Suzuki and Honda look at more India synergies to tighten belts

To increase their outreach across Indian markets in both two wheeler and four wheeler markets Japanese automakers Suzuki Motors and Honda Motors are trying to control cost outlays through adoption of synergies in all departments. Honda which through sustained effort has managed to gain itself a ranking among top five automobile manufacturers of India has recently broken off its long term partnership with Hero Moto Corp for making and selling two wheelers in India. Therefore Honda is trying hardest to create a strong distribution and sales network similar to market leader Maruti Suzuki and steadily increasing its market share.  The competition in two wheeler industry is tougher than four-wheeler but since it is a smaller operation than cars Honda is trying to adopt synergies to reduce costs.

Suzuki Motorcycles which is working with Maruti Udhyog in small car segment and to source materials for its two wheeler business it will use the wide network of its Indian partner’s vendors and suppliers. This will help the firm reduce costs as Maruti has a better network and its outreach into remotest parts of India will help Suzuki source its raw materials at a low price. Suzuki also has great synergies with Maruti for research and development activities which are carried out at Rohtak plant by Maruti only as yet. Besides research both partners will also develop synergies in human resource and back end support.

A different strategy is followed by multinational Honda Motors which set up operations in India several years after Suzuki Motors set up Honda Motors India as an wholly owned subsidiary in 1995 in partnership with Usha International. When it developed a partnership with Hero Motors to set up manufacturing and sale of motorcycles and scooters in India, there were no plans to set up four wheeler unit as markets were still controlled in India. Once ownership norms became more flexible Honda bought over shares of Usha international and established Honda Motors India as an independent entity with separate division which handles procurement of raw materials and spares for both four wheelers and two wheelers manufactured by it.

The slow and steady strategy of Honda Motors under which it launched one vehicle at a time helped the firm to understand market needs better without wasting funds on producing multiple models which would not be sold. Honda has slowly grown therefore from a brand better known for making motorcycles and scooters in India to the manufacturer of award winning Honda City sedan and Honda Brio hatchback.  Like Ford Honda is also following a strategy of one to two models at one point of time to allow its production and marketing team to collate their strategies and energy in making them successful instead of trying to unsuccessfully sell multiple models. The recently inaugurated production unit of Honda at Rajasthan which will produce its successful model Amaze is a case in point of synergized activity wherein all activities related to production namely welding, painting, molding, forging, engine assembly and powertrain all under the same roof. The unit will also have a engine testing facility within factory premises which will save time and funds.