The German Export Engine By

Gunnar Trumbull-Jonathan
Schlefer By Debi S. Saini
Business Case Study
Description:
Multinationals often make judgmental errors regarding cross-cultural issues and the business environments
prevailing in foreign countries. Honda Motorcycles and Scooters India Ltd. (HMSI), a wholly owned subsidiary of
Honda Motor Company Limited, Japan, established its plant in India in 1999 and made mistakes in handling
people-management issues. It wanted to pursue a non-union model but failed to devise and implement an
appropriate human resource management (HRM) strategy. Management was caught unaware when
accumulated grievances led workers to turn hostile and form a union with the help of the trade union wing of a
political party that was a partner in the ruling coalition at the federal level. The management failed to break
workers' unity either by soliciting help from the state agencies or by using the legal system to their advantage.
The subsequent power struggle led to violent clashes between the workers and the police, who had been
called in for protection by HMSI management. The extensive media coverage not only tarnished the company's
image, but also pressured the federal government to come to the rescue of the workers. This incompetent
handling of HR issues by the company led to a long strike by the workers. The strike, besides causing substantial
financial losses, also led to the emergence of a very strong union. In addition, production targets that were
achieved on a daily basis before the union came into existence were seldom achieved after the conciliation
came into effect. Provides insights into building and implementing a commitment model of HRM strategy,
shows how employers should safeguard their interest by managing the countervailing power of workers in the
Indian context, and discusses the dynamics of state power in Indian industrial relations and who can benefit
from it in different contexts.
Subjects Covered:
FINANCE & ACCOUNTING

Publishing Authority:
Harvard Business Review
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