PROJECT REPORT
TO STUDY STRATEGIC ALLIANCES OF HERO & HONDA COMPANY
A PROJECT REPORT SUBMITTED TO UNIVERSITY OF MUMBAI IN PARTIAL
FULFILLMENT OF THE REQUIREMENT FOR M.COM SEMESTER 2IN SUBJECT OF
STRATEGIC MANAGEMENT
BY
NAME OF THE STUDENT: GAURAV BHAURAM JADHAV
ROLL NO: 14-7280
COLLEGE NAME: K.V.PENDHARKAR COLLEGE
BATCH : 2014-2015
DECLARATION BY STUDENT
I GAURAV BHAURAM JADHAV, ROLL NO.14-7280, The student of M.Com
(Accountancy) Semester1(2014),K.V.PNDHARKAR COLLEGE,Affiliated to
University of Mumbai, hereby declare that the project for the
Subject of STRATEGIC MANAGEMENT TO STUDY STRATEGIC ALLIANCES OF
HERO AND HONDA COMPANYSubmitted by me to University of Mumbai, for
Semester II examination is based on actual work carried by me.
I further state that this work is original and not submitted
anywhere else for any examination.
Place : Dombivli Signature Of The Student Date : Roll No :
14-7280 Name : Gaurav B Jadhav
ACKNOWLEDEMENT
AT BEGINNING I WOULD LIKE TO THANK GOD FOR HIS BLESSING. I AM
VERY MUCH THANKFUL TO MY TEACHER DR. RAJESHRI DESHPANDE AND MY
PRINCIPAL FOR THEIR GUIDANCE, SUPPORT & ENCOURAGEMENT.I ALSO
LIKE TO THANK MY FAMILY MEMBERS AND FRIENDS FOR THEIR CO-OPERATION
& HELP AND ALSO WOULD EXPRESS MY GRAITUDE TO ALL THOSE WHO
HELPED ME DIRECTLY OR INDIRECTLY TO COMPLETE MY PROJECT.I ALSO TAKE
THE OPPORTUNITY TO SHOW MY SINCERE GRATITUDE TO MY PARENTS.
Gaurav B. Jadhav
INDEX Sr. No.TitlePage No.
1Objectives Of the study
2Research Methodology
3Scope & Limitations
4Introduction & Meaning of Strategic Alliances
5Importance of Strategic Alliances
6Types of Strategic Alliances
7Advantages of Strategic Alliances
8 Disadvantages of Strategic Alliances
9Company Profile
10Data Analysis
11Findings
12Conclusion
OBJECTIVES OF THE STUDY
The objectives of our project is - To study the Strategic
Alliances of Hero & Honda Company. To study the importance of
Strategic Alliances in corporate sector. To find out its advantages
& disadvantages. To study the awareness of company and its
product among the consumers. To know about the status of the
competitors. To analyze the financial performance of the
company.
RESEARCH METHODOLOGY
The study is an exercise involving estimation of parameters as
regard to organizational requirements- research was designed so as
to get relevant information that can be used for various
organizational purposes.
Data sourcesPrimary dataSecondary data
Primary Data is the first hand information collected from
respondents with the help of questioner, schedules and interviews.
In this project a structured questioner is prepared and data of
thirty respondents is collected, tabulated and analyzed on
percentage basis.
Secondary Data is an information collected through published
data, various reference books, journals, magazines, bullient, week
lings, papers, articles and internet are referred.
SCOPE AND LIMITATIONS
Data is collected on questionnaire basis.
The questionnaire includes a set of 10 questions.
Data collected is limited to only Thirty respondents.
The information provided by respondents proved to be sufficient
to analyze the accuracy of study.
Introduction & Meaning of Strategic Alliances
AStrategic Allianceis an agreement between two or more parties
to pursue a set of agreed upon objectives needed while remaining
independent organizations. This form of cooperation lies
betweenmergers and acquisitionsand organic growth. Partners may
provide the strategic alliance with resources such as products,
distribution channels, manufacturing capability, project funding,
capital equipment, knowledge, expertise, or intellectual property.
The alliance is acooperationor collaborationwhich aims for
asynergywhere each partner hopes that the benefits from the
alliance will be greater than those from individual efforts. The
alliance often involvestechnology transfer(access to knowledge and
expertise),economic specialization,shared expenses and shared risk.
