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August 31, 2009 HERO HONDA MOTORS.LTD 8/31/2009 IBS HERO HONDA MOTORS.LTD Submitted to : Prepared By: GROUP NO – 8 Prof. Mukund Mate Atul Kumar Nitin Bhartia

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Page 1: Hero Honda Motors.ltd

August 31, 2009

HERO HONDA MOTORS.LTD

IBS HERO HONDA MOTORS.LTD

Submitted to: Prepared By: GROUP NO – 8 Prof. Mukund Mate Atul Kumar

Nitin Bhartia Pallavi Boruah

Sandeep Taparia Yashodhan Mundra

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CONTENTS

PAGE NO

1. Introduction

1.1 - Hero Honda Group & Hero Honda Motors Ltd 3 1.2 - Company Profile 4 1.3 - Strategic Intent of HHML 5 1.4 -Two - Wheeler Industry in India 6 1.5 - Key Milestones 9

2. Resources Analysis

2.1 - Financial Resources 11 2.2 - Physical Resources 11 2.3 - Technological Resources 12

3. Strategies & Policies

3.1 - Leadership 13 3.2 - Promotional strategies 143.3 - Target market 163.4 - Marketing mix of Hero Honda 17

4. Group Analysis

4.1 - Value Chain Analysis 184.2 - SWOT Analysis 214.3 - Competitor Analysis 224.4 - BCG Matrix 244.5 - Porters Five Forces Model 25

5. Conclusion & Recommendations 27

6. References 28

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1. INTRODUCTION

1.1. Hero Honda Group & Hero Honda Motors Ltd.

"Hero", the brand name symbolizing the steely ambition of the Munjal brothers, came into being in the year 1956. From a modest manufacturer of bicycle components in the early 1940's to the world's largest bicycle & two-wheeler manufacturer today, the odyssey was fuelled by one vision - to build long-lasting relationships with everyone, including workers, dealers and vendors. This philosophy has paid rich dividends through the years.

Hero Honda Motors Limited, based in Delhi, India, is the world's third largest manufacturer of motorcycles after Honda and Yamaha. Hero Honda is a joint venture that began in 1984 between the Hero Group of India and Honda of Japan. It has been the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year. During the fiscal year 2008-09, the company has sold 3.28 million bikes and the net profit of the company stood at Rs.1281.7 crore, up 32% from the previous fiscal year.

Hero, a name synonymous with two-wheelers in India is today a multi-unit, multi-product, geographically diversified Group of companies. Through fully integrated operations, group roll its own steel, make critical components such as free wheels for their bicycles, and have the foresight to simultaneously diversify into myriad ventures, like product designing, IT enabled services, finance and insurance, just to name a few.

Like every success story, Hero's saga contains an element of spirit and enterprise; of achievement through grit and determination, coupled with vision and meticulous planning. Throughout its success trail, the Hero Group and its members have displayed unwavering passion of setting higher standards for themselves and delivering simply the best to their customers. "Engineering Satisfaction" is the prime motive of the Hero Group and it has become a way of life and a part of the work culture of the Group. This is what drives the Group to seek newer vistas, adopt faster technology and create quality driven products to the utmost satisfaction of customers, partners, dealers and vendors.

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1.2. Company Profile

“Hero” is the brand name used by the Munjal brothers in the year 1956 with the flagship company Hero Cycles. It is a joint venture between India's Hero Group and Honda Motor Company; they are related to Jagdish Lal Munjal.

During the 1980s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission. A legendary 'Fill it - Shut it - Forget it' campaign captured the imagination of commuters across India, and Hero Honda sold millions of bikes purely on the commitment of increased mileage.

Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda's top-selling motorcycle: Splendor.

Hero Honda bikes currently roll out from two globally benchmarked manufacturing facilities based at Dharuhera and Gurgaon in Haryana. These plants together are capable of churning out 3.9 million bikes per year. A third state-of-the-art manufacturing facility at Haridwar in Uttranchal will soon be commissioned to cope with sustained customer demand. Hero Honda's extensive sales and service network now spans over 3,000 customer touch points. These comprise a mix of dealerships, service and spare points, spare parts stockists and authorized representatives of dealers across different areas.

