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INNOSON GROUP:
Against all Odds
Dr. Henrietta Onwuegbuzie, Francis Afam-Anadu and Ese Orighoyegha

Dr. Henrietta Onwuegbuzie and Francis Afam-Anadu prepared this case with the assistance of Ese Orighoyegha as
the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation.
Copyright © 2019, Lagos Business School. This publication was developed through field research. No part
of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without
the written permission of Lagos Business School.

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INNOSON: Against all odds

On the evening of March 20, 2018, Dr. Innocent Chukwuma, CEO of Innoson Group
hung his factory gear as he walked out of the vehicle manufacturing plant. He had just
concluded an elaborate quality control check. Innocent and his team of General
Managers had been supervising operations at the plant tirelessly for the past 3 weeks.
The memory of a near-miss accident at one of the company’s major vehicle assembly
plants was still very vivid. It would have swung the company into a major lawsuit, not
to mention loss of lives. The recent review of Innoson’s factory layout was less than
satisfactory and it was clear that they would have to go back to the drawing board. In
addition to this, the team contemplated how best to improve the quality of
components used for their vehicles. As an indigenous vehicle manufacturing
company, Innoson faced several operational challenges daily.
Innoson Group had disrupted the motorcycle industry as far back as the 80’s, gaining
significant market share upon their entry, amidst well known multinationals. It was
easy to attract buyers in Nigeria’s highly price-sensitive market through affordable
pricing. The thought of owning a brand-new motorcycle for the price of a used one or
even lower, was the game changer for Innoson. The CEO, Innocent had always been
resilient and strategic. He recalled how stiff the competition was when he just started.
The major motorcycle market players already had an established presence in the
country, a lion share of the market and a huge financial and asset base. It was more of
an oligopoly to say the least, but this did not deter him. The company’s strategy was to
crash pricing, and offer the customer more value for less money. An interesting
decision to import motorcycles in dissembled parts and have them reassembled in
Nigeria, slashed cost of importation drastically and took Innoson group from start-up
to market leader in less than 10 years. Hence, some top Executives at Innoson Group
felt very strongly about cost minimization.
It did not help that the Nigerian economy was experiencing a major economic
recession. The exchange rate had risen by more than 200% in the last two years and
this made it very difficult for businesses to thrive. The CEO mused as he walked with
his management team. He wondered if the drive to retain low prices had resulted in
compromised operational standards. With an upcoming Executive Board meeting in
view, Innocent knew it was time to make a decision. Immediate corrective actions
would need to be taken if this was the case.

Growing up
Innocent Chukwuma, like Henry Ford and Kiichiro Toyota, impacted his immediate
society and the world at large, in spite of not following the traditional trajectory of
obtaining well sort-after academic degree. Innocent was the youngest of six children.
He was born in 1961 to Mr. and Mrs. Chukwuma Mojekwu of Uru in Nnewi, in the

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eastern part of Nigeria. A region most famous for trade. In fact, people often teased
that there was nothing one could not buy in the east.
Having completed his secondary education in 1978, Innocent applied to the University
of Nigeria to study Engineering. While awaiting his high school and University
entrance exam results, he started working for his older brother. Gabriel, who was a
patent medicine dealer in Nnewi at the time. A few months later the University
entrance results were released. Unfortunately, Innocent’s grades were not good
enough to qualify him for his desired course of study, but this did not deter him.
Driven by his passion for trading and entrepreneurship, he left his brother’s business
to undergo apprenticeship under Chief Romanus Ezeonwuka, a successful
businessman, who traded motorcycle spare parts. It was common practice in
Innocent’s hometown for young boys to apprentice under a relative, right out of high
school, and he had seen many business men succeed through this route.

Early years
In 1979, after one year of apprenticeship, he returned to join his brother, Gabriel who
registered Gabros Nig. Ltd, a motorcycle spare parts business, for Innocent. This
business operated alongside his patent medicine store. The initial investment in the
motorcycle spare parts business was N3,000 only ($5,033)1. Innocent managed the new
business of trading motorcycle spare parts independently. Gabriel allowed him take
decisions on the daily operations without any interference.
At the end of business year in 1980, the two brothers decided to carry out a
performance review of the two businesses. They discovered that the spare parts
business had an annual turnover that was almost ten times that of the patent medicine
business. The most amazing part of this discovery was that the initial investment in
the patent medicine business was almost three times that of the spare parts business.
This was the moment that they decided that the motorcycle spare parts business was
“the way to go”. Armed with this business experience, Innocent started Innoson
company in 1981 focusing on what he knew best; trading in motorcycle spare parts.

