alpa case-of-hero-honda
TRANSCRIPT
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 1/24
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 2/24
CONTENTS
Contents................................................................................................................. 2
Abstract .................................................................................................................3
Hero Honda and Hero Group .................................................................................4
Three Phases of Strategic Intent in Hero Honda .....................................................4
Indian Automotive industry..................................................................................... 5
Resource based View of Strategy Development:....................................................6
Resources and capability Built within manufacturing Organisation.........................7
Classification of Resources ....................................................................................9
Resource Under VRIO Framework (Barney, 1986)................................................... 9
Strategic Implication and Performance................................................................. 11
Phase 2:1994-1999............................................................................................... 11
Phase 3: 1999-2009.............................................................................................. 16
Sales and Revenue Performance .........................................................................16
Porter five forces analysis..................................................................................... 18
Strategic Shift....................................................................................................... 19
Porter’s Five Business level strategies.................................................................. 21
Sales and Financial Performance..........................................................................21
Conclusion............................................................................................................ 23
References............................................................................................................ 24
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 3/24
ABSTRACT
In this report, we have discussed here the interdependence between resource,
capability and Competency of an organization and the result of such interdependence
on the company’s Strategy and Performance. A company can achieve sustainable
competitive advantage in dynamic environment by such interlinking only.
We have taken the case of Hero Honda. Hero Honda started its motorcycle
business in 1984 after collaboration with Honda, Japan. They started with the
production of CD-100 first 4 stroke bike in India. In the last three decades they have
undergone sea change in their strategy. We will study the change management in an
agile firm like Hero Honda.
The Last three decades have been divided in three phases. During first phase
of 1984-1994, they stressed on resource view of Strategic development. During the
phase two of 1994-1999, they made their Business strategy as market penetration and
Consolidation. During this phase they launched their most successful Bike
“Splendor”. During third phase of 1999-2009, they have strategic focus on market and
Product Diversification in the wake of increasing competition from external market.
The study carried out in this report comprises of views from various Literature
including Firm resources and Sustained competitive advantage (1986,’91) by jay
Barney, Competitive strategy (1980), Competitive Advantage (1985) Why are firms
Successful? (1990) by Michael Porter, Resource based view of manufacturing
strategy (2002) by Roger R. Shroeder, Kimberley A. bates and The Resource-Based
Theory of Competitive Advantage: Implications for Strategy Formulation by Robert
M. Grant.
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 4/24
HERO HONDA AND HERO GROUP
"Hero", the brand name symbolizes the steely ambition of it s founders
the Munjal brothers. Hero came into being in the year 1956 c h a n g i n g i t s e l f
from a modest manufacturer of bicycle components during early 1940's to the
world's largest bicycle & two-wheeler manufacturer today (Hero Honda Motors Ltd,
started in the year 1984 as a JV between Hero Group & Honda Motors, Japan).
Such a Journey was propelled by one vision - to build long-lasting
relationships with everyone, including workers, dealers and vendors. This
philosophy has paid rich dividends for Hero Honda through the past three decades.
Hero, now a name synonymous with two-wheelers in India is a multi-unit, multi-product, geographically diversified Group of companies under the
flagship of Hero Group. Th e group rolls its own steel, through fully integrated
operations, which makes critical components such as free wheels for their bicycles.
They have the vision to simultaneously diversify into many varieties of ventures,
including product designing, ITES, finance and insurance.
The prime motive of the Hero Group is "Engineering Satisfaction" and it has
become a way of life and a part of the work culture of the Group.
From now on, we would mean Hero Honda Motors Ltd. whenever we stateeither “Hero Honda” or “HHML” and the Hero Group in totality when we state
simply “Hero”.
THREE PHASES OF STRATEGIC INTENT IN HERO HONDA
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 first 4-stroke bike CD-100. They stressed
more on Developing dealer and supplier network, they had focussed on operational
efficiency. They followed market diversification strategy as their Business strategy
with campaign “Fill it, Shut it, Forget it”.
Phase 2:
They launched “Splendor” during this period which is a multi segment
targeted Robust vehicle. With this product which is largest selling bike in the world
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 5/24
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 6/24
RESOURCE BASED VIEW OF STRATEGY DEVELOPMENT:
Phase 1: 1984-1994
During This period resources developed by hero Honda can be seen from
various frameworks point of view.
