Case 2:

Hero Honda to Hero MotoCorp Ltd: Role of Strategic HRM

It was a divorce with significant difference. Typically we see optimism during marriage
ceremonies, wherein partners are showered with blessings from all well-wishers. Here
after 26 years of successful partnership that captured 44% of market share, both Hero
group and Honda decided to part their ways. None of the partners badmouthed the
erstwhile spouse. Hero group decided to announce its new single status in style by
launching a new logo on August 9, 2011 in London in the presence of its 1,300 dealers,
vendors and employees. According to Pawan Kant Munjal, the event held at massive
Millennium Dome on the south bank of the Thames showcase “its new global ambitions
as well as to highlight both our legacy and modernity, like London does".

Responsibilities get shared among couples. Single status brings not only the freedom, but
also multiple aspects that causes headache, which were previously handled by the partner.
Cessation of joint venture agreements was not that promising for Indian two wheeler
sector. While Bajaj Auto was able to overcome the technology tie-up break with its
partner, Kawasaki of Japan, and launched highly successful Pulsar brand developed in-
house, companies like Kinetic, LML suffered. It is important for Honda to avoid Kinetic
route, wherein the new models launched by 100% owned subsidiary of erstwhile partner,
Honda (HMSI), cannibalized almost every popular models of Kinetic. Honda made its
intentions clear to move alone by year 2001, while it decided to set up its wholly owned
subsidiary, HMSI. HMSI was confined to scooters during initial years, but started making
motorcycles from 2004.

It was essential for the new entity formed out of joint venture settlement to create a new
identity and name. While the name Honda is associated with excellence in engines, the
name Hero is associated with cycle for an average Indian. Within 16 years of its
operation, Hero cycles became the largest selling brand in India by 1975. Company
signed the joint collaboration agreement with Honda in 1983 and launched its first motor
cycle CD-100 within next two years. Through successful media campaigns Fill it – Shut

This case is developed solely as the basis for case discussion. They are not intended to serve as endorsements or illustrations of
effective/ineffective management. The case facts are collected from Business Today,Times Network, Business line etc .
Any use other than for SHRM course (PM&IR 2011) is prohibited.© Prof. Gloryson Chalil, XLRI
it – Forget it” as well as “Desh Ki Dhadkan”, Hero Honda captured almost 44% of two
wheeler market. Skeptics quote the example of Kinetic and doubt the ability of Hero
group to remain competitive. Hence the new entity require an equally effective campaign
that facilitate both “reinforcement of the brand” and smooth transition from being “Hero
Honda” to just “Hero”. The firm has adopted a new identity Hero MotoCorp, which
epitomizes and symbolizes continuity and change. The new logo symbolizes the new
face of India – that youthful energy and ‘can do’ spirit’. Marketing department worked
closely with the top management to develop a new tag line “Hum Main Hai Hero”.

From a financial perspective, the divorce settlement seems to be favoring the hero group.
26% shares owned by the Honda are transferred to a special purpose vehicle at 45%
discount of the prevailing market value. Moreover the company is allowed to use the
Honda tag till 2014 as per the earlier agreement. According to Munjal “the deal envisages
a new technical agreement, which will cover existing as well as new products till 2014.”
The royalty payment to Honda would start declining from next year. Moreover Hero
MotoCorp can tap overseas markets, seek technology from any other company and even
participate in large scale exports, which were prevented by earlier joint venture
agreement. "The company has already identified 30 countries as 'low hanging fruits' in
Latin America, Africa and South East Asia," Munjal said.

A good divorce settlement can ensure only short-term happiness; it cannot guarantee the
proverbial happily-ever-after. Now the organization needs to invest significantly on its
R&D initiatives. The company has decided to break up its research and development
(R&D) wing into four independent verticals, which would look into product
development, research, design and production.

Marketing & Sales, Finance, and R&D departments have already contributed or in the
process of making adaptation to the post divorce stage. So far the organization hasn’t
made any explicit demand from the HR department. As a firm believer in the strategic
potential of the department, you do not want to remain aloof and planning to develop the
HR department strategy for next five years. The new strategy based on case facts should
prove the value of HR department in the changed context.

This case is developed solely as the basis for case discussion. They are not intended to serve as endorsements or illustrations of
effective/ineffective management. The case facts are collected from Business Today,Times Network, Business line etc .
Any use other than for SHRM course (PM&IR 2011) is prohibited.© Prof. Gloryson Chalil, XLRI