Honda Motor Co. Ltd Business Risk Analysis

Honda Motor Co. Ltd has always sought to provide genuine satisfaction to people around the world. We are striving to deliver the products and services that customers in each locality want most. To ensure that we meet local needs, we go beyond establishing local sales networks; we have structured our operations so that many of our products are not only manufactured, but also developed in the regions where they will be used. The result is over 124 manufacturing facilities in 28 countries outside of Japan, producing the motorcycles, automobiles, and power products that bring us into contact with over 17 million customers each year. This paper focuses on the business risk analysis for building, owning, and operating a manufacturing plant in Croatia. This plant will produce Hybrid vehicles and introduce the Hybrid technology to this region.

Considerable research was conducted on the Republic of Croatia and the region and a SWOTT Analysis was prepared to determine the benefits and risks of conducting business in this country. Political, economic, and market risks have been researched and a detailed description of the risk and how to manage the risk is included.

SWOTT Analysis

SWOTT for Croatia ÐŽV Opening a Honda Hybrid plant in this country

Strength

„П Strategically located in the Adriatic Sea (distribution)

„П Open to FDI

„П Member of the WTO

„П Scheduled to become a member of the EU in 2010

„П Scheduled to become a member of NATO in first decade of 2000

„П Proactive mindset for protecting the environment

„П Competitive advantage in the production of steel and rubber

„П Aggressive tax incentives to corporations (Honda)

„П Low tax rate

„П English well spoken in Croatia

Weaknesses

„П High unemployment rate may affect car sales

„П Managing a multicultural population comprised of enemies ethnic groups

„П Judiciary system challenges ÐŽV ineffective court system

„П Potential political instability due to new government party HDZ, which depends on support of the HSS party for continued ruling

„П Limited motorway network/capacity

„П Inadequate Railway system

„П Post-communist era economy, judicial and political system plagued with corruption

Opportunity

„П Underdeveloped country

„П Honda expects to provide employment opportunities in Croatia

„П Increased road network investments

„П Increased access to EU transit network

„П Railway investments started in 2005

„П Opportunity to create a positive impact on Croatia through charitable donation

Threats

„П EU overturns of existing FDI tax incentives

„П Reticent relations between Croatia and International Criminal Tribunal for the former Yugoslavia (ICTY)

„П Internal organized crime

„П Double taxation

Trends

„П Increasingly high cost of fuel

„П Instability of the Middle East, larger producer of oil

„П EU increased demand for fuel efficient automobiles

„П Worldly initiatives to preserve the environment

Political/Legal/Regulatory Risks

Croatia is a very young political country. The current government has only been in power since 2003. Variations of the current government have run the country in the years previous to 2003, but the current government represents a position more significantly on the center than predecessors. Trends are showing a deep alienation of Croatian public from Croatian political establishment. Evidence is seen through record low turnouts and support for candidates and options that represent alternatives to Croatian political mainstream. Because of this Croatia is perceived as having minor instability problems. This poses a risk for businesses looking to move into the region. Although small, instability is a legitimate issue.

Relieving the concern about the instability in the government and possibly mitigating the problem all together is the fact the Croatia is positioned to join the European Union. Over the past several years Croatia has been making an admiral bid to become a part of the EU. Being a part of the EU has been the major unifying position of all past parties and governments. Croatia has been advancing toward this end for a number of years. Major Croatian advances in foreign relations during this period have included admittance into:

NATO's Partnership for Peace Programme in May 2000

World Trade Organization in July 2000;

Stabilization and Association Agreement with the EU in October 2001

NATO's Membership Action Programme in May 2002

Central European Free Trade Agreement (CEFTA) in December 2002

Application for membership in the EU in February 2003 and full cooperation with the Hague Tribunal and the beginning of accession negotiations with the EU in October 2005 (Wikipedia.com, 2005).

Croatia has had to make several changes in its policies in order to make the EU a possibility in its future. In 1998 questions were raised about the ruling party's commitment to basic democratic principles and norms. Areas of concern included restrictions on freedom of speech, one-party control of public TV and radio, repression of independent media, unfair electoral