REPORT ON HERO HONDA LIMITEDSubmitted To, Dr. V S Pai Submitted By, ChinkyChhiroliya (15) Mohammad. Safique (45) Priyojeet Kumar (61) ShashiShekhar Sharma (79) Large Distribution Network :The Hero group had a large dealer network of about 3500 dealers that would make Honda’s task of selling the product way easier and would save them the cost of setting up a new network altogether. first let’s examine the prevalent situation in the two wheeler segment and economy as a whole that led the two companies of taking such an action. Obsolete Technology: The technology was virtually obsolete according to the international standards and moreover the bikes were not fuel efficient. . Leader in emerging market: Honda group’s strategic decision was to enter into emerging markets of the world with high potential and here was a company in form of Hero which was the market leader in its own segment (In 1984 it clocked 2. Examine the reasons why the two companies entered into a joint venture.1. This attracted other players in the market as there was huge demand and less supply.03 million units in bicycle). In your analysis which of the two is learning faster and gaining more from the partnership? Justify. as a result the waiting time for the delivery of vehicles were huge (up to 12 years in case of Bajaj Scooters). The relevance of the Hero brand: The hero group had a fairly strong brand name in the Indian market as it was in the industry since 1940s and moreover the Hero bicycles were well known for their quality. To understand why the companies entered into a joint venture. Joining hands with such a partner with be a boon for Honda. Limited product range: As a result of few players and funds issues the companies never bothered about increasing their product range (As it is they were finding it difficult to supply the amount of vehicles demanded). Limited Capacity: As India was an emerging market in the 80’s the prevalent companies at that time did not have sufficient funds to increase their capacity because of which the demand was not being met. Reasons for selecting Hero as a partner (from Honda’s view point): Engineering Capability: The hero group was world’s largest bicycle manufacturer and in that way had the experience of handling mass production and engineering related matters. Very few players in the market: There were very few players in the Indian two wheeler market and the demand was huge. World’s largest manufacturer of Motorcycles.HMI was like an automotive part trading company. world’s largest manufacturers of Bicycles and Honda Motors. The legend on one of the HHM’S many advertisement for its 100 cc bike read – “It is the Honda in it that makes it a Hero” . The JV helped the company to establish its brand in India. Take advantage of the government policy: When the government relaxed the FDI norms and foreign companies came to India for prospecting partner Hero group found it an excellent opportunity to tie up with such a massive player. Technology: The Honda group was well known for its superior technology and had won many awards for quality and customer satisfaction. Knowledge about the market: The Honda group got to know about the business environment. It was also the world’s largest motorcycle manufacturer. Best in class management practice: Honda was also famous for best in class management practice which would result in greater operational efficiencies. Brand Awareness: The Honda was a well-known brand in the world. regulatory framework. but Indian consumers did not experience it until the joint venture. cultural nuances and labour management skills which helped it in entering in newer segments.” We feel that Honda has learned much faster and gained more from the partnership because of the following reasons: Entered New market Segment: The Honda group learnt about the local market very fast and entered into various other segments like – Car manufacturing (Honda Seil Cars India) Motorcycle and Scooter (Honda Motorcycle and scooters India) Gensets (Honda Seil Power Equipments) Ancillary Auto parts:To cobble together the domestic spare parts business of its various companies it came up with a new entity HMI which would handle spare parts.Reasons for selecting Honda as a partner (from Hero’s point of view): Global Brand: Honda was a global name and a well renowned brand. It wouldn’t be wrong to say that it was pair made in heaven “Hero Group. Technology: The Company made best use of the technology to grab the market share. it forayed into the scooter segment. The company however could foresee the need of fuel efficiency and good technology would be driving the market in the future and as a result CD 100 (a mobike) was launched. Just in time Inventory: The Company followed just in time approach to keep its costs low and moreover this was made easier to achieve as the vendors were located near the plant. Later when it realized that change in positioning to a young. its advertising message was – “fill it. Branding strategy: The Company very correctly did the brand positioning. the communication was – “you’ve got a good thing