Assignment 2: External and Internal Environments - 96336

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Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Assess how these segments affect the corporation you chose and the industry in which it operates

 

Solution:

Honda Motor Co. is a Japanese public multinational dealing in automobiles, motorcycles and power equipment.

The general environment means elements of the society affect industries and the firms that operate within those industries. The Company cannot directly control these elements. The general environment is consists of the following segments: demographic, economic, political/ legal, sociocultural, technological and global segments.

The demographic segment denotes the characteristics of population in an area, district, and country in the world. It includes factors such as age, income, education etc. These data are used to understand the trend and pattern of consumer behavior.

The economic segment refers to the nature and direction of the economy in which a company competes or may compete. Important characteristics include inflation and interest rates, trade deficits / surpluses, budget deficits / surpluses, individual and business savings and investment rates, and gross domestic product.

The political/ legal segment refers how firms and other organizations to influence government and how governmental entities in turn influence them.  

The sociocultural segment is concerned with the social attitudes and cultural values of different societies.

The technological segment is made up of the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, or materials.

The global segment includes new global markets and existing ones that are changing and important international political events. This segment recognizes that firms now compete in a competitive landscape where both competitors and customers are global, due in part to the rapid diffusion of both information and technology. 

 

 

 

 

 

For Honda Motor Company economic and global environment is highly risky:

Economic Environment:

  • Raw material procurement: Honda is purchasing raw materials and other parts from outside suppliers which are beyond their control. Any increase in raw material price will affect production and cost of product also.
  • Interest rate: Honda is using hedging policies to reduce interest cost. These instruments include foreign currency forward contracts; currency swaps agreements and currency option contracts. Any default by counterparties might have an adverse effect on Honda.

Global Environment:

  • Honda is operating all over world. Regulations regarding vehicle emission level, fuel economy, noise safety are extensive within the automobile industries and power product industries. Due to globalization, many countries are changing their policies very frequently which are affecting company’s operations.

Impact on industry:

Economics Environment:

Prices of automobile are increasing due to inflation. Automobile industry is the basis industry of the economy. The major external factor is oil dependency which influences price elasticity. Some other factors which affect the price elasticity are as follows:

  • Government Taxed on manufacturer
  • Buying capacity of peoples
  • Commercial use of automobile

 

Global Environment:

 

Regulations regarding vehicle emission level, fuel economy, noise safety are extensive within the automobile industries and power product industries. Due to globalization, many countries are changing their policy very frequently which is affected automobile industry.