Demerger of HERO & Honda

Big Move Media Coverage

BS, Kolkata (15th Oct10)

Financial Express, New Delhi(24th Dec10)

29th April11 ( FT, New Delhi)

Hindu Business Line, New Delhi

(26th

Oct10)

ET, New Delhi (2th May11)

Hindustan Times, New Delhi(25th Oct10)

ET, New Delhi (27th Oct10)

Financial Express, New Delhi (24th Sep10)

Mint, New Delhi (13th May11)

Market Buzz

1766
1752

Project Theme

Challenge the Change

Index
History : Hero Group Indian Automobile Market at a Glance Indian Two-wheeler Industry Scenario Difference in approach (Hero Honda, Honda & Bajaj Brand Building)

Hero vs. Honda (Positioning & SWOT analysis)

Hero Approach for Future

History : Hero Group

Hero Group
Brijmohan Lall Munjal was born in 1923 at Kamalia, district Toba Tek Singh (now in Pakistan). He was from a simple middle-class Hindu family. After completing his formal education he worked at the Army Ordnance Factory, before moving his base to India after partition. In 1944, when Brijmohan was 20, his family sensed partition, So Brijmohan along with his elder brothers Dayanand Munjal, Satyanand Munjal and his younger brother Om Prakash Munjal came to India and settled in Amritsar. The brothers initially started a business by supplying components to manufacturers of bicycles in and around Amritsar. After the partition in 1947 the Munjal family completely shifted their base from Pakistan to Ludhiana. Brijmohan Lall Munjal In 1961, Rockman Cycles Industries was established to manufacture bicycle chains and hubs. Under his leadership Hero Cycles was the first company to export bicycles in large scale. In 1975 they had earned the distinction of Largest bicycle manufactures in India. By 1986 Hero Cycles Limited entered the Guinness Book of Records as the largest manufacturers of bicycles in the world The company is a joint venture between India's Hero Group and Honda Motor Company, Japan that began in 1984. In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India and the World No.1 two-wheeler company in terms of unit volume sales in a calendar year by a single company. Hero Honda has retained that coveted position till date. Hero Honda three manufacturing units in India, Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state of Uttrakhand HHML First Plant inauguration, (Gurgaon) HHMLs First Vehicle hit the road

Hero Group Companies

Hero Global Design Munjal Auto Component

Majestic Auto Ltd

Hero Cold rolling Division

Hero has excellent presence in two-wheeler, bicycle and auto component manufacturing

Indian Automobile Industry

Indian Automobile Market at a glance:

2nd most populated country 4th largest economy in the world 2nd largest two-wheeler market 4th largest commercial vehicle market 11th largest passenger car market & is expected to become 7th largest by 2016.

India emerged as Asias 4th largest exporter of automobiles, behind Japan, South Korea and Thailand.
By 2050, the country is expected to Top the world in car volumes with approximately 611 Mn. vehicles on the nations roads

Reasons for Growth :

Growing working population Fast paced urbanization Increasing city limits Lack of good public transport Increased access to credit & lower interest loans Middle class population is expending by 30Mn every year

Indian Two-wheeler Industry

Two wheeler market scenario

<Two- wheeler market volume trend>
Units in Lacs

<Segment wise contribution>

100%

90

81
80 70 60 50 40 30 20 10 0 '99 '00 '01 '02 '03 '04 '05 '06 '07 08
Year wise segment wise Industry data

80%

60%

34
40%

81%

20%

33%

0% '99 '00 '01 '02 '03 '04 '05 '06 '07 08

Year wise/segment wise Industry data (Mkt share)

MC

ATSC SC

MPD FSC

CUB MPD

The Indian two-wheeler market has grown from 3.4 Mn units in 1999 to 8.1 Mn. units in 2008 and crossed by 2010 crosses 10 Mn mark. The Motorcycle segment is the no.1 segment contributing to approx 80% of total sales.

Major Players in Indian 2 Wheeler Market:

Indian Two Wheeler Industry Scenario :

OTHERS

6%
ATSC

15%
GSC 1% >180MC 1%

09Indian 9

150-180MC

11%

2 wheeler 8,076 Industry

15%

100-110MC

51%

125-135MC

Entry level segment governs the industry with more than 50% contribution to the industry.