5.1 Internal Analysis
Strength:
1. Operational: They stressed upon Six sigma, Just in time, ERP. Through
Anciliarization, they achieved close virtual Integration with suppliers.
They developed very good Distribution and after sales Network.
Some of the companies they collaborated with to develop in house
production units are: Showa, Puch, Kawasaki.
2. Cost Competitiveness through development of In-house production of
completely knocked down kits (CKDs).
3. Marketing: they started with Fill it shut it Forget it campaign whichshowed the robustness of their bike. They had complete knowhow of
Indian Consumer Behavior from past experience of cycle business and
they had a well established Distribution Method in entire India.
4. Financial Strength: with Zero debt, They had their say in decision making
capability. Also they have shown double digit growth till date.
5. HR Strength: They had no organized labour Union. The higher
management wanted the employees to grow with Hero Honda. They had
internal employee philosophy of “ Hero is growing Grow with Hero”
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 7/24
Weakness:
1. In the 1st phase they had over dependence on Honda.
2. The no of Product launched were very less
3. They didn’t cater to all the segment of Market
4. Customers were left with very few options.
5. R&D expenditure was low.
RESOURCES AND CAPABILITY BUILT WITHIN
MANUFACTURING ORGANISATION
The manufacturing Capability and resources of Hero Honda can be seen under the
framework developed by (St. John and Harrison, 1999). The resources and
Capabilities are divided under three categories namely proprietary Process and
Equipment, Internal learning and External learning.
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 8/24
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 9/24
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 10/24
1. Value
Highly fuel efficient, even though Medium powered
Robust Bike for Rural environment
Good relationship with Customer
Increased loyalty
Resulted in High revenue
2. Rare
Anciliarization
Vertical and Virtual integration
First mover advantage
Consistent Double digit growth since Inception
Market growth by 22% but it grew by 35%
3. Inimitable
Distributor network
Brand value due to Honda “It’s the Honda that makes it Hero”
Legendary campaign of “Fill it, shut it, forget it”
4. Organization
Strategic Market leadership
Effective Operational Efficiency
Good HR policy
Inclusive Growth target
CSR activity
8.2 Competencies:
The competencies developed based on these Resources were:
1. Technical Superiority
2. Manufacturing Excellence
3. Sales and Marketing
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 11/24
4. Brand Image
5. Visionary Leadership
STRATEGIC IMPLICATION AND PERFORMANCE
Strategy
Based on These resources and Competencies, The strategy developed was to strive for
synergy between technology, systems and human resources, to produce products and
services that meet the quality, performance and price aspirations of its customers and
to maintain the highest standards of ethics and social responsibilities.
Impact on performance
The sales in terms of number of Motorcycle grew from around 40000 in 1985-86 to
around 180,000 per annum in 1994.
PHASE 2:1994-1999
Business strategy
• Hero Honda Update of Honda contract for another 10 yrs in 1992.
• They planned for more R&D support from Honda in two wheelers.
• Product were launched in sub125cc segment
• “Splendor ” launched in 1994 for office going middle class
people
• It is the largest selling bike in the world till date
Marketing strategy
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 12/24
• Focused on Market Consolidation across country with punch line
“Desh ki dhadkan”
• Sub125cc became Star (BCG matrix)
BCG Matrix:
• Splendor launched in this phase became star and till date they are
reaping maximum benefits from it.
• CD 100 had crossed breakeven phase and it got the position of Cash-
Cow from star, now it was profiting the company without any investment
required.
• Street that was launched in last phase became famous in overseas
market but it was not liked in domestic market and so they had to divest this
brand which got position of question mark in BCG matrix.
• Sleek was the dog in matrix and hence they had to kill it.
