Hero Honda Group 1

8/8/2019 Hero Honda Group 1

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Hero HondaGroup 1

Abhay Binani Harsh Sanghavi

Kartik Nallappa Rishabh Chudgar


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Company Background

Hero is the brand name used byMunjal brothers for their flagshipcompany Hero Cycles Limited

In 1984 there was a joint venturebetween Hero Group and HondaMotor company

Hero Honda Motors Limited wasestablished

Hero Honda is the worlds largest

manufacture of two wheelers


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Company Background

Customer base of more than 30million

It controls 48% of the domestic twowheeler market

Hero Honda Motor Limited sales haveincreased from Rs 2621 cr in March

2005 to Rs 4600 cr in March 2010

Profits have increased from Rs 971 crto Rs 2232 cr


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Industry Background

Overall sales in the two wheelermarket has increased from Rs 6576cr in March 2005 to Rs 10511 cr in

March 2010 The key players in the industry are

Hero Honda Motors , Bajaj Auto ,TVS Motor Company , Kinetic Motor,Yamaha Motors India, KineticEngineering Limited, Royal Enfield,Majestic Auto and Honda

Motorcycle and Scooter India


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Industry Background

Products available in the two wheelerindustry are: Motorcycles, Scootersand Mopeds

Motorcycles comprise major segmentof the Indian two wheeler industry

Scooters account for 13% of the

market

Mopeds account for 25% of themarket


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SWOT Analysis

v Strengths

Established brand name

After Sales service

High fuel efficiency (Avg. Kms/ltr)

Low maintenance cost Evolving technology

Understanding customer needs

Wide spread network of dealers and service centers

Effective advertising

Excellent relationship with dealers

Helping dealers with promotion of dealership

Very low equity (nearly 24% of its nearest competitor-Bajaj Auto)


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vWeakness

Dependence on Honda Motors

Brand recognition due to HondaMotors

Limited global presence under theterms of JV

(exports only about 100,000 to SriLanka, Bangladesh, Nepal and some

Latin American countries)


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vOpportunities Global market

Focus on women segment Bajaj Auto gradually pulling out of

scooter segment is opening a hugemarket

Introducing high CC bikes in Indianmarket under the JV to tap the highdemand in that segment due toincreasing personal disposable

income Low rate of interest on loans will tend to

increase the demand Developing Gas-based technology

Govt. proposal to reduce minimum agefor ac uirin drivin licence from 18


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vThreats

Low recognition of Hero brand after end of

JV with Honda Motorcycles and ScootersIndia (HMSI)

HMSI eating the present market of HeroHonda after the JV is called off

Govt. norms-FDI increased to 100% inautomobile sector

High cash reserves of competitors-BajajAuto is threatening considering the

financial advantage for Bajaj Auto if theHero Honda JV ends

New entrants like M&M and likes of HarleyDavidson

Many motorcycle giants entering Indianmarket tar etin the niche market with


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PESTEL Analysis

Political Factors

100% foreign equity investment without any minimum investmentcriteria

Assist development of vehicles propelled by alternate energysource

Formulation of auto fuel policy ensuring availability of appropriatefuel to meet the emission norms

Changing emission norms

Laying emphasis on R&D in automobile industry

Weighted tax deduction of up to 150% for in house research andR&D activities

Govt. impetus on improving connectivity and infrastructure ofroads

Various Govt. policies aim to promote integrated, phased and self-sustained growth Indian automotive industry

Govt. encouraging establishment of international hub formanufacturing small, affordable, passenger cars and a keycenter for manufacturing tractors and two-wheelers in theworld


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Economic Factors

Increasing employment opportunities

Constant increase in per capita income and disposableincome

Credit facility available at low rate of interest forpurchasing automobiles

Government encourages joint ventures with globalplayers by means of weighted tax deduction and

other economical benefits Constant growth in GDP

Low excise duties

Regulated import duties

Growth of manufacturing sector at 8.5% due tovarious government schemes

Govt. granting concession like reduced interest ratesfor export financing

Govt. ensures balanced transition to open trade at aminimal risk to the Indian economy and industry


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Social Factors

Increase in per capita income

Increasing per capita disposableincome

Upward migration of household

income levels Demography High percentage of

youth

Preference for fuel efficient vehicles Price sensitivity and value for money

Influence of the west

Increasing acceptance for innovationand new technology


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Technology Factors Increasing importance laid on R&D

carried out by companies in India Government of India promoting

National Auto motive Testing and R&DInfrastructure Project to supportgrowth of the auto industry in India

Technological solutions help inintegrating the supply chain. Hencereduce losses and increaseprofitability