Manufacturer wise Positioning :

Volume

More than 1Lac units/month Less than 1Lac units/month

Network

Approx 70% market is captured by HHML & Bajaj (Indian Manufaturers)

Manufacturer wise Positioning : Volume

More than 1Lac units/month Less than 1Lac units/month

Network

Honda as a group has more than 60% market share.

Manufacturer wise Contribution :

1%

1%

2% 2%

Market Share (2008-09)

0% 0%

1%

HHML Bajaj TVS

1%
2% 2%

Market Share 0% (2009-10)

0%

HHML Bajaj TVS

14%

HMSI Yamaha 48%

13%

HMSI
Yamaha 48%

Suzuki Enfield Mahindra

Othere

15%

14%

Suzuki
Enfield Mahindra

17%

19%

Othere LML

LML

LY :
HHML leads the position with 48% Market share Followed by Bajaj with 17% & TVS by 15%

CY :
HHML is maintaining its position with 48% market share. Bajaj has improved its position from 17% to 19% There is a slight dip in TVS & HMSI

Difference in Approach

Types of Approach

Inactive
Reactive Active Proactive

Difference in Approach
HHML : Honda Motor Co. Ltd. Japan entered into Indian two-wheeler industry in the year of 1983 with a JV with Hero Group of India and formed a co. called Hero Honda Motors India Ltd. Since its establishment, the Company is the leader in the segment and currently holds market share of 48%. Kinetic : At the same time, to meet increasing customers demand, Honda Motor Co. Ltd. Japan also did a JV with Kinetic Engineering Ltd. of India to venture into indian scooter market in 1985 but the JV could not go for a long and in 1998 the JV between the two broke-down. HMSI : In 1999 Indian Gov. Signed Free Trade Policy which made easy to foreign players to venture in Indian market. HM Japan ventured again in India, the company decided to form its 100% subsidiary and formed a co. called Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) which started its business operations in India in 2001. Company started its business with an entry in scooter segment thereafter introduced motorcycle in 2004. Currently company has its presence in each segment with 9 domestic & 3 international products and enjoying a market share of 15%. Current Scenario : After completion of 10 years of HMSI in Indian two-wheeler market, Honda Motor Co. Ltd. Japan decided to brake the JV with Hero Group of India and decided to serve Indian market independently with HMSI.

Introduction of Kinetic Honda Introduction of HHML

Market Scenario in 1984

Bajaj, Enfield, Escorts were present in the market & Bajaj was the most preferred brand (Hamara Bajaj)

Hero Honda Positioning

Difference in Approach
HHML : Honda Motor Co. Ltd. Japan entered into Indian two-wheeler industry in the year of 1983 with a JV with Hero Group of India and formed a co. called Hero Honda Motors India Ltd. Since its establishment, the Company is the leader in the segment and currently holds market share of 48%. Kinetic : At the same time, to meet increasing customers demand, Honda Motor Co. Ltd. Japan also did a JV with Kinetic Engineering Ltd. of India to venture into indian scooter market in 1985 but the JV could not go for a long and in 1998 the JV between the two broke-down. HMSI : In 1999 Indian Gov. Signed Free Trade Policy which made easy to foreign players to venture in Indian market. HM Japan ventured again in India, the company decided to form its 100% subsidiary and formed a co. called Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) which started its business operations in India in 2001. Company started its business with an entry in scooter segment thereafter introduced motorcycle in 2004. Currently company has its presence in each segment with 9 domestic & 3 international products and enjoying a market share of 15%. Current Scenario : After completion of 10 years of HMSI in Indian two-wheeler market, Honda Motor Co. Ltd. Japan decided to brake the JV with Hero Group of India and decided to serve Indian market independently with HMSI.

