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Honda OR HERO

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Sochiro Honda = ‘Mr Honda’

JV FORMATION & TERMINATION

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Honda OR HERO

  1. 1. HondaHum Mein Hai HERO
  2. 2. Submitted by Ajal.A.J Priya Varma Tony Lloyd Mathachan. P. J George Augustine. K Abi Mani
  3. 3. JV INSTANCES IN INDIA
  4. 4. 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
  5. 5. • 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
  6. 6. Vision of the Hero Honda is “to offer the highest quality at a reasonable price to meet the customers’ expectations and to exceed them”. MISSION Hero 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.
  7. 7. 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.
  8. 8. 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.
  9. 9. 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
  10. 10.  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.
  11. 11.  Suppose to be very sophisticated.  They have big gap between cubic capacities of its products.  Spare parts are too costly.
  12. 12. 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.
  13. 13. Main threats to Hero Honda are their competitors like Bajaj 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.
  14. 14.  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”
  15. 15.  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!”
  16. 16.  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”
  17. 17. A CASE IN POINT No More It’s vs
  18. 18. Who is Honda? Honda Motor Company, Ltd is a Japanese public multinational corporation primarily known as a manufacturer of automobiles and motorcycles.
  19. 19. The Honda Portfolio Subsidiaries: •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.
  20. 20. Honda and the Four Distances Cultural •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.
  21. 21. Honda and the Four Distances Geographic •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.
  22. 22. Honda’s Performance as a MNE
  23. 23. Degree of Multinationality Licensing – 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.
  24. 24. 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
  25. 25. 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
  26. 26. 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
  27. 27. 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
  28. 28. Competitive Advantage Single Diamond
  29. 29. 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
  30. 30. Sochiro Honda ‘Mr Honda’ ‘Mr Honda was especially confident of 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
  31. 31. 1958 Honda Super Cub 1958 Harley FL DuoGlide 1958: The Super Cub – A (Four) Stroke of Genius? Image sources: Honda Worldwide, vintagebike.co.uk
  32. 32. ‘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
  33. 33. What really happened…? Kihachiro Kawashima Founder 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
  34. 34. 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.’
  35. 35. 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. 37
  36. 36. 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. 38
  37. 37. 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
  38. 38. 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
  39. 39. 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
  40. 40. 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
  41. 41. 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.
  42. 42. 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
  43. 43. 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
  44. 44. 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
  45. 45. 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
  46. 46. 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
  47. 47. 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
  48. 48. DIVERSIFYING – TOGETHER OR INDIVIDUALLY? Diversify Explore new market opportunities jointly Discover Defend Develop Competencies New Existing Honda 1984 Market Opportunities Existing New
  49. 49. DIVERSIFYING – TOGETHER OR INDIVIDUALLY? Diversify Explore new market opportunities alone Discover Defend Develop Competencies New Existing Honda 2011 Market Opportunities Existing New
  50. 50. THANK YOU 58

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