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Hero Honda
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But recently as a market leader HHML has struggled to maintain its margins due to stiff
competition from other brands like Bajaj and TVS. Due to this strong competition, its
growth rate has been slower than its competitors, especially Bajaj. This has been further
aggravated by the pricing and the rising input cost pressure. As a result, operating
margins for financial 2004-05 have been impacted heavily.
SURVEY FINDINGS:
The consumer prefers Hero Honda in terms of quality and reliability. However they do
not perceive it as a value for money proposition. Due to this it has not been able to
succeed in the economy segment.
Hero Honda enjoys a very strong brand image and brand loyalty. But the company should
not get complacent as a better product from the competitor will dilute the company’s
brand image.
Hero Honda is lacking products like pulsar which can ignite the passion of youth.
It was found that only a small number of consumers came to the dealers due to its sales
promotion. This indicates that there is a scope for improvement in sales promotion other
than free gifts and discounts as it was not an attractive proposition for their buying
decision.
PROBLEMS:
Hero Honda is very strong in executive segment but far behind it’s competitor in the
luxury and economy segments. It doesn’t have a product to match Pulsar and CT100 and
TVS star which was lunched recently.
The best selling model was launched ten years back and hasn’t improved in terms of
technology or features over the last 10 years. It has only undergone some minor facelifts.
Hero Honda will soon have to upgrade it in all fronts else a good product from competitor
can eat its market share in no time.
For years it has not invested significantly in research and development and after Honda
has come up with its own subsidiary HMSI Ltd .It is now even more important to be
technology independent.
No effective ad campaigns have came after the “desh ki dhadkan” campaign.
Company needs to look at its financing options as only 30 to 40% of its bike is sold in
financing schemes in Orissa in comparison to 60 to 70% of Bajaj.
RECOMMENDATIONS:
It has to come with a product that can not only match but supercede the looks and
performance of pulsar to increase its market share in luxury segment.
Similarly in the economy segment it has to develop a product better than CT100 and
TVS Star and promote it aggressively to overtake Bajaj in the economy segment.
The company needs to come up with new and innovative finance schemes so as to enable
the consumers to get finance easily and that too at a very low interest rate and processing
costs. The formalities required to be complied before granting finance should be made
simpler and hassle free.
1.0 Introduction
“Hero Honda” was the result of a joint venture between the Hero Group, the world's
largest bicycle manufacturer and the Honda Motor Company of Japan. Today, Hero
Honda has become the world's largest two wheeler company. Hero Honda Motors
Limited came into existence on January 19, 1984 and gave India nothing less than a
revolution on two wheels. This revolution was made even more famous by the 'Fill it -
Shut it - Forget it ' campaign. With over 5 million customers, the Hero Honda product
range today commands a market share of 50% making it a veritable giant in the industry.
The salient features of this success story include technological excellence, an expansive
dealer network, reliable after sales service, and a reputation as one of the most customer-
friendly companies in India.
It is debatable as to what are the best means of judging the quality of a company,
but most would agree that sales figures go a long way in giving us a realistic picture of
how the company’s products have been received by the people. The sales details of Hero
Honda over the years are given in the following table, and ought to give us an idea of the
phenomenal rate at which this company has grown.
1985-86 43,000
1989-90 96,200
1998-99 5,30,600
1999-2000 7,61,210
2000-01 10,29,555
2001-02 14,25,195
2002-03 16,77,537
2003-04 2,070,157
2004-05 2,621,400
“We, at Hero Honda, are continuously striving for synergy between technology, systems,
and human resources to provide products and services that meet the quality, performance,
and price aspirations of our customers. While doing so, we maintain the highest standards
of ethics and societal responsibilities, constantly innovate products and processes, and
develop teams that keep the momentum going to take the company to excellence in the
new millennium.”
Recently, Hero Honda has roped in Hrithik Roshan (actor), Sourav Ganguly (Captain,
Indian Cricket Team), Mohammad Kaif, Harbhajan Singh, Zaheer Khan, Yuvraj Singh
and Virender Sehwag (Members of the Indian Cricket Team) as its brand ambassadors.
Although a large number of diverse factors go into the success of a company and its
product, in the case of Hero Honda the key factors were immense customer satisfaction,
high quality of the product, strong technology, and above all the Honda group’s
dynamism.
1.0.1 Management
To quote Mr. Brijmohan Lall Munjal, the Chairman and Managing Director:
"We will continue to make every effort required for the development of the motorcycle
industry through new product development, technological innovation, investments in
equipment and facilities, and through and through efficient management."
The story of Brijmohan Lall Munjal is one of the brightest stories of Indian
entrepreneurship. His inspiration to enter the two-wheeler world came from a desire to
provide the cheapest form of transport for the poorest of the poor. He, along with his
brothers, started off as manufacturers of bicycle components. The rest, as they say, is
history!
