Free Essay

Hero Honda

In: Business and Management

Submitted By nishantahuja46
Words 4931
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Hero Honda Motors Ltd. is a result of the joint venture between India's Hero Group and Japanese Honda Motors Company in the year 1983. This joint venture has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide. Hero Honda is globally known of being the most fuel-efficient and the largest CBZ selling Indian motorcycle company.
This is a relationship so harmonious that Hero Honda has managed to achieve indigenisation of over 95 percent, a Honda record worldwide.

The below chart shows the golden years in the history of HERO HONDA :- 1985 | Hero Honda CD-100 | 1989 | Hero Honda SLEEK | 1991 | Hero Honda CD-100 SS | 1994 | Hero Honda Spelendor | 1997 | Hero Honda Street | 1999 | Hero Honda CBZ | 2001 | Hero Honda PASSION | 2002 | Hero Honda DAWN, AMBITION | 2003 | Hero Honda CD-DAWN, SPLENDOR +, PASSION + and Hero Honda KARIZMA | 2005 | Hero Honda SUPER-SPLENDOR, CD-DELUX, GLAMOUR, ACHIEVER |

The company is committed to provide the customer with excellence. A rich background of producing high value products at reasonable prices led the world's largest manufacturer of motorcycles to collaborate with the world's largest bicycle manufacturer. During 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. They company possess three manufacturing units based at Dharuhera, Gurgaon and Haridwar are capable to produce 4.4 million units per year. They introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission.

Business History

1983 - Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed


- The Company was Incorporated on 19th January, at New Delhi. The Company Manufacture motor cycles upto 100 cc capacity. The Company was promoted by Hero Cycles (P) Ltd. (HCPL).

- The Company entered into a technical-cum-financial collaboration agreement with Honda Motor Co. Ltd., Japan (HML). As per this collaboration agreement, HML was to furnish complete technical information and know-how and trade secrets and other relevant data.

- Hero Honda CD-100 is the first four stroke motorcycle to be introduced in India in 100cc range. Its most attractive features are fuel efficiency and its light weight. CD-100 will be equipped with electronic ignition system, illuminated speedometer, 4 speed gear box, neutral and flasher indicators, etc.

- 15 No. of equity shares subscribed for by the promoters, etc. In November, 119,99,985 No. of equity shares issued at par of which 71,99,985 shares reserved for allotment as under:

- (i) 31,19,998 shares to Hero Cycles (P) Ltd., Hero Investments (P) Ltd., and Bahadur Chand Investments (P) Ltd.

- (ii) 31,20,000 shares to Honda Motor Co. Ltd., Japan and

- (iii) 9,59,987 shares to friends and association of promoters. Out of the balance 48,00,000 shares, 2,40,000 shares were reserved for subscription by the employees of the Company and 96,000 shares by business associates. The remaining 44,64,000 shares were offered at par for public subscription during November.


- The Company embarked on its 2nd phase of expansion of increasing its installed capacity from 1,20,000 to 1,50,000 vehicles per annum by the addition of several critical aliminium and steel components.


- 36,00,000 rights equity shares issued at par in prop. 3:10.


- The Company offered 6,00,000 - 15% secured redeemable non-convertible debentures of Rs 100 each for cash at par on rights basis in the proportion 1 debenture: 18 equity shares.

- Another 3,00,000 - 15% debentures were allotted to retain oversubscription. The debentures were to be redeemed at a premium of Rs 5 per debenture on the expiry of the 7th year from the date of allotment of the debentures.

- 3,75,000 rights equity shares issued at par in prop. 3:10.


- The Company introduced a new model "Sleek" during July.

- 850 No. of equity shares forfeited.


- The Company was planning to launch a new model motor cycle-CD 100 SS sutiable to semi-rural conditions. In the domestic market the Company was reported to have a market share of 46%.

- 850 forfeited shares reissued.


- The Company proposed to expand the capacity of existing plant at Dharuhera to 2,40,000 nos. per annum. Another plant with an installed capacity of 1,50,000 nos. per annum at Gurgaon Industrial Estate was being set up.

- The Company issued 39,79,500 bonus shares to the existing shareholders in the ratio of 1:4. The Company also issued 28,557 number of fractional coupons representing 14,250 shares against which shares shall be allotted to presenting the same for consolidation and allotment.

- The Company's production and turnover increased to 1,83,490 motorcycles and Rs.483.85 crores respectively due to growth in demand for two wheelers and declining inflation.