Demerger of Kinetic Honda Introduction of Kinetic Honda

Introduction of HHML

Difference in Approach
HHML : Honda Motor Co. Ltd. Japan entered into Indian two-wheeler industry in the year of 1983 with a JV with Hero Group of India and formed a co. called Hero Honda Motors India Ltd. Since its establishment, the Company is the leader in the segment and currently holds market share of 48%. Kinetic : At the same time, to meet increasing customers demand, Honda Motor Co. Ltd. Japan also did a JV with Kinetic Engineering Ltd. of India to venture into indian scooter market in 1985 but the JV could not go for a long and in 1998 the JV between the two broke-down. HMSI : In 1999 Indian Gov. Signed Free Trade Policy which made easy to foreign players to venture in Indian market. HM Japan ventured again in India, the company decided to form its 100% subsidiary and formed a co. called Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) which started its business operations in India in 2001. Company started its business with an entry in scooter segment thereafter introduced motorcycle in 2004. Currently company has its presence in each segment with 9 domestic & 3 international products and enjoying a market share of 15%. Current Scenario : After completion of 10 years of HMSI in Indian two-wheeler market, Honda Motor Co. Ltd. Japan decided to brake the JV with Hero Group of India and decided to serve Indian market independently with HMSI.

Demerger of Kinetic Honda Introduction of Introduction Kinetic Honda of HHML

Introduction of HMSI

Hero Honda Positioning

Desh ki Dhadkan (introduction) 2001

Bajaj Positioning

2001 Old Bajaj changing to New Bajaj

(Focused youths & respect Indian Culture)

Difference in Approach
HHML : Honda Motor Co. Ltd. Japan entered into Indian two-wheeler industry in the year of 1983 with a JV with Hero Group of India and formed a co. called Hero Honda Motors India Ltd. Since its establishment, the Company is the leader in the segment and currently holds market share of 48%. Kinetic : At the same time, to meet increasing customers demand, Honda Motor Co. Ltd. Japan also did a JV with Kinetic Engineering Ltd. of India to venture into indian scooter market in 1985 but the JV could not go for a long and in 1998 the JV between the two broke-down. HMSI : In 1999 Indian Gov. Signed Free Trade Policy which made easy to foreign players to venture in Indian market. HM Japan ventured again in India, the company decided to form its 100% subsidiary and formed a co. called Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) which started its business operations in India in 2001. Company started its business with an entry in scooter segment thereafter introduced motorcycle in 2004. Currently company has its presence in each segment with 9 domestic & 3 international products and enjoying a market share of 15%. Current Scenario : After completion of 10 years of HMSI in Indian two-wheeler market, Honda Motor Co. Ltd. Japan decided to brake the JV with Hero Group of India and decided to serve Indian market independently with HMSI.

Honda has arrived Demerger of Kinetic Honda Introduction of Kinetic Honda Introduction of HHML Introduction of HMSI

Honda Positioning

2004 Honda has arrived Honda is adopting Indian Culture & respect their values
(Heena Ad)

Hero Honda Positioning

HHML started Celebrity endorsement & focused on Sports (Dhak Dhak Go)

Bajaj Positioning

2007

Bajaj started focusing on Young Bikers & Fun Biking Culture

(Hami se aage nikal rahe hai hum Hamara Bajaj)

Honda Positioning

Hero vs. Honda

HHML : Honda Motor Co. Ltd. Japan entered into Indian two-wheeler industry in the year of 1983 with a JV with Hero Group of India and formed a co. called Hero Honda Motors India Ltd. Since its establishment, the Company is the leader in the segment and currently holds market share of 48%. Kinetic : At the same time, to meet increasing customers demand, Honda Motor Co. Ltd. Japan also did a JV with Kinetic Engineering Ltd. of India to venture into indian scooter market in 1985 but the JV could not go for a long and in 1998 the JV between the two broke-down. HMSI : In 1999 Indian Gov. Signed Free Trade Policy which made easy to foreign players to venture in Indian market. HM Japan ventured again in India, the company decided to form its 100% subsidiary and formed a co. called Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) which started its business operations in India in 2001. Company started its business with an entry in scooter segment thereafter introduced motorcycle in 2004. Currently company has its presence in each segment with 9 domestic & 3 international products and enjoying a market share of 15%. Current Scenario : After completion of 10 years of HMSI in Indian two-wheeler market, Honda Motor Co. Ltd. Japan decided to brake the JV with Hero Group of India and decided to serve Indian market independently with HMSI.

