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HERO HONDA MOTORS LTD
Submitted to: Prof. Manoj Thomas
Group Members: Satadru Bagchi ‐ G08 – 088 Soumitra Dhali – G08 – 090
1. Introduction 1.1. Hero Honda Group & Hero Honda Motors Ltd. 1.2. Two - Wheeler Industry in India 1.3. Strategic Intent of HHML (Vision & Mission) 1.4. Key Milestones
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2. Resource Analysis 2.1. Financial Resources 2.2. Physical Resources 2.3. Human Resources 2.4. Technological Resources 2.5. Reputation 2.6. Leadership 2.7. Value Chain Analysis 2.8. Slack 2.9. Stretch & Leverage of the Resources 13 16 17 19 20 22 24 29 30
3. Corporate Parenting & Critical Success Factors: Hero Group 4. Competitive Advantages of HHML 5. References
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3 1. Introduction
1.1. Hero Honda Group & Hero Honda Motors Ltd.
"Hero", the brand name symbolizing the steely ambition of the Munjal brothers, came into being in the year 1956. From a modest manufacturer of bicycle components in the early 1940's to the world's largest bicycle & two-wheeler manufacturer today (Hero Honda Motors Ltd. was started in the year 1984 as a JV between Hero Group & Honda Motors, Japan), the odyssey was fuelled by one vision - to build long-lasting relationships with everyone, including workers, dealers and vendors. This philosophy has paid rich dividends through the years.
Hero, a name synonymous with two-wheelers in India is today a multi-unit, multi-product, geographically diversified Group of companies. Through fully integrated operations, group roll its own steel, make critical components such as free wheels for their bicycles, and have the foresight to simultaneously diversify into myriad ventures, like product designing, IT enabled services, finance and insurance, just to name a few.
Like every success story, Hero's saga contains an element of spirit and enterprise; of achievement through grit and determination, coupled with vision and meticulous planning. Throughout its success trail, the Hero Group and its members have displayed unwavering passion of setting higher standards for themselves and delivering simply the best to their customers.
"Engineering Satisfaction" is the prime motive of the Hero Group and it has become a way of life and a part of the work culture of the Group. This is what drives the Group to seek newer vistas, adopt faster technology and create quality driven products to the utmost satisfaction of customers, partners, dealers and vendors.
From now on, we would mean Hero Honda Motors Ltd. whenever we state either “Hero Honda” or “HHML” and the Hero Group in totality when we state simply “Hero”.
78% Tw o w heeler 75. . Passenger Vehicle 16.04% Com m ercial Vehicle 5.4 1. Two – Wheeler Industry in India Automotive market in India (2007-2008) The automotive market of India is dominated by two – wheelers which constitute about ¾-th of the entire market.05% Three w heeler 3.2. The zones which are circled show the presence of the two – wheeler manufacturers. The following figure shows the spread.13% The manufacturing facilities for all these automotive players are well – spread across the country with the east zone having the least of participation.
India is slowly becoming the manufacturing hub for the automotive sector. .5 Delhi-Gurgaon-NoidaGhaziabad Ludhiana Haridwar Pitampu Jamshedpu Rajkot-Halol Kolkata Mumbai-Pune-Nasik Aurangabad Hyderaba Chennai Bangalore Hosur There are many factors which affect the India automotive industry as a whole which is analyzed in the following figure. These factors drive the industry & make it competitive globally.
8 0.65 0 5 Cars 10 CVs 15 Two wheelers 20 25 30 Three Wheelers .87 2015-16 27. let’s take a look at the projected sales in the automobile sector.6 Overall economic growth Lower duties & taxes Policy impact on oil prices Government Policies Growth in Income levels Easier financing Contemp orary products New Product Launches Lower interest Shorter life cycle Indian Automotive Industry loans Increasing Consumer Demand Fast paced urbanization (28‐40 % by 2020) Middle class expanding by 30‐40 mn every year Poor public transport system Export Competitiveness Cost Competitiveness Reduced cost to consumer India emerging as a manufacturing hub After analyzing the drivers. Potential Vehicle sales in India in 2015 .64 2.16 (in mn) 0.
159 bn by 2016. • The size of the Indian automotive industry is expected to grow at 13% p. • The total investments required to support the growth is estimated at around US$ 35 40 bn. .a over the next decade to reach around US$ 120 . Now turning our focus into the two – wheeler industry we find that motorcycles dominate the industry.7 Key insights into the projections are: • Sale of motorcycles in India is likely to touch 10 million mark by 2010 as per Frost and Sullivan report.
in 2008) – Mahabharat Motors (Will start producing TVS branded 2-wheelers in Apr. ¾ Minor players are: – Suzuki Motorcycles India Ltd – Yamaha – Royal Enfield (Niche Segment) ¾ New Entrants – Mahindra & Mahindra (Acquired Kinetic Motor Co. Ltd. – Bajaj Auto Ltd.8 Players in the two – wheeler industry in India All the manufacturers in the automobile industry can be broadly classified into the following categories: ¾ Major players are: – Hero Honda Motors Ltd.’09) ¾ Other Players – Manufacturers of electric two – wheelers such as Yo Bikes . – TVS Motor Company – Honda Motorcycle & Scooter India Ltd.