The following table contains the details of the Board of Directors, Hero Honda:
Introduction
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.
"To provide excellent transportation to the common man at easily affordable prices and to
provide total satisfaction in all its spheres of activity."
Introduction
Thus apart from being customer-centric, the Hero Group also provides its employees with
a fine quality of life and its business associates with a total sense of belonging. In the
following pages, a table has been provided which gives us a timeline of milestones in the
history of the Hero Group.
Today, the Hero Group comprises of 18 companies, 300 ancillary suppliers, deep market
penetration with over 5,000 outlets, 23,000 + employees and a turnover of US$ 2.2
billion.
Established in 1948, Honda Motor Co. Ltd. is one of today's leading manufacturers of
automobiles and the largest manufacturer of motorcycles in the world. The Company is
recognized internationally for its expertise and leadership in developing and
manufacturing a wide variety of products that incorporate Honda's highly efficient
internal combustion engine technologies, ranging from small general-purpose engines to
highly efficient cars which have made it a leading automobile company as well.
Throughout all of its operations – from product development and manufacturing to sales
– Honda maintains a commitment to materialize our company's visions of "value
creation", "globalization" and "commitment to the future" with the aim of sharing the joy
with all their perspective and present groups of customers worldwide.
Seeking to maximize customer satisfaction levels, Honda works together with their
numerous business partners to supply Honda products to countries worldwide. Integral in
this effort is their global network of 441 subsidiaries and affiliates (317 consolidated
subsidiaries, 21 non-consolidated subsidiaries and 103 affiliates).
Un-audited Financial Results for the Quarter Ended June 30, 2005:
(Rs. in Crores)
Quarter
Corresponding Year ended
ended
S.No. Particulars Quarter ended March 31, 2005
June 30,
June 30, 2004 (Audited)
2005
PROFITABILITY RATIOS:
The following facts show the growth %age (over previous year) of
various key indicators which impacts the profitability of the company.
(In terms of %age)
Hero Honda Bajaj Auto TVS Motors
01-02 02-03 03-04 01-02 02-03 03- 01-02 02- 03-
04 03 04
Gross 40.75 14.22 32.24 14.97 15.79 13.83 21.56 40.55 4.78
Sales
PBDIT 63.21 20.49 16.7 48.39 38.93 12.11 0.95 91.20 5.79
PAT 73.78 17.72 24.44 20.52 47.94 18.80 (13.54) 125.7 12
RETURN RATIOS:
The following ratios show the income earned by the company
taking different bases.
(Rs in crores)
Hero Honda Bajaj Auto TVS Motors
Hero Honda-Finances
01-02 02- 03- 01-02 02- 03-04 01-02 02-03 03-04
03 04 03
Gross 4539 5195 5997 4172 4831 5525 2214 3111 3260
Revenue(R
s)
PAT(Rs) 463 581 728 360 533 633 54.58 123.17 138
PAT as a % 10 11 12 8.63 11 11.46 2.47 3.96 4.23
of Gross
Revenue(%
age)
PAT as a % 30.41 26.1 25.4 9.13% 11.5 11.67 6.48 12.71 11.78
of Total 7 4 9% %
assets
ROAE(%a 67.7% 66.6 61.4 13.13 17.5 18.26 16.05 33.02 28.01
ge)* % % % % %
ROACE(% 95.3% 94% 85% 16.74 21.4 20.91 20.86 42.20 37.24
age)** % 5% %
The above financial results are the best in the industry. It is a consolidated effort of
efficiency in sales as well as excellence in resource management. This combination is one
of the reasons of the sharp rise in the shareholders wealth. The highlights of above table
are:
• PAT as a %age of Gross Revenue for Hero Honda is hovering around 10-12%,
whereas that for Bajaj and TVS is somewhere in the range of 3-5%. Thus profit
margin of Hero Honda is way above the industry standards, which reflect the
inbuilt competencies of the company in reducing costs through increased
efficiency and productivity.
• PAT as a % age of total assets of Hero Honda is way above that of the industry
figures which explains the dominance of Hero Honda. It reflects how it utilizes its
assets to the optimum use.
• Return on Average Equity was at 61.4% in 03-04 where as that of Baja grew only
by 11.67% and that of TVS Motor by 11.78%. The company is able to earn a very
high percentage of return on its net worth which is an excellent indicator of the
strong fundamentals of the company.
• Return on Average Capital Employed was at 85% in 03-04 where as that of Bajaj
is 18.26% and that of TVS Motor is 11.78%. This once again reflects the strong
fundamentals of Hero Honda. This is a perfect reflection if the way company has
grown in the past few years.
Hero Honda-Finances
SOLVENCY RATIOS:
The following ratios explain the long term solvency of the company.