Hero Honda values its relationship with customers. Its unique CRM initiative, Hero Honda Passport Program, one of the largest programs of this kind in the world, has over 3 million members on its roster. The program has not only helped Hero

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Honda understand its customers and deliver value at different price points, but has also created a loyal community of brand ambassadors.1.3. Strategic Intent

Vision/Mission

Mission -

“Hero Honda’s mission is to strive for synergy between technology, systems and human resources, to produce products and services that meet the quality, performance and price aspirations of its customers. At the same time maintain the highest standards of ethics and social responsibilities.

This mission is what drives Hero Honda to new heights in excellence and helps the organization forge a unique and mutually beneficial relationship with all its stake holders.”

Mandate -

“Hero Honda is a world leader because of its excellent manpower, proven management, extensive dealer network, efficient supply chain and world-class products with cutting edge technology from Honda Motor Company, Japan. The teamwork and commitment are manifested in the highest level of customer satisfaction, and this goes a long way towards reinforcing its leadership status.”

Objective & Values

The Hero Group philosophy is -

"To provide excellent transportation to the common man at easily affordable prices and to provide total satisfaction in all its spheres of activity”

The group philosophy clearly states what the group objectives are and stresses the focus on – customers, providing reliable and affordable mobility for the masses and other stakeholders like employees, suppliers, distributors, society and environment at large.

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Apart from being customer-centric, the Hero Group provides its employees with a fine quality of life and its business associates (suppliers & distributors) with a total sense of belonging, thus strengthening the bond that is already deep-rooted.

1.4. Two – Wheeler Industry in India

History

Arguably, the first motorcycle was designed and built by the German inventors Gottlieb Daimler and Wilhelm Maybach in Bad Cannstatt (since 1905 a city district of Stuttgart) in 1885.

Replica of the Daimler-Maybach Reitwagen

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A 1913 Fabrique National in-line four with shaft drive from Belgium

Automotive market in India (2007-2008 )

The automotive market of India is dominated by two – wheelers which constitute about ¾-th of the entire market.

75.13%

16.04%5.05%

3.78%

Two WheelerPassenger VehicleCommercial VehicleThree wheeler

The manufacturing facilities for all these automotive players are well – spread across the country with the east zone having the least of participation.

There are many factors which affect the India automotive industry as a whole which is analyzed in the following figure. These factors drive the industry & make it competitive globally. India is slowly becoming the manufacturing hub for the automotive sector.

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Players in the two – wheeler industry in India

All the manufacturers in the automobile industry can be broadly classified into the following categories:

Major players are:

Hero Honda Motors Ltd. :- Achiever - CBZ - Hunk - Karizma - Passion – Splendor

Bajaj Auto Ltd. :- Avenger - Boxer - CT 100 - Discover - Eliminator - Legend – Pulsar - Pulsar 220 - Platina - Wind – XCD Kristal - Chetak – Saffire - Sunny – Wave

TVS Motor Company :-Victor - Flame – Apache

Honda Motorcycle & Scooter India Ltd. :- Activa - Aviator - Dio - Unicorn

Minor players are:

Suzuki Motorcycles India Ltd

Yamaha: - Crux - Gladiator - Libero - RX-135 - RX 100 - R15 -FZ16 - FZ-S

Royal Enfield (Niche Segment)

GOVERMENT POLICIES ...Duties & Taxes ...Impact of oil prices

NEW PRODUCT LAUNCHES ...Shorter life cycle

COST COMPETITIVENESS ...Reduced cost to consumer ...India emerging as a manufacturing hub

I N D I A N A U T O M O T I V E

I N D U S T R Y

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New Entrants

Mahindra & Mahindra (Acquired Kinetic Motor Co. Ltd. in 2008)

Mahabharat Motors (Will start producing TVS branded 2-wheelers in Apr.’09)

