Honda Rover : Crafting an Alliance Essay

Satisfactory Essays

The British Aerospace wanted to get rid of its noncore and loss making business - the automobile subsidiary - Rover. Rover was operating in a collaborative relationship with Honda. BL was in urgent need of a midsized car that would help improve its image, quality, efficiency, boost its capital and expertise to enable it to continue,
Honda was identified as the partner who would provide and would fit in the political environment. Also, a Japanese firm did not appear threatening to the British competitors. Honda wanted to expand internationally. As benefits Honda was looking at using Rover's design studios, and selling engines to Rover. Also, the fact that no other European company would agree to a partnership with Honda combined with …show more content…

Also, the excess capacity utilization for engines was effectively utilized.
Despite all the contributions and gains that ensued from this deal, this deal appeared to be more profitable for Rover than for Honda. There was also considerable friction in the effort for the following reasons:
• Difference in way of operations: While Rover management wanted immediate responses or product alterations, Honda was slow careful and calculated with all its deals and commitments
• Difference in Management Style : While Rover employer employee relationship was contractual in nature, Honda relationships were more nurturing
• Honda was the bigger partner with more bargaining power. Rover had no design say, paid substantial fees plus royalty. Almost all Rover cars were dependent on Honda design. Honda also controlled the marketing rights
• There were cultural and communication gaps along with some amount of xenophobia toward the Japanese
Quality image was not associated to Rover but to Honda's engines. These reasons along with Honda being a giver and less of taker, made Honda more reluctant to raise its stake in Rover.
At this point, BMW showed interest in acquiring Rover. BMW was as cash rich. It wanted to double its market share and achieve economies of scale in production of parts, purchasing, logistics and sales. Rover series would complement BMW's product line and no additional R&D required. BMW would be able to move into sport utility segment and compete with

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