda are :

1. Fuel efficient generators - Honda produces fuel effiecient generators.

Honda uses Eco-Throttle which allows the generator's engine to

automatically adjust the engine speed to produce only the power needed

for the application in use. This is very useful in the context of Nepal

because there is a shortage of petroleum. Since honda uses lesser fuel, it

contributes to the environment.

2. Quiet operation - Honda's generators are substantially quieter than

traditional generators. Eco-Throttle also reduces the noise level of their

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generators. Which is extremely good because it creates less sound

polution.

Nepal has a major problem that has yet to be solved. Nepalese are

entertaining more or less 14 hours of load shedding each day and is

supposed to increase more. That means, Nepalese still have to suffer 10

hours of load shedding every day. However shameful and grave this problem

is, it has shown to be helpful for the market of generators. After the

introduction of load shedding in Nepal in 2005, the sales of generators and

other artificial means of electricity has increased to magnitude.

50  
45  
40  
35  
30  
25   Series1  

20   Linear  (Series1)  
15  
10  
5  
0  
2004   2006   2008   2010   2012   2014  

Fig 1: Average load shedding hours in Nepal

In the above diagram, the x axis is the period of time ( in years) in which

Nepalese has entertained load shedding, which is from 2005 till now. The y

axis shows the average hours of load shedding in a month over a year. Just

by looking at the graph, we can say that as the time (in years) has increased,

the load shedding hours has increased as well. Hence, the period of time (in
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years) and the average hours of load shedding in a month over a year is

positevely correlated. Meaning when the time period increases, so does the

hours of load shedding.

300  

250  

200  

150   Series1  
Linear  (Series1)  
100  

50  

0  
2004   2006   2008   2010   2012   2014  

Fig 2 : The total sales output of Shakti Commercial

In the above figure, the x axis is the time period (in years) in which Shakti

Commercial started distributing Honda generators in Nepal, which is from

2005 to 2012 . The y axis is the total sales output of Honda generators per

year. Here, we can see that as the time period (in years) increases, so does

the total sales output of Honda Generators. So, the time period (in years) and

the total sales output of Honda Generators are positively correlated.

Comparing Fig 1 and Fig 2, we can safely say that when the load shedding

hours increased in Nepal, the total sales output of Honda Generators

increased as well. The other thing to be noted is Shakti Commercial started to

distribute Honda generators exactly the same year as load shedding was
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introduced in Nepal. The sales output of Shakti Commercial and the load

shedding hours are very closely correlated. For example, there was an

extreme increase in load shedding hours in 2010 whereas, there was also an

extreme increase in the total sales output of Honda generators in 2010. This

shows that, the number of generators sold is dependent on the hours of load

shedding in Nepal.

Economic factors :

In case of economic factors, Nepal’s Gross Domestic Product (GDP) is very

low. This is mainly because of increase in import of products. This increases

the compitition of the same kind of products. This affects Honda because the

more the competition rises, so does the variety of products for the consumers

to choose from. Obviously, this means consumers will be more inclined

towards buying products that are better in quality, reasonable in price, durable

in nature, more fuel efficient, more consumer friendly and so on.

Another major economic factor to consider is the Per Capita Income (PCI)

of the country. Nepal’s PCI is very low. This means that the wealth of the

Nepalese people is very low. So, Honda needs to keep in mind that even

though the quality of their products is very high, the current prices they are

operating with is higher than that of their competitors. So in order to increase

their sales, they need to not only target on the higher level people but the

middle class as well.

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Petrol Kerosene Diesel Inflation

(per litre) Rs. (per litre) Rs. (per litre) Rs. (in percent)
2005
67.00 46.00 39.00 4.539
2006
67.25 53.15 47.65 7.963
2007
80.00 56.25 51.20 6.203
2008
80.50 59.50 59.50 6.687
2009
77.50 58.00 58.00 12.626
2010
88.00 68.50 68.50 9.556
2011
120.00 89.00 89.00 10.5
2012
125.00 97.00 97.00 7.5

Table: The price of fuel and the inflation rate in a period of time (2005-2012)

140  

120  

100  
 
80   Series2   Series 2= Petrol
Series 4= Kerosene
Series4  
60   Series 1= Disel
Series1    
40  

20  

0  
2004   2005   2006   2007   2008   2009   2010   2011   2012   2013  

Fig 3 : The price of fuel and the inflation rate in a period of time (2005-2012)
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The above table shows the price of petrol, kerosene and diesel from the

year 2005 to 2012. We can see from the table that except in 2009, all three

fuel prices keeps on increasing every year. Inflation is a general increase in

prices and fall in the purchasing value of money.The inflation rate is the

highest in 2009. We can see that petrol is more expensive and is generally

very hard to find.

