STRATEGIC
AUDIT
REPORT
Honda Atlas Cars (Pakistan) Limited (2020)
Presented by:
Nouman Shakeel & Syida Atia Zainab
(As a part of university project)
Instructor:
Dr. Malik Muhammad Afzal
(MGT 705-STRATEGIC MANAGEMENT)
INTRODUCTION
Founded in 1992
Joint Venture
Honda Atlas Cars (Pakistan) Limited (2020)
51% 30.2%
Honda Motor Company Atlas Group of Companies,
Limited Japan Pakistan.
CURRENT SITUATION
PSX Symbol: HCAR
Free Float: 20%
Avg. trade price June Rs. 198.11
(April: Rs. 167.5)
Fiscal Year end on: March 31st
Market Share: 15%
Auditors:
M/s A.F. Ferguson & Company
Chartered Accountants
STRATEGIC POSTURE
• Vision: “Creating products that maximize the joy of
customers with speed, affordability and low CO2”
• Objective: Honda Atlas Cars (Pakistan) Limited strives to
achieve the best Customer satisfaction.
• Philosophy:
POLICIES
Management Policy: Respect for all, Man is the key, believe in 3S , follow 3A
Priority Standards of Conduct: Safety, Quality, Productivity
Human Resources: Hire young, fresh, energetic and active associates
Quality Policy: Strive for supplying top quality Honda cars to get customers satisfaction
Environment Policy: Commitment to preserve global environment
Operating Principles: Always keep the deadline, never make excuses, team work
Strategic Managers:
Board of Directors: Total 9 members; 1 Chairman, 1
President / CEO, 1 Director & Senior Advisor, 1 Executive
Director / VP, 2 Directors,3 Independent Directors.
Top Management:
• Company Secretary,
• Chief Financial Officer,
• Audit Committee (5 members),
• HR Committee (5 members),
• Executive Committee (3 members)
External Environment:
• A. Natural Environment: Unfavorable amid Covid-19, PAMA released stats showed 71%
decline in car sales with 59% from HACPL
• B. Societal Environment:
• Economic: Annual GDP contribution 4%, workforce 1.8 million people, plants 3,200,
investment of ₨. 92 billion, production 200,000 vehicles contribution to the national
treasury is nearly ₨. 50 billion.
• Yet unfavorable as evident from July 2019 shutdown due to inventory pileup due
to higher taxes and currency devaluation.
• Technological: Huge shift towards electric vehicles
• Honda Atlas have only a variety of oil-based cars
• This poses a big threat for the company in the coming years
• Political-Legal: Auto Policy 2016-21 and new Government’s Electric Vehicle Policy.
External Environment: (contd.)
• C. Task Environment:
• Threat of New Entrants: Both the Auto Policy 2016-21 and the new electric vehicle
policy have attracted a lot of new entrants in the industry.
• Rivalry among Existing Firms:
Market share breakdown with regards to specific brands:
Toyota Corolla — 23%, Honda (City and Civic) — 16.40%, WagonR — 14.35%, Mehran —
12.60%, Cultus — 12%, Alto — 11.20%, Bolan — 8.10%, Swift — 2.35%
External Environment: (contd.)
• C. Task Environment: (contd.)
• Threat of Substitute Products or Services: In terms of substitute products, the
electric vehicle-which Honda Atlas don’t have any, could be considered as the biggest
threat.
• Bargaining Power of Buyers:
Summary of External Factors
External Factors Analysis Summary (EFAS Table): Honda Atlas Cars
External Factors Weight Rating Weighted Score Comments
Opportunities:
Automotive policy 2016-21 0.05 1 0.05 Both an opportunity and a threat
Decreasing oil prices 0.05 1 0.05 Temporary
Car leasing services 0.20 3 0.6 Best opportunity
Customer desire for hybrid and fuel efficient
0.10 2 0.2
vehicles.
Threats:
Unfavorable natural environment amid
0.20 3 0.6 Unpredictable
Covid-19.
Economic instability, rising prices, higher
0.10 4 0.4 Deteriorating economy
taxes, currency devaluation.
Threat of substitute product, the electric
0.10 3 0.3 Controversial
vehicles policy.
