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International study case - Essay Example

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Introduction The case provided is about the Hero Honda Motors Limited which is actually a merger of two companies in India, one of which is Hero Cycles of India and Honda Motors of Japan. The joint venture was formed in 1984 when India had started to liberalize when it comes to imports and foreign direct investment…
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Download file to see previous pages The success of Hero Honda has been prominent to such an extent that in the Indian market, when the general public is referring to the two wheeler industry, the first name that comes on top is the Hero Honda Motors Limited. The company has managed to secure the top spot in India when it comes to volumes in the two wheeler industry and the second spot in the world in the same category. Background As mentioned above, the Hero Honda company formed as a result of a joint venture of the Hero Group of India, owned by the Munjal family, and Honda Motors of Japan. The company started with each of the two co-owners possessing 26% of the company with the rest owned by the public and financial institutions. The arrangement to form the joint venture was initially on a 10 year period till 1994 and Honda Motors was supposed to provide the technology and technical expertise while Hero Cycles was responsible to bring in local talent for the company management including the marketing, human resources and finance managers. A period of uncertainty followed in this joint venture when Hero Honda began to lose its market share due to the fact that the Honda research and development department was too slow to introduce new products for the Indian market. Therefore, they initially missed out on the boom in the two wheeler industry from the year 1993 to 1996 but soon recovered as the clauses of contract of Hero Honda were renegotiated and the research and development was given priority. Since then, Hero Honda has been on a constant rise and quickly managed to beat its competitors to become the producer with the highest market share in the industry. Issues As India began to liberalize and foreign direct investment was allowed into the nation, the foreign investors could view the huge population as a major motivator to invest. Soon, the emergence of Hero Honda, Bajaj, TVS, and Yamaha made this industry a very dynamic one where every company was competing against themselves to be the market leader. In the case of Hero Honda however, it was much more complex than its competitors. The competitors including Bajaj and TVS were giving Hero Honda a tough time in the domestic as well as in the international market. Bajaj and TVS had also formed joint ventures of their own and therefore they were not far behind Hero Honda on technological grounds. Along with this, the Indian market prefers to buy a two wheeler at a low price given that it is usually the lower and the middle financial class, who cannot afford to buy cars, that buys the two wheelers. This encouraged the importers to introduce the China-made motorbikes in India which were priced at a much lower level than its Indian counterparts. This made it necessary for the Hero Honda marketing department to position the brand as such to make it the preferred option for the Indian buyer. Unfortunately for Hero Honda, the company had to face not only the external competition but also internal due to poor cooperation between the partner firms. The Honda Motors’ Research and Development department was not located in India and they had little Indian customer insights. This meant that the R & D department was unable to respond to the changing Indian two wheeler market as fast as other competitors were. Along with this, when Honda decided to open its subsidiary firm on its own to produce scooters in India, it was also felt that they may also decide to part ways with Hero group and start ...Download file to see next pagesRead More
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