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 13/24
Value Chain Analysis
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 14/24
Value Chain Analysis
Primary Activities
1. Inbound logistics
Close Integration with suppliers
JIT ,Tight control and reduction of logistic cost
Vendor supply through conveyors ( at Haridwar with 100 ancillary
unit)
Reduction of Inventory, 3rd party logistics
Virtual Integration through Working with vendors in developing their
production facilities
2. Operations
Lean manufacturing (JIT)
Inventory cost less, Working capital less, Transaction cycle less
Fully automatic Robotic operations plant hence Production per unit
employee very high
1000 motorcycle per employee per year
3. Outbound Logistics
Approx 1,00,000 exports
Delivery Channels through three Plants
Focus on minimum waiting period (Customer satisfaction)
Wide and deep distribution Network
4. Marketing and Sales
“Fill it, shut it, forget it” - To show value for money
“Desh ki dhadkan” – Expanding and market consolidation
“Har Gaon har Aangan” – To reach villages further (2007)
Brand Popularity through Cricketers and Popular stars like Hrithik
Roshan, Virender sehwag, Harbhajan singh, Priyanka Chopra
Hero Honda passport programme For customer loyalty
Launch of Newer range of Bikes in 125cc+ range, Electric vehicles
5. Service
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 15/24
One of the best after sales service in Industry
Cheap but quality rich spare parts
Benefit of inbound logistics (Network) transferred to customers
Mobile service stations for rural Areas
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 16/24
6.
PHASE 3: 1999-2009
This phase witnessed a strategic shift from earlier operational core
competencies to the addition of other core competencies which is marketing, after thetransition phase –II. This phase was much more competitive than first or second
phase. Number of competitors increased manifold, apart from its regular competitors
Honda also became the direct competitor in this phase.
Competitors are
– Honda, Bajaj. TVS-Suzuki, Kinetic, Yamaha etc.
Strategy Adopted:
Product diversification: In this phase Hero Honda has launched 5-7 newmodels almost every year. They diversified their product based on target customers
groups
Aggressive Marketing: They have extended their core competency from
operational efficiency to marketing efficiency, added new advertisement strategy and
customer base.
Branding strategy: They have launched new bikes keeping in mind needs of
various segments of customers like family, office-goers, youths, girls etc.
Even after change in strategy they maintained leadership position in market in
revenue as well as number of unit sells which is evident from the following data.
SALES AND REVENUE PERFORMANCE
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 17/24
Bike Sales trend
Company
Apr-Jun Apr-Jun Growth (%)
Market
Share %
2008-09 2009-10
Hero Honda 8,77,089 10,94,996 24.84 51.26
Bajaj Auto 3,91,100 3,31,731 -15.18 15.53
TVS Motors 2,92,530 3,15,785 7.94 14.78
Honda 2,26,068 2,84,890 26.01 13.33
Others 78,980 1,08,467
Total Market 18,65,767 21,35,869 14.48 -
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 18/24
PORTER FIVE FORCES ANALYSIS
• Threat of new entrants
• Phase I
Joint Ventures like Bajaj-Kawaski, Kinetic, and TVS
Competition on volume basis
Strong
• Phase III
Rivals from India two-wheeler companies like Bajaj, Kinetic andTVS
Potential competitors like HMSI, Chinese (low cost) and other foreign
companies, Competition on Quality and Power for niche segments
Strong
• Threat of substitutes
• Phase I
• There were very few number of competitors named Scooters and
Mopeds only Weak
• Phase III
• Motorcycles had replaced scooters and mopeds
• High Earning has driven market towards High-end Bikes• Introduction of low cost four wheelers (e.g. Tata Nano)
• Efficient Public Transport Medium
• Intensity of rivalry among competitors
• Phase I
• Meager no. of competitors
• Demand growth higher than Supply growth (space for all)
Weak
• Phase III
• Intense rivalry among the competitors vying for the No. 1 spot
• Aggressive marketing strategy by competitors
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 19/24
• Companies like Bajaj, TVS, Kinetic, HMSI are trying to enter
into new segments
• Rivalry from low cost Chinese bikes and Yo bikes (Electrical )
• Very less competition in sub125cc segment (Splendor and
Passion)
Strong• Bargaining power of buyers
• Phase I
• First Mover Advantage
• Meager options available with buyers
Weak
• Phase II
• Uniqueness of CD100 shaded by introduction of feature-rich
models by competitors
• Launch of splendor in response to competition was huge
strategic success
• Phase III• The customers have high bargaining power as there are lot of
choices to choose from
• The customers are searching for features in addition to price
and fuel efficiency like style, pickup etc
Strong
• Bargaining power of suppliers
• Phase I & III
• Suppliers are mostly companies owned by the Hero family.