If we look at the competitors D/E ratio, a similar trend can be found even
though their D/E ratio is higher than that of Hero Honda. Thus Hero Honda is has
out performed its competitors in this sector also.
• The interest coverage ratio has risen sharply as can be seen in the above data.
In case of Hero Honda it rose from 21.23 in 01-02 to 42.67 in 03-04. This is an
indication of the huge reduction in debt due to the wide debt reduction policy
followed by the company and also of the huge rise in the profit during this
period. The interest coverage ratio of Bajaj is way too high over that of Hero
Honda and TVS Motor, which gives a strong signal of its ability to meet its
interest expenses
• The receivables (days gross sales) is 8.15 whereas that of Bajaj is 17.53 and of
TVS motor is 6.72. It shows that Honda’s debtor in the balance sheet is
reflected at an amount equivalent to 8.15 days sales. This is in line with the
industry statistics.
• The finished goods inventory (days consumption) of Hero Honda is better then
that of its competitors.
• The Cash flow from operations (CFO) of the Co. is rising at a rapid pace. The
CFO was 971.22cr in 03-04 as compared to 572.92 for Bajaj Auto and 280.73 for
TVS Motors. This is a result of the increase in market share of Hero Honda from
Hero Honda-Finances
37% in 02-03 to 48% in 03-04. The cash generated from operating activities is a
strong indication of the growth of the Co as it is the major source from which
expansion of the company is funded.
• The Co. has made huge investments in Fixed assets apart from making
investments, which is evident from the fact that cash outflow of investing
activities is a whopping 376.38cr. The Co. is following an expansion plan and has
made huge investments in increasing company’s manufacturing capacity which
resulted in the growth of fixed assets by 13.95% in 03-04. This gives a positive
signal of the future growth prospects of the company.
• Hero Honda is slowly moving towards becoming a debt free company which is in
parity to the pattern followed in this industry. The co. had repaid a the long term
loan of Rs 9.67cr. Even though the co. raised a loan of Rs 50cr but it was under
sales tax deferment scheme. This would lead to reduction in interest expenses and
thus contribute to the wealth of shareholders by increasing the profits.
It is clearly evident from the above cash flow pattern of Hero Honda and its
competitors that Hero Honda is a fast growing company which uses the funds generated
from its operating activities to finance its expansion plans. This is one of the key reasons
of the sharp increase in market share irrespective of the stringent competition it faces.
Hero Honda has been an early-entrant in the 4 – stroke segment of the two
wheeler industry. With a right mix of product styling and pricing, the company helped
garner a larger market chunk of the 4–stroke market as compared to Bajaj Auto. A
shifting consumer preference towards motorcycles has also enabled the fast growth of the
company in the last few years.
In the quarter ended on March 31, 2005 India's motorcycle sales rose by 19% to
4,964,442 units versus 4,170,445 units in the previous fiscal year. It also exhibited a
growth in sales of 25.7%, selling 2,557,385 vehicles. In the quarter ended on 31 July
2005 the two wheeler segment grew by 12. 7 % and export by 37.66% comparing to the
same period last year.
Competition has intensified over the last couple of years, altering the dynamics in
the motorcycle segment with various companies planning to cash in on this spurt in
demand by calling off their JVs. A good example is that of Suzuki Motors, who are
planning to break-off with TVS. HHML, a part of the Hero group, is a reputed name in
the two-wheeler sector and the management has a rich experience in the business. HHML
is a joint venture with The Honda Corporation, Japan and over the years has been the
most successful Indo-Japanese venture in two-wheelers. The company has been cash–rich
and has been effectively utilizing its surplus resources combined with prudent working
capital management. The low–interest regime has helped in reducing the cost of loans,
which will help in boosting sales of 2-wheelers, since 80% of the two- wheelers are
credit–stimulated
Hero Honda has opted for the powerful self service features of ‘mySAP Supplier
Relationship Management’ (mySAP SRM), plus the e-commerce capabilities of mySAP
Customer Relationship Management (mySAP CRM). It was chosen as the software can
be seamlessly integrated into existing environment. The new SAP solutions have
The Bajaj Group came into existence during the Indian National Movement.
Jamnalal Bajaj, founder of the Bajaj Group, was a confidante and disciple of Mahatma
Gandhi, and was deeply involved in the effort for freedom. The integrity, dedication,
resourcefulness and determination to succeed which are normally associated with the
Company today, are often traced back to its birth during those long days of relentless
devotion to a common cause.
Kamalnayan, the eldest son of Jamnalal Bajaj, succeeded his father in 1942, at the age of
twenty-seven. Putting the Nation before business, he devoted himself to the latter only
after India achieved independence in 1947. But when he did so, he put his heart and soul
into it. Within a short while, he not only consolidated the Group, but also diversified into
various manufacturing activities, elevating the Group to the status it enjoys till this day.
