Kinetic Honda - The Break-Up

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Case Details:

Case Code : BSTR003
Case Length : 12 Pages
Period : 1998-2001
Organization : Kinetic Motor Limited, Honda Motors Ltd.
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Souring Ties

Reports claimed that right from the beginning there had been differences between Honda and the Firodias over the issue of management of Kinetic Honda.

Firodia admitted that there were serious differences over issues like introduction of new models, advertising expenditure, marketing strategies, etc. As a result, the company suffered in terms of growth and profitability. Under the joint venture agreement, Kinetic Honda manufactured scooters and Kinetic Engineering made mopeds. Both of them could not manufacture each other's products or motorcycles. Because Honda was present in the motorcycle segment with Hero Honda, the Kinetic group remained in mopeds and scooters. This was not in favor of Kinetic because the moped market had declined considerably during the 1990s. Kinetic had ambitions of becoming a full range two-wheeler company as it was strong in operations and also had a large distribution network...


Firodia denied that the dropping of the Honda tag from its scooters would affect the sales.

The company introduced tough measures to facilitate improvements on various fronts including input costs, asset management and inventory management. Kinetic realized that gaining customer and dealer confidence would be a key task if it wanted to survive without Honda. Kinetic told its dealers about its product plans for 1999-2001 and tried to convey to them that now on they would be selling not just Kinetic Honda scooters, but promoting the umbrella 'Kinetic' brand. This meant that they would also be selling mopeds and motorcycles. This in turn, meant higher volumes and, thus, higher profits in the coming years. Kinetic conducted training programs for its dealers to help them deal with customers in a better manner...

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