• Hence, HHM wouldn’t be facing much threat from the
bargaining of the suppliers
Weak
Porter 5-Forces Conclusion
• Phase I
• Industry was highly attractive,
• High entry barrier due to lack of technical know-how
• Phase III
• Highly competitive
• Moderately attractive Urban industry
• Highly attractive Rural market for sub125cc bikes• No technology barrier for sub-125CC vehicle (Entry barrier for higher
cc)
STRATEGIC SHIFT
Product Diversification
They launched on an average 6-7 models per yr for last 5 yrs (2004-09). Some
of the Successful models are Hunk, Glamour, Karizma, Pleasure, Hunk, and
Glamour. They cater to various 125cc+ Range.
With changing scenario in international market, they have come up with
collaboration with Ultra to produce Electric Vehicle named “Hero Ultra”.
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 20/24
R&D Expenditure Increased
In this phase, R&D base has been developed for “Hero Honda” in India in
collaboration with “Honda”. Now the engineers collaborate in bringing out better
products to suit Indian condition for different segments.
Market Diversification
They have now started targeting to High End Niche segment also, which means
that they have moved from sub125cc segment.
They have also launched first Scooter for Women
Branding
During December 2007, They came up with campaign Har Gaon – Har
Aangan to cover 25000 villages. They have found that sub125cc segment market is
there in villages.
They have roped in cine stars Hrithik Roshan, Priyanka Chopra as Brandambassador. These efforts have given them better Brand visibility than earlier phase.
They have even roped pulled in Cricketers like Virender Sehwag, Harbhajan singh for
advertising.
Positioning for Different Segment
• Young ladies - Pleasure ad “Why should boys have all the fun”
• Young and Brash - MTV Roadies - Brand Association
• Family oriented segment – “SA RE GA MA PA” Association
In the first phase they have mainly targeted only the office-goers middle class
customers and they were mainly emphasized the technical efficiency of Honda and
robustness of CD-100 bike through fuel efficiency .
Shift in strategy from First Phase (above) to Third Phase (below):
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 21/24
They have launched “Pleasure” for youth girls. They also associated their
brands with different TV Soaps for family oriented customers. Apart from that they
have launched “Karizma” with ‘Macho-man’ image and associated with young
energetic youth.
PORTER’S FIVE BUSINESS LEVEL STRATEGIES
• Differentiation
• Uniqueness
• Broad target
• Differentiation Strategy
• For each range separate products
• Hunk, Ambition, Splendor NXG, Karizma, CD100, Pleasure
•
Differentiation based on Quality and features• No cost leadership
• Positioning for each segment done separately
SALES AND FINANCIAL PERFORMANCE
Financial performance
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 22/24
Sales performance
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 23/24
CONCLUSION
Through above discussion we have seen that three is Strong Interdependence
between Resources, Capability, Competency, Strategy and performance.
While in Phase 1 &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 these variables changed, Hero Honda changed
its strategy. Which shows agility in Strategic approach of Hero Honda?
Despite change in Environment External as well as Internal collaborations,
Hero Honda has been able to maintain the market leadership, this shows that such an
approach towards interlinking variables provides them long term sustainable
Competitive Advantage.
8/7/2019 alpa Case-of-Hero-Honda
http://slidepdf.com/reader/full/alpa-case-of-hero-honda 24/24
REFERENCES
1. D G Sirmom, MA Hitt, RD Ireland, Managing Firm resources in Dynamic market
to create value, looking inside the Black Box, Academy of management review,
2. A W king, 2007, Disentangling Interfirm and Intrafirm causal Ambiguity: A
causal Model of conceptual ambiguity and Sustainable competitive Advantage,
Academy of Mgt Review, 32, 156-178
3. J B Barney, 2001, Is the resource based view useful perspective for Strategic
management research? Yes, Acad of Mgt review 26, 41-56
4. J B Barney, 1991, Firm resources & Sustained Competitive Advantage, Journal of
Management, 17:99-120
5. R G Shroeder, K A bates & M A Juntilla 2002, A Resource base view of
manufacturing Strategy and the relationship to manufacturing Performance,
Strategic management Journal, 23: 105-117
6. Hero and Honda Fill it, shut it, forget it? By Raghuvir Srinivasan Business
Line
7. Swaraj Baggonkar / Mumbai July 12, 2009, Hero Honda aims for 25% growth,Business Standard
8. J F rayport, JJ Sviokla, Exploiting the virtual value chain
9. C. K. Prahalad & Gary Hamel, Strategy as stretch & Leverage
10. WWW. Herohonda.com
11. www.herogroup.com
12. www.indiatoday.com
13. www.businessweek.com