Rahul Bajaj today heads the Group. He has been the Chief Executive Officer of Bajaj
since 1968 and is recognized as one of the most outstanding business leaders in India. As
dynamic and ambitious as his illustrious predecessors, he has been recognized for his
achievements at various national and international forums.
Bajaj is currently India's largest two and three-wheeler manufacturer and one of the
LARGEST in the world.
4.0.2 Yamaha
Yamaha's history goes back over a hundred years, to 1887 when Torakusu
Yamaha founded the company. Initially the company used to produce reed organs. The
Yamaha Motor Corporation, Ltd., begun on July 1, 1955, is a major part of the entire
Yamaha group, but is a separately managed business entity from the Yamaha
Corporation. The Yamaha Motor Corporation is the second largest manufacturer of
motorcycles in the world. In 1954 production of the first motorcycles began, a simple
125cc single-cylinder two-stroke. It was a copy of the German DKW design, which the
British BSA Company had also copied in the post-war era and manufactured as the
Bantam.
The first Yamaha, the YAI, known to Japanese enthusiasts as Akatombo, the "Red
Dragonfly", established a reputation as a well-built and reliable machine. Racing
successes helped boost its popularity and a second machine, the 175cc YCI was soon in
production.
Hero Honda-Competitors
The first Yamaha-designed motorcycle was the twin-cylinder YDI produced in 1957. The
racing version, producing 20bhp, won the Mount Asama race that year. Production was
still modest at 15,811 motorcycles, far less than Honda or Suzuki.
The company grew rapidly over the next three years and in 1959 introduced the first
sports model to be offered by a Japanese factory, the twin-cylinder YDSI with five-speed
gearbox. Owners who wanted to compete in road racing or motocross could buy kits to
convert the machine for both road and motocross racing.
4.0.3 TVS
What is today known as the TVS Group comprises more than 30 companies,
which employ a combined total of more than 40,000 people. TVS Motor Co. Ltd., which
is the flagship company of the group, is one of the major Indian players in the
manufacturing of two-wheelers, auto components. This company has many achievements
to its credit, which include being the first such company in the world to be honored with
the Hallmark of Japanese Quality – The Deming Prize for TQM. Other achievements
include launching India’s first two-seater Moped, being the first Indian company to
introduce Indo-Japanese motorcycles (1984), and many such similar path-breaking
initiatives.
Hero Honda-Comparative Studies
Model Sales
Karizma 9736
CBZ 16935
Passion/ 34782
Splendor 38401
CD 100/CD 100 SS/Sleek 11099
CD-Dawn 1880
10% 2% 9%
15%
Karizma
CBZ
Passion/
Splendor
CD 100/CD 100 SS/Sleek
33% CD-Dawn
31%
Pulsar 29003
Discover 18957
CT 100 229880
Wave 2397
M-80 4S 2106
Chetak 4S 7843
Eliminator Stopped Manufacture
Avenger 450
Wind 1900
Bajaj Auto
0%1% 10%
7%
Pulsar
Discover
CT 100
Avenger
Wind
82%
TVS Motors:
TVS
5%
18%
31%
Centra
Victor
Fiero
Star
46%
Yamaha Motors:
RX 135 20349
Enticer 1038
Fazer 11293
Libero 19439
Crux 3209
Hero Honda-Comparative Studies
YAMAHA
6%
37%
35%
RX 135
Enticer
Fazer
Libero
Crux
2%
20%
Customization And Segmentation
Strengths:
1. High break horse power. So
power is maximum
2. Style of the bike is at par.
3. The break system and fuel
ignition system is very good
4. The design of the bike is
aerodynamic
Luxury Karizma Eliminator/Avenger N/A Enticer
5. Colors and stickers are
excellent and also attractive
Weakness:
1. The fuel efficiency is very
negligible
2. The vehicle is heavy.
3. The spare parts of the bike
are very expensive.
Customization And Segmentation
Strengths
1. High break horse power. So
power is maximum
2. Style of the bike is at par.
3. The break system and fuel
ignition system is very good
4. Colors and stickers are
Higher CBZ Pulsar Fiero Fazer
excellent and also attractive.
Weakness
1. The fuel efficiency is very
negligible
2. The vehicle is heavy.
3. The spare parts of the bike
are very expensive.
Strengths
1. The fuel efficiency is good
2. Style of the bike is decent
and maximum people admire it
3. The bike is time tested so it
is reliable in its segment.
Middle 4. Colors and stickers are
Passion/Splendor Discover Victor RX 135
Higher good.
Weakness
1) The bike is bit expensive as
compared to its segment
2) The vehicle is heavy.
3) The spare parts of the bike
are very expensive.
Strengths
1. The fuel efficiency is good
2. These category bikes are
strong and robust
3. The bike is time tested so it
is reliable in its segment.
