Business Analysis of Mazda: Strategy, Financial Performance and Industry Analysis

This report analyzes the business strategy, financial performance, and industry analysis of Mazda. It benchmarks Mazda’s competitive advantage against two of its leading competitors including Toyota and Honda. 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.

Running Header: Business Analysis

Business Analysis
Contents
Purpose of the report....................................................................................................................2
Background of the company........................................................................................................2
Rationale.......................................................................................................................................2
Key Issues....................................................................................................................................2
Entry Barrier.................................................................................................................................2
Bargaining Power of Buyers........................................................................................................3
Bargaining Power of Suppliers....................................................................................................3
Threat of Substitute......................................................................................................................3
Technology Disruption.................................................................................................................3
Financial Performance..................................................................................................................3
Current Ratio................................................................................................................................3
Gross Profit Margin (GPM).........................................................................................................3
Net Profit Margin (NPM).............................................................................................................3
Return on Capital Employed (ROCE)..........................................................................................3
Market share.................................................................................................................................4
Limitation of Strategic Analysis..................................................................................................4
Limitation of Financial Analysis..................................................................................................4
Recommendation Potential Strategy Direction................................................................................4
Strategy Selection.........................................................................................................................4

Business Analysis
Introduction
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.
Background of the company
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).
Rationale
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 10th 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.

Business Analysis
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.
Top quality customer
service.
High-speed vehicles.
State of the art

Business Analysis
Performance driven
vehicles.
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.
Key Issues
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).
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.

Business Analysis
Figure 1Brand performance of Mazda
[Source: Brand performance of Mazda, 2018]

Business Analysis
Figure 2Brand performance of Mazda
[Source: Brand Performance of Mazda 2018\.

Business Analysis
Strategic analysis
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).
PESTEL (Macro environment analysis)
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

Business Analysis
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)
Forces model was given by Michael Porter to analyze where does the company stand in the terms
of competition.
Figure 3Industry Analysis
[Source: Industry analysis, 2018]
Entry Barrier
In Malaysia the entry barrier is strong but it gives the competitive advantage to Honda
Competitive Rivalry

Business Analysis
Toyota and Mazda give a tough competition to Honda.
Bargaining Power of Buyers
Car buyers possess a very high bargaining power which creates the competitive advantage for the
vendors (Baker and Saren, 2016).
Bargaining Power of Suppliers
For Toyota and Mazda, the bargaining power is low but neutral for Honda.
Threat of Substitute
A threat from substitute is moderate and therefore it is not suitable for all three brands.
Figure 4 Car Sales in Malaysia
[Source: Car sales in Malaysia statistics, 2018]

Business Analysis
Figure 5Car Sales in Malaysia
[Source: Car sales in Malaysia statistics, 2018]
Technology Disruption
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
Financial performance can be analyzed in the following terms (Brand and Rolland, 2018)
Current Ratio
Comparing total assets of the company with relation to the complete liability
Gross Profit Margin (GPM)
The below presented is the Gross Profit Margin of Automobile industry:

Business Analysis
Figure 6 Gross Profit Margin
[Source: Gross Profit Margin of Mazda, 2018]
Net Profit Margin (NPM)
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).
Return on Capital Employed (ROCE)
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%.
Industry Specific Performance
It specifies performance of the brand in relation to the competitive brand
Total Industry Volume (TIV)
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.

Business Analysis
Figure 7Total Industry Volume Graphs of Mazda
[Source: Total industry volume graphs of Mazda, 2018]
Market share
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 Analysis
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

Business 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.
Limitation of Financial Analysis
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.
Recommendation
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.
Critical Evaluation
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

Business Analysis
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.

Business Analysis
Strategy Selection
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
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.
Feasibility
6M model is required to evaluate feasibility.

Business Analysis
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.

Business Analysis
Acceptability
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
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.
Assumptions
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

Business Analysis
Future Trend
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.

Business Analysis
Future Trend Analysis
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.
Gross Profit Margin
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.
TIV Market Share
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.

Business Analysis
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Business Analysis
1.