Govt. policies steering Indias softwareinto automotive technology

Govt. encourages modernization ofindustry and facilitate indigenous

design, research and development


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Environment Factors

Govt. putting emphasis on

international emission norms Due to entry of global companies in

Indian market, advanced

technology in product andproduction process have developed

Development of alternate fuel is

encouraged Physical infrastructure like roads and

bridges affect the use of

automobiles. Better the roads,


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Legal Factors

Legal provision relating to

environmental pollution byautomobiles

Legal provision relating to safetymeasures

Govt. ensures balanced transition toopen trade at minimum risk to Indianeconomy and local industry

Indian government policy aimed atpromoting an integrated, phased andconducive growth of Indianautomobile industry

Government intends to harmonize there ulator standards with the rest of


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BCG Matrix

Question Mark

Glamour FIStar

Karizma

DogPleasureAchieverHunkJoyAmbition

Cash CowSplendorCD DawnCD DeluxePassion

B u sin e ss

G row th

Rate

M a rke t sh a re

H ig h

Lo w

Lo w H ig h


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qCash Cows- The 4 bikes mentioned have been

pumping in most of the salesrevenues with increasing demandevery year

- Splendor launched in 1994 and today

1 splendor is sold every 30 seconds


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qStar- Karizma is the sole 225cc bike when

launched. It caters do that segment

succesfully and still does. With demandrising for even after 7 years from thelaunch of the product, it remains a starproduct as value addition is made at

every stage to this product.- CBZ requires huge raw materials. Its

segment was a differentiation and it stillis one of the contenders for high power

and pick up


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q

Question Mark- Glamour FI launched with a newtechnology first time in India.Launched in 2009 it was a potential

market in 125cc segment. Theproblem till now has been customerawareness of the technology change

qDogs- Achiever, Ambition etc. were well

planned models but did notmaterialize in terms of volumes and

sales


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Porters five force model


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Rivalry amongst existingcompetitors

The main rivalry that HERO HONDA isfacing is from Bajaj Auto Ltd (BajajAuto) and TVS Motor Company Ltd

(TVS) Hero Honda is given a stiff run for

their money by Bajajs Discover

and Pulsar priced at 40,000/-


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Threat of new entrants

Mahindra and Mahindra has acquiredthe business assets of Pune-basedKinetic Motor Company Ltd. (KMCL)for Rs 110 crore

M and M plans to design and market arange of scooters, value engineeredmotorcycles and high-end bikes forthe Indian as well as global markets

Honda plans to spend $76 million (2.4billion Baht) in the next three years onfour to five new models andincreasing annual manufacturing

capacity from 1 million vehicles to 1.2million b 2010


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Threat of substituteproducts

There is no perfect substitute to two-wheelers

Cars never directly compete withtwo-wheelers. However low priced4-wheelers pose an indirect threatto the 2-wheeler industry


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Bargaining power ofsuppliers

Owing to backward integration ofHero Honda, the suppliers have alow bargaining power

Hero Honda has long termrelationship with its suppliers thatfurther increases their bargaining

power over the suppliers


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Bargaining power of customers

Variety of options to choose fromgives customer a high bargainingpower

Also the price sensitivity has reduceddue to competition by variouscompetitors


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AnsoffMatrix Existing productNew product

N e w

p ro d u ct

SplendorCD DawnCD DeluxeCBZKarizma

Passion etc.

A new 250 cc bike

Hero Honda CD DAWNHero Honda PASSION PLUSHero Honda SPLENDOR

NXG (export of motorcycles to

Africa)

Passenger car ( in talks for JVwith Malaysias nationalcarmaker Proton Holding )

Ex

is

tin

g M

ar

ke

t

s

N

ew

m

ar

ke

t


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Existing product Existingmarket

- Hero Honda sells Splendor, CD Dawn,CBZ, Karizma, Passion etc to theexisting market

Existing Market New Product- A new 250 cc bike priced at Rs 1.5

lakh is going to be launched therebyentering the 250 cc market- This is priced 1.2 lakh lesser than

that of Kawasaki which costs about2.7 lakh.


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New market - New Product- Passenger car - in talks for JV with

Malaysias national carmaker ProtonHolding

- Is in final stages of negotiations with

the Hero Group to produce cars inIndia

New Market Existing product- Possibility of selling 100 cc bikes to

Africa


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Strategy maps


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Strategy

To constantly innovate, create valueand deliver new technology to thecustomer at affordable prices to

lead the growth of 2 wheelermarket in India


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Customer perspective

Price is competitive for 125 CCsegment and probably charge

higher for emphasizing on productdifferentiation

Add value to brand name

Value for customer will increase ,providing them with first of its kindtechnology in India


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Internal perspective

Improved processes to match theequation of creating value and

delivering it successfully

Manage customers by meeting thenew demand and catering to

service


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Learning and Growth

Have right talent pool and availabilityof capital to improve technology

and safeguard it


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Financial perspective

Give deeper penetration into themarket for 125 CC models, pump in

more revenue

This would lead to increase in marketshare

Sales will increase and value of thecompany will also increase for theshareholders


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Thank you

Hero Honda Group 1

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