There are several ways of defining a strategic alliance. Some of
the definitions emphasize the fact that the partners do not create
a new legal entity, i.e. a new company. This excludes legal
formations like Joint ventures from the field of Strategic
Alliances. Others see Joint Ventures as possible manifestations of
Strategic Alliances. Some definitions are given here: A strategic
alliance is an agreement between two or more players to share
resources or knowledge, to be beneficial to all parties involved.
It is a way to supplement internal assets, capabilities and
activities, with access to needed resources or processes from
outside players such as suppliers, customers, competitors,
companies in different industries, brand owners, universities,
institutes or divisions of government. A strategic alliance is an
organizational and legal construct wherein partners are willing-in
fact, motivated-to act in concert and share core competencies. To a
greater or lesser degree, most alliances result in the virtual
integration of the parties through partial equity ownership,
through contracts that define rights, roles and responsibilities
over a span of time or through the purchase of non-controlling
equity interests. Many result eventually in integration through
acquisition. Agreement for cooperation among two or more
independent firms to work together toward common objectives. Unlike
in a joint venture, firms in a strategic alliance do not form a new
entity to further their aims but collaborate while remaining apart
and distinct.
Importance of Strategic Alliances
Strategic Alliances have developed from an option to a necessity
in many markets and industries. Variation in markets and
requirements leads to an increasing use of Strategic Alliances. It
is of essential importance to integrate Strategic Alliance
management into the overall corporate strategy to advance products
and services, enter new markets and leverage technology and
Research & Development. Nowadays, global companies have many
alliances on inland markets as well as global partnerships,
sometimes even with competitors, which leads to challenges such as
keeping up competition or protecting own interests while managing
the Alliance. So nowadays managing an alliance focuses on
leveraging the differences to create value for the customer,
dealing with internal challenges, managing daily competition of the
alliance with competitors and Risk Management which has become a
company-wide concern. Statistics show that the percentage of
revenues for the top 1000 U.S. public corporations generated by
Strategic Alliances increased from 3-6% in the 1990s up to 40% in
the year 2010, which shows the fast changing necessity to align in
partnerships. The number of equity-based alliances has dramatically
increased in the last couple of years, whereas the number of
acquisitions has decreased by 65% since the year 2000. For a
statistically examination over 3000 announced alliances in the USA
have been reviewed in the years 1997 to 1997 and results showed
that only 25% of these alliances were equity based. In the years
2000 until 2002 this percentage increased up to 62% equity-based
alliances among 2500 newly formed alliances.Types of Strategic
Alliances
Some types of strategic alliances include: Horizontal strategic
alliances, which are formed by firms that are active in the same
business area. That means that the partners in the alliance used to
be competitors and work together In order to improve their position
in the market and improve market power compared to other
competitors. Research &Development collaborations of
enterprises in high-tech markets are typical Horizontal Alliances.
Vertical strategic alliances, which describe the collaboration
between a company and its upstream and downstream partners in the
Supply Chain, that means a partnership between a company its
suppliers and distributors. Vertical Alliances aim at intensifying
and improving these relationships and to enlarge the companys
network to be able to offer lower prices. Especially suppliers get
involved in product design and distribution decisions. An example
would be the close relation between car manufacturers and their
suppliers. Intersectional alliances are partnerships where the
involved firms are neither connected by a vertical chain, nor work
in the same business area, which means that they normally would not
get in touch with each other and have totally different markets and
know-how. Joint ventures, in which two or more companies decide to
form a new company. This new company is then a separate legal
entity. The forming companies invest equity and resources in
general, like know-how. These new firms can be formed for a finite
time, like for a certain project or for a lasting long-term
business relationship, while control, revenues and risks are shared
according to their capital contribution. Equity alliances, which
are formed when one company acquires equity stake of another
company and vice versa. These shareholdings make the company
stakeholders and shareholders of each other. The acquired share of
a company is a minor equity share, so that decision power remains
at the respective companies. This is also called cross-shareholding
and leads to complex network structures, especially when several
companies are involved. Companies which are connected this way
share profits and common goals, which leads to the fact that the
will to competition between these firms is reduced. In addition
this makes takeovers by other companies more difficult. Non-equity
strategic alliances, which cover a wide field of possible
cooperation between companies. This can range from close relations
between customer and supplier, to outsourcing of certain corporate
tasks or licensing, to vast networks in R&D. This cooperation
can either be an informal alliance which is not contractually
designated, which appears mostly among smaller enterprises, or the
alliance can be set by a contract.