About 47.6% of Honda generators distributed by Shakti Commercial needs

petrol to operate. About 42.9% operates with kerosene and about 9.5%

operates with Diesel only.

PEST Analysis

Political Factor :

Nepal’s political arena is more or less in a democratic state meaning the

common people are handling the Nepalese economy without heavy

governmention intervention. Even so, Nepal’s political situation is highly

unstable. There could an immediate price hike or unexpected strike. So it is

very difficult for the businesses to operate. This has deeply affected Honda

generators in Nepal. For Honda, the problem is, the constant change in the

price of fuel. Since generators cannot operate without fuel, Honda’s generate

cannot operate as well. So, people tend to over thing about buying

generators. They would choose generators which could operate with cheaper

fuel like disel.

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Tax is also another factor that affects businesses. Tax on good is imposed

by the current government of Nepal. They can increase and decrease the

price of products. Tariff is tax on imported goods. If the tariff on generators

increases then the prices of the generators will increase as well. Hence,

making Honda’s generators more expensive. Honda imports all its generators.

So, Honda will be benefited if the tariff on generators are low.

Economic Factors

Economic conditions affect how easy or how difficult it is to be successful and

profitable at any time because they affect both capital availability and cost,

and demand.

If the economic condition of a country is good, then it is more likely that the

living standard of the people is aslo good. The more good the living standatrd

is, the more the people are capable of affording goods like generators.

In the context of Nepal, almost 26% of the total population is under poverty

line. These people cannot even afford basic nessecities much less artificial

electricity. Not even lower or middle class people can afford generator even

though they are suffering from load shedding. So, the PCI of the country has a

great effect on luxury products like generators.

Social Factor

Today’s society is much different from what they used to be. Due to spreading

of awareness and good education, people has actually started to care about

their environment. Government has also started to encourage such

awareness programmes. Albeit the loopholes, Nepalese people has really

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started worry about the state of their environment and their health as well.

People has started to get more concerned about the quality of the products.

Honda is already eco-friendly and user friendly. If it can bring in generators

that can run without using petrol and has a reasonable pricing than obviously

their market shares would increase.

Technological Factors

Technology has made distribution of Honda generators possible. Technology

has made transactions complete with the push of a button, and emails allow

customers to communicate quickly and efficiently with businesses. If it wasnt

for technology than countries would has a hard time communicating with each

other merely due to the absence of a translator.

For example, Honda Nepal imports generators from Honda Japan. If they

don’t have proper communication between them, they will not properly

understand each other and this can obstruct the efficiency of the business.

Honda uses a chat system called QQ. QQ is a kind of instant message, that

can translate one language to another in an instant.

With the help of the internet, sales of generators has increased drastically.

They can get the generator details and buy them oline 24/7. Communication

between consumers and producers is also very easy because of the internet.

SWOT Analysis :

SWOT Analysis is a useful technique for understanding the Strengths and

Weaknesses, and for identifying both the Opportunities open to the business.
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SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. It is

a planning tool for a business. Strengths and Weaknesses are internal factors

whereas Opportunities and Threats are external factors.

Strength

• Honda is one of the leading generator brand of Nepal.

• It already has an established brand image world-wide.

• Honda generators are highly qualitative.

• Honda has a diverse product line and size range.

• It is recognized globally.

• It is operated globally.

• Honda’s market share in Nepal is higher compared to its competitors.

• Honda Generators has a growing demand

Weaknesses

• Cost structure is high compared to other generator manufacturers.

• Honda requires privileged purchase deposit.

Opportunities

• Honda has the best opportunity in producing generators which is more

eco-friendly.