Other Players

Manufacturers of electric two – wheelers such as Yo Bikes

1.5. Key Milestone

YEAR MILESTONE

19831.Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed 2. Shareholders Agreement signed

1984 Hero Honda Motors Ltd. incorporated 1985 First motorcycle "CD 100" rolled out 1987 100,000th motorcycle produced 1989 New motorcycle model - "Sleek" introduced 1991 1. New motorcycle model - "CD 100 SS" introduced

2. 500,000th motorcycle produced 1992 Raman Munjal Vidya Mandir inaugurated - A School in the memory of

founder Managing Director, Mr. Raman Kant Munjal 1994 1. New motorcycle model - "Splendor" introduced

2. 1,000,000th motorcycle produced 1997 1. New motorcycle model - "Street" introduced

2. Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated 1998 2,000,000th motorcycle produced

1999

1. New motorcycle model - "CBZ" introduced 2. Environment Management System of Dharuhera Plant certified with ISO-14001 by DNV Holland 3. Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder Managing Director, Mr. Raman Kant Munjal

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2000

1. 4,000,000th motorcycle produced 2. Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland 3. Splendor declared 'World No. 1' - largest selling single two-wheeler model 4. "Hero Honda Passport Programme" - CRM Programme launched

20011. New motorcycle model - "Passion" introduced 2. One million production in one single year 3. New motorcycle model - "Joy" introduced 4. 5,000,000th motorcycle produced

20021. New motorcycle model - "Dawn" introduced 2. New motorcycle model - "Ambition" introduced 3. Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer Khan as Brand Ambassadors.

2003

1. Becomes the first Indian Company to cross the cumulative 7 million sales mark 2. Splendor has emerged as the World's largest selling model for the third calendar year in a row (2000, 2001, 2002) 3. New motorcycle model - "CD Dawn" introduced 4. New motorcycle model - "Splendor +" introduced 5. New motorcycle model - "Passion Plus" introduced 6. New motorcycle model - "Karizma" introduced

2004

1. New motorcycle model - "Ambition 135" introduced 2. Hero Honda became the World No. 1 Company for the third consecutive year. 3. Crossed sales of over 2 million units in a single year, a global record. 4. Splendor - World's largest selling motorcycle crossed the 5 million mark 5. New motorcycle model - "CBZ*" introduced 6. Joint Technical Agreement with Honda renewed 7. Total sales crossed a record of 10 million motorcycles

2005

1. Hero Honda is the World No. 1 for the 4th year in a row 2. New motorcycle model - "Super Splendor" introduced 3. New motorcycle model - "CD Deluxe" introduced 4. New motorcycle model - "Glamour" introduced 5. New motorcycle model - "Achiever" introduced H

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6. First Scooter model from Hero Honda - "Pleasure" introduced 2006 Hero Honda is the World No. 1 two-wheeler co. for the 5th year in a row 2008 Hero Honda is the World No. 1 two-wheeler co. for the 8th year in a row

2. Resources Analysis

2.1. Financial Resources

We begin the resource analysis of Hero Honda Motors Ltd. with the break up of the capital structure of the firm & the financial comparison of different players in the two – wheeler segment. The company is 100% debt free with the break up of the capital structure as follows:

48%

26%

26%

EQUITY SHAREHOLDERSHERO GROUPHONDA GROUP

26% of the shares are each owned by Hero Group & Honda Motors, Japan while the rest is owned by equity shareholders. Apart from this Honda Motors, Japan gets a royalty fee of 25% of the contribution margin because of the technical - know how provided to Hero Honda. Needless to say, this has been one of the most successful overseas joint ventures by Honda Motors, Japan. However, employees are free to take the company’s shares at their own discretion. It is

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interesting to note that in spite of the global meltdown, Hero Honda’s net profit has increased by 47% as in the first three quarter as compared to last financial year.