Four new product launches are proposed in this year itself. New product launched (Bajaj Discover) in 125cc category in July 08. Its sales growth was virtually flat during the April-August period. . TVS Motor has also seen sales stagnate.15% between April and August. TVS entered into a JV in Jun 2008 with Mahabharat Motors of Kolkata to increase presence in eastern region. It established a manufacturing facility in Indonesia as well. TVS TVS is the third largest two-wheeler manufacturer in India. Bajaj Auto has seen August sales decline by 3. TVS launched the last product Flame in March 2008. Honda Motor Has recently entered the Indian market through its direct subsidiary (in addition to its joint venture Hero Honda). with a growth of only 1.9 Brief Details about Major Competition & Domestic Two-Wheeler Market Share (2006-’07) BAJAJ Second largest two-wheeler manufacturer and the largest three-wheeler manufacturer in India.7%.
the Hero Group provides its employees with a fine quality of life and its business associates (suppliers & distributors) with a total sense of belonging. Strategic Intent of HHML (Vision & Mission) Vision/Mission Mission “Hero Honda’s mission is to strive for synergy between technology.10 1. thus strengthening the bond that is already deep-rooted. Japan. and this goes a long way towards reinforcing its leadership status. suppliers.” Objective & Values The Hero Group philosophy is "To provide excellent transportation to the common man at easily affordable prices and to provide total satisfaction in all its spheres of activity.3. . systems and human resources. Apart from being customer-centric. efficient supply chain and world-class products with cutting edge technology from Honda Motor Company." The group philosophy clearly states what the group objectives are and stresses the focus on – customers. At the same time maintain the highest standards of ethics and social responsibilities. The teamwork and commitment are manifested in the highest level of customer satisfaction. society and environment at large. to produce products and services that meet the quality.” Mandate “Hero Honda is a world leader because of its excellent manpower. providing reliable and affordable mobility for the masses and other stakeholders like employees. distributors. performance and price aspirations of its customers. extensive dealer network. This mission is what drives Hero Honda to new heights in excellence and helps the organization forge a unique and mutually beneficial relationship with all its stake holders. proven management.
000th motorcycle produced New motorcycle model . Raman Kant Munjal 4. Mr. Mr. 1' .A School in the memory of founder Managing Director.largest selling single two-wheeler model "Hero Honda Passport Programme" . Ltd.000."CBZ" introduced Environment Management System of Dharuhera Plant certified with ISO- 1992 1994 1997 1998 1999 14001 by DNV Holland Raman Munjal Memorial Hospital inaugurated .000."Street" introduced Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated 2.000th motorcycle produced .A Hospital in the memory of founder Managing Director.000.000th motorcycle produced New motorcycle model ."Splendor" introduced 1."Joy" introduced 5.11 1. Key Milestones YEAR 1983 1984 1985 1987 1989 1991 Milestones Joint Collaboration Agreement with Honda Motor Co.000th motorcycle produced Environment Management System of Gurgaon Plant certified ISO-14001 2000 by DNV Holland Splendor declared 'World No. incorporated First motorcycle "CD 100" rolled out 100."Passion" introduced 2001 One million production in one single year New motorcycle model ."CD 100 SS" introduced 500."Sleek" introduced New motorcycle model .000.CRM Programme launched New motorcycle model .000th motorcycle produced New motorcycle model .000th motorcycle produced Raman Munjal Vidya Mandir inaugurated . Japan signed Shareholders Agreement signed Hero Honda Motors Ltd. Raman Kant Munjal New motorcycle model .4.
"Splendor +" introduced New motorcycle model . 1 two-wheeler co. Harbhajan Singh and Zaheer Khan as Brand Ambassadors.World's largest selling motorcycle crossed the 5 million mark New motorcycle model . Becomes the first Indian Company to cross the cumulative 7 million sales mark Splendor has emerged as the World's largest selling model for the third calendar year in a row (2000."CBZ*" introduced Joint Technical Agreement with Honda renewed Total sales crossed a record of 10 million motorcycles Hero Honda is the World No. Yuvraj Singh."Achiever" introduced First Scooter model from Hero Honda . a global record.12 New motorcycle model ."Pleasure" introduced 2006 2008 Hero Honda is the World No. 2001."Super Splendor" introduced 2005 New motorcycle model ."Glamour" introduced New motorcycle model ."Ambition 135" introduced Hero Honda became the World No. Mohammad Kaif. for the 8th year in a row . 1 for the 4th year in a row New motorcycle model ."CD Dawn" introduced New motorcycle model . 2004 Crossed sales of over 2 million units in a single year."Ambition" introduced Appointed Virender Sehwag. 1 Company for the third consecutive year. for the 5th year in a row Hero Honda is the World No."Karizma" introduced New motorcycle model . 1 two-wheeler co."Dawn" introduced 2002 New motorcycle model ."CD Deluxe" introduced New motorcycle model ."Passion Plus" introduced New motorcycle model . Splendor . 2002) 2003 New motorcycle model .
Financial Resources We begin the resource analysis of Hero Honda Motors Ltd. this has been one of the most successful overseas joint ventures by Honda Motors. Resource Analysis The resources that HHML has are analyzed from various viewpoints so as to ascertain whether it has actually achieved competitive advantage by not only utilizing. 2.13 2. Additionally. employees are free to take the company’s shares at their own discretion. but also stretching & leveraging its resources. The company is 100% debt free with the break up of the capital structure as follows: EQUITY SHAREHOLDERS (48%) (26%) (26%) 26% of the shares are each owned by Hero Group & Honda Motors.1. Needless to say. Hero Honda’s net profit has increased by 47% as in the first three quarter as compared to last financial year. with the break up of the capital structure of the firm & the financial comparison of different players in the two – wheeler segment.know how provided to Hero Honda. Further. Japan. we tried to establish what “slack” HHML has in the resource pool to tackle adverse situations. Apart from this Honda Motors. Japan gets a royalty fee of 25% of the contribution margin because of the technical . There are no such schemes like ESOP’s in place. However. It is interesting to note that in spite of the global meltdown. . we tried to extricate the interlinkages between the value chain and the resources of HHML. Japan while the rest is owned by equity shareholders.