4. Spare parts are not that
expensive
Middle CD 100/CD 100 5. After sales service is good
CT 100 Centra Libero as it is an old brand
Lower SS/Sleek
6. The bike is generally cheap
in this category
Weakness
1. Style of the bike is not that
attractive
2. The power of the bike is not
comparable to executive level
or Luxury level
Customization And Segmentation
Strengths
1. The fuel efficiency is good
2. These category bikes are
strong and robust
3. Spare parts are not that
expensive
4. After sales service is good
5. The bike is generally cheap
Lower CD-Dawn CT 100 Star Crux in this category
Weakness
1. Style of the bike is not that
attractive
2. The power of the bike is not
comparable to executive level
or Luxury level
3. No design improvement for
slickness
Hero Honda-Marketing Strategies
Hero Honda has a presence in all segments of Indian Motorcycle market catering to all
price ranges and customer age groups. Its strength lies in the executive segment where its
models Splendor and Passion hog the limelight in terms of sales. The models comprise of
more than 65% of the sales of Hero Honda.
However at the upper end of the executive segment, its offering the CBZ has lost the
competition to its peers namely Bajaj Pulsar which has been able to capture the market
with its technological superiority and looks.
The company’s foray into the luxury segment with Karizma has failed mainly due to its
low fuel efficiency and a very high price.
At the lower segment of the spectrum, Hero Honda has had limited success with its CD
Dawn and CD Deluxe although it has successfully warded off the challenges thrown up
by CT 100 and more recently TVS Star.
Product Development:
From time to time Hero Honda has upgraded its products according to customer feedback
and market conditions. For Example it upgraded Splendor and Passion to Splendor plus
and Passion Plus respectively. Further it launched an upgrade of Splendor to Splendor
125 CC for those who wanted higher power to go with already established credentials
that it boasts of.
The company is all set to launch a new bike, the 125 CC Glamour, in order to regain the
ground lost to Bajaj Discover. It has also stopped producing the 135 CC Ambition and is
planning to launch it with a better engine in the near future. CBZ was re-launched by
giving it a new look with newer graphics in 2004, which has resulted in sales going up a
wee bit.
Price:
Hero Honda has priced almost all its products a bit on the higher side compared to their
competitors. It can afford to charge a premium as it has a high brand loyalty and a
positive perception in the customer’s mind. But there have been exceptions. The
exorbitantly priced 223 CC Karizma (INR 82000 initially) had a reduction of INR 13000
last year (2004) but was not able to capture any significant market share.
It also stopped the manufacture of Joy and replaced it with CD Dawn having a
considerably lower price tag. Similarly the price of CBZ was reduced by INR 4000 within
two months of its launch in the market.
Hero Honda-Marketing Strategies
In all the examples sited the price adjustments haven’t served the company well in terms
of sales the exception being CD Dawn. Hero Honda having a strong brand image in the
market has been able to get premium rates for its products from the consumers.
Star 31 Crux 33
Centra 34.9 Enticer 46.4
Victor GX 40 Libero 41.3
Victor GLX Disc 45.3 Fazer DLX 48.1
Fiero FX Disc 50
Product Price Proposition
Product
Quality High Medium low
CD Dawn/CD
Medium Enticer/Fazer/Fiero Wind/Victor/Discover/Libero Deluxe
However Bajaj Auto is providing finance through its group entity Bajaj Auto
Finance. Thus the customers of Bajaj Auto are subject to less botheration. For instance,
on buying a Pulsar, Bajaj Auto Finance gives 0% financing up to Rs 30,000 for 12
months (with no advance EMIs). Unlike the normal 0% finance, where there is roughly a
2% processing charge and 4 EMIs to be paid in advance, here, the buyer actually pays
nothing out of his pocket. Also no such security deposits is required for taking a finance
and also there is expedition in the finance related matters as it directly impacts the
profitability of Bajaj Group through Bajaj Auto’s performance.
The other companies like TVS Motors, Yamaha also have made arrangements to
assist the customers in getting easy finance. Their scheme is also in same line as above.
The customer needs to carefully study the various scheme, as there are lot of added
benefits with various offerings, so that they don’t miss to catch on the various offerings.
Hero Honda- Product Positioning
ECONOMY SEGMENT:
Through this campaign the company tries to position this product as a basic
means of transport at an affordable price. Value for money and fuel efficiency are
the core focus areas of the product.
The main focus of promotion campaigns for CD Deluxe is on style and a true
Value for 100cc motorcycle.
This product represents toughness. The ability to handle even off-road, dirt
conditions with ease is its main USP. It is basically meant for the rural market.
EXECUTIVE SEGMENT:
The promotion strategies used in this segment can be discussed through the
following products:
The ad shows a blind man identifying the product and assuring its quality.
