Hero honda Demerger

By1. Aditya2. Debangshu3. Kiran Kumar4. Manikandan5. Sandra

MARKET BEFORE LIBERALIZATION

License Raj

Restricted foreign investment

In 1980’s, 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

Network Through

Dealers

Better Understanding

Of The Market

Dynamics

Limited Options With

Honda

Wide Experience In

Manufacturing Of

Vehicles

Commitment To

Quality

Focus On Financial

And Raw Material

Processes

Salience Of Hero

Brand

Cordial Industry

Relation

Engineering

Capabilities

STRENGTHS

1. Retained the position of World no 1 Two-Wheeler company.

2. High sales growth3. Fuel economy4. Quality policy5. Service schedule6. High financial performance

WEAKNESSES

1. High maintenance2. Labor reactions3. Lack of recycling scrap

OPPORTUNITIES

1. High GDP and increasing income level of consumer

2. Good will of company

THREATS

1. Finance assistance2. Technical renovation aspect

SWOT ANALYSIS OF HERO HONDA

SUCCESS STORY OF HERO HONDA

Hero Honda Motors had grown consistently, earning the title of the world’s

largest motorcycle manufacturer with annual sales volume of over 7

million

Targeted the rural markets

Every 30 seconds, someone in India buys Hero Honda's top-selling

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 PEOPLE’S PERCEPTION

DECREASE IN PRICE DIFFERENCE WITH SCOOTERS.

THE PARTING OF HERO AND HONDA

REASONS OF PARTING OF HERO HONDA

DEMERGER

Conflict of Interest

(Exports)

Launch of HMSI’s 110 cc Motorcycle

Hero Honda wanted its

independent R&D and

manufacture its own products

Honda’s Indian

Subsidiary HMSI

Honda representative On The Board

DECEMBER 16’ 2010, 1600 HOURS

VISION OF HERO MOTOCORP POST SPLIT

1. 10 Million volume company.

2. 10% volume from exports.

3. Cumulative sales of 100 million two-wheelers by 2020.

VISION OF HONDA POST SPLIT

1. Honda aimed at becoming market leader in India by 2020 and sells no less than 10 million two-wheelers in India alone.

2. With the impending Honda threat , Hero Moto corp. had begun looking outward for growth even as things got hot under the collars in its home market, India!

CHALLENGES FOR HERO MOTOCORP.

Transition of the brand.

Change of name of the bikes.

Launching products

Exports

Managing our costs.

Managing costs

Philosophical shift.

POSITIVE ANTICIPATIONS ( IMMEDIATELY AFTER SPLIT )

POSITIVESNo royalty after 2014

Continued technical

support till 2014

3 Years to develop

R&D capabilities

Higher exports

NEGATIVE ANTICIPATIONS ( IMMEDIATELY AFTER SPLIT )

NEGATIVES

R&D spent for Hero

Honda will rise.

Reserving good

models for HMSI

Exports may not rise

as fast as expected

HMSI is likely to

turn more aggressive in its plans