30 Less excise duty Net Sales Other income Total Revenue Expenditure + Interest + 9106.8 9899.28 1246.1 967.53 11542.95 10606.89 -15. HMSI is not included as it is not listed.29 9292.84 10076. & compare those with that of its main competitors i.96 -16.05 -34.82 9689.04 1134.42 189. PROFIT & LOSS ACCOUNT HHML % AGE BAJAJ 2007% AGE TVS 2007200607 % AGE CHANGE 2007-08 2006-07 CHANGE 08 2006-07 CHANGE 08 Gross Sales 12038.77 3219.08 1026.93 10517.64 3683.95 1237.73 1728.96 4.23 -6.88 857.04 4.05 -9.48 185.85 65.37 31.98 3830.55 783.18 12.66 1706.94 8843.e TVS Motors & Bajaj Auto.36 8663.00 3310.07 -52.57 8034.30 .71 Depreciation PBT PAT 1410.86 464.94 35.73 1642.81 4.09 -8.5 3854.66 1313.77 90.35 3920.03 618.33 755.82 90.14 Now. The analysis is done for financial year 2007 – 08.85 505.53 4473.24 9168.48 10331.44 -17.22 10089. let us take a look at the profit & loss account & balance sheet of Hero Honda Motors Ltd.11 8348 3274.96 -38.6 -61.85 66.89 13.
Also. During this time Hero Honda has been able to regain its market share from a low of 44% to current levels of 56%.71 1877. The reason for this success of Hero Honda has been due to the adoption of a two pronged strategy.82 1649.94 2946.77% & 16.25 1334.34 132 1292.79 566.48% respectively.34 666. it undertook a program called the “Rural Vertical” in which it focused itself in improving the distribution network in the rural areas so as to access the untapped market.91 42 -73 23.2 The net sales for Hero Honda has increased by 4. First. The increase in fixed assets for Hero Honda . it introduced products in the 150 c.15 Balance Sheet 2008 BAJAJ % Change 2007-08 from 2006-07 Share Capital Reserves & surplus Loans (Secured & Unsecured) Fixed Assets Current assets Current Liabilities 144.8 39. The total revenue for Hero Honda has increased by 4.36% while that of its competitors Bajaj Auto & TVS Motors has decreased by 6.c segment along with variants of its existing product portfolio.78 1824.25% while that of its competitors Bajaj Auto has decreased by 73% & for TVS Motors has increased by a meager 1.82% while that of its competitors Bajaj Auto & TVS Motors has decreased by 39% & 52% respectively.29 0 1043.8%.7 936.24% while that of its competitors Bajaj Auto & TVS Motors has decreased by 9% & 15.75 797.83 TVS % Change 2007-08 from 2007 0 1. Looking at the balance sheet we find that the reserves & surplus for Hero Honda has increased by 21.05 774.3 2007-08 HHML % Change from 2007 0 21. PAT for Hero Honda has increased by 12.68 1442.57% respectively.77 4 1548.74 14.
04 BAJAJ 7.8 TVS 0. The concepts of Lean Manufacturing are applied in all the plants to improve performance & drive down cost.3. 2. Its distribution network is controlled by regional offices & area offices & includes about 3000 dealers. Comparing the operating ratios we find that HHML has been performing better than its nearest competitors. .2.16 has been due to the massive investment in green field project – a state of the art manufacturing facility called the “The Shrine of Technology” at Haridwar. 2007-08 HHML Net Profit Margin (in %) PAT / SALES 8. The cycle time for vehicle production is maintained at 18 secs. Physical Resources Hero Honda has got three manufacturing facilities at Dharuhera & Gurgaon in Haryana & Haridwar in Uttarakhand.84 3. stockists & SSP’s (Service & Spare parts) across the length & breadth of India. The production capacity of the first two plants is 6500 vehicles per day while for the third plant is 3500 vehicles per day. FOR FINANCIAL YR.86 Assets Turnover Ratio SALES / TA 4.03 2.29 2. Human Resources The following model has been developed by Gallup to understand the importance of a fit between a person & the organization he is working to the performance of the organization.
Recruitment • • Orientation • Start with MDP – specific to the requirement and understanding the products Development & Learning • Functional & Behavioral input in single program. it becomes imperative to find the right fit between the . .would be employee to the organization. ENTER HERE ENGAGED CUSTOMERS ENGAGED EMPLOYEES GREAT MANAGERS IDENTIFY STRENGTHS THE RIGHT FIT S .Curve for Success According to this model. The following are the salient features of Hero Honda managing of human resource. .17 A GOOD BUSINESS SENSE To reliably influence these . engaged employees & how they are managed. . So. REAL PROFIT INCREASE STOCK INCREASE SUSTAINABLE GROWTH . through consultant networking Use of PI as one of the tool Right Fitment . these must be managed. stock price of a company depends upon its sustainable growth which in turn depends upon engaged customers.both culturally and Job based . .
Coaching & Counseling • Low performer – Development. developmental program. quiz. slogan Cross-functional teams Suggestion scheme Quality circles Idea camps Even IT services are extensively used to support employee welfare. poem. speech. poster. special assignment. coaching & counseling Employee Communication • Stand-Up meetings • • Open House Monthly Communication Meetings Employee Involvement • • • • • Various competitions like debate.18 Managing Performance • High performers – lateral movement. This includes Intranet • • • • • Employee Policies Leave Application System Resource Reservation System Bulletin Board ESS • • • Salary Loan status Attendance .
