Case Analysis: Hero Honda

Group: 7

AKSHITA PGP/22/118
HEENA PGP/22/133
NUTHAN PGP/22/136
KAUSTUBH PGP/22/137
NIKHIL GUPTA PGP/22/149
LATASRI FPM/12/26/S
SANDEEP YADAV FPM/12/27/S
1. Trace the evolution of the joint venture to identify the pros and cons of the relationship at
different times? What would you interpret as confidence-building measures and what would
you see as confidence destroying on behalf of either side? Putting yourself in the shoes of
each partner in turn, comment on why these measures seemed appropriate.

Joint Venture took place in June 1984 - Hero Honda Motors Ltd. Honda gave specialized skill and
helped with setting producing facilities. It agreed for $500000 as one-time lump sum fees and 4%
loyalty.
Hero Honda Motors had developed reliably, procuring the title of the world's biggest motorcycle
maker with yearly deals volume of more than 2 million. The company leads in both the 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.

Pros:
Honda brought in its technical experts to run the engineering and quality support functions. Hero
brought in local talents to manage all other services including marketing, finance, and HR.

HHM figured out how to hose a portion of the adverse effect of these years through clever
advertising and by utilizing its information of clients. It built an expansive network of dealers who
were extremely loyal to the company.

Cons:
Hero Motors more depended on Honda for all the product innovations inputs, so HHM lacked to
respond to emerging changes in the market.
Honda did not set up the R&D center in India. New product designs did not materialize as fast as
the market.
New product designs did not materialize as fast as the market demands dictate. It was tough to
support client intrigue when all HHM could do was to discharge more up to date models that were
just varieties of the CD-100 stage. It is costly for the company since it did not have any new
products when competitors were coming up with new products to ride the boom in demand from
1993 to 1996 when industry deals developed at a combined average rate of 31% every year.

Confidence building measures:

HHM retained the best advertising agencies to execute its campaigns. Its "fill it, shut it, overlook
it" campaign advancing the support free nature of its bikes was a noteworthy hit with the Indian
public. These campaigns additionally utilized the Honda name to greatest preferred standpoint.

Gaining by Honda's notoriety for the nature of its motors, HHM ran promotions that broadcasted,
"It is the Honda that makes it a Hero." These measures seemed appropriate because Hero gave
equal importance to the Honda when Honda is thinking a bit lost about the joint venture.

Confidence destroying:
Munjal family had set up a range of firms to supply components, not just to HHM, but also to other
buyers. These operations varied from the manufacture of shock absorbers and wheel rims to
aluminum castings and plastic products. Munjal family ran seven of its main supplier firms. HMC
had also helped establish some of these ventures, and HHM had a controlling shareholding in
Munjal Showa, for shock absorbers, and Sunbeam Castings and Munjal Castings, both of which
supplied castings.
The preferred provider network of suppliers filled with either Hero family companies or firms that
were run by promoters who closely aligned with Munjal family interests and this posed a potential
conflict of interest because Hero has not given much preference to Honda owners.

There was a lack of new product innovation and much uncertainty surrounding the negotiations at
that time. Even routine design changes took too long, and HMC’s R&D engineers did not appear
cooperative at all. The impending negotiations paralyzed HHM, and it had to sit on the sidelines
while its competitors roared past.

HMC started negotiations with new ventures with other Indian partners for manufacturing
automobiles and power equipment. By doing this Honda has shown a sign of disinterest.

Hero Motors entered into discussions with BMW of Germany to manufacture 650cc bikes.
Likewise, had been assessing alternative product lines and market approaches right from 1986. It
came into a collaboration agreement with Steyr Daimler Puch, an Austrian subsidiary of Daimler
A.G., to manufacture motorcycles in the 50cc-65cc range. This business organized under the Hero
Motors banner and mainly targeted to Indian and foreign markets.

2. What advice would you offer to Mr. Munjal? What alternatives would you identify for
him as he charts a future strategy for HHM? Do the same for the HMC designate.

Munjal now has to partially separate from the joint venture and try to concentrate on the niche
segment in the rural areas, as they already had an excellent loyal dealer who penetrated all the rural
areas.
Continuing with the same models which they have right now, they should venture into electric
bikes and maybe into electric three-wheelers with the help of Honda as they can give good
technological support.
Hero can
1. Setup its R&D
2. Can acquire technologies
3. Make stronger to their core competence of distribution network
4. Can go for related verticals diversification
5. Prompt their brand name and think for expansion

HMC can also try only one or two new variety of products to the niche segment where they can
leverage their high-end technology and try to cater to a target segment. And after that, they can try
to capture the market later. Honda should break JV and start operating independently as they are
having learning of Indian market and customer demands.