- 14,420 bonus shares issued by way of consolidation of fractional coupons. - A new Technical Collaboration Agreement has been signed with Honda Motor Co. Ltd., Japan for the period upto the year 2004 which includes technology related to models of higher Engine displacement.

- The Company alloted 39,79,500 No. of Equity Shares of Rs. 10/- each as Bonus shares on 7th February, by way of capitalisation of General Reserves.

- The Company had issued 28557 No. of Fractional Coupons representing 14.250 shares against which the Shares shall be alloted on presenting the same for consolidation and allotment.


- Hero Honda Motors has launched its newest motorcycle, the Street, a 100 cc bike designed for use in congested urban traffic conditions.

- Hero Honda Motors Ltd (HHML) has set up a new motorcycle plant in Gurgaon, near Delhi for the manufacture of the Honda Super Cub 100 cc stepthro bike.

- Hero Honda has set up a new state-of-the-art plant, heralding a new phase of development of motorcycle industry in India, to provide the most modern and technologically advanced production facilities.

- Hero Motors of the Rs.1,600 crore Hero group, as part of its globalisation plan, has set up a plant in Brazil for manufacturing hero winner scooters.

- A new step thru model `Street-100' with unique feature was launched on 24th January.


- The company proposes to increase the share capital to 5 crore equity shares of Rs. 10 each, 4 lakh cumulative redeemable preference shares of Rs. 100 each and 4 lakh cumulative convertible preference shares of Rs. 100 each with power to increase or reduce it from time to time.

- The company further proposes to capitalise Rs. 19,96,87,500 from general reserve to share capital through issue and allotment of bonus shares. Altogether, 1,99,68,750 fully paid bonus shares will be allotted and distributed to members of the company holding equity shares of the company in the proportion of one bonus share for every fully paid equity shares of Rs.10 each.

- Motorcycles major Hero Honda is considering entry into scooters in collaboration with partners, Honda Motors, after the Japanese company decided to walk out of Kinetic Honda, their scooter venture with the Firodias of Pune.

- Honda Motors recently pulled out of its joint venture with the Firodias in which it held a 51 per cent equity stake.

- Honda Motor Company Ltd of Japan (Honda) and Kinetic Honda Motor Ltd (KHML) have signed a five-year licence and technical assistance agreement under which KHML will continue to receive the technical knowhow, critical vehicle parts and access to Honda's markets even after the sale of Honda stake in KHML to Kinetic Engineering Ltd (KEL).

- The Company changed the paradigm in two-wheelers by launching the most powerful and fast bike- CBZ(ee) with a unique feature of Transient Power Fuel Control (TPEC) system.

- 23,962,500 bonus shares issued in prop. 1:1.


- Hero Honda Motors Ltd (HHML) and 20th Century Finance Corporation Ltd have signed a Memorandum of Understanding (MoU) for financing of Hero Honda motorcycles.

- The company, a joint venture between Honda Motor Company of Japan and Hero group of India to produce four-stroke motorcycles, also aims to increase its share by 1 per cent to 38.6 per cent during the current fiscal.

- Leading two-wheelers manufacturer Hero Motors has formed a joint venture with Briggs Stratton of US to develop and manufacture four-stroke engines for mopeds and scooters in India, a top company.

- Honda Motor Company of Japan has decided to re-enter the scooter market in India as also foray into three-wheelers in a joint initiative with its existing joint venture company Hero Honda Motors Ltd.


- Hero Honda Motors Ltd. and Tata Finance Ltd. have signed a national tie-up agreement. The Company is the largest manufacturer of motorcycles in the country.

- The Company will relaunch its stepthru Stree Smart on Baisakhi 13th April.

- Hero Honda Motors Ltd (HHML), has launched an upgraded version of the existing step-through motorcycle - the Hero Honda Street.

- The Company was ranked as the 9th Highest Value Creator among 12 industry groups within the Bombay Stock Exchange top 100 companies over a five year period (1994-99).


- Hero Honda Motors Ltd. has launched a new 100cc motorcycle named `Passion'.

- The Company has secured shareholders' approval for splitting one equity share of Rs 10 each into five equity shares of Rs 2 each in the ratio of 1:5.

- Hero Honda Motors Ltd. has become the largest seller of motorcycles amongst all Honda companies and ventures in the world by selling one million motorcycles during the current financial year.

- Credit rating Agency Crisil has reaffirmed outstanding `AAA' rating assigned to the proposed Rs 15 crore non-convertible debenture issue, Rs 16 crore commercial paper programme and fixed deposit programme of Hero Honda Motors.