This shows the blind faith that people have in this bike. It also promotes the
Splendor as the world’s best selling motorcycle which got better with the
Splendor Plus model.
The Glamour is a brand new bike from the Hero Honda stable. Though it is
yet to be launched, all the pre-launch promotions and specifications suggest
that it is an attempt to gain some of the lost market share in the 125 cc upper-
end executive segment. Super Splendor and Glamour will operate in the same
mechanism in the 125 cc segment as that of Splendor and Passion in 100 cc
segment.
CBZ was the first sports bike launched by Hero Honda in India. It was
targeted at those customers who have a passion for style and speed. This is
one of the most stable bikes at high speeds. Hrithik Roshan and cricket star
Sourav Ganguly endorse this product.
Karizma was targeted at a niche segment. It was a premium segment bike for
those people who can afford to pay a few extra rupees for the unmatched style
and speed. Karizma was positioned as a total pleasure bike. Hrithik Roshan is
the brand for this premium segment two wheeler product from Hero Honda.
Competitor Product Positioning
It is positioned as a powerful and fast bike which despite its speed is able to
deliver a good mileage because of its new technology twin spark plug. The Pulsar
is aimed at the power hungry fun filled bike enthusiast who wouldn’t compromise
for fuel efficiency or style.
The main USP of the Discover is the excellent mileage it provides because of the
use of the latest 125cc DTS-I engine. Actor Jackie Chan appears in its
advertisement.
It is a 125cc bike which was priced in the mid-range and promoted as giving
“more value for money”. Hero Honda has now stopped promoting this bike in
India and is just using it for the export market.
It uses the latest technology which delivers a linear and smooth power delivery.
This is the only Cruiser bike launched by Bajaj.
It uses a 110cc engine which generates 6kw of power for awesome power delivery.
This is promoted as a strong and robust bike with a decent look, and is targeted
especially towards the urban and rural segments. Aamir Khan appears as Mangal
Pandey in its promotional campaign.
This bike was built to cater to the changing needs of customers and times. It is
available in two different models to suit the needs of the wide range of customers.
Its main focus is to attract attention due to its style and performance.
YAMAHA MOTORS
The new CRUX S has been designed as a very rugged and reliable bike which
will give its best performance even in the toughest conditions. It is being
positioned on its Solid Body, Solid power and Solid Mileage as a dependable
bike, which is ready for responsibility in all your traveling needs.
This bike is positioned on the basis of its beauty, grace and rhythm. The
affordable price would be a major point of attraction.
With stylish new looks, advanced technology and greater features including a fuel meter
an Air Induction System, the Yamaha Libero LX is ultimate in riding comfort and style.
Contact Initiatives of Hero Honda
Ad Expenditure
140
120
100
80 2003 -2004
60 2002 -2003
40
20
0
Hero Bajaj TVS
Honda
The factors that motivate people to buy Hero Honda bikes are as follows:
Motivator Numbers
No of Person consulting
Family 17
Friends 10
Independent 9
Magazines 2
5%
No of Person consulting
Family
24%
Friends
45%
Independent
Magazines
26%
Promoters Numbers
Over All Reputation 25
Proximity of the dealer to the area of
residence 2
Test Drive 1
Survey Findings
4%
7%
89%
no of 5
person as
4
there first
recall 3
0
Hero Bajaj EnfieldYamahaOthers
honda pulser bullet RX
splendor/ 135,RX
100
brand/model
Inference: Splendor is preferred irrespective of the age group but the age group of 30-40
(Middle age) seems to have a special liking towards Splendor.
The economy segment bikes are more preferred in the 25 -30 age group as there first choice
vehicle. This can be attributed to starting of the professional career where the disposable
income may not be very high.
The choice of passion is well distributed throughout the different age group.
250
8
200
89
40+
150 4
8
30-40
Scores
6 39
3 42 3
26 30 25-30
100 33
111 7
2
<25
84 28
65 61 78 22
50 68
36 35
28 27 27 23 18
17 15 13
0
Power,Pick Up, Speed
Brand Name
Free Gifts/Discounts
Price
Design and Style
Comfort(Seating,Suspension)
Fuel Efficiency
Attributes
Type Of Bikes
Budget Splendor/Splendor+ Passion/Passion+ CBZ Karizma CD Dawn CD Deluxe Super Splendor
Survey Findings
<35000 1
35000 - 40000 1 2
40000 - 45000 8 1 3 1
45000 - 50000 3 8 1
>50000 2 1
Substantial amount of customer choose their bike above their budget level due to the
financing schemes available.
The 40000-45000 budget slab prefers Splendor over other bikes where as 45000 – 50000
prefer passion over Splendor.
Interestingly, it was found that people having a higher budget for purchase still preferred
economy model due to high fuel efficiency and low ownership cost.
