Hero Motocorp Case Study
About Hero Cycles Ltd.: Hero Group’s journey started pre-independence in 1944 when four Munjal brothers started a small business of bicycle spare parts in Amritsar. For the next 3 years, the business …show more content…
Subsequently in 1984, the first bike Hero Honda CD 100 rolled out of the factory at Dharuhera, Haryana. Subsequently in November 1984, the company listed its shared in the stock market for public subscription.
About Honda Motor Company: Honda Motor Co., Ltd. is a Japanese public corporation which is primarily a manufacturer of automobiles, motorcycles and power equipment. Honda has been the largest manufacturer motorcycles in the world since 1959. While deciding to enter the Indian market, the company initially planned to enter the two wheeler and electric generator segments. Honda first chose Kinetic Engineering Ltd. and formed Kinetic Honda Motors Ltd. which was a joint venture for scooter manufacturing. Subsequently it chose to form joint venture with the Hero Group for manufacturing of the motorcycles.
About the joint venture – Hero Honda: Hero Honda was started in 1984 as a joint venture between Hero Cycles and Honda Motor Corp. Each of Munjal family, Honda Motor Corp. and the public held a stake of 26% in the joint venture while the remaining stake was issued to the financial institutions. Under the rules of the joint venture, Hero Honda could not export to international markets other than Sri Lanka. Both of the companies had entered into a technical and financial collaboration and each of them entered into 50-50 sharing of the resources and …show more content…
Honda can achieve high sales through the wide distribution network of Hero’s existing dealers. Also since Hero was well known for its partnerships and relationships with its dealers, it would be very easy for them to setup new dealers in the network. Hero provided Honda a safe and reliable distribution channel to market its products.
2. By partner up with Hero, Honda can understand the market dynamics of India, which had then just opened up its economy to the outside world, in a much better way. Hero was the market leader in the bicycles and it had a profound brand name. In addition to its insight about the Indian consumers, Hero was also highly known for its excellent dealer and distributor relationship. Hero brought with it, its trustworthy partner networks.
3. During that time, the Government of India has just withdrawn the License Raj norms and so there were only few big companies at that time. So effectively Honda had limited options to enter the joint venture with. Honda had already decided to form joint venture with Kinetic Engineering Ltd. to enter into the business of scooters. Hero was one of the well established companies and it was ideal partner to provide political protection to