2.2. Physical Resources

Hero Honda has got three manufacturing facilities at Dharuhera & Gurgaon in Haryana & Haridwar in Uttarakhand. The production capacity of the first two plants is 6500 vehicles per day while for the third plant is 3500 vehicles per day. The cycle time for vehicle production is maintained at 18 secs. Its distribution network is controlled by regional offices & area offices & includes about 3000 dealers, stockists & SSP’s (Service & Spare parts) across the length & breadth of India. The concepts of Lean Manufacturing are applied in all the plants to improve performance & drive down cost. 2.3. Technological Resources

The company believes in the concept called World Class Manufacturing. Its major ingredients are shown in the figure below –

W C M

QUALITY

ZERO INVENTORY CONCEPT

FULLY INTEGRATED VALUE CHAIN

5 S SYSTEM

T P M

DIRECT ONLINE SYSTEM

LEAN & FLEXIBLE MANUFACTURING

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The Direct Online System (DOL) is similar to JIT. Here the vendors are selected for DOL category based on a variety of parameters such rate of parts being defective & replaced in warranty. In order to remove bottlenecks & improve quality of work fully integrated robotic lines are used such as in Aluminium phase (for manufacturing cylinder heads, crankcase etc.) and in weld & paint shops.

Flexible manufacturing system is followed where in any product assembled in any assembly line.

3. STRATEGIES & POLICIES

3.1. Leadership

Dr. Brijmohan Lall Munjal, Chairman, Hero Honda Group, is one of the best known first-generation entrepreneurs in India. Dr. Munjal started Hero group right from the scratch along with three of his brothers after shifting base to Ludhiana, India from Pakistan after 1947 and built a business empire of US$ 3.2 billion in a span of nearly six decades comprising of 20 companies in diverse fields including auto parts, bicycles, motorcycles, education, BPO, IT software etc.

The value set, which forms the intrinsic core of his business philosophy, is based on simplicity, honesty, highest integrity & sense of fairness.

Dr. Munjal traversed the road to success with the Hero group following these principles –

• “Trust the instincts”, • “Deal with people with compassion”, • “Think ahead of time”,

• “Show others the way through highest form of corporate citizenship”.

The examples for all of the principles just mentioned are easy to find out. Dr. Munjal, never satisfied being only a bicycle component manufacturer, moved up the value chain by becoming a complete bicycle manufacturer in 1956. Through continuous growth and establishing a nation-wide supply & distribution network

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which was based on mutual trust and relationship, within 30 years of starting, Hero Group became the largest bicycle manufacturer in the world and it continues to be so till date. Hero Group, under the able leadership of Dr. Munjal, pioneered bicycle exporting from India as early as in 1963. Though exports were initially limited to Africa & Middle East, now Hero Group caters to the US & European markets as well. Adoption of key new technologies and providing best-in-class value & performance are the hall marks of Hero Cycles.

At a time when the Indian two-wheeler industry was known by the rusty Bajaj Chetak and other two-stroke engine vehicles, Dr. Munjal revolutionized the industry by bringing the first four-stroke motorbikes to the table. It was a brilliant strategic move. Since these technologies were not indigenously available, he collaborated with the Honda Motor Company of Japan and Hero Honda Motors Ltd. was formed in 1984 as a JV between Honda & the Hero Group. It’s one of the best success stories in India as a collaborative effort between two different cultures and entities. The JV thrived because the roles of the partners were clearly demarcated by the leadership – Honda to provide the technological inputs and overall guidance, Hero Group to provide the manufacturing resources and foot the distribution efforts. With this, Dr. Munjal ensured cheaper, affordable mobility to the millions of Indians. Not only the four-stroke engines gave better mileage, but these are reliable, less polluting machines which immediately became the darling of the masses and for Govt. regulators as well. He was at the forefront of the campaign by Hero Honda Motors Ltd. - 'Fill it - Shut it - Forget it', which brought forth the value-of-money aspect of these bikes and endeared the masses. The testimony to all these efforts came in 2001 when Hero Honda Motors Ltd. became the largest two-wheeler maker in the world with a customer base of over 20 million. Though without teamwork & commitment, all these achievements would not have been possible, it was the vision and zeal of the founders which pushed Hero Group to rise higher and higher and touché the horizons.