Disrupting the motorcycle market

The birth of Innoson Nigeria Ltd was not an easy one. It was an unfavourable time
economically following the 1984 military coup in Nigeria. The value of the local
currency, the “Naira”, began to depreciate badly against the dollar. This made imports
more expensive. Nevertheless, Innocent was keen on exploring business opportunities
within the market. He noticed that the importation of fairly-used motorcycles was a
thriving business in the country. For him, the use of second-hand motorcycles was
very unsafe and derogatory to Nigerians. Nevertheless, many people opted for
second-hand motorcycles because it was the significantly cheaper option. Innocent
however figured that if he could bring new motorcycles into the country for the same
price or lower than that of the used ones, more people would buy new motorcycles,
and he would take a huge share of the motorcycle market.
His market research showed that there were only four major players in the motorcycle
business at the time – all importing well-known brands. Since his perceived
competitors in this new venture were multinational companies, they had huge
overhead costs. He therefore decided that since he wanted to adopt a low-cost strategy
to disrupt the market, he would have to maintain very low overhead costs. But how
could he achieve this feat given the import duties and levies he would have to contend

11979 $1 = N0.596 https://www.theinfofinder.com/naira-to-dollar-exchange-rate-history/; 2019

$1=N361.9 https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=NGN

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with? He later figured out that if he brought in the motorcycles disassembled and
coupled them locally, he would be able to bring in more units at a lower cost. He
narrates his reasoning:
“As time went on, most motorcycles that were brought in from Japan
became very expensive. I was looking for ways to bring down the
prices of motorcycles and their spare parts. So I went to China and
found out that it was cheaper for me... Based on my knowledge of
motorcycle spare parts, I asked them to unassemble them. That way, I
was able to pack over 200 units of motorcycles into the same 40 feet
container, where others packed 30-40 units. On arrival at my shop, I
would then couple them manually. Because of my experience in the
motorcycle spare part business, I found it very easy.”

In addition, his goods were imported as Completely Knocked Down components

(CKD), which made the import duties, taxes and port charges lower compared to the
duties payable for a completely assembled motorcycles. Further, Innoson’s
competitors paid about five times as much on transportation costs for the same
number of motorcycles. With these savings, Innoson was able to crash the price of new
motorcycles by 60%.
Within three months, Innoson’s first five-container shipment was sold out. Back-to-
back sales followed after with the next 10 containers sold within a month, and another
20 containers disposed of in a week. The climax was when Innoson started bringing in
200 containers monthly, and if you did not perfect an advanced payment plan before
the arrival of these containers, chances were that you would have to wait until the next
month.

Navigating stormy waters

Although the business had enjoyed much success during its early years, each
successive government brought with it further depreciation of the local currency, as
well as economic policies that made the business difficult. In 2002, the State
governments in Nigeria banned commercial motorcycles, because they had become a
harzard due to their wreckless driving. Given the traffic situation, the use of
motorcycles as taxi’s had become prevalent. They were popularly called “Okada”, and
had gradually become a means of transportation for the masses and for those in a
hurry, as they could easily weave through traffic to get you to your destination if you
were running late. Once in a while, one could spot an executive who had abandoned
his air-conditioned, chauffeur-driven car in traffic, to jump on a motorcycle-taxi,
because he was either running late for a meeting or trying to catch a flight. Further, in
parts of the city suburbs, where the roads were very bad and practically unmotorable,
these motor-cycle taxi’s were a life-saver, as they could bring the residents from such
locations to more motorable major roads.

Nevertheless, in spite of these benefits, the riders were frequently poorly trained and
often drove wrecklessly. Between their careless driving, which resulted in a high
number of accidents, and the fact that they were often involved in crimes, the
government decided that their disadvantages outweighed their advantages, and
promulgated a policy that banned their use as means of transportation. Another
challenge was that the motorcycle market had become highly saturated by companies
owned by Indians, Chinese and other Nigerians. With these realities, the future of
Innoson’s motorcycle business looked bleak. That was when Innocent decided it was
time to pivot to vehicle manufacturing, though he had by this time, fortunately

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diversified into a plastics manufacturing company – Innoson Plastics Factory, in a bid

to optimise the use of the large expanse of land, from which he operated.

Vehicle manufacturing was indeed a new terrain, as Innocent had no prior knowledge
or experience in it. True to Innocent’s ways, he thought to start by gaining first-hand
knowledge. In the seven years that followed, he visited major car factories in America,
Taiwan, Japan and China, observed the step-by-step operational processes and soaked
in every information possible. In most of these factories, the processes were highly
automated and mechanised. He however admitted that it looked like an impossible
venture for the Nigerian clime, given the erratic power supply. Thus, he chose to
adopt a different strategy; the manual vehicle manufacturing process.

In 2009, the first indigenous automobile manufacturing company was launched by

Innoson Group. Innoson Vehicle Manufacturing Company (IVM) in collaboration with
Chinese auto dealers, produced different commercial automobiles, utility vehicles and
passenger cars. The incredible feat was received with mixed feelings by the public.
“Finally the masses would be able to afford a brand new car”, some thought. The
excitement was palpable. Yet others were skeptical about the functionality and quality
of a locally manufactured car. This was a highly risky venture they thought. “Could
the brand be trusted to maintain high quality global standards and not cut corners?”
Would there be a trade-off between quality and cost?”

