By:

TAMMINA AVINASH
MBA 09MO45
 The license raj that existed prior to economic
liberalization (1940s-1980s) in India did not allow
foreign companies to enter the market.
 In the mid-’80s when the Indian government

started permitting foreign companies to enter the

Indian market through minority joint ventures.
 The entry of these new foreign companies

transformed the very essence of competition from

the supply side to the demand side.
What Was Hero Before JV ?
 Hero Cycles manufactured Over 16000 Bicycles a
day.
 They Sold about 86 million bicycles in aggregate as

of 2002.
 They had nurtured an excellent network of dealers

to serve India’s expansive markets.

 Over the years Hero Group had entered multiple

business areas.
Some Facts About Honda…
 HMC initial plans called for both two-wheeler
market and the electric generator market.
 HMC first chose Kinetic Engineering Ltd. And

formed Kinetic Honda Motors Ltd. But this JV

would work in field of Scooters Manufacturing.
 HMC came to Hero Group as the Last compromise

choice for its motorcycle venture.

Honda selected the Hero Group for a
variety of reasons, which included:
 Its engineering capability
 Relevance and salience of HERO brand.
 Distribution network.
 Commitment to Quality.
 Know-how and experience in handling large volume
production and distribution.
 Tight focus on financial and raw material processes.
 Cordial Industrial Relations.
 Honda agreed to provide tech. know-how to HHM
and setting up manufacturing facilities. This
included the future R & D efforts.
 Honda agreed for a lump sum fee of $500,000 & 4%
royalty on SP.
 Both Partners held 26% of the equity with other
26% sold to the public and the rest held to financial
institutions.
 HHM had grown consistently, earning the title of
the world’s largest motorcycle manufacturer after
having churned out 1.3 million vehicles in 2001.
 World’s largest two-wheeler manufacturer with
annual sales volume of over 2 million
motorcycles.
 Owns world’s biggest selling motorcycle brand –
Hero Honda Splendor.
 Over 9 million motorcycles on Indian roads.
 Deep market penetration with 5000 outlets.
 The 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 people’s perception.
◦ Decrease in price difference with scooters.
 In August 1999, HMC announced Honda
Motorcycle & Scooter India (HMSI) to initially
make scooters and later, motorcycles as well.
HHM’s stock plummeted by 30% on the day of the
announcement.
 Possible hike in royalty .
 Competition hotting Up.
 Recovery in the Scooter segment
Thank You
Presented by :

Tammina Avinash