Advantages of Strategic Alliances
For companies there are many reasons to enter a Strategic
Alliance: Shared risk: The partnerships allow the involved
companies to offset their market exposure. Strategic Alliances
probably work best if the companies portfolio complement each
other, but do not directly compete. Shared knowledge: Sharing
skills (distribution, marketing, management), brands, market
knowledge, technical know-how and assets leads to synergistic
effects, which result in pool of resources which is more valuable
than the separated single resources in the particular company.
Opportunities for growth: Using the partners distribution networks
in combination with taking advantage of a good brand image can help
a company to grow faster than it would on its own. The organic
growth of a company might often not be sufficient enough to satisfy
the strategic requirements of a company, that means that a firm
often cannot grow and extend itself fast enough without expertise
and support from partners Speed to market: Speed to market is an
essential success factor In nowadays competitive markets and the
right partner can help to distinctly improve this. Complexity: As
complexity increases, it is more and more difficult to manage all
requirements and challenges a company has to face, so pooling of
expertise and knowledge can help to best serve customers. Costs:
Partnerships can help to lower costs, especially in non-profit
areas like Research & Development. Access to resources:
Partners in a Strategic Alliance can help each other by giving
access to resources, (personnel, finances, technology) which enable
the partner to produce its products in a higher quality or more
cost efficient way. Access to target markets: Sometimes,
collaboration with a local partner is the only way to enter a
specific market. Especially developing countries want to avoid that
their resources are exploited, which makes it hard for foreign
companies to enter these markets alone. Economies of Scale: When
companies pool their resources and enable each other to access
manufacturing capabilities, economies of scale can be achieved.
Cooperating with appropriate strategies also allows smaller
enterprises to work together and to compete against large
competitors.
Disadvantages of Strategic Alliances
Sharing: In a Strategic Alliance the partners must share
resources and profits and often skills and know-how. This can be
critical if business secrets are included in this knowledge.
Agreements can protect these secrets but the partner might not be
willing to stick to such an agreement. Creating a Competitor: The
partner in a Strategic Alliance might become a competitor one day,
if it profited enough from the alliance and grew enough to end the
partnership and then is able to operate on its own in the same
market segment. Opportunity Costs: Focusing and committing is
necessary to run a Strategic Alliance successfully but might
discourage from taking other opportunities, which might be
beneficial as well. Uneven Alliances: When the decision powers are
distributed very uneven, the weaker partner might be forced to act
according to the will of the more powerful partners even if it is
actually not willing to do so. Foreign confiscation: If a company
is engaged in a foreign country, there is the risk that the
government of this country might try to seize this local business
so that the domestic company can have all the market on its own.
Risk of losing control over proprietary information, especially
regarding complex transactions requiring extensive coordination and
intensive information sharing. Coordination difficulties due to
informal cooperation settings and highly costly dispute
resolution.
Company Profile
Hero Motocorp Ltd., formerly Hero Honda, is an Indian motorcycle
and scooter manufacturer based in New Delhi, India. The company is
the largest two wheeler manufacturer in the world. In India, it has
a market share of about 46% share in 2-wheeler category. The 2006
Forbes 200 Most Respected companies list has Hero Honda Motors
ranked at #108. On 31 March 2013, the market capitalisation of the
company was INR 308 billion (USD 5.66 billion). Hero Honda started
in 1984 as a joint venture between Hero Cycles of India and Honda
of Japan. In 2010, when Honda decided to move out of the joint
venture, Hero Group bought the shares held by Honda. Subsequently,
in August 2011 the company was renamed Hero MotoCorp with a new
corporate identity. In June 2012, Hero Motocorp approved a proposal
to merge the investment arm of its parent Hero Investment Pvt. Ltd.
into the automaker. The decision comes after 18 months of its split
from Honda Motors.