- Promoter-Chairman of the country’s largest motorcycle manufacturing company, Hero Honda Ltd, Brijmohan Lall Munjal has bagged the prestigious Ernst & Young Entrepreneur of the Year (EOY) award here on September 27.


-Company included in the 30 companies Bombay Stock Exchange index (Sensex)

-Becomes the world's largest two wheeler company by selling 1.3 million vehicles in 2001

-Japanese automaker Honda Motor for the first time decides to source motorcycles from its Indian joint venture Hero Honda to sell as 'Honda' brandname in Vietnam

-Royalty to the Japanese parent, Honda Motor Co, hiked to Rs 630 per vehicle as compared to the flat royalty of Rs 200 on existing models like Splendor and Passion

-Approves Foreign Institutional Investors (FIIs) to increase their stake from the present 24 per cent to 40 per cent

-Comes out as the most profitable two-wheeler company in the country during the trailing four quarters by overtaking second-largest player, Bajaj Auto

-Launches Ambition, a 133 cc 11 BHP vehicle

-Unveils Smart, a 75 cc step-thru

-Comes out with a free insurance scheme worth Rs 1,000 for all its bikes

-Bajaj Auto goes ahead of Hero Honda in market capitalisation (m-cap) growth in the last fifteen months


-Achieves a landmark sales turnover of over Rs 5,000 crore during 2002-03

-Launches its cheapest 100cc motorbike 'CD Dawn'

-Hikes production capacity at two of its manufacturing facilities to three lakh units

-Hero Honda and SBI Cards launch co-branded credit card for Hero Honda's customers

-Achieves milestone by producing five million bikes from its Dharuhera plant in Haryana

-Launches its new 223-cc, 16.8 BHP Karizma at Rs 79,000

-Joins hands with Small Industries Service Institute (SISI) to train the unemployed youth who have finished diplomas

-Initiates a new dealer credit system which will bring down its receivable levels to around seven days and save the company Rs 100 crore

-Introduces Passion Plus, new version of Passion motorcycle

-Forges marketing pact with Aprilia, the Italian bike maker, to introduce its range of motoscooters and top-end motorcycles in India

-The company has bagged two Total Customer Satisfaction (TCS) Awards.

-Hero Honda Karizma bags BBC Bike of the Yr Award


-Hero Honda retreats Ambition

-Hero Honda unveils new version of Ambition

-Hero Honda's Dawn emerges as largest entry-level bike

-Hero Motors introduces 'Sting' new 4-stroke bike

-Hero Motors has announced a licensing agreement with Austria-based Bombardier-Rotax that will provide 125cc-175cc engines for the upcoming `Hero Aprilia' range of scooters.

-Hero Honda renews alliance with Honda Motor

-Two-wheeler major Hero Honda and SBI Card, the credit card arm of State Bank of India, have joined hands to launch India's first co-branded credit card in the two-wheeler industry


-New product launches widen HHML's product portfolio

-Two-wheeler major Hero Honda on October 5 announced launch of its first scooter 'Pleasure'

-Hero Honda rolls out 150-cc motorcycle Achiever


-Hero Honda launches CBZ variant X-treme

-Hero Honda announced the launch of two new variants the new 'Glamour' and 'Passion Plus' limited edition. - Hero Honda is the World No. 1 for the 5th year in a row

- 15 million production milestone achieved


-Hero Honda Motors Ltd. has appointed Mr. Yutaka Kudo as Director and Whole-time Director of the Company in the category of Executive Director w.e.f. April 1, 2007.

- Hero Honda is the World No. 1 for the 6th year in a row

- New 'Splendor NXG' launched

- New 'CD Deluxe' launched

- New 'Passion Plus' launched

- New motorcycle model 'Hunk' launched

- 20 million production milestone achieved


- Hero Honda Motors Ltd has informed that Mr. Arun Nath Maira. has been appointed as an Additional Director in the category of Non Executive and Independent Director w.e.f. December 20, 2008 by the Board of Directors by way of passing a resolution by circulation.

- Hero Honda Haridwar Plant inauguration

- New 'Pleasure' launched

- Splendor NXG lauched with power start feature

- New motorcycle model 'Passion Pro' launched

- New 'CBZ Xtreme' launched

- 25 million production milestone achieved

- CD Deluxe lauched with power start feature

- New 'Glamour' launched

- New 'Glamour Fi' launched


- Hero Honda Motors Ltd has appointed Mr. Ravi Nath as an Additional Director in the category of Non Executive and Independent Director w.e.f. October 14, 2009 by the Board of Directors by way of Passing a resolution by circulation on October 14, 2009.

