CASE ANALYSIS OF HERO HONDA MOTORS LIMITED

PRESENTED BY:- VISHAL KUMAR

RAJ LAKSHMI GUPTA

INTRODUCTION

Today if one talks about Indian two wheelers industry, reference to Hero Honda Motors Limited is by default. It is not only the market leader in the two wheeler segment but also the number one two wheeler company in the world by volume. The company’s name is synonymous with fuel efficient bike and longevity.

BACKGROUND

Hero Honda came into existence as a Joint venture agreement between Munjal’s family Hero group and Honda motor company (HMC) Japan, each having 26% stake in the company. A ten year agreement was first entered in the year 1984, where by HMC brought in Technical expertise and Hero brought in local talent to manage all other function including Marketing, Finance and Human resources.

PERFORMANCE

The Indian two wheeler industry has seen a paradigm shift from being a regime of regulation and tight control in the 1980s to a more liberalised and competitive present day era. After missing out on the initial boom in two wheeler segment during the period of 1993- 1996, Hero Honda has emerged as a world leader. The gap between motorcycles sold by Hero Honda and its closest rival is approximately 1 mn units( 23% of industry size).

• One of the reason for tremendous performance of Hero Honda is the significant increase of share of motorcycles in the two wheeler segment.

ISSUES:

• Threat of competition:- Not only from its own partner i.e Honda motor co. but also from domestic rivals and foreign interlopers.

• Decline in market price of shares:- The share plummeted more than 30%, when Honda motors announced to start a new loop subsidiary.

• Lack of cooperation's from Honda motor co’s R&D engineers.• Competition from domestic as well as international front:-

Domestic players such as Bajaj and TVS were giving competition to Hero Honda, after making a joint venture with foreign co’s, moreover Chinese motorcycles imported in India were for cheaper than domestic motorcycles.

STRATEGIES ADOPTED BY HERO HONDA MOTORS LTD.

We have divided the whole duration of 1984-2009 in three phases for understanding the relationship between their Resources, Capabilities and Competencies in developing their strategy.

PHASE 1: 1984 – 1994

During this period they launched 4 stroke bike CD-100. They stressed more on developing dealers and suppliers network, they have focused on operational efficiencies. They followed market diversification strategy as there Business strategy with campaign, “fill it, shut it, forget it”.

PHASE 2: 1994- 1999

During this period they launched ‘splendor’ , which is a multi targeted Robust vehicle, with this product which is the largest selling bike in the world they focused on market consolidation across country. The market punch line of their Business strategy of market consolidation was “ Desh ki Dhadkan”.

PHASE 3:1999- 2009

In the wake of outside competition from Bajaj, Tvs, Honda they started with Business strategy of Aggressive marketing and market Diversification . At Resource development level they stressed upon Product innovation and product diversification.

PORTER FIVE FORCES ANALYSIS

1. THREAT OF NEW ENTRANTS.• Joint venture like Bajaj-Kawasaki, Kinetic and Tvs.• Competition on volume basis.• Potential competitors like HMSI, Chinese(low cost) and other

Foreign companies.

2. THREAT OF SUBSTITUTES.• There were few numbers of substitutes available such as

Scooters and moped.• High earning has driven market towards High end bikes.

• Introduction of low cost four wheelers e.g.. Tata Nano

3. RIVALRY AMONG COMPETITORS.• Aggressive marketing strategy by competitors.• Companies like Bajaj, Tvs, Kinetic, HMSI, were trying to

enter into new segment as well as motorcycle segment.• Rivalry from low cost Chinese bike and Yo-bike(electrical).

4. BARGAINING POWER OF BUYERS.• First mover advantage.• Launch of splendor in response to competition was huge

strategic success.

• The customers were searching for features in addition to price and fuel efficiency like style, pick up etc.

5. BARGAINING POWER OF SUPPLIERS.• Suppliers are mostly companies owned by Hero family.• Hence HHM wouldn’t be facing much threats from

bargaining of the suppliers.

CONCLUSION

• Through above discussion we have seen that there is strong interdependence between Resources, Capability, Competency, Strategy and Performance.

• While in phase 1 and 2 Hero Honda adopted the Resource driven strategy to have sustainable competitive advantage. During phase 3 its strategy was Environment driven strategy. Hence, we see that as the variables changed, Hero Honda changed its strategy. Which shows Agility in strategic approach of Hero Honda.