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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.
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
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