How 'Honda Super Cub entry into USA' inspired a family owned business to change their outlook
Adapting to emerging opportunities over sticking to invested opportunities
Meera bid her time patiently as she absorbed the discussions in the leadership meeting of her hospitality company. It ran a chain of upscale restaurants that served traditional Rajasthani dishes in a village setting.
Meera’s father - Chaganlal had started his first restaurant 35 years ago and over the time, grown the business into a chain of premium restaurants. Famous among its many items were the traditional ‘thaali’ and the desserts. People thronged in large numbers to each of their 5 restaurants in the 3 cities of Rajasthan, earning them a battery of awards from the known food connoisseurs of the country.
In the meeting, the leaders argued vehemently over different approaches to keep the business running. The traditional restaurant industry was undergoing a churn with new food delivery apps and cloud kitchens eating into their market share. The margins were dipping with rising inflation and competitive underpricing. Chaganlal was worried and his health had suffered lately. Meera, who had joined the business only 4 years back had begun taking over most of the responsibilities from him. She was well educated and had spent significant time working in new age businesses over the past decade before returning to the family fold. Eldest among all kids, she was mature, ambitious and resourceful at work. Chaganlal trusted her and was confident she would carry on his venture further.
After an hour of bickering, Meera stepped into the conversation
Meera - I see all your views have strengths and some weaknesses. But I have been noticing something different lately. Before I do that, let me explain a business case study of Honda Super Cub
There was a murmur, few groans and grunts as the leaders sunk into their seats. Many knew Meera had a story telling habit to convince her point. She was quite good at it. A few shoulders shrugged as Meera soldiered on.
..in 1960, the US motorcycle market was characterized by heavy duty motorcycles and dominated by Harley-Davidson and handful of European motorcycle manufacturers. Honda saw an opportunity to penetrate this market by offering lower price motorcycle through the arbitrage of low cost production back in Japan. It was a sound business strategy until it cracked for two reasons - in terms of look, it did not quite match the macho features of the incumbents and there were oil leakages during long runs. With local US dealers not skilled at handling such problems, Honda had to air-freight these faulty bikes to Japan for fixes.
While the leadership focused on tackling the heavy duty market, they also shipped a few smaller bikes to West Coast dealers to showcase the Honda range ~ fully aware that no significant sales would happen for them. Branded as Super Cub, these bikes were popular in urban Japan for short rides in crowded roads. As the heavy duty motor bikes sales and operations drained cash, Honda team began to offer these Super Cubs to their employees to save commute expenses.
One of the employees was an avid dirt biker and he happened to experiment with a Super Cub. He enjoyed it thoroughly and soon he motivated his colleagues to join in for weekend dirt biking trips. Soon the word spread on how nifty the Super Cub is for dirt biking and people began to ask for Super Cubs at dealerships. Noticing the demand, Sears ( then the leader in retail sales ) asked for adding Super Cub in their catalogue. The Honda team agreed but remained cold as they chased the heavy duty motor cycle sales.
Gradually, the Honda business began to thrive, not for improving its large motor cycle sales, but the Super Cub began to create a new market for itself. The target buyer was not the heavy duty motorcycle lover; the Super Cub priced at 25-30% of the larger motorbike was targeted at a new undiscovered buyer- ‘off road/dirt bikers’…..
Meera’s voice trailed off as she completed the case study. She paused to see the message sinking in. For some it did, for many it did not seem to.
Chaganlal kicked off the discussion. “I remember you telling me this story before, Meera. How does it make sense here?”
Meera smiled and said - “Let me explain why I think so.”
“I know the footfalls in our restaurants have dipped. But there has been a significant rise in our delivery orders. Among those orders, majority are ordering the desserts.
So, my team went and spoke to a few customers and we were surprised to see why they ordered our desserts - unique taste and trust in our brand; especially the health safety aspect.
In fact, we have orders coming from corners of the city -from where people usually would not come to our restaurant due to the driving distance. There were two instances where our packaging gave the customer enough confidence to courier the desserts to other parts of the country and the quality was still the same…”
Meera continued with her talk as she presented a new opportunity of packaged foods to her team. While they were focused on dining experience, the customers had discovered value in their offering and were consuming it in sizeable quantities. The current structure was designed for a inhouse diner, but a new target segment-the home diner was emerging that could sustain the business in the new way of life.
The team realized that they had worked hard to tap the known opportunities in their sight. But there were unknown opportunities emerging in the marketplace which they could pivot to and quickly scale.
Chaganlal had a tear in his eye and lump in his throat. His trust in Meera was now justified, she had proved her ambition and maturity.