Its major ingredients are shown in the figure below - . material & manpower. They pray for the success of their work. This results in having post – production quality checks and scheduled overhauls. fear & misery. As a part of this. As a part of this. The solutions are presented to the senior management for approval. These check – points help him in improving quality and reducing break downs. As part of this. the employees get together at the atrium. which considerably results in saving time. 2.19 SOME OF THE UNIQUE PRACTICES AT HERO HONDA MOTORS LTD Joint prayers & exercises – The employees start their shift by saying joint common prayers followed by physical exercises and discussion on a theme for that day. Another leader leads the gathering for undertaking physical exercises which propel them toward better physical & mental efforts in achieving the company’s targets. Quality Circles – Cross functional teams work together to solve factory related problems using quality control techniques. the operator identifies using prescribed systems. One of them acts as a leader of the gathering. the quality check points maintenance check points. The team identifies and selects problems. Technological Resources The company believes in the concept called World Class Manufacturing. Self managed team members – The operator on the assembly line also undertakes quality checks and maintenance activities apart from operation related activities. This helps them in affirmation towards achievement of the company’s targets. All of them recite a prayer wherein they pray for the well – being of the world and freedom from pain.4. the employees voluntarily form their teams after trained by the qualified trainers in applying the above.
but also due to the several of the following social & environmental initiatives that it has under taken – Safety. This has been achieved not only by the continued excellence of its products & services. 2. crankcase etc. effluent treatment plants.5.20 QUALITY ZERO INVENTORY CONCEPT FULLY INTEGRATED VALUE CHAIN 5 S SYSTEM WCM TPM DIRECT ONLINE SYSTEMS LEAN & FLEXIBLE MANUFACTURING The Direct Online System (DOL) is similar to JIT. Health & Environment Policy – Extensive use of incinerators. Here the vendors are selected for DOL category based on a variety of parameters such rate of parts being defective & replaced in warranty. sold waste disposable systems. Rainwater harvesting system – It has an extensive system of rain water harvesting as is shown in the following figure: . OHSAS 18001 certifications.) and in weld & paint shops. Flexible manufacturing system is followed where in any product assembled in any assembly line. Reputation Hero Honda has toiled hard for the brand image it now has. It has also been awarded ISO 9001. ISO 14001. In order to remove bottlenecks & improve quality of work fully integrated robotic lines are used such as in Aluminium phase (for manufacturing cylinder heads.
The hospital also caters to the needs of the people of the rural areas of Haryana through mobile dispensaries etc. Promotional Activities – Time and again Hero Honda has been associated with the major sporting events in the country like golf & cricket. Hero Honda has opened “The Raman Munjal Memorial Hospital”. It has sponsored reality shows like MTV Roadies & Sa Re Ga Ma Pa. “The Raman Munjal Vidya Mandir” was opened to provide quality education to the poor & needy. This is because this highway is notorious for accidents.21 CSR Initiatives – Another name for the Delhi – Jaipur Highway is the “killer highway”. Hero Honda Traffic Park & Ride Safe Program – This was initiated to teach people traffic rules & riding their vehicles in the most appropriate manner to avoid accidents. In order to take care of such casualties. .
under the able leadership of Dr. Hero Group became the largest bicycle manufacturer in the world and it continues to be so till date. Through continuous growth and establishing a nation-wide supply & distribution network which was based on mutual trust and relationship. is one of the best known firstgeneration entrepreneurs in India. Though exports were initially limited to Africa & Middle East. within 30 years of starting. which forms the intrinsic core of his business philosophy. BPO. “Think ahead of time”. pioneered bicycle exporting from India as early as in 1963. Hero Group. Hero Honda Group. The core values that he inculcated from the beginning of his academic life as he attended the Gurukul system of education guided him through thick & thin. Brijmohan Lall Munjal. India from Pakistan after 1947 and built a business empire of US$ 3. From a modest beginning as bicycle component manufacturer in the early ‘50s to world’s largest bicycle maker in 1986 till date to world’s largest two-wheeler maker in 2001 and continuing – Hero Group has achieved much within this limited period of time. The value set. thanks to the guiding vision and principles of its founding father. education. now Hero Group caters to the US & . Munjal traversed the road to success with the Hero group following these principles – • • • • “Trust the instincts”. moved up the value chain by becoming a complete bicycle manufacturer in 1956. honesty. “Show others the way through highest form of corporate citizenship”. Chairman. is based on simplicity. Munjal started Hero group right from the scratch along with three of his brothers after shifting base to Ludhiana.22 2.2 billion in a span of nearly six decades comprising of 20 companies in diverse fields including auto parts. Dr. Brijmohan Lall Munjal. motorcycles. Leadership Dr. highest integrity & sense of fairness. bicycles. Munjal. “Deal with people with compassion”. IT software etc. Dr. Dr. never satisfied being only a bicycle component manufacturer. Munjal.6. The examples for all of the principles just mentioned are easy to find out. Dr.
