Hero Honda Demerger

1. By
1. Aditya
2. Debangshu
3. Kiran Kumar
4. Manikandan
5. Sandra

2. MARKET BEFORE LIBERALIZATION
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

3. HERO BEFORE JOINT VENTURE
 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

4. HONDA STRATEGIES
 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

5. WHY HERO FOR JOINT VENTURE
Wide Distribution
Network Through
Dealers
Better Understanding
Of The Market
Dynamics
Limited Options With
Honda
Wide Experience In
Manufacturing Of
Vehicles
Commitment To
Quality
Focus On Financial
And Raw Material
Processes
Salience Of Hero
Brand
Cordial Industry
Relation
Engineering
Capabilities

7. STRENGTHS
1. Retained the position of World no
1 Two-Wheeler company.
2. High sales growth
3. Fuel economy
4. Quality policy
5. Service schedule
6. High financial performance
WEAKNESSES
1. High maintenance
2. Labor reactions
3. Lack of recycling scrap
OPPORTUNITIES
1. High GDP and increasing income
level of consumer
2. Good will of company
THREATS
1. Finance assistance
2. Technical renovation aspect
SWOT ANALYSIS OF HERO HONDA

8. SUCCESS STORY OF HERO HONDA
 Hero Honda Motors had grown consistently, earning the title of the world’s
largest motorcycle manufacturer with annual sales volume of over 7
million
 Targeted the rural markets
 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

9. REASONS FOR SUCCESS
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.

10. THE PARTING OF HERO AND HONDA

12. REASONS OF PARTING OF HERO HONDA
DEMERGER
Conflict of
Interest
(Exports)
Launch of
HMSI’s 110 cc
Motorcycle
Hero Honda
wanted its
independent
R&D and
manufacture its
own products
Honda’s
Indian
Subsidiary
HMSI
Honda
representative
On The Board

13. DECEMBER 16’ 2010, 1600 HOURS

16. VISION OF HERO MOTOCORP POST SPLIT
1. 10 Million volume company.
2. 10% volume from exports.
3. Cumulative sales of 100 million two-
wheelers by 2020.

17. VISION OF HONDA POST SPLIT
1. Honda aimed at becoming market leader in India by 2020 and
sells no less than 10 million two-wheelers in India alone.
2. With the impending Honda threat , Hero Moto corp. had begun
looking outward for growth even as things got hot under the
collars in its home market, India!

18. CHALLENGES FOR HERO MOTOCORP.
Transition of the brand.
Change of name of the bikes.
Launching products
Exports
Managing our costs.
Managing costs
Philosophical shift.

19. POSITIVE ANTICIPATIONS ( IMMEDIATELY
AFTER SPLIT )
POSITIVES
No royalty
after 2014
Continued
technical
support till
2014
3 Years to
develop
R&D
capabilities
Higher
exports

20. NEGATIVE ANTICIPATIONS ( IMMEDIATELY
AFTER SPLIT )
NEGATIVES
R&D spent
for Hero
Honda will
rise.
Reserving
good
models for
HMSI
Exports
may not rise
as fast as
expected
HMSI is
likely to
turn more
aggressive
in its plans