• People are more aware of the well being of their environment

• People prefer disel generators to petrol generators.

• People of Nepal are starting to be more quality conscious.

• Introducing more fuel efficient and cheaper priced generators.

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Threats

• Honda has many competitors.

• The competitors generators much lower cost.

• Majority of Nepalese citizens cannot luxury like generators.

• Fuel prices are contributing a lot towards the loss of Honda company.

• One of the major threat is the economic slowdown.

• Substitute products are the major threats for the Honda company.

• Poor state of economy.

• Political instability in Nepal.

Barriers to Entry Supplier Power

Threat of entry is low 1) Since there are only two
because of: Competitive Rivalry dealers of Honda
1. Stricter 1) Cheaper generators like generators, they can fix
government Yamaha, Suziki and any amout as they want.
regulations on new Elemax are the major 2) Honda being a well
distributors of threat to Honda. known and qualitative
imported 2) Threat of substitute brand, the buyers have
generators. no choice but to agree
2. 6% to 10% Import to the price.
Duty Rates 3) Supplier concentration
imposed on the is extremely low
inmported compared to the buyers.
generators.
3. Matching prices
Buyer Power
and quality is
1. End consumers have
difficult with the
very little bargaining
existing Threat of Substitutes
1. The major threat of power.
competitors.
substution for Honda 2. Buyer concentration v/s
generators are invertors. Even industry concentration is
though Honda manufactures low.
invertors, they do not really 3. Some buyers may
distribute it here in Nepal. beprice sensitive but
most of them are not.

Figure : Porter’s Five Forces that Influence the Honda Generators

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Generators are becoming increasingly important for Nepalese people now-a-

days. Since the load shedding still exists, pleople who can afford it tends to

buy generators and invertors rather than suffer in the dark. So, Honda has to

be aware of that and try its best out its portable generators as much as

possible. The distributors should be aware of the four P’s. These four P’s are

the essential parts of marketing and every manufacturers should highly focus

on this in order to meet the customers’ needs.

• Product

Every manufacturers should know what they are going to produce,how they

are going to produce it and what kind of group they should target. They

should also be well aware of what the customers want so that the

manufactures can fulfill the demand of the customers. In order to achieve that,

the manufactures must do an analysed market research and sales

forecasting with the help of primary research and secondary research. Market

research is the action or activity of gathering information about consumers'

needs and preferences and sales forecasting is the prediction, projection or

estimation of expected sales over a specified future time period.

Nepal being a poor country, it cannot afford to manufacture generators

here. So, generators are usually imported from main countries like Japan,

India and China. Honda being a Japanese company is imported from Japan.

The quality of Japanese generators are usually better than Indian and

Chinese generators. So, Honda generators’ are very good in quality but

expensive as well. Honda distributors of Nepal should import those generators

that fits the demand and standard of Nepalese people.

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Core Product :

The core product or benefit of Honda Generator is using eco-friendly and fuel

effecient technology.

Basic Product :

The basic product of Honda generators are Engine,automatic decompression,

electronic ignition and so on.

Expected Product :

It should have a 4-in-1 tank sump includes a tank filter, a fuel tank sump, a

sediment bowl, and an additional screen filter above the sediment bowl. It

should have Spark arresters. It should have its own charging system to keep

the battery charged.

Augmented Product: -

It provides fast service of the product.Mechanical governors respond quickly

to load changes.more fuel efficient and use less oil than other brands.

 
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• Pricing-

Pricing has always played a key role in the marketing. A business should

employ the pricing strategy that suits the business. The strategies of pricing

that can be most effective for the businesses are skimming pricing,

penetration pricing and psychological pricing. Skimming pricing is the strategy

of establishing a high initial price for a product with a view to “skimming the

cream off the market” at the upper end of the demand curve. It is

accompanied by heavy expenditure on promotion.

