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Hero Honda Joint Venture Split

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Hero honda Demerger
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Hero Honda Joint Venture Split

  1. 1. License Raj Restricted foreign investment In 1980’s, government permitted joint venture with minority foreign holding in Indian companies Supply side economics to demand side economics
  2. 2.  Hero cycles manufactured 16000 cycles per day  Sold about 86 million bicycles till 2002  Nurtured an excellent network of dealers to serve to serve India's expansive market
  3. 3.  Honda motor company initially planned to enter two wheeler segment and electric generator segment  Honda first chose kinetic engineering ltd. and formed Kinetic Honda Motors Ltd. joint venture for scooter manufacturing  It chose Hero Group for motor cycle manufacturing as joint venture
  4. 4. Wide Distribution Better Understanding Network Through Of The Market Dealers Dynamics Wide Experience In Manufacturing Of Vehicles Commitment To Quality Limited Options With Honda Focus On Financial And Raw Material Processes Salience Of Hero Cordial Industry Engineering Brand Relation Capabilities
  5. 5.  Joint Venture came up in June 1984 -Hero Honda Motors Ltd.  Honda would provide technical know how and assist in setting manufacturing facilities  Honda agreed for $500000 as one time lump sum fees and 4% loyalty  Joint Venture had 26% equity each with 26% to the public and rest with the financial institutions
  6. 6.  Hero Honda Motors had grown consistently, earning the title of the world’s largest motorcycle manufacturer with annual sales volume of over 2 million  Every 30 seconds, someone in India buys Hero Honda's top-selling motorcycle – Hero Honda Splendor  Company lead in both domestic two wheeler industry with nearly 48 % and motorcycle segment, with the shares of 59%  Over 9 million motorcycles on Indian roads  Deep market penetration with 5000 outlets
  7. 7. DEEP PENETRATION NETWORK OF HERO LARGELY BENEFITED THE SALES ABSENCE OF MAJOR COMPETITORS IN INITIAL YEARS SOUND AND PROVEN TECHNICAL CAPABILITIES OF HONDA AND THE RELIABILITY OF HERO INCREASED MARKET FOR MOTORCYCLES BETTER FUEL EFFICIENCY CHANGE IN PEOPLE’S PERCEPTION DECREASE IN PRICE DIFFERENCE WITH SCOOTERS.
  8. 8.  Technological Leadership  Market STP  Extending brand equity to new categories  Innovative Advertising  Consumer Initiatives  Rural Market Penetration  Employee Management   Stronger product portfolio Capacity expansion  Ancillarization  Expanding Dealer Network
  9. 9.  Announcement regarding formation of Honda Motorcycle and Bicycle India (HMSI) in August, 1999  Hero Honda Motor Company stock plunged by 30 % on the day of announcement  Overlapping of products had already started  Example:-Honda Unicorn and Hero Honda CBZ Extreme in 150cc segment whereas Similar is the case with Honda Shine and Splendor plus  Entry of new entrants increasing competition
  10. 10. HERO HONDA 1984 - 2010 HERO MOTOCORP LTD Paid 2,479.33 crore for assembly, manufacture, selling, distribution and exports licenses, which have been amortized over a period of 42 months up to 30 june’14 HONDA - Entered into a share transfer agreement - Entire share holding of 26% transferred to Hero, bringing an end to the joint venture
  11. 11. Higher Royalty Payments Honda's reluctance to fully and freely share technology Refusal of Hero Honda to merge the company's spare parts business with HMSI Partners turning into Competitors
  12. 12.  Hero’s Rebranding Exercise – HERO MOTOCORP  New logo along with an advertising campaign  Launched new products and announced its intentions of exploring international markets  Remained successful in retaining its position as the top two-wheeler company in the Indian market  According to Pawan Munjal MD of Hero Motocorp, the Challenges included - First is to bring our own product - Second is to go out and set up our distribution globally - Third to replace the brand, which was already one of the most established brands in the country

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