HondaHum Mein Hai HERO

Submitted by

Ajal.A.JPriya VarmaTony Lloyd

Mathachan. P. JGeorge Augustine. K

Abi Mani

JV INSTANCES IN INDIA

Timeline -Honda• 1946 Sachiro Honda forms Honda Technical Research Institute, this leads

onto the formation of Honda Motor Company• 1949 2-Stroke, D-type engine introduced. • Fujisawa invests $7,500 and brings financial expertise and marketing

strength• 1952 Brisk demand for Honda’s superior 4-stroke engine allows

Fujisawa to raise $88,000 in additional funding• 1958 Honda 50cc Supercub introduced• 1959 Honda leads the Japanese market, and decides to enter the

United States• 1960 40 dealers in the U.S.• 1963 ‘You Meet the Nicest People on a Honda’ campaign launched• 1964 Nearly one out of every two motorcycles sold in the U.S. is a

Honda

• 1944- Hero group by Munjal Brothers for supply of bicycle components in Amritsar• 1956 – Moved to Ludhiyana and started Hero Cycles after independence and partition of India• 1975- Largest bicycle manufacturer in India• 1984- partnership with Honda• 1985- started producing CD 100 motorcyle • 1986- world’s largest cycle manufacturer• 2004- Hero Honda largest two-wheeler maker in the world. 48% of Indian market• 2006 – Entered scooter market with PLEASURE• 2013- New cycle named Hero SPRINT

•

Timeline -Hero

Vision of the Hero Honda is “to offer the highest quality at a reasonable price to meet the customers’ expectations and to exceed them”.

MISSIONHero Hondas mission is to strive for synergy

between technology,ststem and human resources, to produce products and services that meet the quality, performance and price aspirations of its customers. At the same time maintain the highest standards of ethics and social responsibilities.

Being the most fuel efficient Company.To develop Appropriate product & excellent Quality. To Meet the demands of the sophisticated markets

in Europe & America. To reach an unassailable pole position in the Indian

Two Wheeler market. To maintain high standard of ethics & social

responsibilities.To meet the quality performances & price

aspirations of the customer.

BRANDS CORE NEEDS AUXILARY NEEDS

1. Hero Honda Achiever Transportation Speed

2. Hero Honda CBZ

extreme

Transportation Stylish Look

3. Hero Honda CD

Dawn

Transportation Safety & economy

4. Hero Honda Glamour Transportation Glamorous look.

BRANDS CORE NEEDS AUXILARY NEEDS

6. HeroHonda

passion plus

Transportation Professional

7. Hero Honda

Pleasure

Transportation Light weight and

design

8. Hero Honda Hunk Transportation Stylish & new body

look

9. Hero Honda

Splendor

Transportation Mileage And good

performance

http://www.bajajauto.com/index.htm

Hero Honda introduced First stroke bike in the Indian market.

Hero Honda bikes gives good mileage. Huge sale network (3500 Dealers). Better sale service. It has the highest share in automobile sector. It has a good brand image. It gives better service for customers.

Suppose to be very sophisticated. They have big gap between cubic capacities

of its products. Spare parts are too costly.

They should go in new segments of bikes. There is large no. of young consumers in the

market. Company has to focus on them.They have big opportunities in heavy bike

segments.As government policies are amended against

pollution in metro cities, Hero Honda being 4 stroke bike manufactures has great opportunities to explore its new innovations and technologies.

Main threats to Hero Honda are their competitors likeBajaj Auto Ltd.TVS motors Ltd.Yamaha Motors India.

Honda motorcycle and scooter India.The cost of the product is very high in

comparison to other companies.Decreasing market share.

HERO HONDA CD-DELUXE

“Naye Indian ki Nayi Deluxe Bike” HERO HONDA SPLENDOR PLUS

“Designed To Excel” HERO HONDA SPLENDOR NXG

“Bharosa Bhi Style Bhi” HERO HONDA PASSION PLUS

“Whole New World Of Style”

HERO HONDA SUPER SPLENDOR

“Generation Nayi Bharosa Wohi” HERO HONDA GLAMOUR

“Simply Magnetic” HERO HONDA ACHIE V ER

“SOLID, Like You!” HERO HONDA CBZ XTREME

“Live Of The Edge!”

