Hero Honda: Is It Honda That Made It a Hero?

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1.Executive Summary

Hero Honda Motors (India) Ltd. is the World's biggest manufacturer of motorcycles (by quantity). Starting as a bicycle company, it set up a 50/50 joint venture, set up in 1984 with Honda Japan, to manufacture and sell motorcycles in India. Honda brought in the technological know-how, and Hero the India presence, and the local manufacturing ability. Hero Honda Motors captured the market for motorcycles in India, by offering an affordable 4-stroke, 100 CC motorcycle, that was extremely fuel efficient. They also established dealerships al over the country – even rural areas – . The strategy of Hero Honda Motors was to capture the market by offering a superior product at an affordable price, with excellent customer service. (Right cost) The strategy has been successful to date and Hero Honda Motors (India) Ltd. is the dominant market leader with over 50% of market share, ahead of closest competitors Bajaj (Kawasaki JV) and TVS-Suzuki.

Recently new challenges have come up: in 1999, Honda has set up a 100% owned subsidiary, which produces scooters, and represents a direct competitive threat. New entrants have entered the market, offering cheap motorcycles from China. The market is showing signs of maturing, with a reduction in business growth.

The company's response is a defend and fortify strategy: Hero has renewed the technology JV with Honda, and have widened their offering a wider share of products. They have integrated vertically, reducing cost drivers in the value chain. At the same toiken, they have increased service levels, customer loyalty programs, and have started addressing niche-markets ("Just 4her") The next step for the company, is to retain and expand shareholder value by either expanding to new geographical areas and/or diversify in new businesses.

2.Company Background

Hero Honda Motors (India) Ltd. is the World's biggest manufacturer of motorcycles (by quantity). Hero Honda Motors (India) Ltd is a 50/50 joint venture, set up in 1984 between the Hero group of India and Honda Japan.

It has been the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year.

Hero Honda's Splendor model is the world's largest selling motorcycle.

Splendor © http://www.herogroup.com/images/honda_splendor.jpg

At this moment, Hero Honda has set up over 2400 customer touch points, comprising a mix of dealers, service centers across rural and urban India. Today, Hero Honda is an amalgam of winning networks and relationships with internal and external stakeholders, including Investors, Dealers, Vendors and Employees. These relationships have helped the company hold on to the mantle of World No.1 for years in succession.

The company has 2 plants. One in Dharuhera and the other in Gurgaon, both in Haryana, in the north of India. Hero Honda Motors (India) Ltd. specializes in dual use motorcycles that are low powered but very fuel efficient.

Current models offered by Hero Honda Motors (India) Limited:

Two-WheelersAchieverCBZ*CD100SSCD DAWN
CD DeluxeGlamourKarizmaPassion Plus*
PleasureSplendor+*Super Splendor*

*Major model

2.1. The Hero Group

Hero Honda Motors (India) Ltd. started in the 1940's as hero Ltd., a family owned business, manufacturing bicycle components. The Munjal family, owners of the group, turned the company into the world's largest bicycle manufacturer today. (It overtook Huffy, the US. Manufacturer in volume in 1986). Dr.Brijmohan Lall Munjal – Chairman Hero Group

The Munjals roll their own steel, make free-wheel and other critical bicycle components and have diversified...
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