going”. Distribution Network: The Company was focused on developing strong network of over 3500 customer touch points . forget it”. When it first came into being.2. The company took care to foster close bonds with dealers as they were the ones who would be responsible to push company’s products. shut it. It came up with 4 stroke engines in the bikes which were more fuel efficient and thus light on the customer’spocket (The only other motorcycle at that time with 4 stroke engine was Royal Enfield. service centres and stockists located across the country including rural sector. the company launched a programme called “passport”. which ruled the market for the company in the later years.72 percent of the vendors and suppliers were connected online which resulted in better supply chain management. in fact were paid instantly after the delivery of goods.comprising of dealers. The vendors and the suppliers were also paid on time. Vendor Management: Use of technology was there in the vendor management system of the company as well. nearly 80 percent of the two wheeler market was dominated by the geared scooters. Right understanding of the market: When HHM entered the market. vibrant and exciting was required. Describe the business strategy of Hero Honda Motors that enabled them to become the market leader in the motorcycle segment. . but it was in the higher segment). The passport generated a membership of close to two million and was supposedly one of the largest CRM initiatives in India. Customer Relationship Management: On the CRM front. which was a huge success. which was one of the major factors in the HHM success. The company when observed that the scooters market was booming in 2006. Market Intelligence: The Hero group came into the market in 1940s and was in bicycle market since 1956. customer tastes and preferences which was of great help to Hero Honda Motor group. Honda’s contribution: Technology:The Hero group wanted to make the best use of the government policies and was looking for a partner with requisite technology. Globalization: Honda had the idea of “manufacturing the products where they are sold”. The Honda Motors got the technology to produce fuel efficient bikes (4 stroke) in India which nobody else was having at that point in India. The company because of right forecast was able to even outperform its rivals during the recessionary period. Honda knew it would take time and investment to build the distribution network to reach and service the entire country). This practice saved a lot of cost to the company as importing bikes or components would increase the cost. was the redesigned model of the Honda Cub. Research and Development: The complete Research and Development was handled by the Honda Motors as it was more technically advanced and was also well known for innovation in the world. Designs: The first bike that was launched by Hero Honda Motors was CD SS. the resulting synergies help the companies to achieve their motive. (Besides there were restrictions on 100 per cent FDI in the country. . A separate sales division was set up with a mandate to reach “every village. both the companies are equally responsible for the success of the joint venture. every house” 3. Who is in your group opinion is responsible for success: Is it Munjals or is it Honda Motors? In our group’s opinion. Attention to Rural Sector: The Company assessed that the rural sector was less susceptible to global economic pressures and recessionary conditions and there was huge market potential to tap. The foundation of a joint venture itself is based on the fact that two companies come together with individual set of capabilities and when they work together. this helped them to better understand the market trends. Hero’s contribution: Distribution Network: Hero Group required the vast dealer network to the Honda which helped them in penetrating the market. This helped them in tapping the rural market for motorcycles from where company generated lot of revenues.” ********* . on the back of a formidable sales and distribution network. Rural Reach: The Hero group had a strong rural reach because of its bicycle operations. But every network needs a product to sell. Honda was the master of the product. “Hero's dominance in the pedal pushers gave it a deep understanding of the market. CBZ.51% 8.72% Taiwan 590 Two Wheeler per Thousand Thailand Malaysia China 285 258 52 India 37 In Dec 2009 HMSI became the Second Largest Two Wheeler Maker Rank Company Sales First Hero Honda -Second HMSI 87164 Third Bajaj Auto 69419 Hero Honda's Three segment in Motorcycle on the basis on price Market Segment Brands Share(%) Entry (Below INR 40000) CD Dawn.77% HMSI 63% Others 7. Premium (Above INR 55000) Karizma 50 Leader Bajaj Hero Honda Bajaj ********* .20% Total Motorcycle Produced in the year 2009-10 10 million 92% of two wheeler market Scooter Segment TVS Motors Hero Honda 20.80% 75% 1. Achiever. CD Deluxe 27 Executive (Between INR 40000 and Glamour.Annexure -1: Worldwide Market Share in Two Wheeler Segment India China Others 23. 50000) Passion 65 Hunk. Splendour.