Case Study Of Hero Cycles Usa

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The Hero Honda Joint Venture

The origins of Hero date back to 1944, when four brothers of the Munjal family started a bicycle spare parts business in Amritsar, Punjab, North India. In 1956, Hero Cycles Ltd was established in Ludhiana, Punjab. In the first year, the output was 639 bicycles. They started exporting bicycles in 1963. The Munjals also incorporated several bicycle component manufacturing units, which included Rockman Cycle Industries for manufacturing bicycle hubs and chains, and Highway Cycles for making freewheels. By 1975, Hero had become the largest manufacturer of bicycles in India.

In 1978, Majestic Auto Limited, was incorporated. The first product from this venture was Hero Majestic Moped, a motorized two wheeler. In 1986, Hero became the largest bicycle manufacturer in the world.

In the early 1990s, Japan-based Honda was looking at entering the Indian two wheeler market (both scooters and motorcycles) through joint ventures7. Honda had been the largest manufacturer of motorcycles in the world since 1959. In terms of automobile manufacturing, it was the sixth largest in the world. Initially, Honda intended to partner with the then market leader Bajaj Auto Ltd. (Bajaj). But the venture did not work out, and Honda partnered with Kinetic Engineering Ltd. (Kinetic), which manufactured the Luna brand of mopeds. Both the companies entered into a joint venture, with each company holding 28.56% of the equity. The venture, Kinetic Honda Motors Ltd. (Kinetic Honda) opted to produce scooters through the joint venture, as the scooters were highly popular at that time.

Then for the motorcycle venture, Honda approached Hero. Hero's bicycle business, mopeds, and wide distribution network attracted Honda. Both the companies started negotiating in 1983 and entered into a joint venture in 1984. The joint venture agreement was for a period of ten years. As per the deal, Honda agreed to provide the technical know-how, set up manufacturing facilities, and carry out Research and Development activities. Hero Honda had to pay a royalty of 4% on the ex-factory price of each vehicle for these services. Hero also paid a lump sum fee of US$ 500,000. In the venture, both the partners held 26% of the equity, 26% was sold to the public, and the remaining was held by financial institutions.

On the board of Hero Honda, Honda appointed four members and the Munjal family had four representatives. Employees from Honda, Japan, were brought to take care of the quality and engineering functions. Other functions like marketing, finance, HR, and daily operations were managed by the local staff.

Hero Honda announced that it would launch a 100 cc motorcycle the next year. At that time, industry observers were of the view that consumers would reject motorcycles as they were more used to and preferred scooters. Hero Honda set up a factory in Haryana, North India. The company launched its first bike - the Hero Honda CD 100 - in 1985. The CD 100 was designed completely by Honda. The four stroke motorcycle was equipped with an electronic ignition system, illuminated speedometer, and 4-speed gear box. The bike set very high standards of fuel efficiency, promising a mileage of 80 km per liter. The Hero Honda CD 100 was launched with the campaign - 'Fill it, shut it, forget it' that highlighted the mileage that it provided. The motorcycle became highly popular owing to its mileage and the fact that it was the only four stroke engine motorcycle at that time in India.

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The Need: Real-Time Data on Transporter Performance and Shipment ETAs

Hero Cycles, with a 48% share of India's bicycle market, ships products to about 2800 dealer locations across the country. They sought a shipment monitoring solution to address a variety of needs. These included evaluating the performance of multiple transporters, gaining control over dealer inventory needs, providing real-time visibility and ETA information for dealers, and reducing depot detention costs. In addition, they wanted to be able to respond quickly and efficiently if any problems arose during shipment.

The Solution: Real-Time Insight into Market Vehicle Activities

Roambee provided on-demand shipment monitoring services, including wireless tracking devices ("Bees") that last up to 90 days on a single charge. The Bees were attached starting point of each shipment. On delivery, the devices were unloaded along with the goods and returned to Roambee.

Hero and their dealers were able to follow shipments in real time via Roambee's customer dashboard, using their own computer, tablet, or smartphone.

Roambee's cloud-based service provided real-time alerts about shipment movement. Alerts were set to notify Hero of stops, movements, delays, and the crossing of defined waypoints.

Using the Roambee service, Hero was able to evaluate transporters and use that data to take actions to streamline the delivery process. Real-time shipment visibility for dealers improved the dealer experience. Finally, the real-time data on shipment movement enabled Hero to work with transporters to reduce depot detention costs.

Roambee's portable vehicle traceability solution enables consumer goods companies such as Hero to gain greater control of shipments carried by third-party transporters. Roambee's next-generation technology and pay-as-you-go business model make shipment monitoring flexible and affordable. 

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