The Hero of Indian Joint Ventures
In the world of joint ventures, no nation embodies the concept more than India. This is especially evident in its now overheated motor industries, the overlooked ugly sister of the Indian IT industry. For years, the Indian government operated on a disclosure and joint venture policy, meaning that any foreign company wishing to enter the Indian market had to disclose various formulas, trade secrets, etc. and/or partner with a local Indian interest. That policy, among other things, kept Coke out of the subcontinent for 20 years due to Coca Cola’s fear of revealing the best-kept secret recipe next to the Colonel’s 11 herbs and spices. Nonetheless, other companies learned to use the platform as a viable means to penetrate a massive market. The best example of this is the two-wheeled vehicle market.
Hero Honda Motors, Ltd. is one of India’s most successful joint ventures and anyone who has traveled there recently can tell you about the magic of seeing a gleaming new fiberglass, steel and concrete showroom in the middle of a desolate muddy highway stretch. Indians take their motorcycles very seriously and have traditionally looked to them as the entrée into middle class living, as opposed to the more expensive and less wieldy automobile. Hero motorcycles tapped into this market early in India’s history piggybacking a motorized division off of a booming bicycle operation. Once the motorized division reached a critical mass, Hero went searching for a foreign partner to bless it with a technological edge. Ironically, Honda was last on the list, but a marriage was forged. So lucrative was this marriage that the joint venture has posted profits each and every quarter since its inception in 1984.
Instructive for its nimble use of each partner’s assets, the joint venture is an excellent case study of developing market exploitation. Both partners expertly leveraged their contributions. They made skilled use of Honda’s brand name and goodwill, making its trademark a prominent component of all advertising and branding materials. Hero leveraged its superior understanding of the local markets and their psychology, tapping into the top advertising firms to convey its message. Hero also developed a highly agile, and increasingly efficient local workforce. Meanwhile, Honda’s world famous engine technology created generations of excellent motorcycles.
Despite, this rosy picture, attorneys must be sensitive to the cyclical nature or the growing pains of joint ventures and the need to provide or guard against partner flexibility and maneuverability. Indeed, as Hero Honda is entering its mature phase, the two partners are sending signals of impending inter-competition, courting other venture partners and establishing separate brand identities and market segments. Against the backdrop of the simmering relations within other joint ventures such as TVS-Suzuki, this is not surprising. As Hero and Honda maneuver and circle for potential advantage as adversaries, each set of attorneys must stand ready to protect and leverage the assets each side has nurtured. Moreover, to the extent the joint venture continues in the face of competition from the partners themselves, this will create legal issues.
Click here for an excellent and probing case study of the Hero Honda joint venture.
Kaiser Wahab
Hero Honda Motors, Ltd. is one of India’s most successful joint ventures and anyone who has traveled there recently can tell you about the magic of seeing a gleaming new fiberglass, steel and concrete showroom in the middle of a desolate muddy highway stretch. Indians take their motorcycles very seriously and have traditionally looked to them as the entrée into middle class living, as opposed to the more expensive and less wieldy automobile. Hero motorcycles tapped into this market early in India’s history piggybacking a motorized division off of a booming bicycle operation. Once the motorized division reached a critical mass, Hero went searching for a foreign partner to bless it with a technological edge. Ironically, Honda was last on the list, but a marriage was forged. So lucrative was this marriage that the joint venture has posted profits each and every quarter since its inception in 1984.
Instructive for its nimble use of each partner’s assets, the joint venture is an excellent case study of developing market exploitation. Both partners expertly leveraged their contributions. They made skilled use of Honda’s brand name and goodwill, making its trademark a prominent component of all advertising and branding materials. Hero leveraged its superior understanding of the local markets and their psychology, tapping into the top advertising firms to convey its message. Hero also developed a highly agile, and increasingly efficient local workforce. Meanwhile, Honda’s world famous engine technology created generations of excellent motorcycles.
Despite, this rosy picture, attorneys must be sensitive to the cyclical nature or the growing pains of joint ventures and the need to provide or guard against partner flexibility and maneuverability. Indeed, as Hero Honda is entering its mature phase, the two partners are sending signals of impending inter-competition, courting other venture partners and establishing separate brand identities and market segments. Against the backdrop of the simmering relations within other joint ventures such as TVS-Suzuki, this is not surprising. As Hero and Honda maneuver and circle for potential advantage as adversaries, each set of attorneys must stand ready to protect and leverage the assets each side has nurtured. Moreover, to the extent the joint venture continues in the face of competition from the partners themselves, this will create legal issues.
Click here for an excellent and probing case study of the Hero Honda joint venture.
Kaiser Wahab
posted by Kaiser at 6:06 AM
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