History "Hero" is the brand name used by the Munjal brothers for
their flagship company, Hero Cycles Ltd. The two-wheeler
manufacturing business of bicycle components had originally started
in the 1940s and turned into the worlds largest bicycle
manufacturer today. Hero, is a name synonymous with two-wheelers in
India today. The Munjals roll their own steel, make free wheel
bicycle critical components and have diversified into different
ventures like product design. The Hero Group philosophy is: To
provide excellent transportation to the common man at easily
affordable prices and to provide total satisfaction in all its
spheres of activity. The Hero group vision is to build long lasting
relationships with everyone (customers, workers, dealers and
vendors). The Hero Group has a passion for setting higher standards
and Engineering Satisfaction is the prime motivation, way of life
and work culture of the Group. A joint venture between the Hero
Group and Honda Motor Company was established in 1984 as the Hero
Honda Motors Limited at Dharuhera, India. Munjal family and Honda
group both owned 26% stake in the Company. During the 1980s, the
company introduced motorcycles that were popular in India for their
fuel economy and low cost. A popular advertising campaign based on
the slogan 'Fill it Shut it Forget it' that emphasized the
motorcycle's fuel efficiency helped the company grow at a
double-digit pace since inception. In 2001, the company became the
largest two-wheeler manufacturing company in India and globally. It
maintains global industry leadership till date. The technology in
the bikes of Hero Motocorp (earlier Hero Honda) for almost 26 years
(19842010) has come from the Japanese counterpart Honda.
Motorcycle & Launches 1985Hero Honda motorcycle CD 100
launched. 1989Hero Honda motorcycle Sleek launched. 1991Hero Honda
motorcycle CD 100 SS launched. 1994Hero Honda motorcycle Splendor
launched. 1997Hero Honda motorcycle Street launched. 1999Hero Honda
motorcycle CBZ launched. 2001Hero Honda motorcycle Passion and Hero
Honda Joy launched. 2002Hero Honda motorcycle Dawn and Hero Honda
motorcycle Ambition launched. 2003Hero Honda motorcycle CD Dawn,
Hero Honda motorcycle Splendor plus, Hero Honda motorcycle Passion
Plus and Hero Honda motorcycle Karizma launched. 2004Hero Honda
motorcycle Ambition 135 and Hero Honda motorcycle CBZ Star
launched. 2005Hero Motocorp SuperSplendor, Hero Honda motorcycle CD
Deluxe, Hero Honda motorcycle Glamour, Hero Honda motorcycle
Achiever and Hero Honda Scooter Pleasure. 2007New Models of Hero
Honda motorcycle Splendor NXG, New Models of Hero Honda motorcycle
CD Deluxe, New Models of Hero Honda motorcycle Passion Plus and
Hero Honda motorcycle Hunk launched. 2008New Models of Hero Honda
motorcycles Pleasure, CBZ Xtreme, Glamour, Glamour Fi and Hero
Honda motorcycle Passion Pro launched. 2009New Models of Hero Honda
motorcycle Karizma:Karizma ZMR and limited edition of Hero Honda
motorcycle Hunk launched 2010New Models of Hero Honda motorcycle
Splendor Pro and New Hero Honda motorcycle Hunk and New Hero Honda
Motorcycle Super Splendor launched. Company performance The company
has sold over 47 million 2-wheelers since its inception in 1984
till March 2013. It sold 6.07 million 2-wheelers in 2012, out of
which 5.5 million were motorcycles. Hero Motocorp sells more two
wheelers than the second, third and fourth placed two-wheeler
companies put together. Its most popular bike Hero Honda Splendor
sells more than one million units per year. In 2013, Hero MotoCorp
registered best ever calendar year performance of more than 6.1
million unit sales. By selling 6.25 lakh units in the month of
October, it became the first-ever manufacturer to cross landmark 6
lakh unit sales in a month. In the last quarter of the year or say
in the festive season, the company sold more than 1.6 million
units, while in non festive time in AprilMay 2013, it managed to
sell out quite good numbers of units- 1.1 million.
Marketing Strategies
Hero Honda globally known of being the most fuel-efficient and
the largest CBZ selling Indian motorcycle company. This is a
relationship so harmonious that Hero Honda has managed to achieve
indigenization of over 95 percent, a Honda record worldwide. The
company is committed to provide the customer with excellence. A
rich background of producing high value products at reasonable
prices led the world's largest manufacturer of motorcycles to
collaborate with the world's largest bicycle manufacturer
CD Dawn : Honda CD Dawn is a beginner's bike well tested on
Indian roads and proven in city conditions. Hero Honda CD Dawn is a
no-nonsense bike that's all about price and utility. New bikes have
showroom prices of around Rs. 32,000 and on-road prices of around
Rs. 37,000.