Demerger of Kinetic Honda Introduction of Kinetic Honda Introduction of HHML

Introduction of HMSI

Honda has arrived

Honda - 10yrs Hero Honda 25yrs

Honda Long Term Planner

Hero Honda Fill it. Shut it. Forget it.

Hero vs. Honda

HHML : Honda Motor Co. Ltd. Japan entered into Indian two-wheeler industry in the year of 1983 with a JV with Hero Group of India and formed a co. called Hero Honda Motors India Ltd. Since its establishment, the Company is the leader in the segment and currently holds market share of 48%. Kinetic : At the same time, to meet increasing customers demand, Honda Motor Co. Ltd. Japan also did a JV with Kinetic Engineering Ltd. of India to venture into indian scooter market in 1985 but the JV could not go for a long and in 1998 the JV between the two broke-down. HMSI : In 1999 Indian Gov. Signed Free Trade Policy which made easy to foreign players to venture in Indian market. HM Japan ventured again in India, the company decided to form its 100% subsidiary and formed a co. called Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) which started its business operations in India in 2001. Company started its business with an entry in scooter segment thereafter introduced motorcycle in 2004. Currently company has its presence in each segment with 9 domestic & 3 international products and enjoying a market share of 15%. Current Scenario : After completion of 10 years of HMSI in Indian two-wheeler market, Honda Motor Co. Ltd. Japan decided to brake the JV with Hero Group of India and decided to serve Indian market independently with HMSI.

Demerger of Kinetic Honda Introduction of Kinetic Introduction Honda of HHML

Introduction of HMSI

Honda has arrived

Demerger of Hero Honda

Removal of Honda from Hero

Lesson from Indian Automobile JVs

Kawasaki Bajaj (1986 ~ 2000)
TVS Suzuki (1986 ~ 2000) Escort Yamaha (early 80s to late 90s) Kinetic Honda ( 1984 ~ 98) LML Piaggio (1984 ~ 99)
Introduction of Kinetic Introduction Honda of HHML Demerger of Kinetic Honda Honda has arrived Demerger of Hero Honda Removal of Honda from Hero

Introduction of HMSI

Know

Your Competition Your Market Your Customer

Have breakfast or be breakfast

Difference in Approach
HHML Approach Celebrity Sports Music & Reality Hrithik, Priyanaka Cricket, Shooting, Hockey, Tennis Sa Re Ga Ma Pa & Roadies Focus was on Indian Culture, Tradition & their Values

Key attribute : Marketing & Distribution

Honda Approach Key attribute : Quality & Technology

Bajaj approach Key attribute : Fun Biking & Youth Centric

Hero vs. Honda

Hero vs. Honda

Munjal Auto Component

(Hero Group)

Hero Global Design

Majestic Auto Ltd

Hero Cold rolling Division

Hero neither focused on BRAND nor diversified their business in other sectors.

Hero vs. Honda

(Hero Group)

Hero Cup 1993

Hero vs. Honda

(Honda Group)

Honda R&D (India) Pvt Ltd.

Honda Siel Power Products Ltd.

6 Group Companies in India Honda Motorcycle & Scooter India Pvt. Ltd.

Honda Siel Cars India

Hero Honda Motor Ltd

Honda Motor India

Honda has over 60% Market Share in Indian two-wheeler Market

Hero vs. Honda

2001 2002
Activa
JUL 01

2003

2004
OCT 05

2005
Color & Graphics

2006
SEP 07

2007
Color & Graphics

2008
MAR09

2009

2010

Color & Graphics

Color & Graphics

Color & Graphics

Dio
SEP 02

OCT 05 Color & Graphics

OCT 07

OCT 08 Color & Graphics

Eterno
MAY03

NOV 05

SEP 07 Color & Graphics Color & Graphics

Stopped
Color & Graphics

CB Unicorn

Unicorn
OCT 04

OCT05

MAR07

APR08 Color & Graphics CB Unicorn Dazzler

MMC/ Cast wheel Color & Graphics

Shine APR. 07
APR 06
Cast wheel,

Oct08 CB Shine

Aviator OCT09
JAN 08
May09

Every year Honda introduced a Product & silently strengthened its portfolio

CBF Stunner
JUNE08
PGM-FI

Fun Bike
FEB 09
CB1000R CBR1000RR

JAN10

CB Twister

Manufacturer wise Positioning :

