Sochiro Honda = ‘Mr Honda’ JV FORMATION & TERMINATION

1. HondaHum Mein Hai HERO

2. Submitted by
Ajal.A.J
Priya Varma
Tony Lloyd
Mathachan. P. J
George Augustine. K
Abi Mani

3. JV INSTANCES IN INDIA

4. Timeline -Honda
• 1946 Sachiro Honda forms Honda Technical Research Institute, this leads
onto the formation of Honda Motor Company
• 1949 2-Stroke, D-type engine introduced.
• Fujisawa invests $7,500 and brings financial expertise and marketing
strength
• 1952 Brisk demand for Honda’s superior 4-stroke engine allows
Fujisawa to raise $88,000 in additional funding
• 1958 Honda 50cc Supercub introduced
• 1959 Honda leads the Japanese market, and decides to enter the
United States
• 1960 40 dealers in the U.S.
• 1963 ‘You Meet the Nicest People on a Honda’ campaign launched
• 1964 Nearly one out of every two motorcycles sold in the U.S. is a
Honda

5. • 1944- Hero group by Munjal Brothers for supply of bicycle components in
Amritsar
• 1956 – Moved to Ludhiyana and started Hero Cycles after independence
and partition of India
• 1975- Largest bicycle manufacturer in India
• 1984- partnership with Honda
• 1985- started producing CD 100 motorcyle
• 1986- world’s largest cycle manufacturer
• 2004- Hero Honda largest two-wheeler maker in the world. 48% of Indian
market
• 2006 – Entered scooter market with PLEASURE
• 2013- New cycle named Hero SPRINT
Timeline -Hero

6. Vision of the Hero Honda is “to offer the highest
quality at a reasonable price to meet the
customers’ expectations and to exceed them”.
MISSION
Hero Hondas mission is to strive for synergy
between technology,ststem and human
resources, to produce products and services that
meet the quality, performance and price
aspirations of its customers. At the same time
maintain the highest standards of ethics and
social responsibilities.

7. Being the most fuel efficient Company.
To develop Appropriate product & excellent Quality.
 To Meet the demands of the sophisticated markets in
Europe & America.
 To reach an unassailable pole position in the Indian
Two Wheeler market.
 To maintain high standard of ethics & social
responsibilities.
To meet the quality performances & price aspirations
of the customer.

8. BRANDS CORE NEEDS AUXILARY NEEDS
1. Hero Honda Achiever Transportation Speed
2. Hero Honda CBZ
extreme
Transportation Stylish Look
3. Hero Honda CD
Dawn
Transportation Safety & economy
4. Hero Honda Glamour Transportation Glamorous look.

9. BRANDS CORE NEEDS AUXILARY NEEDS
6. HeroHonda
passion plus
Transportation Professional
7. Hero Honda
Pleasure
Transportation Light weight and
design
8. Hero Honda Hunk Transportation Stylish & new body
look
9. Hero Honda
Splendor
Transportation Mileage And good
performance

11.  Hero Honda introduced First stroke bike in the
Indian market.
 Hero Honda bikes gives good mileage.
 Huge sale network (3500 Dealers).
 Better sale service.
 It has the highest share in automobile sector.
 It has a good brand image.
 It gives better service for customers.

12.  Suppose to be very sophisticated.
 They have big gap between cubic capacities of its
products.
 Spare parts are too costly.

13. They should go in new segments of bikes.
 There is large no. of young consumers in the market.
Company has to focus on them.
They have big opportunities in heavy bike segments.
As government policies are amended against pollution
in metro cities, Hero Honda being 4 stroke bike
manufactures has great opportunities to explore its
new innovations and technologies.

14. Main threats to Hero Honda are their competitors
like
Bajaj Auto Ltd.
TVS motors Ltd.
Yamaha Motors India.
Honda motorcycle and scooter India.
The cost of the product is very high in comparison
to other companies.
Decreasing market share.

15.  HERO HONDA CD-DELUXE
“Naye Indian ki Nayi Deluxe Bike”
 HERO HONDA SPLENDOR PLUS
“Designed To Excel”
 HERO HONDA SPLENDOR NXG
“Bharosa Bhi Style Bhi”
 HERO HONDA PASSION PLUS
“Whole New World Of Style”

16.  HERO HONDA SUPER SPLENDOR
“Generation Nayi Bharosa Wohi”
 HERO HONDA GLAMOUR
“Simply Magnetic”
 HERO HONDA ACHIE V ER
“SOLID, Like You!”
 HERO HONDA CBZ XTREME
“Live Of The Edge!”