- Hunk' (Limited Edition) launched

- Splendor completed 11 million production landmark

- New motorcycle model 'Karizma - ZMR' launched

- Silver jubilee celebrations

Hero Honda Motors Key Financial Ratios

Particular | 201103 | 201003 | 200903 | 200803 | 200703 | Liquidity Ratios | | | | | | Debt/Equity Ratio | 0.24 | 0.02 | 0.03 | 0.05 | 0.08 | Current Ratio | 0.40 | 0.57 | 0.50 | 0.56 | 0.57 | Turnover Ratios | | | | | | Inventory Turnover Ratio | 42.99 | 43.97 | 42.06 | 40.62 | 45.97 | Fixed Assets Turnover Ratio | 4.99 | 6.37 | 6.08 | 6.44 | 7.05 | Debtors Turnover Ratio | 172.92 | 129.92 | 60.54 | 38.06 | 46.74 | Interest Coverage Ratios | 153.20 | 1349.44 | 705.13 | 706.14 | 774.98 | Profitability Ratios | | | | | | Operating Profit Margin | 13.66 | 18.03 | 14.51 | 13.06 | 12.02 | PAT/Total Income | 9.12 | 13.02 | 9.26 | 7.90 | 7.30 | NPM (Net Profit Margin) | 9.33 | 13.30 | 9.46 | 8.04 | 7.43 | Return on Capital Employed | 60.68 | 76.48 | 50.99 | 49.09 | 51.66 | Return on Networth | 60.05 | 61.43 | 37.77 | 35.48 | 38.30 |

Source: Powered by Tickerplant

Company Profile

Hero Honda Motors Ltd. is the world's largest manufacturer of two – wheelers, based in India.
The company is a joint venture between India's Hero Group and Honda Motor
Company, Japan that began in 1984.
In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India and the ‘World No.1’ two-wheeler company in terms of unit volume sales in a calendar year by a single company. Hero Honda has retained that coveted position till date.
Today, every second motorcycle sold in the country is a Hero Honda bike. Every 30 seconds, someone in India buys Hero Honda's top-selling motorcycle – Splendor
Hero Honda bikes are manufactured across three globally benchmarked manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state of Uttrakhand.
The company's growth in the two wheeler market in India is the result of an intrinsic ability to increase reach in new geographies and growth markets. Hero Honda's extensive sales and service network now spans close to 4500 customer touch points.
These comprise a mix of authorized dealerships, Service & Spare Parts outlets, and dealer-appointed outlets across the country.
Product range of the company includes:
CD Dawn
CD Deluxe
Splendor +
Splendor NXG
Passion PRO
Passion Plus
Super Splendor
Splendor PRO
Glamour PGM FI
CBZ Extreme


The rising differences between the two partners over a number of issues gradually led to the
Split of Joint Venture. Differences ranged from Honda's refusal to fully and freely share technology with Hero, despite a 10-year technology tie-up that expires in 2014, even when
Indian partner was paying high royalty to the Japanese company. Another major reason for
Honda was the refusal of Hero Honda to merge the company's spare parts business with Honda’s new fully owned subsidiary Honda Motorcycle and Scooter India (HMSI)
In December 2010, the Board of Directors of the Hero Honda Group decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The
Hero Group would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export. Since the beginning, the Hero
Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint
Venture alone.


Hero Moto Corp has three manufacturing facilities based at Dharuhera, Gurgaon in Haryana and at Haridwar in Uttarakhand. These plants together are capable of churning out 3 million bikes per year. Hero Moto Corp has a large sales and service network with over 3,000 dealerships and service points across India. The company has a stated aim of achieving revenues of $10 billion and volumes of 10 million two-wheelers by 2016-17. This in conjunction with new countries where they can now market their two-wheelers following the disengagement from Honda, Hero Moto Corp hopes to achieve 10 per cent of their revenues from international markets, and they expected to launch sales in Nigeria by end-2011 orearly2012. In addition, to cope with the new demand over the coming half decade, the company was going to build their fourth factory in South India and their fifth factory in Western India.
The HMSI factory is at Manesar, Gurgaon district of Haryana. The initial production capacity was 100,000 scooters per year, which are currently 600,000 scooters. The motorcycle production capacity is 1,000,000 per annum. Honda Motorcycle & Scooter India (HMSI) plans to expand its network by opening 500 dealers and sub-dealers in tier-II and tier-III cities by FY 13 which will take its network strength to 2000. The company is targeting 30 per cent growth in sales in current fiscal. With about 14 per cent market share in two-wheeler segment, HMSI has set a target to sell 27.5 lakh bikes and scooters in current fiscal against 21 lakh units sold in last fiscal.
Sales Figure-Hero:

