Changes in Hero MotoCorp after the Joint in Hero MotoCorp after the Joint Venture ... Hero Motocorp Ltd. is an Indian ... on the ex-factory price of each vehicle for these services. Hero also
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Changes in Hero MotoCorp after the Joint Venture
Submitted By: - Submitted To:-
Shalaka Somani Dr. Ajai Prakash
Serial No. Topics Page No.
1 Introduction 3
2 Hero Honda Joint Venture 4
3 Termination of Joint Venture 7
4 Relationship between Hero and Honda after the split
5 Steps undertaken to improve organizational effectiveness by Hero Group
6 Key pace transformation 11
7 The company performance 12
8 Conclusion 15
9 Reference 16
The origins of Hero date back to 1944, when four brothers of the Munjal family started a
bicycle spare parts business in Amritsar, Punjab, and North India. In 1956, Hero Cycles
Ltd was established in Ludhiana, Punjab. In the first year, the output was 639 bicycles.
They started exporting bicycles in 1963. The Munjals also incorporated several bicycle
component manufacturing units, which included Rockman Cycle Industries for
manufacturing bicycle hubs and chains, and Highway Cycles for making freewheels. By
1975, Hero had become the largest manufacturer of bicycles in India.
A joint venture between the Hero Group and Honda Motor Company was established in
1984 as the Hero Honda Motors Limited at Dharuhera, India. This joint venture did not
only create the world's single largest two wheeler company but also one of the most
successful joint ventures worldwide. In December 2010, the board of directors of the
Hero Honda Group decided to terminate the joint venture between Hero Group of India
and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake
of the Honda in JV Hero Honda. After the split the name of the company was changed
from Hero Honda Motors Limited to Hero MotoCorp Limited on 29 July 2011.
Hero Motocorp Ltd. 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 capitalization of the company was INR 308 billion (USD 5.66
Hero Honda Joint Venture
"Hero" is the brand name used by the Munjal brothers for their flagship company, Hero
Cycles Ltd. In 1956, Hero Cycles Ltd was established in Ludhiana, Punjab. In the first
year, the output was 639 bicycles. They started exporting bicycles in 1963. The Munjals
also incorporated several bicycle component manufacturing units, which included
Rockman Cycle Industries for manufacturing bicycle hubs and chains, and Highway
Cycles for making freewheels. By 1975, Hero had become the largest manufacturer of
bicycles in India.
In the early 1990s, Japan-based Honda was looking at entering the Indian two wheeler
market (both scooters and motorcycles) through joint ventures. Honda had been the
largest manufacturer of motorcycles in the world since 1959. In terms of automobile
manufacturing, it was the sixth largest in the world.
Hero's bicycle business, mopeds, and wide distribution network attracted Honda. Both
the companies started negotiating in 1983 and 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. The joint venture agreement was for a period of ten years. As per the deal,
Honda agreed to provide the technical know-how, set up manufacturing facilities, and
carry out Research and Development activities. Hero Honda had to pay a royalty of 4%
on the ex-factory price of each vehicle for these services. Hero also paid a lump sum
fee of US$ 500,000. In the venture, both the partners held 26% of the equity, 26% was
sold to the public, and the remaining was held by financial institutions.
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 Honda for almost
26 years (19842010) has come from the Japanese counterpart Honda.
1956Formation of Hero Cycles in Ludhiana(majestic auto limited)
1975Hero Cycles becomes largest bicycle manufacturer in India.
1983Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed
Shareholders Agreement signed
1984Hero Honda Motors Ltd. incorporated
1985Hero Honda motorcycle CD 100 launched.
1989Hero Honda motorcycle Sleek launched.
1991Hero Honda motorcycle CD 100 SS launched.
1994 Hero Honda motorcycle Splendor launched.
1997Hero Honda motorcycle Street launched.
1999 Hero Honda motorcycle CBZ launched.
2001 Hero Honda motorcycle Passion and Hero Honda Joy launched.
2002Hero Honda motorcycle Dawn and Hero Honda motorcycle Ambition
2003Hero Honda motorcycle CD Dawn, Hero Honda motorcycle Splendor plus,
Hero Honda motorcycle Passion Plus and Hero Honda motorcycle
2004Hero Honda motorcycle Ambition 135 and Hero Honda motorcycle CBZ Star
2005Hero Motocorp Super Splendor, Hero Honda motorcycle CD Deluxe, Hero
Honda motorcycle Glamour, Hero Honda motorcycle Achiever and Hero Honda
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 launched.
2008New Models of Hero Honda motorcycles Pleasure, CBZ Xtreme, Glamour,
Glamour FI and Hero Honda motorcycle Passion Pro launched.
2009New Models of 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.
It is our mission to strive for synergy between technology, systems and human
resources, to provide products and services that meet the quality, performance and
price aspirations of its customers. While doing so maintain the highest standards of
ethics and societal responsibilities.
The vision was driven by commitment to customer, quality and excellence, and while
doing so maintaining the highest standards of ethical and societal responsibilities.
Termination of Joint Venture
In December 2010, the board of directors of the Hero Honda Group had decided to
terminate the joint venture between Hero Group of India and Honda of Japan in a
phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero
There were really four constraints on Hero Honda which it had shared with Honda in
2008. The first was the issue of exports. For 11 years starting 2001, Hero Honda has
been the worlds largest, with volumes growing from 1 million to 6.2 million in 2011-12.
The agreement was subsequently, modified to allow exports of limited products to a few
countries, namely Sri Lanka, Bangladesh, Nepal, and Columbia.
However, in 2008, when the issue of exporting the Indian JVs products to other
countries came up, Honda said that Hero Honda will have to compete on its own since
it could not influence its subsidiaries abroad to import the JVs products. Hondas
subsidiaries are run very independently and decide which countries they want to source
their products from. This was a bitter pill to swallow for Hero Honda.
The second contentious issue was that of board representation. Of the four Honda
representatives on the board, one executive director was the head of Honda in India, to
whom HSMI reported, and the other located in Bangkok, represented Hondas two-
wheeler business in Asia. The other two were nominated by Honda. As directors on the
board of Hero Honda all of them had access to its plans and strategies, while Hero
Honda had access to none of Hondas pla