17.  HERO HONDA HUNK
“NO One Messes With It”
 HERO HONDA KARIZMA
“Jet Set Go. . .”
 HERO HONDA PLEASURE
“Karlo rock ‘n’ roll on the run
Why should boys have all the fun?”
 HERO HONDA CD-DAWN
“Public Ka Apna Transport”

19. A CASE IN POINT
No More
It’s
vs

20. Who is Honda?
Honda Motor Company, Ltd is a Japanese
public multinational corporation primarily
known as a manufacturer of automobiles and
motorcycles.

21. The Honda Portfolio
Subsidiaries:
•Many subsidiaries are companies that manufacture specific
components (i.e. Honda Lock Manufacturing).
•These companies manufacture transmission parts, motorcycle
exhaust components, electronic safety systems, solar cells, brake discs,
etc.
Affiliates:
•Multiple companies’ supply components go into Honda products (i.e.
Keihin Corporation, Masuda Manufacturing).
•These companies make automobile body parts, fuel systems, air
conditioning systems, injection-molded plastic parts, etc.
•Most affiliates and subsidiaries are Japanese (single diamond).
•For example, Honda is starting to install Krell stereo systems on Acura
vehicles.

22. Honda and the Four Distances
Cultural
•Honda hired American workers for their passion, not for
their knowledge of motorcycle manufacturing.
•Honda sent American workers to Japan to learn about
Honda’s manufacturing processes, and sent some Japanese
workers to the US to instill Honda’s philosophy into the
plant.
Administrative
•US government passed the Clean Air Act imposing stricter
requirements on tailpipe emissions.
•Honda feared that if demand rose for their fuel efficient
cars, the US would impose export restrictions.

23. Honda and the Four Distances
Geographic
•Honda had to search for a long time before finding the proper
place to being manufacturing – Marysville, Ohio.
•Only a few suppliers agreed to follow Honda and build their
own plants in the US.
Economic
•The rising price of the yen against the dollar in the 1970s made
continued exporting problematic.
•The Oil Crisis of 1973 caused the price of Honda’s exports to
increase while causing consumer demand for more fuel-
efficient cars to increase as well.
Honda’s approach to bridging the Four Distances in the 1970s
classifies it as an International Projector.

24. Honda’s Performance as a MNE

25. Degree of Multinationality
Licensing – Honda licenses its technology to other
companies in different countries (i.e. India) and
engages in international joint ventures.
Export – Honda is a net exporter, exporting more
American–built vehicles than it imports from Japan.
Honda exports 11 models accounting for over 100,000
units shipped to more than 40 countries.
Local Packaging / Assembly – Honda has 57 factories
worldwide, 49 outside of Japan and 12 plants in North
America .
FDI – Honda establishes relationships with suppliers in
host countries.

26. Firm Specific Advantages
Tangible Resources
•57 factories in all regions
•8 R&D facilities worldwide
•Many additional facilities
Human Resources
•Honda’s management style
•Honda selected employees based on the passion for
their work rather than their experience
•Japanese/American employees visited one another’s
countries

27. Firm Specific Advantages (cont’d)
Intangible Resources
•Manufacturing process
•Brand reputation: practical, reliable, high-quality products
•Immense experience with internal combustion engines
•Partnerships with many affiliates who manufacture parts for
motorcycles, cars, and other products
•More than 17,600 patents in Japan and 25,300 patents
abroad as well as 29,400 patents pending worldwide.
•Supply chain management
•Green initiatives such as reducing PVC use and fuel efficient
car and motorcycle engines

28. Firm Specific Advantages (cont’d)
Subsidiary Specific Advantages
•Subsidiary HAM in case study had connections to
Ford that Honda was able to leverage
•Over 25,000 patents in foreign markets
•Decentralized manufacturing allowed Honda to
overcome the Earthquake and Tsunami in 2011 that
disrupted Japanese manufacturing

29. Country Specific Advantages
• The 1970 Clean Air Act passed by US Congress
opened up an opportunity for Honda to bring
fuel efficient cars into America.
• European Union fuel costs are high and
environmental restrictions are very severe on
products with internal combustion engines.
The mix of strong CSAs and strong FSAs places
Honda in the 3rd
Quadrant of the FSA-CSA
Matrix