In 1983, Hero Cycles of India signed an agreement with Honda Motor Corporation, forming Hero Honda. This agreement, between an Indian firm that got its start making bicycle parts, and the world’s largest motorcycle manufacturer, marked Honda’s entrance into the Indian market for motorized two-wheeled transportation. While the country was already crowded with competitors such as Suzuki, Yamaha, LML and Kinetic, Honda’s executives and Hero’s founder and CEO, Brijmohan Lall Munjal, saw significant potential in the Indian twowheeled market.
Why was the market attractive?

At first glance, the Indian market was attractive because of its sheer size and significant growth. India boasted a population of approximately 725 million in 1983, growing at a rate of 2.2 per cent per year. At that rate of growth, the Indian population was expected to grow by 163 million people in the 1980s and to surpass 1 billion people by 2000. Not only was the total population of India enormous, but Munjal also knew that the adult age group most likely to purchase two-wheelers (15–65-year-olds) was expected to grow to over 500 million by 1990 and to an estimated 695 million by 2005.

But why would one want to pursue a market where 35 per cent of the population was impoverished? Mitigating this fact was growth in the purchasing power of the Indian population, expected to grow per capita by 5.2 per cent between 1983 and 1993. Furthermore, even in the early 1980s, the country was wealthy enough to support an infrastructure of 1.4 million kilometres of highway. In total, Munjal saw that a large population coupled with a substandard economic situation was an ideal environment for inexpensive, motorized, two-wheeled scooters.

Honda also saw the potential. With air pollution from industry and vehicle emissions topping India’s environmental concerns, emissions regulations had become increasingly stringent. These regulations made environmentally friendly vehicles more attractive, and two-wheelers with their fuel efficiency and low emissions fit the bill. Honda also recognized that Asian countries such as India and China, with their huge populations and relatively low levels of economic development, were likely to embrace twowheeled vehicles as a popular means of transport.

In short, India offered a large and growing market for two-wheelers, supported by several favourable macro-trends that boded well for the future: growth in numbers in the demographic group most likely to buy twowheelers, growing purchasing power across the Indian population, and regulatory encouragement.
How did Honda enter the market?

Rather than enter the Indian two-wheeled market alone, Honda opted to join hands with the established bicycle manufacturer Hero Cycles, a company with proven manufacturing, distribution and management practices. Founded by Brijmohan Lall Munjal and his brothers in 1945, Hero Cycles was an ideal partner for Honda. In business for nearly 40 years, Hero had manufactured and distributed bicycle parts and bicycles in India for as long as Honda had produced motorcycles. And, with strong distribution channels and well-honed supplier management, the Hero Cycles name was as reputable in India as was Honda’s in Japan.

But Hero Cycles was no ordinary partner. The Munjal family’s management practices had led to exceptional results, low employee turnover, and never a day of strike in 40 years. The company used modern manufacturing concepts such as just-in-time supply chain management, multi-tasking assembly line workers, and stringent quality assurance programmes. Most importantly, Hero’s management brought an intimate familiarity with the Indian economy, government, business culture and people. ‘What drew Honda to Hero was the philosophy and value of the group. It’s good management and customer-oriented thinking’, said Honda’s Kazumi Yanagida, one of two Honda directors on the Hero Honda board.
Macro-trends steer India’s two-wheeled market

In the 1980s, the geared scooter with a four-stroke engine was Hero Honda’s most popular two-wheeled vehicle, providing inexpensive and reliable transportation to India’s largely rural population and growing middle class. Hero Honda had seen something that all the motorcycle manufacturers had missed. The biggest chunk of demand was to come from villages, small towns and the middle-class office-goers in cities for whom the fuel economy of a four-stroke engine was a bigger draw than the looks and the power of two-stroke bikes. As Brijmohan Lall Munjal remarked, ‘Looking into the rear view mirror today, the choice of a four-stroke bike in the 1980s may sound providential, but we knew that buying a product is one thing and running it for a long time is quite another. That is why we wanted the running cost of our vehicle to be low’.