Making an Impact
Innoson created jobs and consequently, a better life for families. At the beginning, he
hired young boys and taught them to couple motorcycles. So Innocent figured the
vehicle manufacturing unit could adopt a similar strategy. He was passionate about
giving back to society through employment. Many young men who otherwise may
have been unemployed and delinquent on the streets had a decent means of livelihood
as a result. This was Innocent’s preferred way of doing business and a core value at
Innoson Group. He believed strongly in helping people find work. When he needed to
decide between an automated or manual process to manufacturing cars, he opted for
the manual process. He once said “Any work that a person can do well should be
given to a human being, not a machine.” At another time he noted “Now if I decide to
use the automated process, where will the people work?
A number of his former employees who started as apprentices learning the ropes at
his factory had grown to become suppliers of locally sourced parts such as the boot for
the company’s bigger buses. The staff had modified and evolved the techniques learnt
from Innoson successfully. Innocent expressed his joy at this, because it made him
fulfilled, knowing that his company had not only created financial prosperity for other
families but had taught people skills and challenged people to think outside the box.
The establishment of Innoson’s factories in-country also reduced capital flight,
generated inflow of foreign currency thereby reducing overdependence on foreign
goods, which deplete the country’s foreign currency reserve. The experience and
success of Innoson, especially in car manufacturing served as a stimulus for other
entrepreneurs in the automobile industry, who are now attempting to do the same.
Creating a better society was always top priority for Innoson. Hence his company, in
partnership with the Federal Government of Nigeria, under the Presidential amnesty
program, successfully trained two batches (30 persons each), of Niger Delta militants.
They agreed to drop their arms in exchange for pardon and education/training.
Innoson offered courses such as auto electronics, auto welding and fabrication,

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automobile mechanics and maintenance, auto spraying and painting, information and
communication technology.
IVM products were well-received in the market, and in addition to the Nigerian
market, IVM products were sold in other African countries like Ghana, Togo, Chad,
Niger and Sierra Leone. The remarkable success of Innocent’s IVM project led to the
enactment of a National Automotive Policy by the erstwhile President, Goodluck
Jonathan, to encourage local patronage and utilization of home-made automobiles.
The policy mandated that all government bodies, purchase and use only locally
manufactured vehicles. The policy also imposed a duty of 70% on imported vehicles
and 10% on semi-knocked-down components of automobiles. However, a major feat
for Innoson group was landing a deal to manufacture spare parts for the fighter jets of
the Nigerian air force.

Growing concerns
With growth came some major challenges for Innoson. The largely manual method of
operation that Innocent took pride in, had begun to cause concerns for the company,
due to challenges in the operational processes and customer feedback. At the fore were
the health and safety risks which faced the factory workers, due to passive
enforcement of safety precautions in the manufacturing plants. Innoson factory
workers were often casual about safety precautions. Some failed to wear safety gears
on site. The factory layout was also a major challenge. The manual movement of
sensitive equipment and machinery increased the instances of scratched and dented
material parts.
Innoson group struggled to keep pace with digital technology and its accompanying
customer demands. For instance, the company barely had an online presence for its
products. The website of the group was not impressive, and the content was tedious to
navigate. The company also had no functional social media page. Even in terms of
traditional marketing, the automobile arm of the business had challenges, as the
showroom in the country’s major commercial city, Lagos, was not located in any of the
prime areas.

Options to choose from

Innoson group started as a motorcycle manufacturing company, expanded to include
a major indigenous plastics company which produced over 150 different types of
products and then pivoted to an automobile manufacturing company. The company
grew over 30 years to employ 7,400 people and empower thousands of others. The
annual turnover of the Innoson group was estimated to be around N19.8 billion ($55
million) in 2018.
Innocent still has big dreams. He wants to phase out second-hand cars from Nigeria
by bringing down the prices of brand new cars. He strongly advocates for an
indigenously driven Nigerian economy that creates employment for the masses. The
company has two salient tenets – integrity and affordability. While the highpoints
were glaring to many, the company was facing internal quality management failures.
There was an urgent need to improve operational processes and product quality.
Several strategic decisions had to be made. It was on this basis that Innocent, the CEO,
sat with his team of top General Managers at the Nnewi manufacturing plant to
deliberate on the options available. Should upfront investments be made to reduce
manual clerical effort? Would the company need to migrate towards automated
manufacturing and inspection processes? The CEO wondered about how this would

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affect the company’s ability to create employment. How could quality be improved
considering the cost of quality? He worried about how this would affect the average
man’s ability to buy an IVM vehicle. As Innocent was driven by the vision to eradicate
second-hand cars, some of the top managers felt it was important to keep cost at the
barest minimum. Yet others reasoned that it was time to make significant investments
and rightsizing to improve quality.

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Exhibits:

Innoson cars

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