3.2. Promotional Strategies

1. BRAND AMBASSADORS OF HERO HONDA Hrithik, Saurav Ganguly, brand ambassadors of Hero-Honda. Hero Honda, a leading manufacturer of motorcycles, has roped in film actor Hrithik Roshan and captain of Indian Cricket team Saurav Ganguly as its brand ambassadors for three years till 2003.

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The latest commercial featuring Hrithik Roshan, Priyanka Chopra and six cricketers, is perhaps the longest ad, at three minutes.Promotion Policy: Company gives advertisement in different media vehicles time to time. Like in

TV, Magazines, newspaper, etc. Hero Honda also organizes free service camps every year. Hero Honda also takes art in trade fair. Hero Honda with the help of ICICI Bank provides loan to the customers & also

provide easy monthly installment scheme to customers. Hero Honda gives huge commission to their dealers.

2. ADVERTISEMENT

Hero Honda - Sa Re Ga Ma Pa Challenge 2009 - Watch Hindi Zee TV Program

Hero Honda - Sa Re Ga Ma Pa Challenge 2009 is the 3rd installment of the Sa ReGa Ma Pa Challenge series which premiered on July 4, 2008 on Zee TV

The show is hosted by Aditya Narayan, who also hosted the previous competition Sa Re Ga Ma Pa Challenge 2007. This show features three new mentors, Aadesh Shrivastava, Shankar Mahadevan and Pritam, who join Himesh Reshammiya.The concept, is similar to the previous show Sa Re Ga Ma Pa Challenge 2007 where the contest invited singers from all around the world. Auditions were held outsideIndia & contestants were judged by various music artistes from the Indian Music industry. Only the top contestants from the auditions were selected to participate in the show.

Some of the advertisements are:

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3. PLAN HAR GAON HAR AANGAN:

Hero Honda was quick to realize that there was a huge opportunity waiting to be tapped. A rural vertical was set up under Dua sometime in 2007. Five hundred sales representatives were taken on board for the mission Har Gaon, Har Aangan (every village, every courtyard.)

These representatives have been given work tasks and not sale targets - they need to meet potential customers and opinion leaders in villages. So far, Hero Honda hasmounted three two-month long "waves" through these men. Each wave hasresulted in additional sale of 15,000-16,000 motorcycles

4. CORPORATE SOCIAL RESPONSIBILITY:

Hero Honda Motors takes considerable pride in its stakeholder relationships, especially ones developed at the grassroots. The Company believes it has managed to bring an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream.

3.3. Target Market

WHY COMPANY CHOOSE RURAL MARKET

Hero Honda has worked out a major expansion strategy for the rural markets and is planning to strengthen retail financing to support the initiative that could lead to setting up of its own finance arm. Pawan munjal, MD of Hero Honda, told TOI

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that rural market would be a special focus area for the company as it is looking at new growth areas to maintain sales momentum in a shrinking market. "We have created a special ‘rural vertical' to push growth and this would spearhead our expansion in the rural market,' Munjal said.

India's largest two wheeler company Hero Honda Motors is spreading its wings to capture the commuting bikers' imagination in rural India, after witnessing flat sales growth in 2007-08. The two wheeler market leader plans to cover 100,000 of the600,000 villages in the country by the end of this financial year under a campaign named Har Gaon, Har Aangan (every village, every household).

3.4. Marketing mix of Hero Honda

4- A’s OF HERO HONDA

1. Availabilitya) Hero Honda's 2 plants are in Dharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also started production byApril, 2008.b) Hero Honda's extensive sales and service network have spans over 3,000 customers touch points.c) The number of touch points (dealerships plus sales and service outlets) is already 3,500 from 2002 and another 500 would be added every year.

2. Affordabilitya) Hero Honda offer cheapest motorcycles in India cost between Rs 30,000 and Rs 35,000.b) Hero Honda with the help of ICICI Bank provides loan to the customers & also provide easy monthly installment scheme to customers.