23 European markets as well. The testimony to all these efforts came in 2001 when Hero Honda Motors Ltd. but these are reliable. was formed in 1984 as a JV between Honda & the Hero Group. . regulators as well. At a time when the Indian two-wheeler industry was known by the rusty Bajaj Chetak and other two-stroke engine vehicles. Dr. he was conferred numerous awards and recognized. It was a brilliant strategic move. In his personal capacity. Since these technologies were not indigenously available. Though without teamwork & commitment. all these achievements would not have been possible. Dr.Shut it Forget it'. Adoption of key new technologies and providing best-in-class value & performance are the hall marks of Hero Cycles. but by his philanthropic activities as well. The JV thrived because the roles of the partners were clearly demarcated by the leadership – Honda to provide the technological inputs and overall guidance. With this. . It’s one of the best success stories in India as a collaborative effort between two different cultures and entities. Dr. In recognition of his contribution to Indian industries and society at large. he collaborated with the Honda Motor Company of Japan and Hero Honda Motors Ltd.'Fill it . He was at the forefront of the campaign by Hero Honda Motors Ltd. affordable mobility to the millions of Indians. he is an active Rotarian and he co-ordinates various social initiatives in the capacity of Rotary District Governor. less polluting machines which immediately became the darling of the masses and for Govt. Munjal ensured cheaper. it was the vision and zeal of the founder which pushed Hero Group to rise higher and higher and touch the horizons. Not only the four-stroke engines gave better mileage. Munjal revolutionized the industry by bringing the first four-stroke motorbikes to the table. the important among these are – • Businessman of the Year in 1994 by business magazine "Business India". became the largest two-wheeler maker in the world with a customer base of over 20 million. He spearheads Corporate Citizenship & CSR activities of the Hero Group. which brought forth the value-of-money aspect of these bikes and endeared the masses. Munjal is not known only by his business acumen. Hero Group to provide the manufacturing resources and foot the distribution efforts.
Primary Activities Inbound Logistics From early days. Varanasi conferred him with a Doctorate. The Distinguished Entrepreneurship Award from The PHD Chamber of Commerce and Industry in 1997. enabling them to be the largest two-wheeler maker in the world for the 7th year in a row and commanding a hefty market share of 52% of Indian two-wheeler market (Ref. HHML tried to have close integration with suppliers as vendor management is critical for its operation. • Awarded "Padma Bhushan" in March 2005 for his contribution to Trade and Industry in 2005. for the simple fact that 73% of production cost is due to material components. HHML) and continuing to grow at a healthy rate of 13% (PAT) amid worsening financial crisis and deepening of recessionary influences. degree of "Doctors of letters" Honoris Causa in October 2004. The Lifetime Achievement award for "Management" from All India Management Association in 2003. reduction of inventory will be an added boon so that working capital requirement will be less.24 • National Award for outstanding contribution to the Development of Indian Small Scale Industry in 1995. • • In 1999 Featured in Most Admired CEO List of the magazine "Business Barons". Annual Report. • • • Sir Jehangir Ghandy Medal for Industrial Peace in 2000 by XLRI.7. We attempt to ascertain the competitive advantages that HHML has by analyzing its value chain. 2. ’07-’08. Thus it is essential for HHML to ensure tight control & reduction of logistical cost and/or transaction cost when procuring components. HHML adopted “Just In Time” (JIT) manufacturing philosophy which demanded close coordination between its manufacturing facilities and the vendors and . Jamshedpur. With these aims. Additionally. • Banaras Hindu University. Featured as Ernst and Young Entrepreneur of the year in 2001. Value Chain Analysis It is quite obvious that Hero Honda possesses some competitive advantages over competition.
3rd Party Logistics (3PL) service providers have also been identified for the Haridwar plant — if 3PL is started. With employee strength being in the range of 4320. design improvements etc for two-wheelers are provided by Honda after the initial design requirements as espoused by customers and market trends put in a structured form by Hero Honda R&D team in India. design & commissioning phases are the unique tangible assets that HHML has. HHML is probably the only Indian company to have truly mastered the art of JIT manufacturing. HHML also follows Lean Manufacturing. All these initiatives have helped to reduce transactional & logistical costs and save Rs. this will be a first for any two-wheeler company in India. capacity expansion etc. uses high degree of automation levels (full automatic robotic operation in welding and some other specific areas) to ensure high efficiency. All these vendors will be connected to the main plant by conveyors to prevent chances of time & material loss due to multiple handling. JIT & Integrated Supply Chain have been applied from the start in Haridwar plant making it highly efficient. During 2008-09. These fully equipped plants where these manufacturing concepts have been applied during plant layout. Operations As was being described above. Gurgaon and Haridwar (newest). HHML plans to work with vendors to develop new vendor production facilities.25 ancillary units. HHML has three manufacturing facilities at Dharuhera. In this respect. For example. Outbound Logistics . Further.5 million units. ~ 100 ancillaries are setting manufacturing bases in Haridwar near the newly started HHML plant to ensure integrated supply chain. the productivity per employee is very high. in the operational & strategic decisions of the vendors as well like production planning. low inventory production. Technological know-hows. 343 per vehicle in 2007-’08. HHML has succeeded in establishing online real-time connectivity between its operation and that of ~ 72% of its 300 plus-strong vendor base (in 2007-‘08). reduced cash & operating cycles and thus improved working capital conditions. Efforts are afoot to extend the JIT beyond shop floor. with annual production capacity of 4. the concepts of Lean Manufacturing. with usual benefits like increased cash flow.
