International Business Strategy of Honda in India

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Honda is a Japanese public multinational corporation, it is known for manufacturing automobiles, aircraft, motorcycles and power equipment’s. Honda as a corporation has been the largest motorcycle manufacturer in the world since 1959. In 2001 it became the second largest Japanese manufacturing corporation and was also the 8th largest automobile manufacturer in the world in 2015. Honda was the first Japanese company to manufacture a luxury brand, Acura, in 1986. Their core business was automobile and motorcycle manufacturing, it also manufactures garden equipment, ship engines, war machines and generators, and many other products. Honda has also been involved in the artificial intelligence/robotics research since 1986 and released their first robot ASIMO in 2000. In 2004 Honda also advanced in aerospace with the company name as GE Honda Aero Engines and in 2012 began the production for Honda HA-420 Honda Jet.

Hero MotoCorp ltd is an Indian Motorcycle and scooter manufacturing Company from New Delhi, it is also the world’s largest two-wheeler manufacturing company and in India where it has over 46% of the market share. The companies name represents the flagship company hero cycles ltd of the Munjal Brothers. In 1984 Honda corporation and Hero MotoCorp came together as joint venture and as a result Hero Honda Motors was established in 1984 in Dharuhera, India. The Munjal Brothers owner 26% stake in the company. This essay talks about the various strategies used by Honda in India after its merger with Hero Cycles ltd. It will also talk about the success and merger of the company. And will also provide a deeper insight about the Corporate Social Responsibility. Honda Made its appearance in the Indian Automobile Industry in 1984 after its merger with hero cycles ltd the newly formed company was Hero Honda Motors. The Munjal brothers owned 26% stake in the company. The organisation had Brij Mohan Munjal as Chairman, Pawan Munjal as Managing Director. The Management Structure of the

Company was to market itself Honda’s approach towards the Indian Automobile Industry was aggressive, it targeted the Middle-class families with its two wheelers. The company launched new motorcycles which set benchmark in the industry when it came to low emission and fuel efficient. The company sold millions of bikes as a result of its fuel efficient and increased mileage campaign. Around 20 million Hero Honda two wheelers were there on the road. Its plant in Dharuhera and Gurgaon including the newly inaugurated plant in Haridwar combine can produce 4.4 million units of two-wheeler in a year. The Japanese Multinational Corporation Honda as its strategy to launch itself in the Indian Automobile Industry Merged with Hero Cycles ltd. Hero Honda was one of the most successful mergers. The company controlled over 46% of the market share. Splendor Hero Honda Motorcycle was one most sold two-wheeler. In 1998-99, Hero Honda performed extremely well in the two-wheeler market the company’s sales volumes showed an increase of 38%, turnover rose up by 34 per cent, and the net profit soar up by 58 per cent. Both the partners decided to sign off the consent of the joint merger and work in their own way. Board of the company met together to put a stamp to end the 26-year-old partnership that began when India was open to Foreign Direct Investment. The merger was a success and as a result the motorcycles manufactured by Hero Honda motors showed growth in sales every month. It had sold over 3,53,342 unit in March 2009 compared to its sales in the last year 3,20,594 and showed a 10% increase in sales.

The sales for the financial year 2008-09 stood at 37,22,000 units compared to that of last year 33,37,142 units. It has been the world’s biggest manufacturer of 2-wheeled motor vehicles since 2001, when it manufactured 1.3 million motorbikes in a single year. During the fiscal year 2008-09, the company had sold over 3.28 million bikes with the net profit of the company at Rs. 1281.7 crore, about 32% hike from the previous fiscal year. Hero Honda said it sales showed a 12% increase by the end of the year. (PTI, 2019) The performance in the fiscal year 2008-09 in over 75,00,000-units domestic market the company now covered 57% of the market share at a time when the industry was facing slowdown and the world face the impact of recession. In the last fiscal (2008-09), the company had launched various new models across segments like Hunk, in the 150-cc segment and CBZ X-Treme also new variants of Passion, Splendor NXG along with refreshed models of its scooter Pleasure. (PTI, 2019) The merger resulted in many achievements for the company.

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The Two-wheeler company Hero Honda was reported to have best sales for February at 4,72,055 units, showing a hike of 23.54 per cent over the same month last year. The company had sold 3,82,096 units in the parallel month last year. The revenue at two-wheeler unit of Honda Motor Grew by 4 ½ times and demand for the two-wheeler increased by 3 times since fiscal 2011, when the Japanese company ended its joint venture with the Hero Group. The Indian unit covered for more than 30% of Honda Motors’ global sales from scooters and motorcycles in the financial year 2011, making the country’s the No.1 market for it in this segment. India also Marked for 15% of Honda’s operating profit from the two-wheeler business. It was also the 10th consecutive month where the company recorded 4-lakh plus sales. The company’s scooter model ‘Pleasure’ continued to do extremely well with an average of 30,000 units being sold in a month. (@businessline, 2019). In terms of Competitors the sales of Discover and Pulsar would help the competitor company bajaj a rise of 40% in the whereas Hero Honda might grow at 12-13% for the fiscal (2010-11). This will Reduce the gap between the two Automobile organisation. It was also expected that the two-wheeler industry is expected to grow upto to 15% in the fiscal year, which can also bring down Hero Honda's market share to below 50%.

