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

    M.B.A (Finance)

  • INDEX

    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

    8

    5 Steps undertaken to improve organizational effectiveness by Hero Group

    9

    6 Key pace transformation 11

    7 The company performance 12

    8 Conclusion 15

    9 Reference 16

  • Introduction

    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

    billion)

    http://en.wikipedia.org/wiki/Dharuherahttp://en.wikipedia.org/wiki/Motorcyclehttp://en.wikipedia.org/wiki/Scooter_(motorcycle)http://en.wikipedia.org/wiki/New_Delhi,_India

  • 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.

    http://en.wikipedia.org/wiki/Dharuherahttp://en.wikipedia.org/wiki/Hondahttp://en.wikipedia.org/wiki/Hondahttp://en.wikipedia.org/wiki/Hero_Cycleshttp://en.wikipedia.org/wiki/Honda_Motor

  • 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

    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 Super Splendor, 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 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.

    Mission

    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.

    Vision

    The vision was driven by commitment to customer, quality and excellence, and while

    doing so maintaining the highest standards of ethical and societal responsibilities.

    http://en.wikipedia.org/wiki/Hero_Honda_Splendorhttp://en.wikipedia.org/wiki/Hero_Honda_CBZhttp://en.wikipedia.org/wiki/Hero_Honda_Passionhttp://en.wikipedia.org/wiki/Hero_Honda_Karizmahttp://en.wikipedia.org/wiki/Hero_Honda_Karizmahttp://en.wikipedia.org/wiki/Hero_Motocorp_SuperSplendorhttp://en.wikipedia.org/wiki/Hero_Honda_CBZ_Xtremehttp://en.wikipedia.org/wiki/Hero_Honda_Hunkhttp://en.wikipedia.org/wiki/Hero_Honda_Hunkhttp://en.wikipedia.org/wiki/Hero_Honda_Hunkhttp://en.wikipedia.org/wiki/Hero_Honda_Hunk

  • 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

    Honda.

    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