. HHML has come up with Hero Honda Passport Program which gives special privileges to its customers.26 HHML feeds the demand in India & exports ~ 95. Of late. Forget it” campaign years ago to pitch for its better fuel efficiency and thus lower owning cost. stockists and SSPs. It has been a constant strive for HHML’s marketing efforts (in advertisements. authorized representatives. Place & Promotion). Another complaint was that many of the variants offered by HHML have little or insignificant product differentiation which can justify the price difference. In March 2001. 50 dealers. Shut it. Marketing & Sales Marketing arm of HHML started the hugely successful “Fill it. flashier & more powerful bike models in the premium segment that competitors like recharged Bajaj is offering. this number went up to over 3500. with advertising campaigns and promotional events clearly focusing on the two markets – “Har Gaon. HHML does not indulge in price wars in an effort to maintain the perception of enduring quality among present & potential customers. 267 dealers and 45 city work agents were added within this period. By March 2008. On an all India basis. the company had 826 such customers points in India. To ensure customer loyalty. 150 SSPs. HHML has paid heed to these stated & unstated needs of its customers and improved the 4P’s (Product. Har Angaan” is the recent rural connect initiative to cover ~ 23.360 villages with a population of 5000 or more by 500 specially trained rural sales executives. It has been a constant endeavor of HHML to cater to both urban and rural markets with similar zest. The effort is to provide for minimum waiting period or rather filling the regions as per the demand forecasts and market trends.000 bikes through its well established delivery channels from the 3 plants. HHML has roped in popular heartthrob Hrithik Roshan as its brand ambassador to give impetus to its marketing efforts. HHML has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network which is made up of dealers. in promos) to focus the value for money and reliability of its products and thus attracting new customers and retaining customers as well. there were complaints from customers that HHML is not dynamic enough to present newer. Its offerings now are well accepted in the market. Price.
For example. IA1. finance. HHML has implemented SAP ERP package for all necessary modules like production. In fact. The value activities done by HHML in its value chain (both primary & support activities) are given in Fig. Service HHML has constituted one the best after-sales service network in the industry. IA2.27 The distribution network of HHML is both wide & deep rooted. . quality. so that consumers can come and get their two-wheelers serviced. The unique value activities of HHML that is at the heart of its competitive advantages are shown in Fig. HHML has also focused on cleanliness and other aesthetics of the service stations and added amenities such as airconditioned waiting area. To ensure that millions of customers in the rural areas are not left waiting for adequate service as it is impossible for HHML to introduce service stations at every nook & corner of the country. marketing. superior brand image & reliability perception of its brand is the outcome of these intangible & tangible key assets. Trust & loyalty of distribution network is very important in maintaining the leadership position in this highly competitive industry. assets. All these activities are aimed to increase the customer loyalty and thus retaining customers. Virtual Value Chain All the activities that HHML is doing in its Physical Value Chain (PVC) are being augmented multifold by its efforts in establishing and improving the Virtual Value Chain (VVC -the flow of information across its value activities). mobile service stations are regularly arranged with prior intimation to public about the route that the mobile workshop would take when passing through that region. to enhance the in-house experience of the consumers at those “customer touch-points”. HHML’s strength in Supply Chain & distribution network is one of the unique intangible resources that it has. It reduced duplication of efforts across many functional areas. it is based on both mutual trust & relationship between HHML & its distributors and HHML’s philosophy of ensuring its partners to grow with its own growth. materials. Apart from improving the quality of service and easy availability of spare parts. internet browsing and coffee shops etc. sales and distribution so that only single version of right information is available with everybody at any time.
work capacity on railroads/trucks with advertisers Ship to dealers using railroads/ trucks. designs. as if the same system is being used across location & plants.28 SU PP O RT AC TI VI TI ES Infrastructure Administrative. oversee workers Invest in new Streamline turnaround time eng. ordering and components. documentation partner with systems key suppliers Adopt faster means to order and receive components Inbound Logistics Make and assemble components into autos Operations Oversee supplier & management personnel Oversee personnel involved in distribution Oversee marketing personnel Oversee service personnel Human Resource Management Technology Development Streamline Work with shipping time. These aspects are essential factors of its successes in applying the JIT manufacturing philosophy. promote product service. inventory tracking product mix Buy media Purchase time. irrespective of the ownership. . By managing PVC & VVC together in concert. Tools & tackles Source spare parts & tools. IA1. This ensures seamless flow of information about the products. union relations. components between itself and its collaborators beyond the physical boundaries. work parts availablity with dealerships Marketing / Sales Service Fig. with suppliers to bike models. dealers to web‐based improve selling. HHML has been able to connect real-time with ~72% of its vendors. Dealer Management System & CRM are other examples of VVC for HHML. legal and accounting tasks managed systemwide Develop new virtual teams. new factories. HHML is able to exploit its value chain much more effectively. partner with key suppliers Procurement PRIMARY ACTIVITIES After sales Advertise. ship parts t li Streamline Source parts. deliver Outbound Logistics Improve service turn around time with spl. Spare to public. making the whole process much more integrated & robust. Significant reduction of transaction costs can be achieved in this manner. Hero Honda’s Business System (Value Activities Mapped in the Value Chain) Further.
Lean Mfg. deliver Inbound Logistics Operations Outbound Logistics Marketing / Sales Fig. using CRM – HH & receive World class mfg. Among other indicators of slack based strategies. partner with key suppliers Procurement PRIMARY ACTIVITIES Buy media Purchase time. J J Sviokla) 2.. Ship to dealers “Dhak Dhak Go”. peak selling period is Sept. SAP ERP SAP ERP Improve service turn around time with spl. During the peak seasons. to shipping time. Slack “Slack” is defined as that cushion of factual or potential resources which allow an organization to adapt successfully to internal pressures for adjustment or to external pressures for change in policy as well as to initiate changes in strategy with respect to the external environment. means to order TQM (initiating). Tools & tackles Source spare parts & tools.J F Rayport. employee union.8. IA2. product mix . in the year whereas the lean period is Jun.29 SU PP O RT AC TI VI TI ES Infrastructure Administrative. inventory tracking. Spare parts availablity Service Online real‐time New design & tech. to Nov. components.. Exploiting the Virtual Value Chain . which is around 0.5 million twowheelers in a month. employee loyalty No formal No formal labour No formal labour No formal labour labour union. one is the increase in working capital as a percentage of sales. work capacity on railroads/trucks with advertisers Campaigns ‐ Adopt faster JIT. from connectivity Honda. employee loyalty loyalty loyalty loyalty Streamline Dealer mgt. For Hero Honda. it sells around 0. to Aug. employeeunion. railroads/ Passport components. new with vendors factories. Hero Honda’s Competitive Advantages through Value Activities & Virtual Value Chain (Ref. JIT Automation trucks. employee union . Streamline ordering & documentation system. improve selling. legal and accounting tasks managed systemwide Human Resource Management Technology Development No formal labour union.1 million more than it can produce in a month with all . partner with key suppliers After sales service (largest network) . SAP ERP Source parts.