HERO HONDA HUNK

“NO One Messes With It” HERO HONDA KARIZMA

“Jet Set Go. . .” HERO HONDA PLEASURE

“Karlo rock ‘n’ roll on the run

Why should boys have all the fun?” HERO HONDA CD-DAWN

“Public Ka Apna Transport”

A CASE IN POINT

No More

It’s

vs

Who is Honda?Honda Motor Company, Ltd is a Japanese public multinational corporation primarily known as a manufacturer of automobiles and motorcycles.

The Honda PortfolioSubsidiaries:•Many subsidiaries are companies that manufacture specific components (i.e. Honda Lock Manufacturing).•These companies manufacture transmission parts, motorcycle exhaust components, electronic safety systems, solar cells, brake discs, etc.

Affiliates:•Multiple companies’ supply components go into Honda products (i.e. Keihin Corporation, Masuda Manufacturing).•These companies make automobile body parts, fuel systems, air conditioning systems, injection-molded plastic parts, etc.•Most affiliates and subsidiaries are Japanese (single diamond).•For example, Honda is starting to install Krell stereo systems on Acura vehicles.

Honda and the Four DistancesCultural

•Honda hired American workers for their passion, not for their knowledge of motorcycle manufacturing.•Honda sent American workers to Japan to learn about Honda’s manufacturing processes, and sent some Japanese workers to the US to instill Honda’s philosophy into the plant.

Administrative•US government passed the Clean Air Act imposing stricter requirements on tailpipe emissions.•Honda feared that if demand rose for their fuel efficient cars, the US would impose export restrictions.

Honda and the Four DistancesGeographic

•Honda had to search for a long time before finding the proper place to being manufacturing – Marysville, Ohio.•Only a few suppliers agreed to follow Honda and build their own plants in the US.

Economic•The rising price of the yen against the dollar in the 1970s made continued exporting problematic.•The Oil Crisis of 1973 caused the price of Honda’s exports to increase while causing consumer demand for more fuel-efficient cars to increase as well.

Honda’s approach to bridging the Four Distances in the 1970s classifies it as an International Projector.

Honda’s Performance as a MNE

Degree of MultinationalityLicensing – Honda licenses its technology to other companies in different countries (i.e. India) and engages in international joint ventures.Export – Honda is a net exporter, exporting more American–built vehicles than it imports from Japan. Honda exports 11 models accounting for over 100,000 units shipped to more than 40 countries.Local Packaging / Assembly – Honda has 57 factories worldwide, 49 outside of Japan and 12 plants in North America .FDI – Honda establishes relationships with suppliers in host countries.

Firm Specific Advantages

Tangible Resources•57 factories in all regions•8 R&D facilities worldwide•Many additional facilities

Human Resources•Honda’s management style•Honda selected employees based on the passion for their work rather than their experience •Japanese/American employees visited one another’s countries

Firm Specific Advantages (cont’d)

Intangible Resources•Manufacturing process•Brand reputation: practical, reliable, high-quality products•Immense experience with internal combustion engines•Partnerships with many affiliates who manufacture parts for motorcycles, cars, and other products•More than 17,600 patents in Japan and 25,300 patents abroad as well as 29,400 patents pending worldwide.•Supply chain management •Green initiatives such as reducing PVC use and fuel efficient car and motorcycle engines

Firm Specific Advantages (cont’d)

Subsidiary Specific Advantages•Subsidiary HAM in case study had connections to Ford that Honda was able to leverage•Over 25,000 patents in foreign markets•Decentralized manufacturing allowed Honda to overcome the Earthquake and Tsunami in 2011 that disrupted Japanese manufacturing

Country Specific Advantages

• The 1970 Clean Air Act passed by US Congress opened up an opportunity for Honda to bring fuel efficient cars into America.

• European Union fuel costs are high and environmental restrictions are very severe on products with internal combustion engines.