30. Competitive Advantage
Single Diamond

31. Foreign Direct Investment
Efficiency-seeking:
Honda has mainly taken advantage of low-wage
countries like Indonesia, Vietnam, Thailand and
India
Market-seeking:
Honda Motor of Japan is going to expand its
operations into India
Strategic Asset -seeking:
8 R&D facilities worldwide

32. Sochiro Honda
‘Mr Honda’
‘Mr Honda was especially confident
of the [larger] machines …
Super Cubs wholly unsuitable for the US market’
What really happened…?
Source: Pascale, R. T. (1984:) ‘Perspectives on Strategy: The Real Story behind Honda’s success’,
California Management Review, 26(3), 47-72

33. 1958 Honda Super Cub 1958 Harley FL DuoGlide
1958: The Super Cub –
A (Four) Stroke of Genius?
Image sources: Honda Worldwide, vintagebike.co.uk

34. ‘A deliberate attempt
to dissociate
motorcycles from
rowdy, Hell’s Angels
type people’
Image source: 4strokes.com. Quote source: Purkayastha, D. (1981) ‘Note on the Motorcycle Industry – 1975’, #9-578-210,
Harvard Business School, Cambridge MA, cited in Source: Pascale, R. T. (1984: 50) ‘Perspectives on Strategy: The Real Story
behind Honda’s success’, California Management Review, 26(3), 47-72

35. What really happened…?
Kihachiro Kawashima
Founder of American Honda Motor Co., Inc.
‘In truth, we had no strategy other than seeing if
we could sell something in the United States’
Source: Pascale, R. T. (1984: 54) ‘Perspectives on Strategy: The Real Story behind Honda’s success’, California Management
Review, 26(3), 47-72

36. HONDA & THE US
MOTORCYCLE MARKET (A & B)
Pascale suggests the Honda Executives in the US
show
• a sensitivity to context
• improvisation and adaptability within a culture
that allows and supports this style
• a different concept of strategy, more of overall
mission than guidelines & plans
• And ‘miscalculation’, ‘serendipity’.
• Did H redefine the US market?
‘ They backed into it …. and reluctantly.’

37. The Market before JV
Hero Honda Joint Venture
•The license raj that existed prior to economic
liberalization (1940s-1980s) in India did not allow foreign
companies to enter the market.
•In the mid-’80s when the Indian government started
permitting foreign companies to enter the Indian market
through minority joint ventures.
•The entry of these new foreign companies transformed
the very essence of competition from the supply side to
the demand side.
•The license raj that existed prior to economic
liberalization (1940s-1980s) in India did not allow foreign
companies to enter the market.
•In the mid-’80s when the Indian government started
permitting foreign companies to enter the Indian market
through minority joint ventures.
•The entry of these new foreign companies transformed
the very essence of competition from the supply side to
the demand side. 37

38. The Deal Is Done.(June 1984)
• Honda agreed to provide tech. know-how to
HHM and setting up manufacturing facilities.
This included the future R & D efforts.
• Honda agreed for a lump sum fee of $500,000
& 4% royalty on SP.
• Both Partners held 26% of the equity with
other 26% sold to the public and the rest held
to financial institutions.
• Honda agreed to provide tech. know-how to
HHM and setting up manufacturing facilities.
This included the future R & D efforts.
• Honda agreed for a lump sum fee of $500,000
& 4% royalty on SP.
• Both Partners held 26% of the equity with
other 26% sold to the public and the rest held
to financial institutions.
38

39. Success Story
•HHM had grown consistently, earning the title of the world’s
largest motorcycle manufacturer
•World’s largest two-wheeler manufacturer with annual sales
volume of over 2 million motorcycles.
•Owns world’s biggest selling motorcycle brand – Hero Honda
Splendor.
•Over 9 million motorcycles on Indian roads.
•Deep market penetration with 5000 outlets.
•HHM had grown consistently, earning the title of the world’s
largest motorcycle manufacturer
•World’s largest two-wheeler manufacturer with annual sales
volume of over 2 million motorcycles.
•Owns world’s biggest selling motorcycle brand – Hero Honda
Splendor.
•Over 9 million motorcycles on Indian roads.
•Deep market penetration with 5000 outlets.
39