International

Conservative

Modern

Indian
Hero Honda is yet to make its clear positioning

HERO HONDA ~ SWOT Analysis

Brand equity/reputation among customers Aggressive Marketing Strong Distribution Network Deep Penetration in India Market Strong Resale Value New Brand has to be established R&D setup Less International Market know how Too much dependence on few models Hero is very much dependent on Honda

Fast growing sector Exports market is yet to be properly exploited Cruiser bike segment is unexplored by HHML Most reliable bike manufacturer in India Strong brand follower

S W OT
Establish customer trust with new Hero Brand Need to have a bigger presence in the executive seg. Major bike makers in the world are lining up for India Low cash reserves Losing a foothold in the exports market Strong competition from Indian & International Brands

Hero Future Approach

Brand Building Market Entering

Companys Vision & Mission

Hero Honda
Vision : The Hero Honda story began with a simple vision the vision of a mobile and an empowered India, powered by Hero Honda. This vision was driven by Hero Hondas commitment to customer, quality and excellence, and while doing so, maintaining the highest standards of ethics and societal responsibilities. Hero Honda believes that the fastest way to turn that dream into a reality is by remaining focused on that vision. Strategy : Hero Hondas key strategy has been driven by innovation in every sphere of activity building a robust product portfolio across categories, exploring new markets, aggressively expanding the network and continuing to invest in brand building activities.

Honda
Philosophy : Honda operates on a principle, which is followed worldwide by all Honda companies. Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality, yet at a reasonable price for worldwide customer satisfaction. Honda's philosophy is based on the company's guiding principle and advocates 2 fundamental beliefs: 1. Respect for Individual Initiative, Equality & Trust 2. Three Joy Joy of Buying, Joy of Selling, Joy of Creating Principle : Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality yet at a reasonable price for worldwide customer satisfaction.

Brand Building
Introduction of new Brand Logo & CI Strengthen new Hero Brand Focus on R&D Deep penetration in Indian Market Make a Vision for International Markets Focus on 4As

Introduction of New Logo

Hero should create a new CI first and it should be introduced in phased manner

Strengthen New Hero Brand

2nd Hand 2-w
(April12) Co. Owned Outlets (March12) Auto Expo (Jan12)

Racing in India
(Oct11) New CI & Promotion

(July11)

Hero Future Approach

Brand Building Foreign Market Approach

Major International Marketing Decisions

Framework for International Marketing

Strategy Designing and managing markets
Implementing and Managing Marketing Strategy Marketing Situation Analysis Designing Marketing Strategy

Framework for Entering Foreign Market Firm Capability Size Experience in International Business
Industrial Factors Expansion of industry International characteristics Technological strengths Publicity advantages Geographic Factors Country risks Cultural differences Market efficiency Market knowledge Specific Relevant Factors Asset value Commitment risks Specific strategies Strategic Factors Strategic motives Allies in international business

Entry Method Exporting Licensing Franchising Contract Manufacturing Contractual Joint Venture Equity Joint Venture Wholly Owned

Strategies for entering foreign market(s) for business

Porters competitive strategy theory Low capital cost strategy Differentiation strategy Focus strategy

STP
Segmentation

Hero
Positioning Targeting

Porters 5- Forces
Substitutes

New Entrants

Hero

Customer

Supplier

PESTEL : Strategy
Political

Legal

Economical

Hero
Environmental Social

Technological

Suggestion

How to enter
Degree of involvement
High Involvement, High Cost Equity stake or acquisition Joint Venture Contract Manufacturing Licensing Exporting Low Involvement & Low Cost

Cost

India should be the first Priority

Vision for International Markets

Culturally Close

Organic
Easy to enter

Acquisition
Difficult to enter

Franchise

Joint Venture

Culturally Distant

Latin America, Africa, Middle East & South East Asia

Focus Required
4 As
Awareness

Acceptability

Customer

Availability

Affordability

Learning

If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trade marks, and I would far better than you.
John Stuart

Thank you