JOINT VENTURE CASE STUDY

Presented by:

Devendra Rai
Gokul Raj Mahima Bhatnagar

HISTORY
HERO GROUP:
Started by Brijmohan Lal Munjal as Hero Cycles Limited Established itself as one of the major manufacturers of bicycles in India Manufactured close to 16,000 bicycles a day

excellent network of dealers and distributors to serve Indias expansive

markets

HISTORY
HONDA MOTORS:
Japanese public multinational corporation Founded by Soichiro Honda and Takeo Fujisawa World's largest motorcycle manufacturer since 1959 World's largest manufacturer of internal combustion engines

HERO HONDA- A JOINT VENTURE

Hero Honda Motors Limited started in 1984 Munjal family and Honda group both own 26% stake in the Company 1980s- company introduced new generation motorcycles, benchmarked for fuel thrift and low emission 2001- emerges as the market leader in motorcycles with sales of over a million motorcycles and a strong market share of 47%

TECHNICAL KNOW-HOW OF THE VENTURE HM Japan setting up manufacturing facilities and future research and
developments assistance Hero Group signed the technical agreement in June 1984 Renewed in 1994 and again in 2004 HM Japan would receive a lump sum fee of USD 500,000 and 4% royalty on spare parts

The agreement prevented Hero Group from collaboration with any other foreign
player or allowing the Company to export its products The target for the Company was only limited to the Indian market.

WHY DID HM JAPAN SELECT HERO GROUP FOR THE VENTURE?

Hero was a well-known and respected brand name An association with Hero would make their entry into Indian market a lot easier Hero Cycle Limiteds engineering capabilities, their know-how, experience in handling large volume production and their extensive distribution networks were also attractive factors in their favor

Their tight focus on financials and raw material processes also made them
a suitable partner for HM Japan

HOW SUCCESFUL WAS THE VENTURE

The company has grown consistently, earning the title of the worlds largest motorcycle manufacturer Have an annual sales volume of over 2 million motorcycles Owns Hero Honda Splendor which is the worlds biggest motorcycle brand 5,000 outlets across the Nation Had 5 million customers and 40 per cent average annual growth in sales between 1996 and 2000 The company had total unit sales of 5.4 MILLION UNITS IN 2011

Number of units

Rs. in crores

Rs.

Rs.

Statistics for the year 2011

REASONS FOR SUCCESS

Sound and proven technical capabilities of HM Japan and the reliability of Hero
Group made an effective combination HM Japans technical expertise provided better fuel efficient motorcycles and was easily sold through Hero Groups deep distribution network No major competitors in the initial years helped the Company make the best of the growing market demand for motorcycles With the decrease in price difference in comparison with scooters, that were the more popular choice earlier, the Company was able to successfully stabilize in

the Indian market

THE FALL OF THE VENTURE

On December 16, 2010, the parties made public, the fact of selling of HM Japans holding of 26% in the Company to Hero Group Termination meant that Hero Group can now export Hero is paying Honda Rs. 2,479 crore as license and exports fees, i.e., 14 % of Hero's 2010/11 revenues

REASONS FOR FAILURE

Supply of components Reluctance to share key technology Brand confusion Distrust between the two companies Bar on exports hurt the long term growth of the Company The split was inevitable

POST SPLIT EFFECTS

HERO GROUP
Biggest challenge that the Hero Group faced was of identity Tied up with world leader Erik Buell to modify existing engines and develop new platforms Vision FY 16- To become 10 million volume company, of which 10 % should come from exports. Today, exports is negligible

Statistics for the year

CONSEQUENCES OF THE SPLIT

HONDA