40. IS “HERO HONDA” A SUCCESS?
 Achievement - World’s largest two wheeler
manufacturer - 50% Market Share in India
 Competition - Successfully ends the “Bajaj” raj
 Image - Perceived as the company that put
Indian middle class on wheels – Dhak Dhak Go
 Investors - $ 3.6 Billion Revenue – 4700
Employees. FY09 – FY10: Operating Profit
increases by 28% and Net Profit by 74%
 Financiers - LAAA Rating

41. THEN IS IT A BITTER DIVORCE?
 Honda selling its stake at 50% of market
valuation
 Increase in Hero’s royalties to Honda – 3% to 6%
 Shares sank 9% on the day of announcement of
termination

42. REASONS FOR JV CREATION IN
INDIA
 For foreign partner
 Government restrictions
 Indian market unlike other monolithic markets
 Access to local distribution channels
 For local partner
 Access to new technology and processes
 Opportunity for larger chunk of revenue
 Pre-empt creation of JV with a rival
 Proving ground for exporting to external markets

43. WHY DO INDIAN JVS FAIL?
 Imbalance in elements of exchange
 Foreign partners bring in intellectual capability which is difficult to learn quickly
 Indian partners hand over information of local market, making it comparatively easier
to learn.
 Foreign partners come in with an intent to learn and incorporate this in their process.
 Indian partners are very lax when it comes to learning. When they do realize, it’s very
late.
 Foreign partners, mainly MNCs, compartmentalize certain knowledge in certain
regions – R&D in US, manufacturing in Taiwan, etc.
 Indian partners do not have this advantage.
 Big Brother’s hand
 Foreign partners initiate the JV due to government restrictions, not due to partner’s
capability
 Indian partners take advantage of this, and try to add more restrictions to prevent the
foreign partner from creating other alliances instead of learning successfully.

44. JV FORMATION & TERMINATION
Spider Web of
cooperative agreements
No inter firm
agreements
Joint Ventures (Hero
Honda, TVS Suzuki)
Cooperative
Agreements (Kawasaki
Bajaj)
High Strategic Importance Low Strategic Importance
Volatile
Competitive
Environment
Stable
Competitive
Environment
1980s
Post
Liberalizati
on

45. PORTERS FIVE FORCES ANALYSIS
 Threat of New Competitors – LOW
- Competition is tough
 Rivalry among the existing firms – HIGH
- Main rivalry from Bajaj, TVS, Yamaha and HMSI
 Threat of substitutes – HIGH
- New e-bikes
- Nano car
- Used cars market
 Supplier’s Bargaining Power- HIGH
- Honda is the main supplier. Now they are one of the main
competitors
 Bargaining power of customers – HIGH
- Lot of options available

46. SWOT HERO
- Established distribution
network
-Higher installed capacity
- Market leader
- Growing Indian two
wheeler market (both motor
cycles and scooters)
- Exports opportunities
Strengths Weaknesses
Opportunities Threats
-Relied for too long on
Honda’s R&D
- Weak exports
- New emission norms
- Intensive competition
- Increasing input costs

53. HOW IS HONDA POISED
- Strong Brand Name
- R&D
- Unmet scooter demand
- Growing motor cycle
market
Strengths Weaknesses
Opportunities Threats
-Dealer network not a
match to other
competitors
- Lower installed
capacity
- Intensive competition
- Increasing input costs

54. DISCOVERING – TOGETHER OR
INDIVIDUALLY?
Diversify
Discover
Build new competencies
through JV ( Motorcycle
manufacturing)
Defend Develop
Competencies
New
Existing
Hero Group 1984
Market
Opportunities
Existing New

55. DISCOVERING – TOGETHER OR
INDIVIDUALLY?
Diversify
Discover
Build new competencies
alone ( R&D, Exports)
Defend Develop
Competencies
New
Existing
Hero Group 2011
Market
Opportunities
Existing New

56. DIVERSIFYING – TOGETHER OR
INDIVIDUALLY?
Diversify
Explore new market
opportunities jointly
Discover
Defend Develop
Competencies
New
Existing
Honda 1984
Market
Opportunities
Existing New

57. DIVERSIFYING – TOGETHER OR
INDIVIDUALLY?
Diversify
Explore new market
opportunities alone
Discover
Defend Develop
Competencies
New
Existing
Honda 2011
Market
Opportunities
Existing New

58. THANK YOU
58