3. Awarenessa) Hero Honda Motors Ltd was the top advertiser then, accounting for a little over 25% (one fourth) of the share.b) Five hundred sales representatives were taken on board for the mission Har Gaon, Har Aangan (every village, every courtyard.)c) Company gives advertisement in different media vehicles time to time. Like in TV, Magazines, newspaper, etc. H

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d) Hero Honda also organizes free service camps every year.e) Hero Honda also takes art in trade fair.

4. Acceptability

a) Hero Honda has accepted by people because its strong brand image and product quality.b) Hero Honda is considered to be most fuel-efficient bike on Indian roads.c) Hero Honda bikes are purchased more by daily users who needs more average of bikes as well as look.d) People prefer Hero Honda because of its product varieties & stylish design etc.

4. Group Analysis

4.1. Value Chain Analysis

It is quite obvious that Hero Honda possesses some competitive advantages over competition, enabling them to be the largest two-wheeler maker in the world for the 7th year in a row and commanding a hefty market share of 52% of Indian two-wheeler market and continuing to grow at a healthy rate of 13% (PAT) amid worsening financial crisis and deepening of recessionary influences. We attempt to ascertain the competitive advantages that HHML has by analyzing its value chain.

Primary Activities

Inbound logistics From early days, HHML tried to have close integration with suppliers as vendor management is critical for its operation, for the simple fact that 73% of production cost is due to material components. Thus it is essential for HHML to ensure tight control & reduction of logistical cost and/or transaction cost when procuring components. With these aims, HHML adopted “Just in Time” (JIT) manufacturing philosophy which demanded close coordination between its manufacturing facilities and the vendors and ancillary units. For example, ~ 100 ancillaries are setting manufacturing bases in Haridwar near the newly started HHML plant to ensure integrated supply chain. All these vendors will be connected to the main plant by conveyors to prevent chances of time & material loss due to multiple handling.

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Operation s As was being described above, HHML is probably the only Indian company to have truly mastered the art of JIT manufacturing. HHML also follows Lean Manufacturing, uses high degree of automation levels (full automatic robotic operation in welding and some other specific areas) to ensure high efficiency, low inventory production, with usual benefits like increased cash flow, reduced cash & operating cycles and thus improved working capital conditions. With employee strength being in the range of 4320, the productivity per employee is very high. Further, the concepts of Lean Manufacturing, JIT & Integrated Supply Chain have been applied from the start in Haridwar plant making it highly efficient.

Outbound logistics

HHML feeds the demand in India & exports ~ 95,000 bikes through its well established delivery channels from the 3 plants. The effort is to provide for minimum waiting period or rather filling the regions as per the demand forecasts and market trends.

Marketing & Sales

Marketing arm of HHML started the hugely successful “Fill it, Shut it, Forget it” campaign years ago to pitch for its better fuel efficiency and thus lower owning cost. To ensure customer loyalty, HHML has come up with Hero Honda Passport Program which gives special privileges to its customers. HHML does not indulge in price wars in an effort to maintain the perception of enduring quality among present & potential customers. Of late, there were complaints from customers that HHML is not dynamic enough to present newer, flashier & more powerful bike models in the premium segment that competitors like recharged Bajaj is offering. Another complaint was that many of the variants offered by HHML have little or insignificant product differentiation which can justify the price difference. HHML has paid heed to these stated & unstated needs of its customers and improved the 4P’s (Product, Price, Place & Promotion). Its offerings now are well accepted in the market. It has been a constant endeavor of HHML to cater to both urban and rural markets with similar zest, with advertising campaigns and promotional events clearly focusing on the two markets – “Har Gaon, Har Angaan” is the recent rural H

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connect initiative to cover ~ 23,360 villages with a population of 5000 or more by 500 specially trained rural sales executives. HHML has a conscious strategy of penetrating new markets and unrepresented territories through its distribution network which is made up of dealers, authorized representatives, stockists and SSPs. In March 2001, the company had 826 such customers’ points in India. By March 2008, this number went up to over 3500. On an all India basis, 50 dealers, 150 SSPs, 267 dealers and 45 city work agents were added within this period.