40
35
7
30
2
8
25 4
6 3
Scores
5
20 7
8 6 7 4
>50000
5 2 45000 - 50000
15 8 40000 - 45000
6 8 6 4 35000 - 40000
7 5
10 <3500
3
4 3 6
3 5 1
5 8 1
2 7 6 2
5 4
2 3 1
1
0
After Sales Service
Brand Name
Power pickup
Design n Style
Price
Comfort
Free Gifts
Fuel
Attributes
The age group below 25 years preferred power, pick up and speed as their primary factor
for buying but fuel efficiency, design and style also highly influence their decision
making.
The top three criteria for the age group 25 -30 are the fuel efficiency, price and comfort .
For the age group that belongs to 30 – 40, fuel efficiency, comfort and price are there
primary concern while purchasing a bike.
Survey Findings
For the age group above 40, Fuel efficiency, comfort and after sales service is a top most
important criteria. The top 3 criteria across all the age group was found to be Fuel
Efficiency, price and comfort.
For those who are having less than 35000 as their budget, price, fuel efficiency and brand
name is the top three deciding criteria.For the budget group of 35K -40K, the top three
important criteria are price , fuel efficiency, and after sales service.
For the next group having a budget more than 45 K and less than 50K fuel efficiency,
brand name , design and style are the top concern in the purchasing decision.Power and
pick up, fuel efficiency and style are the major factor for the buyers having more than
50K as their budget.
Consumers were asked to rate the brands according to the attributes on a 10 point scale.
They showed their preferences which is given in the table below:
Hero
Attributes Honda Bajaj TVS Yamaha
Power 7 9 6 8
Fuel Efficiency 9 8 7 6
Style 7 9 8 5
Comfort 8 7 9 7
High Price 8 7 7 9
Brand Name 9 8 6 7
After Sales
Service 8 7 7 6
Discount 7 9 7 5
Annexure
An attempt is now made to carry out a brief SWOT analysis of Hero Honda and its
various products:
Strengths:
1) The company was the first to launch two wheeler bikes in India. Consequently,
their main strength lies in their brand name.
2) Hero Honda service centers are available almost everywhere, due to the
comparatively old age of the company. Spare parts are easily available in every
shop.
3) The distribution network of Hero Honda Ltd is far superior to that of any other
company in the two-wheeler segment.
4) Due to the large range of products that are available, almost the entire customer
base is covered.
The following table illustrates the growth of Hero Honda as against the overall growth of
the industry:
As can be seen from the following table, the sales as well as the profits have increased
enormously over the years. The net sales have shown a CAGR of 27% and net profits
have shown a CAGR of 39%. The operating margin of the company has improved by 290
basis points to 16.8%.
Annexure
(Rs m) FY00 FY01 FY02 FY03 FY04
Motor Cycles sold (m) 0.76 1.03 1.43 1.68 2.07
Net sales 22,464 31,687 44,654 51,017 58,324
Other income 204 221 767 956 1,681
Total revenues 22,668 31,907 45,422 51,973 60,005
Operating profit 3,070 4,285 6,807 8,636 9,801
Depreciation 347 443 510 580 733
PBIT 2,724 3,843 6,297 8,056 9,068
Interest 47 25 15 17 17
PBT 2,880 4,038 7,049 8,995 10,732
Extraordinary Items -34 -268 -105 (149) (7)
Tax 925 1,301 2,315 3,038 3,441
Net Profit 1,921 2,469 4,629 5,808 7,283
Operating profit margin 13.7% 13.5% 15.2% 16.9% 16.8%
Net profit margin 8.6% 7.8% 10.4% 11.4% 12.5%
Number of shares (m) 39.9 199.7 199.7 199.7 199.7
Face Value (Rs) 10.0 2.0 2.0 2.0 2.0
DPS (Rs) 10.0 3.0 17.0 18.0 20.0
EPS (Rs) 48.1 12.4 23.2 29.1 36.5
Fully Diluted EPS (Rs) 9.6 12.4 23.2 29.1 36.5
Weaknesses:
1) The company launched two models of bikes called “Karizma” and “CBZ”, which
could not hold on to the high end customers. The main reason was that the fuel
efficiency of both the models was very low. The price was also high. The nearest
competitor, Bajaj Motors Ltd., launched similar bikes called “Pulsar 150” and
“Pulsar 180” which were very fuel efficient.
2) The lower end bike segment was also captured by Bajaj Motors’ “Boxer” which
swayed the market. The Bajaj Boxer was very fuel efficient and also cheap.
Although Hero Honda had captured the market before Bajaj, Bajaj introduced the
bike at a very low price. The prices for Hero Honda were high, particularly for the
models “CD 100” and “CD 100 SS”. Hero Honda also faces competition from
TVS Motors’ “Victor” in the middle segment market.