Low market-share. 0.10 3 0.3 Needs improvement
Increase buying power of local parts suppliers. 0.02 1 0.02 Moderate penalties
Customer’s orientation towards used cars. 0.08 1 0.08 Shift-able
Total Score 1 2.6
Table 1 EFAS
Internal Environment:
• A. Corporate Structure:
• B. Corporate Culture: “taking up the challenge without fear of failure, free from the
prejudice of preconceived ideas, and with a foundation of teamwork based on trust”.
Internal Environment: (contd.)
• C. Corporate Resources:
• Marketing: Honda spends around 1% of Sales of Marketing and distribution.
• Finance:
Internal Environment: (contd.)
• C. Corporate Resources: (contd.)
• Research & Development: R & D for Honda Atlas lies under the Honda R&D Co.
Ltd a subsidiary company of Honda (Japan)
• Operations:
• Human Resources: one of the most important considerations with the senior management. The
Board has established an HR&R Committee which is involved in the selection, evaluation,
compensation and succession planning of key management personnel
Summary of Internal Factors
Internal Factors Analysis Summary (IFAS Table): Honda Atlas
Internal Factors Weight Rating Weighted Score Comments
Strengths:
Centralized R & D. 0.15 3 0.45 Needs innovation
Strong corporate culture 0.05 1 0.05
Joint venture with Atlas group 0.15 3 0.45
Dedicated HR committee 0.025 3 0.075
Goods operating results 0.075 2 0.15 Needs improvement
High assets turnover ratio 0.05 1 0.05 Due to reduces total assets
Weaknesses:
Declining sales in units 0.15 4 0.6 Needs attention
Declining production 0.05 1 0.05 Due to declined sales
Inventory pile-up 0.10 3 0.3 Economic factors, uncontrollable
Low marketing budget 0.15 4 0.6 High priority
Declining total assets 0.05 1 0.05 May effect stock prices
Total Score 1 2.825
Table 2 IFAS
Analysis of Strategic Factors
Strategic Factors Analysis Summary (SFAS Table): Honda Atlas Cars
Short- Long-
Strategic Factors Weight Rating Weighted Score Medium Term Comments
Term Term
Need to focus on
Centralized R&D (S1) 0.05 3 0.15 X
regional factors
Variety of business
Joint venture with Atlas group (S2) 0.15 3 0.45 X
options
Declining sales (W1) 0.175 4 0.70 X Require innovation
Could be a reason for
Low marketing budget (W2) 0.175 4 0.70 X
declining sales
Car leasing services (O1) 0.175 3 0.53 X Could improve sales
Customer desire for hybrid and fuel Could be substituted by
0.05 2 0.10 X
efficient vehicles. (O2) electric vehicles
Unfavorable natural environment amid
0.15 3 0.45 X Uncontrollable
Covid-19. (T1)
Economic instability, rising prices,
0.20 4 0.80 X Uncontrollable
higher taxes, currency devaluation. (T2)
Total Score 1 3.5
Table 3 SFAS
Strategic Alternatives and Recommended Strategy
Strengths (S)
Weakness (W)
S1: Centralized R & D.
W1: Declining sales in units
S2: Strong corporate culture
Internal Factors W2: Declining production
S3: Joint venture with Atlas group
(IFAS Table) W3: Inventory pile-up
S4: Dedicated HR committee
W4: Low marketing budget
S5: Goods operating results
W5: Declining total assets
S6: High assets turnover ratio
External Factors
(EFAS Table)
Opportunities (O)
Use efficient inventory
O1: Automotive policy 2016-17
Launch range of hybrid vehicles management policies like Just In
O2: Decreasing oil prices
with regional specifications. Time (JIT) method.
O3: Car leasing services
Start in-house car leasing services. Use extensive marketing to
O4:Customer desire for hybrid and fuel efficient
enhance market share.
vehicles.
Threats (T)
T1: Natural environment amid Covid-19. Develop its own range of electric
T2: Economic instability, rising prices, higher taxes, vehicles with regional specification
currency devaluation. keeping in view the National
Use cost cutting techniques to
T3: Threat of substitute product, the electric vehicles Electric Vehicles Policy (NEVP).
offer competitive prices.
policy. Allocate more budget for marketing
T4: Low market-share. expenditures to improve market
T5: Buying power of local parts suppliers. share.
T6: Orientation towards used cars.
Table 3 TOWS
Recommended Strategy:
Corporate Directional Strategy: Launch a range of hybrid
vehicles with regional specifications.
Supporting Business Strategy: Start inhouse car leasing
services.
Supporting functional Strategy: Use efficient inventory
management policies along with increased marketing activities.