The mix of strong CSAs and strong FSAs places Honda in the 3rd Quadrant of the FSA-CSA Matrix

Competitive AdvantageSingle Diamond

Foreign Direct Investment

Efficiency-seeking:Honda has mainly taken advantage of low-wage countries like Indonesia, Vietnam, Thailand and India

Market-seeking: Honda Motor of Japan is going to expand its operations into India

Strategic Asset -seeking: 8 R&D facilities worldwide

Sochiro Honda‘Mr Honda’

‘Mr Honda was especially confidentof the [larger] machines … Super Cubs wholly unsuitable for the US market’

What really happened…?

Source: Pascale, R. T. (1984:) ‘Perspectives on Strategy: The Real Story behind Honda’s success’, California Management Review, 26(3), 47-72

1958 Honda Super Cub 1958 Harley FL DuoGlide

1958: The Super Cub – A (Four) Stroke of Genius?

Image sources: Honda Worldwide, vintagebike.co.uk

‘A deliberate attempt to dissociate motorcycles from rowdy, Hell’s Angels type people’

Image source: 4strokes.com. Quote source: Purkayastha, D. (1981) ‘Note on the Motorcycle Industry – 1975’, #9-578-210, Harvard Business School, Cambridge MA, cited in Source: Pascale, R. T. (1984: 50) ‘Perspectives on Strategy: The Real Story behind Honda’s success’, California Management Review, 26(3), 47-72

What really happened…?

Kihachiro KawashimaFounder of American Honda Motor Co., Inc.

‘In truth, we had no strategy other than seeing if we could sell something in the United States’

Source: Pascale, R. T. (1984: 54) ‘Perspectives on Strategy: The Real Story behind Honda’s success’, California Management Review, 26(3), 47-72

HONDA & THE US MOTORCYCLE MARKET (A & B)

Pascale suggests the Honda Executives in the US show

• a sensitivity to context• improvisation and adaptability within a culture

that allows and supports this style• a different concept of strategy, more of overall

mission than guidelines & plans • And ‘miscalculation’, ‘serendipity’.• Did H redefine the US market? ‘ They backed into it …. and reluctantly.’

The Market before JV

Hero Honda Joint Venture

•The license raj that existed prior to economic liberalization (1940s-1980s) in India did not allow foreign companies to enter the market.

•In the mid-’80s when the Indian government started permitting foreign companies to enter the Indian market through minority joint ventures.

•The entry of these new foreign companies transformed the very essence of competition from the supply side to the demand side.

•The license raj that existed prior to economic liberalization (1940s-1980s) in India did not allow foreign companies to enter the market.

•In the mid-’80s when the Indian government started permitting foreign companies to enter the Indian market through minority joint ventures.

•The entry of these new foreign companies transformed the very essence of competition from the supply side to the demand side.

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The Deal Is Done.(June 1984)

• Honda agreed to provide tech. know-how to HHM and setting up manufacturing facilities. This included the future R & D efforts.

• Honda agreed for a lump sum fee of $500,000 & 4% royalty on SP.

• Both Partners held 26% of the equity with other 26% sold to the public and the rest held to financial institutions.

• Honda agreed to provide tech. know-how to HHM and setting up manufacturing facilities. This included the future R & D efforts.

• Honda agreed for a lump sum fee of $500,000 & 4% royalty on SP.

• Both Partners held 26% of the equity with other 26% sold to the public and the rest held to financial institutions.

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Success Story

•HHM had grown consistently, earning the title of the world’s largest motorcycle manufacturer

•World’s largest two-wheeler manufacturer with annual sales volume of over 2 million motorcycles.

•Owns world’s biggest selling motorcycle brand – Hero Honda Splendor.

•Over 9 million motorcycles on Indian roads.

•Deep market penetration with 5000 outlets.

•HHM had grown consistently, earning the title of the world’s largest motorcycle manufacturer

•World’s largest two-wheeler manufacturer with annual sales volume of over 2 million motorcycles.

•Owns world’s biggest selling motorcycle brand – Hero Honda Splendor.

•Over 9 million motorcycles on Indian roads.