higher efficiency (and thus better mileage) and less pollution. even though it promised higher power-to-weight ratio. The promoters of the JV. it has established such alliances with numerous other companies. the supply-demand mismatch was even more acute. even though it faced a lot of challenges like a violent strike which affected its production facilities in 1987. But it stretched & leveraged its resources – the supplier & distribution network (initially based on the reliable & loyal distribution channel of Hero Cycles. 2. But Hero Honda aspired to be the largest player in the industry. HHML has a strategy in place which can be summarized as that HHML continues to operate the plants during lean seasons at high capacity to build up a reasonable inventory. This inventory increases its working capital considerably in that period and acts as a buffer when demand surges. In order to smoothen this fluctuation in demand and also to ensure that this cyclicality doesn’t impact the operations of the plants. The 4-stroke technology taken up by Hero Honda was looked at with skepticism. when Haridwar plant was not commissioned.9. As an underlying theme in all these activities. (ii) Diversification – importance is given here for risk mitigation & . Even Splendor when it was launched initially had many technical problems. as a whole. The Hero Group. the gap between the aspiration & reality being huge.this is common for most related diversifications.30 3 plants running in their full capacity. had a lot of faith & confidence on the eventual success of this strategic alliance. which is a group resource) and technological superiority of Honda engines & design to bridge the gap between its aspiration levels & current reality and eventually succeeding & becoming the largest player in the industry. Earlier. has firm beliefs in its capability of successfully borrowing & extracting knowledge from numerous technical/strategic alliances & JVs that it has formed over the years as means of resource accumulation in its pursuit of leveraging resources. it was shaped very much by the regulatory & bureaucratic forces and has been dominated by 2-stroke scooters & bikes manufactured by Bajaj Auto and some other companies. Apart from the most celebrated JV with Honda. both Hero Group & Honda of Japan. we can see a general trend emerging – (i) Vertical Integration . Stretch & Leverage of the Resources When Hero Honda entered the two-wheeler market in ‘80s.
shock absorbers.31 opportunity grabbing by moving in unrelated but high growth areas. Japan. Porsche-design mini-motorcycles. the . • Sunbeam Auto Limited has set-up a state of the art piston manufacturing facility in technical collaboration with M/S Honda Foundry Company Limited of Japan. to design. struts and gas struts. some of these are discussed - (A) Technology Related Partnerships/ Alliances and Joint Ventures • Hero entered a joint venture for technical and financial participation with one of the world's largest automotive makers. in 1984 for the manufacture of 100cc motorcycles in India. In the next few paragraphs. develop and manufacture of front forks. fuel-efficient and environment-friendly two-wheeler led Hero Motors to enter into a Technical Collaboration with Steyr Daimler Puch of Austria in 1987 for the manufacture of the 65cc. Honda Motor Company Limited of Japan. • Hero's quest for a low-budget. • Munjal Showa Limited was formed in Technical and Financial Collaboration with Showa Corporation.
HeroITES. Navision in the manufacturing sector. Automotive. pharmaceuticals. It is ISO 9001:2000 certified and is today. which provides quality courseware by combining proven classroom teaching skills with the best of multimedia techniques. Asia's largest engineering consultants and in Technical Collaboration with Wean United. FMCG. education services. reduction of customer returns and enhancement of maintenance operations against certain predetermined targets. indusrial goods manufacture. (B) IT/ITES Related Alliances Munjal-eSystems. a dedicated and the most preferred solution center for microsoft business solution.35 billion ACS is a Fortune 500 company with .32 pioneers in the world for manufacturing high-strength lightweight pistons used in light. the BPO and Contact Centre solutions provider of Hero Management Service Limited has a strategic alliance with ACS Incorporated. powerful fuel-efficient engines. trading. the Enterprise-oriented and Software Solutions division of Hero Corporate Service Limited is a microsoft gold certified partner. It has alliance with two companies. IT. in order to facilitate the successful training of students and professionals in globally understood Business English: • DynEd Corporation. Japan for the improvement of production yield. is one of the largest and premier training powerhouses in the country focussed on building BPO/Customer Service Professionals in the sector of Airlines. USA. to cater to the needs of the overseas market. and Pharma. With revenues of US$ 4. USA. switchgears. • Hero Cycles Cold Rolling Division has also entered into a technical collaboration with Kawasaki Steel Corporation. • Munjal Auto Industries Limited has a joint venture with the State-owned Gujarat Industrial Investment Corporation. elimination of defects. BPO. Hero Mindmine. the technology based learning solutions provider and training division of Hero Corporate Service Limited. a leading BPO and IT services company. It has to its credit many sucessfully completed projects in various industries like automobiles. • Hero Cycles CR Division was set up in consultation with MECON. IT enabled services etc.