The advantages of four-stroke engines were threefold. Not only did they produce less pollution than a two-stroke engine (commonly used in other motorcycles) but they were also more fuel-efficient and ran for longer than the more powerful two-stroke engine. Fuel efficiency and product longevity translated directly into money saved. Saving money appealed strongly to India’s middle-class consumer. Hero Honda had the first and for many years only four-stroke vehicle. As its early ads said, ‘Fill it, shut it, forget it.’ Yet demand for these scooters would last less than a decade. The growing purchasing power of India’s expanding middle class would soon change what they wanted in two-wheeled transportation.

In 1988, to understand its market better, Hero Honda conducted a massive customer survey, collecting some 25,000 responses. The survey told Hero Honda a surprising story. India’s consumers had changed their minds. Scooters were no longer the vehicles of choice. Motorcycles were to become the two-wheel vehicles of the 1990s. Atul Sobti, Senior Vice President of Marketing and Sales for Hero Honda said, ‘It’s thanks to that survey that today we sell over a million motorcycles in a year’.

Sobti couldn’t have been more accurate. In response to these surveys, Hero Honda set up a second plant in Gurgaon to allow for additional manufacturing capacity. Ravi Sud, Vice President of Finance said, ‘With additional capacity, we found it easier to cash in on the trend in favour of motorcycles’. By 2000, motorcycles were the choice of 58 per cent of India’s twowheeled customers, up from 33 per cent in 1996.

By making efforts to gauge and understand its market and the trends therein, Hero Honda cemented its reputation as a market-driven company, one that anticipated and acted upon these trends. As Brijmohan Lall Munjal said, ‘The excellent results achieved by Hero Honda can be attributed to our continued focus on understanding and satisfying customer needs to the finest detail. We are committed to maximizing value to all our stakeholders, by delivering “value for money” products with the best in technology and service, to our customers, consistently, wherever they are.’

In response to its customers’ desires, Hero Honda introduced other customer-friendly innovations to the Indian two-wheeled market, extending motorcycle warranties from six months to two years, and developing a Passport Scheme that included accident insurance and reward points for purchases and service.
The results of great market understanding

Being market-driven has its benefits. The proof of that mantra is in the pudding:

Hero Honda had 5 million customers and 40 per cent average annual growth in sales between 1996 and 2000.
In 2000, Hero Honda’s Splendor, a model introduced in 1994, became the world’s largest selling motorcycle.
In the first quarter of 2001, Hero Honda became the number-oneselling two-wheeled manufacturer in India, usurping arch-competitor Bajaj Auto Limited’s 43-year reign. In the first four months of 2001, Hero Honda outsold Bajaj by 40,000 vehicles, grabbing nearly 50 per cent of India’s motorcycle market.
In its year ending 2001, Hero Honda sold 1 million motorcycles, becoming the largest two-wheel company in Honda’s worldwide family.

To put that in perspective, Honda’s two-wheel market in India ‘equals the whole of North America in cars’,25 commented Atul Sobti. With such a strong share of the market, Hero Honda expected to sell 1.4 million motorcycles in its year ending March 2002,26 for net sales of more than 44 billion rupees (£400 million). For his continued entrepreneurial accomplishments, Brijmohan Lall Munjal was named Ernst & Young’s Entrepreneur of the Year for India in 2002.

It would be myopic to attribute Hero Honda’s successes simply to the size and growth of the Indian market. As the company’s case history shows, Munjal and his team have done many things well. Among the most important of these, though, is keeping a watchful eye on market trends in order to stay in tune with changing customer needs, appropriately matching their offerings to what customers want. They understood the opportunity in 1983. Their ability to stay in touch with changes in the market has enabled them to continue to seize new opportunities as they have presented themselves.
Lessons learned from Hero Honda

In 1983, could Honda Motor Company and Hero Cycles have predicted that the Indian market would buy 320,000 motorized two-wheelers each month in 2001?69 Probably not. But Honda and Hero were confident of significant market potential for motorized two-wheel vehicles in India, given the sheer size of the Indian market and its emerging middle class. At the same time, they understood the limitations in the still-modest purchasing power of their target customers, so they offered products whose reliability and overall economy were unmatched by their competitors. Hero Honda’s ability to identify an underserved market – one that was large and would grow – and match its offering to that market’s needs were the twin factors that separated them from larger competitors who had targeted more upscale urban customers having quite different needs. These are simple ideas – marketing basics, really – but they comprise the foundation for many successful entrepreneurial ventures.

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