Services

HHML has constituted one the best after-sales service network in the industry. Apart from improving the quality of service and easy availability of spare parts, HHML has also focused on cleanliness and other aesthetics of the service stations and added amenities such as air-conditioned waiting area, internet browsing and coffee shops etc. to enhance the in-house experience of the consumers at those “customer touch-points”. To ensure that millions of customers in the rural areas are not left waiting for adequate service as it is impossible for HHML to introduce service stations at every nook & corner of the country, mobile service stations are regularly arranged with prior intimation to public about the route that the mobile workshop would take when passing through that region, so that consumers can come and get their two-wheelers serviced. The value activities done by HHML in its value chain (both primary & support activities) are given in Fig. IA1.

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4.2. SWOT Analysis

STRENGTHS Huge brand equity among customers R & D due to JV with Japanese giant Honda Models in almost every bike segment Healthy growth in profits Brilliant relations with customers and dealers

WEAKNESSES Relatively low cash reserves due to massive dividend payouts Virtual absence in the highly lucrative bike segments Imports approximately more than 30 percent of its spare parts requirements Slow to react to market changes – late entrants into the 125 cc segment Too much dependence on few models

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4.3. COMPETITIVE ANALYSIS

HERO HONDA HONDA BAJAJ

KEY POLICIES

- Environment policy: Cleaner production processes and better environmental performance

- Quality policy: Provide innovative products and focus on TQM

- Safety Policy: Provide a safe work environment for

-The Joy of buying: The joy of using world class products

- The Joy of selling: The joy of selling world class products

- The Joy of manufacturing: The joy of producing world class quality products

- Total Productivity Maintenance: Provide safe work environment to enhance efficiency of work processes

- Quality Policy: Provide value for money through enhanced quality, safety and service

OPPORTUNITIES HHML can still make it up by launching a strong model in the 150 cc segment It has opportunity to pick pace in the 125 cc segment which is relatively unexploited Exports market can form a larger part of its revenues Advertisements appealing to youth can do wonders for the company Cruiser bike segment is unexplored by HHML

THREATS All major bike makers in the world are lining up for India The growth in 2 wheeler market is slowing down Absence in the 150 cc could harm the company’s growth plans Low cash reserves HHML is losing foothold in exports market which is now dominated by Bajaj

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employees to enhance productivity

PRODUCT LINE

-Large number of products in all segments

- Market Leader in executive segment

-Most products in the executive segment, especially scooters

- A new entrant, so all products are relatively new in the markets

-Market leader in Premium and Entry segments

- Cashes in on the success of the previous variants of its large selling models

R & D

-Does not have own dedicated R&D facility

- Also faces a threat of Honda withdrawing its support with HMSI entering the market

-Dedicated R&D facility at Gurgaon

- Major strength lies in new product development and quality

-Fully integrated R&D facility

- Major strength in quality but not in new product development

EXPORTAs per the agreement with HMSI, it cannot export to countries where Honda bikes are already present

Not Applicable Largest 2 and 3 wheeler exporter, leader in Sri Lanka and Central America

BRAND PROMOTION

-Aggressive promotion strategies especially for launch of new bikes

- Extensive use of celebrity endorsements and event sponsorships

-Lesser presence in the advertising canvas

- Emphasizes on product and quality characteristics in advertisements

-Aggressive promotion campaigns for new products

- No celebrity endorsements; prefers to emphasize on lifestyle aspect

MKT SHARE CHANGE

Losing market share in most segments due to greater competition

Has grown above 10% in the overall market

Steadily rising market share on the back of superior performance of Pulsar

The following diagram summarizes the competitive advantages Hero Honda enjoys thus -

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4.4. BCG Matrix for Hero Honda

Visionary Leadership

Technical Superiority

Brand ImageMarketing &

Sales capability

Manufactu-ring

Excellence

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The BCG matrix shows a link between the growth rate of business and the market share. “Question marks” in business are with weak market share and high growth rate usually requires cash investment so that they can become Stars. The business with high growth and strong competitive position has opportunities for growth and profit. The “Cash cows” with a strong competitive position and low growth rate, are usually well established in the market and such enterprises are in the position of making their products at low cost. The “dogs” are the business with a low growth rate and a weak market share. These businesses are usually not profitable and generally should be disposed of.