went into commercial production in 1978. in collaboration with global technology leader Steyr Daimler Puch of Austria. It also enables Hero Global Design to provide high quality Legacy Data Conversion Services. where the first indigenously designed moped. With this alliance. The integration of the automotive business of the group started with the setting up of Majestic Auto Limited.33 more than 50. Canada. Argentina and India. . • Hero Global Design is the exclusive representative of Porsche Design GesmbH (studio) in India. Munjal and Sunbeam Castings. Munjal Auto Components and Munjal Showa Limited amongst other component-manufacturing units. ACS Inc aims at increasing client's prosperity through Customer Care Solutions that exceed industry norms in Service and Value. Hero Honda Motors was established in 1984 to manufacture 100 cc motorcycles. an opportunity to work directly with PTC and its customers and to gain expertise as a Pro/ENGINEER Expert throughout PTC's Worldwide Customer Base. (C) Product Engineering Related Alliances • Hero Global Design is the largest Certified Engineering Provider (CEP) of PTC from India. near-shore and off-shore centers across the United States. a leading industrial and automobile design company in Germany. Then came Hero Motors which introduced Hero Puch. HeroITES can provide onshore and nearshore solutions in the customer acquisition and customer interaction segment of the BPO industry. Hero Global Design's alliance with PTC enables the development of elite corps of engineering professionals. A considerable level of vertical integration in its manufacturing activities has been ample in the Group's growth and led to the establishment of the Hero Cycles Cold Rolling Division. Hero Majestic. HeroITES and ACS offer a complete range of services to clients from their on-shore. • Hero Global Design has a business agreement with Target Design. Horizontal / Vertical Integration Over the years the Hero group has diversified into different businesses in which a pattern of Vertical Integration can be observed.000 people in nealry 100 locations around the world.
Corporate Parenting & Critical Success Factors: Hero Group We have already stated that many of the group technical/strategic alliances and JVs are aimed at increasing the vertical integration of the businesses.34 3. these initiatives are falling mostly in the Heartland zone (shown below). From the corporate parenting concepts also.e. .. The following Parenting Fit Matrix shows how major Hero group companies are placed - The unrelated diversifications into IT/ITES arena should fall in the Ballast zone. i. these related diversifications are helped by accumulated competencies of the group as well as complementing the core business as well. But none of the business ventures are either in Alien Territory or in Value Trap category.
The focus on quality is clearly visible from the various policies of the management. the company has been exemplary in its efforts towards maintaining the highest quality standards. such as linking a major component of the worker’s wages with factors such as quality and productivity. In a country where focus on quality is perceived to be less important than achieving cost leadership and volume sales. This has been possible by the managements relentless thrust on quality. Core Competency & Competitive Advantages Core Competency of Management Thrust on Quality – Hero Honda does not sell the cheapest bikes in the Indian market. the company’s products command a premium as the consumers believe that that they offer better value for their hard-earned money. instead.35 The following table shows Critical Success Factors as we found out for the Hero Group for its diversifications in various businesses Critical Success Factor Healthcare Equipments Bicycle Parts Automotive Parts Motorcycle Bicycle Mopeds Marketing Consumer Awareness Operational Efficiency Technology Supply Chain Cost NPI Cost of Ownership Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 4. But it has to be kept in mind that Hero Honda has achieved and continue to achieve and provide its customers product and services of such high quality at comparable or at lower cost .
The focus has been to create a sustainable business model that leads to a win-win proposition for all the members of the value chain. This also helps the company to think ahead of its competitors and come up with products for satisfying the ever changing consumer needs. Hero Group has strengthened its joint ventures. In a nut shell. "… never wanted to march alone. the major reasons behind Hero Honda’s success are: • Visionary Leadership . the company was the first to introduce fuel injection for two wheelers in India. Focus on Continual Improvement – The management has been successful in leveraging Honda’s vast product and technology range and the product offerings of the company are a reflection of the ability of the management to exploit the competencies of its JV partner to the fullest. Mr Brijmohan Lall. relatives. The management has been able to live up to this challenge through its ability to build long term relationship with over a large no. of dealers. These ancillary units are manned by friends. Building Long Term Relationships with Channel Partners – Being at the helm of the Indian two wheeler industry and sustaining the pole position calls for an efficient supply chain. Global Gearing: Managing Alliances . suppliers & other channel partners. The combination of this knowledge and the supplier network along with Honda’s expertise over 4-stroke technology has greatly contributed to the success of the Joint Venture.Over the years. ex-employees or close associates of the Munjal family since the Group patriarch. For example.36 than its competitors by virtue of its diligent following of Lean Manufacturing & other World Class Manufacturing concepts." Domain Knowledge – The management posses in-depth knowledge of the Indian market. The Munjals have gone much beyond the conventional definition of ancillarisation. making it a point to extend technical and managerial support to these ancillaries. forged profitable relationships with its partners and allied itself with some of the best players in the market. Technology assimilation through wide sourcing has been and will continue to be an integral part of the progression of the Hero Group.
com iv.indiatoday. www. J J Sviokla. References i. www. K.com v. www. Prahlad iii. www.37 • • • • Technical Superiority Superior Customer Focus Manufacturing Excellence Marketing & Sales Capability. Strategy as Stretch & Leverage by Gary Hamel & C.com vi. The following diagram summarizes the competitive advantages Hero Honda enjoys thus - Visionary Leadership Technical Superiority Manufacturing Excellence Marketing & Sales Capability Brand Image 5.herohonda. ii. Exploiting the Virtual Value Chain by J F Rayport.com .businessweek.herogroup.
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