Rated Tank Dry

Generators Consumption Price
Output Capacity Weight Fuel Type
(Model) (litre/ hour) (Rs.)
(VA) (litre) (Hours)
EB 1000 750 6.8 0.72 9.5 Gasoline 49,350
EB 3000 2300 14.4 1.92 62 Gasoline 73,500
EB 3000S 2300 14.4 1.92 66 Gasoline 89,250
EM 650Z 450 2.8 0.47 22 Gasoline 45,150
EP 1800 CX 1300 15.0 42 Gasoline 64,900
EP 2500 CX 2300 15.0 1.47 45 Gasoline 78,000
120,000
EP 3800 CX 2800 25 1.92 68 Gasoline

EP 5000 CX 4000 25 2.72 82 Gasoline 145,000

EU 30is 2800 13 0.65 59 Gasoline 235,000

EBK 1000 650 6.5 0.72 30 Kerosene 49,350
EBK 2000 1400 9.1 1.35 47 Kerosene 69,825
EBK 2800 2100 15.5 2.01 62 Kerosene 80,850
EBK 2800S 2100 15.5 2.01 67 Kerosene 90,300
EK 400 350 2.7 0.45 20 Kerosene 84,000
EXK 2000AC 1600 9.1 2.63 76 Kerosene 84,000
EXK 2000S 1600 9.1 2.75 83 Kerosene 88,275

EXK 2800S 1600 15.5 3.28 102 Kerosene 120,910

EP 5D 3700 12 1.94 113 Diesel 250,000
870,000
EXT 15D 13 kVA 38 4.75 335 Diesel
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The above table is the Honda generators that are distributed by Shakti

Commercial in Nepal.

Penetration pricing is the strategy of entering the market with a low initial price

so that a greater share of the market can be captured. Psychological pricing is

done to create an emotional impression on the customers.

Honda’s fix price is based upon the quality of the generator rather than the

trend of market demand and supply. The price of a Honda generator may vary

from Rs.60000 to 2 lakhs whereas Honda’s competitors in Nepal : Yamaha,

Suziki and Elemax’s generators varies form Rs. 8000- 1 lakh 70 thousand.

Price conscious customers prefer Honda’s competitors (Yamaha, Suziki and

Elemax) whereas quality conscious customers prefer Honda generators.

Hence, Honda generators charge a high price because they have a

substantial competitive advantage. However, the advantage is not

sustainable. The high price tends to attract new competitors into the market,

and the price inevitably falls due to increased supply.

• Promotion :

Sales promotion is an incentive to buywhereas advertising is a reason to

buy. Sales promotion is an integral part of marketing. Promotions are of many

types. It does not only mean advertising. Promotions can be in the form of

contests, coupons, freebies, loss leaders, point of purchase displays,

premiums, prizes, product samples, and rebates. This includes planning,

implementations and control of the communication done with the customers

for persuasion. The promotion of a product should be crafted in such a way

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that the customers can get a clear picture of the product, its price and how

they can benefit the customers.

Honda generator is distributing its product to only two authorized dealer in

Nepal : Shakti Commercial and Syakar Company. The premium rate for

Honda generators ranges from 7.5% for to 10%. Dealers has offered special

discount on generators costing more than $485. No interests are charged if

the imported generators that cost $485 or less are paid within 18 months.

Nepal’s one of the Honda dealer, Syakar Company Ltd had launched a

consumer promotion scheme ‘Honda Generator On & Life On’. In which

buyers would get a Philips Mobile Phone worth Rs. 2,590 for free, on every

purchase of generators up to 4KVA. Similarly, on every purchase of

generators above 4KVA, buyers would get a Philips DVD worth Rs. 5,490

absolutely free. This offer was promoted through The Himalayan Time, Friday

Weekly and The Kathmandu Post.

Conclusion? Focus on the pricing strategies mainly along with linkages with

the the other aspects of the marketing mix.Start working on the conclusions

and think in terms of answering the RQ

Below the line promotion :

Honda has been providing its dealer with some percent of premium. It has

also offered special discounts on various range of generators.

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Above the line promotion :

Honda mostly uses ALT promotion because the majority of their promotion is

done through Radio, T.V., Newspaper, Internet and Other media

communications.

Therefore, according to the facts and figures shown above, it is safe to

conclude that Honda Generators could use the above market strategies in

order to increase the sales of its generators in the context of changing socio-

economic situation and increasing competition in Nepal, proving my

hypothesis correct.
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