Splendor NXG : The Hero Honda Splendor NXG is a new age bike in
Hero Honda's 100 cc stable. Stunning looks, economic performance,
and a multitude of features backed by Hero Honda's reliable support
network, makes this a good choice for the city commuter. The Hero
Honda Splendor NXG is now available at a showroom price of around
Rs. 42,000. Hero Honda Splendor Plus is one of the largest selling
bikes in India.
DATA ANALYSIS 1) Are you aware about Hero Honda Company ?No. of
Consumers 30
Yes 28
No 02
Findings: Out of 30 Respondents, 28 peoples aware about Hero
Honda Company, which shows its market image.
2) For what Purpose Hero Honda company Known for ?
No. of Consumers 30
Electronic Products 01
Automobiles 27
Furniture & Furnishing 01
None of the above 01
Findings: We found that out of 30 consumers 27 peoples said
Automobiles and every single said remaining ones respectively.3)
Which bike you used mostly?No. of Consumers 30
Hero Honda 16
Bajaj 08
Any Other 06
Findings: From the above question 16 respondent said Hero Honda
bike, which shows trust factor of the people on it. Remaining 8
& 6 said Bajaj & Any Other respectively.
4) Which Model do you have/had ?
No. of Consumers 30
Passion 05
Splendor 10
Karizma 01
Any Other 14
Findings: From the above question, Splendor is the most popular
bike of Hero Honda because out of 30 consumers 10 consumers uses
splendor bike and remaining ones uses other models.
5) How did you come to know about this motor bike ?
No. of Consumers 30
Through Advertisement 22
Through Customers 03
Through Internet 05
Findings: Out of 30 respondents 22 consumers aware through
Advertisement and 5 & 3 said Internet & Customers
respectively, which shows that Hero Honda Company spend aggressive
money on Advertisement and all.6) Does Advertisement Influence your
decision in choosing a motor bike?
No. of Consumers 30
Yes 20
No 04
Cant Say 06
Findings: Out of 30 respondents 20 says that Advertisement
influence to take a decision in choosing a motor bike which proves
that Advertisement plays an important role in taking decision to
customers.
7) Is Hero Hondas price range affordable to common people?
No. of Consumers 30
Yes 26
No 04
Findings: Out of 30 respondents 26 said Yes & only 4 said
No, which shows that Hero Hondas price is affordable to all common
people.
8) Which factor below do you liked in Hero Honda bike?
No. of Consumers 30
Price 10
Mileage 08
Quality 07
Look 05
Findings: Out of 30 respondents 10 people like price, 8 peoples
like mileage, 7 peoples like quality and 5 peoples like look of
Hero Honda bike.
9) Which Company was competing Hero Honda in the market?
No. of Consumers 30
Bajaj 15
Mahindra 05
Other 10
Findings: Out of 30 respondents 15 peoples said Bajaj, 5 peoples
said Mahindra and 10 people said others. From the above question we
conclude that Bajaj is strong competitor of Hero Honda in the
market.
10) Are you satisfied with After sales services provided by Hero
Honda ?
No. of Consumers 30
Yes 22
No 08
Findings: Out of 30 respondents 22 customers like after sale
services provided by Hero Honda.
Findings
1. Hero Honda was considered to be most fuel-efficient bikeon
Indian roads,& have better quality, higher resale ascompared to
Bajaj Bikes.
2. Hero Honda Service & Spare parts was available
throughoutIndia in local markets.
3. Customer trust on brand of Hero Honda.
4. While buying a motorcycle, economy is the mainconsideration
in form of maintenance cost, fuelefficiency.
5. Bikes such as Hunk, Karizma are purchased by young generation
18 to 30 because they prefer stylish looks and rest of the models
of HeroHonda are purchased more by daily users who needs more
average of bikes than looks.
CONCLUSION
Most of the bikes like CBZ, Karizma are purchased by young
generation 18-30 because they prefer stylish look and rest of the
model of Hero Honda was purchased more by daily users who need more
average of bikes than look. Hero Honda was to be considered most
fuel efficient bike on Indian road. While buying a motorcycle,
price, mileage look and quality influence to take decision. Price
and mileage are key factors which drives the customer to buy the
particular bike. Strategic Alliances plays a vital role in creating
unique identity of Hero Honda in Indian market.