Presentation on

Joint Venture

MARKET BEFORE
LIBERALIZATION
License Raj

Restricted foreign investment

In 1980s, government permitted joint venture
with minority foreign holding in Indian companies
Supply side economics to demand side economics

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

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

WHY HERO FOR JOINT VENTURE

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

DEAL IS DONE!

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

SUCCESS STORY

Hero Honda Motors had grown consistently, earning the title of

the worlds largest motorcycle manufacturer with annual sales
volume of over 2 million

Every 30 seconds, someone in India buys Hero Honda's topselling 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

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 PEOPLES PERCEPTION
DECREASE IN PRICE DIFFERENCE WITH SCOOTERS.

STRATEGIES OF HERO
HONDA

Technological Leadership

Extending brand equity to new categories

Stronger product portfolio

Capacity expansion

Ancillarization

Expanding Dealer Network

Market STP

Innovative Advertising

Consumer Initiatives

Rural Market Penetration

Employee Management

CONCERNS AND ISSUES

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

THE SPLIT
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 june14

HONDA
- Entered into a share
transfer agreement
- Entire share holding of
26% transferred to
Hero, bringing an end
to the joint venture

VERY REASONS FOR SPLIT

Higher Royalty Payments

Honda's reluctance to fully and freely

share technology
Refusal ofHero Hondato merge the
company's spare parts business with
HMSI
Partners turning into Competitors

AFTER SPLIT

Heros 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