By:

Dewal Jindal – 10IB-027

Dhruv Kapoor – 10FN - 038
Joel Abreo – 10DM-066
Kapil Daga – 10DM-069
Neha Gupta – 10DM-091
Yogesh Gadre – 10DM-048
Agenda

 What is a Joint Venture

 The Market before Joint Ventures
 What was Hero before Hero Honda
 The trails of Honda
 Why Hero
 June 1984
 Success Story
 Some Concerns
 The road ahead
The Market before JV

 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.
Before Entering into a JV
 Compatibility be the foremost criteria for selection of a
partner (work culture, organizational behavior)
 Need to have a clear long term goal and set the terms and
conditions of the JV
 Preempt the conflicts that may arise due to frequent
changes in regulatory environment
 Clearly define the role and responsibilities of each partner
 Maintain transparency of operations and regular
communications between the stakeholders
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.
The Trails of 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.
Why Hero
 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.
June 1984
 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.
Success Story

 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.
 Every second motorcycle sold in the country is a Hero
Honda bike
 Every 30 seconds, someone in India buys Hero Honda's
top-selling motorcycle – Splendor
 Over 9 million motorcycles on Indian roads.
 Deep market penetration with 5000 outlets.
Success Story (Contd.)

 VISION
 Simple Vision – Mobile and Empowered India
 Commitment to consumer, quality, high
standards of ethics and societal responsibilities
STRATEGY
 Driven by innovation in every sphere of activity
 Robust portfolio across categories
 Exploring new markets
 Brand building activities
Success Story (Contd.)
 MANUFACTURING
 3 Globally benchmarked plants at Gurgaon, Dharuhera and
Haridwar
TECHNOLOGY
 Fuel efficient, environment friendly, four-stroke motorcycles
 First company to launch Fuel Injection tech in Indian
motorcycles with Glamour ( June 2006)
DISTRIBUTION
 5000 consumer touch points
 Authorized dealers, Service and Spare Parts, Dealer
appointed outlets
 Success Story (Contd.)
 BRAND
 New product Launches
 Innovative marketing initiatives revolving around
cricket, entertainment and ground level activation
2009-10 PERFORMANCE

Total Unit Sales: 46,00,130
two wheelers (23.6% growth)
Reasons for success

 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
 Bikes as a status symbol
 Increased market for motorcycles:
 Better Fuel efficiency.
 Change in people’s perception.
 Decrease in price difference with scooters
Some concerns for the
JV Honda which provided the technology, felt 26% was
too less a stake. Felt its contribution was way too
bigger
 By 2015, Bharat IV emmission norms would be
implemented – more R&D, innovation and
investment in technology
 Increase in royalty payment by Honda
 Net profit declined 20% to Rs 429 crore during the
third quarter ended December 31 from Rs 535 crore
in the same period last year
 The latest drop in quarterly profit comes after a 15%
and 1.6% decline in the second and first quarters,
respectively
 Input costs rise 43.5%
The Road Ahead
 The $4-billion BML Munjal-led Hero Group is
acquiring the entire 26 per cent stake of Honda
Motor Company, Japan
 The groups has parted way after 26 years
 The company and brand name will be changed
 Hero Honda announced that the existing products
will continue
 a new licensing agreement has been signed with
Honda to provide new models
 The pact which was renewed in 2004, would be
run till 2014 as signed
Thank You