4.5. Porters Five Forces Model

Rivalry:-Hero Honda has competitive advantage over its competitors in following manner:-

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Huge customer base High sale in tier1 and tier2 cities and also in rural areas. Large distribution network Technical knowledge to the mechanics. Large service centre across whole country. Stable prices Resale value of Hero Honda bikes is more than other company’s bikes.

Threats of substitutes:-Hero Honda faces threat of substitute in many segments. Splendor with Bajaj Discover and TVS Apache. Karizma with Bajaj Pulsar 220 DTSFi and Yamaha R1. Substitute of High ended bike with bikes like avenger. Lowering price of second hand cars. The car price is low which gives the switching power to buyer. Due to availability of substitute demand is more elastic.

Buyer’s Power:- Buyers are less powerful because Hero Honda has its own distribution channel. Buyer’s are fragmented in the market so no particular group of buyer had a

significance on sale of motorcycle or its price so buyer are less powerful.

Supplier Power:- Rolex IPEX Company provides the engine, suspension, brakes etc for Hero

Honda. Saicom International provide electrical parts, head light, tail light, switches. In

case of Hero Honda its suppliers have the power to bargain because in all the product line the same spare part is used by the company so it cannot early switch it. But the supplier maintains relationship with the company because they regularly receive the order from the company in bulk.

Barrier to Entry and Exit:- If Hero Honda wants to enter into other segment market, i.e. producing

scooters, cars, three wheelers etc. It has to take patent or proprietary knowhow.

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It has to explore new distribution channel. Product would be successful or not. Switching to other segment will affect the Industry. Very high exit cost from the Industry.

5. CONCLUSION & RECOMMENDATIONS

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1) Most of the Hero Honda Bikes are purchased by young generation 18 to 30 because they prefer stylish looks and rest of the models of Hero Honda are purchased more by daily users who needs more average of bikes than looks.

2) Hero Honda is considered to be most fuel-efficient bike on Indian roads.

3) Service & Spare parts are available throughout India in local markets also.

4) While buying a motorcycle, economy is the main consideration in form of maintenance cost, fuel efficiency.

5) Hero Honda started growing in rural market rapidly with its ad campaign and promotion strategies in rural market.

Recommendations:

1) The company can utilize a related diversification strategy by entering the

scooter market.

2) They can capitalize on positive and popular brand image.

3) Optimum utilization of resources can be done by sharing similar resources for motorcycles and scooters.

4) Expand to countries that heavily use two wheelers as tourists may opt to rent two wheelers instead of cars

6. REFERENCES

1) www.businessweek.com Her

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2) www.herohonda.com 3) www.herogroup.com

4) www.indiatoday.com

5) www.extrememachines.com

6) www.twowheeler.com

CONTRIBUTION OF EACH MEMBER IN THE REPORT

CONTENTS NAME OF THE MEMBER

1. Introduction

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1.1 - Hero Honda Group & Hero Honda Motors Ltd : Pallavi B 1.2 - Company Profile : Pallavi B 1.3 - Strategic Intent of HHML : Sandeep T 1.4 -Two - Wheeler Industry in India : Atul K / Yashodhan M 1.5 - Key Milestones : Yashodhan M

2. Resources Analysis

2.1 - Financial Resources : Nitin B 2.2 - Physical Resources : Nitin B 2.3 - Technological Resources : Atul K

3. Strategies & Policies

3.1 - Leadership : Nitin B 3.2 - Promotional strategies : Sandeep T 3.3 - Target market : Yashodhan M 3.4 - Marketing mix of Hero Honda : Pallavi B

4. Group Analysis

4.1 - Value Chain Analysis : Atul K 4.2 - SWOT Analysis : Yashodhan M 4.3 - Competitor Analysis : Sandeep T 4.4 - BCG Matrix : Pallavi B4.5 - Porters Five Forces Model : Nitin B

5. Conclusion & Recommendations : All

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