•Deep market penetration with 5000 outlets.39

IS “HERO HONDA” A SUCCESS?

Achievement - World’s largest two wheeler manufacturer - 50% Market Share in India

Competition - Successfully ends the “Bajaj” raj Image - Perceived as the company that put

Indian middle class on wheels – Dhak Dhak Go Investors - $ 3.6 Billion Revenue – 4700

Employees. FY09 – FY10: Operating Profit increases by 28% and Net Profit by 74%

Financiers - LAAA Rating

THEN IS IT A BITTER DIVORCE?

Honda selling its stake at 50% of market valuation

Increase in Hero’s royalties to Honda – 3% to 6%

Shares sank 9% on the day of announcement of termination

REASONS FOR JV CREATION IN INDIA

For foreign partner Government restrictions Indian market unlike other monolithic markets Access to local distribution channels

For local partner Access to new technology and processes Opportunity for larger chunk of revenue Pre-empt creation of JV with a rival Proving ground for exporting to external markets

WHY DO INDIAN JVS FAIL? Imbalance in elements of exchange

Foreign partners bring in intellectual capability which is difficult to learn quickly Indian partners hand over information of local market, making it comparatively

easier to learn.

Foreign partners come in with an intent to learn and incorporate this in their process.

Indian partners are very lax when it comes to learning. When they do realize, it’s very late.

Foreign partners, mainly MNCs, compartmentalize certain knowledge in certain regions – R&D in US, manufacturing in Taiwan, etc.

Indian partners do not have this advantage.

Big Brother’s hand Foreign partners initiate the JV due to government restrictions, not due to

partner’s capability Indian partners take advantage of this, and try to add more restrictions to

prevent the foreign partner from creating other alliances instead of learning successfully.

JV FORMATION & TERMINATION

Spider Web of cooperative agreements

No inter firm agreements

Joint Ventures (Hero Honda, TVS Suzuki)

Cooperative Agreements (Kawasaki Bajaj)

High Strategic Importance Low Strategic Importance

Volatile Competitive Environment

Stable Competitive Environment

1980s

Post Liberalizati

on

PORTERS FIVE FORCES ANALYSIS Threat of New Competitors – LOW- Competition is tough Rivalry among the existing firms – HIGH- Main rivalry from Bajaj, TVS, Yamaha and HMSI Threat of substitutes – HIGH- New e-bikes- Nano car- Used cars market Supplier’s Bargaining Power- HIGH- Honda is the main supplier. Now they are one of the

main competitors Bargaining power of customers – HIGH- Lot of options available

SWOT HERO

- Established distribution network-Higher installed capacity- Market leader

- Growing Indian two wheeler market (both motor cycles and scooters)- Exports opportunities

Strengths Weaknesses

Opportunities Threats

-Relied for too long on Honda’s R&D- Weak exports

- New emission norms - Intensive competition - Increasing input costs

HOW IS HONDA POISED

- Strong Brand Name- R&D

- Unmet scooter demand - Growing motor cycle market

Strengths Weaknesses

Opportunities Threats

-Dealer network not a match to other competitors- Lower installed capacity

- Intensive competition - Increasing input costs

DISCOVERING – TOGETHER OR INDIVIDUALLY?

Diversify

Discover

Build new competencies through JV ( Motorcycle manufacturing)

Defend Develop

Competencies

New

Existing

Hero Group 1984

Market Opportunities

Existing New

DISCOVERING – TOGETHER OR INDIVIDUALLY?

Diversify

Discover

Build new competencies alone ( R&D, Exports)

Defend Develop

Competencies

New

Existing

Hero Group 2011

Market Opportunities

Existing New

DIVERSIFYING – TOGETHER OR INDIVIDUALLY?

Diversify

Explore new market opportunities jointly

Discover

Defend Develop

Competencies

New

Existing

Honda 1984

Market Opportunities

Existing New

DIVERSIFYING – TOGETHER OR INDIVIDUALLY?

Diversify

Explore new market opportunities alone

Discover

Defend Develop

Competencies

New

Existing

Honda 2011

Market Opportunities

Existing New

THANK YOU

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