Making it lose its Market Position. Bajaj's Discover and Pulsar brought 86% to domestic motorcycle sales, which then grew to 53% to about 632,672 units in the second half of the fiscal year, crossing the industry's 21% overall rise. The company values its customer, Hero Honda Passport Program its unique CRM initiative had over 3million users under it. (Scribd, 2019). The Program has also helped the company to understand its customer which helped them to deliver value at different price and created loyal customer community. The company’s approach being aggressive its strategy was to combine its position in the market. It believed that increasing urbanization empowerment will bring rural areas to economic stability. This would help Hero Honda to sustain in the years to come. (Scribd, 2019).

The company’s corporate social responsibility (CSR) vision is to have a sustainable Greener, Safer World. This vision is a core part of the company’s strategy. The company has four main programmes. The first being Happy Earth, there are numerous projects running towards environment protection and preservation. Central focus of Happy Earth is to ensure environment protection beyond the newly formed CSR laws. Happy earth’ initiative, focuses on providing a change in environment to make the world a joyful place to live in. under this programme they have already initiated 160000 plantations in the last 8 months and constructed 82 toilets. (sethi, 2016) The company’s second programme is Hamari Pari. It is basically focused on empowering deprived/poverty-stricken girls through various involvement in partnerships with dependable non-profit organisations NGOs and social businesses. They take girls from the age of 5 to 16 and help and support them on their overall holistic development. (sethi, 2016), The third CSR initiative of the company is Educate to Empower. This is focused at supporting and providing education to promising youngsters across the country. The idea of the initiative is to ensure that each legatee of this programme is provided education in a way that the person becomes an individualistic and responsive citizen of the country. The Company has provided support to over 14000 kids for health and hygiene and are also supporting 15000 kids for career counselling in 8th, 9th and 10th class. (sethi, 2016). The fourth initiative of the company was Ride Safe India, the company’s fundamental responsibility towards ensuring ‘safety’ of commuters on India’s roads. They have created road safety footpaths in many cities like Gurgaon, Delhi, Lucknow, Rourkela and Hyderabad.

For Example, they have put simulators, showing people how to drive two wheelers and four wheelers safely. (Majmudar, 2019) The company started its focus on ‘green manufacturing and production many years ago and have been consistently working on reducing carbon footprint. Their production process eliminated the use of harmful substances like asbestos, hexavalent chromium, and other phenol substances that are harmful to the environment. All their production/manufacturing units were technologically updated and had eco efficient and effective -treatment plants, sewage-treatment plants, waste food-treatment mechanism, oil conversation and paints conservation techniques and the company also had systemised water-management system that preserves, harvests, and reuses and recycles water. Hero Honda as CSR activities followed in preserving the environment and have been working towards its preservation with the use of innovative technology and methods. (Majmudar, 2019).

Conclusion

Honda’s decision to introduce itself in the Indian Automobile Industry with its merger with Hero Cycles Pvt ltd was a success. The Company achieved a lot in the 26 years of its partnership. The company implemented Multidomestic strategy in its initial stage, that was to introduce and manufacture bikes that were Customised and Tailored according to the requirement of middle class and other customers, i.e. the manufactured motorcycles were fuel efficient and had increased mileage. This helped the company to gain customers and as a result there were over 20 million Hero Honda two-wheelers on the road. Market share rose up to 54%. The Merger is the most successful Merger in the History of the same Context.

As a result of High Integration and High responsiveness strategy the company also had various mergers with other companies in the global market. Hero MotoCorp also acquired 49.2% stake in the US based ERIK BUELL RACING for 25 million dollars. It was also the companies first equity share investment outside home country. This acquisition helped the company to procure more technological advancement, which has been Indian automobile industry’s requirement. It also planned to launch itself countries like Africa, Ivory Coast, Burkina Faso and in Ecuador and Peru the company as a strategy planned to set up its assembly units Colombia, Kenya and Nigeria. As of the current situation it had assembly units in Bangladesh. The Company build a International Brand Image. To gain customer loyalty the company also initiated many strategic programs and practices. Hero Honda Passport Program 3 million members under it. Which helped them understands its customer in a better way and provide the company with deeper insights about the two-wheeler market. In 2006 the company crossed a unit sale threshold of 3 million motorcycles. A famous 'Fill it - Shut it - Forget it' campaign captured the idea of many bike riders across India, and Hero Honda sold millions of bikes purely on the word of increased mileage/average and that the motorcycles was fuel efficient and eco-friendly.

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International Business Strategy of Honda in India. [online]. Available at: <https://writingbros.com/essay-examples/international-business-strategy-of-honda-in-india/> [Accessed 20 Jul. 2024].
International Business Strategy of Honda in India [Internet]. WritingBros. 2020 Dec 28 [cited 2024 Jul 20]. Available from: https://writingbros.com/essay-examples/international-business-strategy-of-honda-in-india/
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