3) The technological changes in the bike sector occurred at a very fast rate. Bajaj
Auto Ltd. patented the DTSI model of the Pulsar. The technology was introduces
by Hero Honda into the market with the launch of the “Ambition”, but it was not
patented.
Annexure
Opportunities:
1) The company already has a wide customer base and there has been a shift of the
preference of the people. Most people who would earlier go for a scooter/moped
nowadays prefer to go for motorcycles. So in the future there is like to be a lot
more demand for motorcycles than there was before. Hero Honda can capitalize
on its superior distribution channel to facilitate the selling of more bikes.
2) New launches of middle category bikes like the Super Splendor which is a re-
engineered version of the highly successful Splendor may catch the middle
segment and may attract some new customers.
3) It can penetrate into the market for scooters and mopeds, using its long
distribution channel.
4) As the Indian population consists of a large number of teenagers and young
people, Hero Honda can capture the young market by offering various pay back
schemes or it may provide financing options.
Threats:
1) The main threats are in the form of competition from Bajaj Auto Ltd., TVS Motors,
Yamaha, and Honda Motors. These companies adopt advanced technology, so
Hero Honda must stay on its toes. Bajaj Auto has found popularity with both its
low-end and premium offerings, which have helped chip away at Hero Honda's
dominance
2) The second threat is from partner Honda Motors. As Honda Motors eyes high end
customers through its model, the “Unicorn”, Hero Honda may lose some revenue
as the customer base is divided.
3) Since Hero Honda has no patented products, people may go for some other brand
patented product.
4) Rising steel, rubber and plastic prices, coupled with a cut-throat market has seen
more money go into advertising and discounts.
Annexure 1.0
The Hero Group – A Timeline
1963 It pioneered bicycle exports from India - a foray into the international
market.
1971 Highway Cycles was set up to meet the demands of Hero Cycles. It is
today the largest manufacturer of single speed and multi-speed
freewheels.
1978 Majestic Auto Limited was formed and the Hero Majestic Moped was
introduced.
1984 Hero Honda Motors Limited established in joint venture with Honda
Motors of Japan, to manufacture motorcycles.
1985 The 100 cc Hero Honda Motorcycle arrived and by 1988 was the No. 1
among all motorcycles in India.
1986 Hero Cycles Limited entered the Guinness Book of Records as the
largest bicycle manufacturer in the World.
1987 Gujarat Cycles Limited, now known as Munjal Auto Industries Limited
was established to manufacture and export state-of-the-art bicycles and
allied products in its fully automated plant at Waghodia.
1988 Introduced "Hero Puch" from Hero Motors Limited. This revolutionary
machine immediately set new records of petrol efficiency and usable
power in 50 - 65 cc machines.
1990 Hero Cold Rolling Division established and is one of the most modern
Annexure
1991 Hero Honda receives the Economic Times - Harvard Business School
Association Award against 200 contenders.
1993 Hero Exports established as the International Trading Division for Group
and non-Group products.
1995 Hero Corporate Services Limited as the service segment for the Hero
Group Companies, ancillaries, suppliers, dealers and other associates.
1996 Munjal Showa Limited receives British Council's National Safety Award.
1998 - Hero Briggs and Stratton Auto Private Limited was set up to produce
4-stroke two-wheeler engines in various cubic capacities.
2000 The Hero Group diversifies into IT and IT enabled services through its
service segment – Hero Corporate Services Limited.
2000-2001 Hero Honda emerges as the market leader in motorcycles with sales of
over a million motorcycles and a strong market share of 47%.
2002 Hero Cycles ties up with National Bicycle Industries, part of Matsushita
Group to manufacture high-end bicycles.
2002 Easy Bill Established to offer utility bill collection & retail services.
Annexure 2.0
Head Office
2-1-1 Minami Aoyama, Minato-ku Tokyo 107-8556, Japan
Tel: +81-(0)3-3423-1111
Annexure 3.0
Annexure
Range Of Products
The following is a brief description of the various kinds of motorcycles that are
manufactured by Hero Honda.
a. CBZ:
b) Splendor Plus:
c) Passion Plus:
d. CD Deluxe:
d) CD Dawn:
e) CD 100SS:
80 120
70 100
Return %age
Return %age
60
50 Hero Honda 80 Hero Honda
40 Bajaj 60 Bajaj
30 TVS 40 TVS
20
10 20
0 0
1/4/01 to 1/4/02 to 1/4/03 to 1/4/01 to 1/4/02 to 1/4/03 to
31/3/02 31/3/03 31/3/04 31/3/02 31/3/03 31/3/04
Year Year
0.45 1200
0.4
1000
0.35
No of times
0.3 Hero Honda 800 Hero Honda
Ratio
0.25
Bajaj 600 Bajaj
0.2
0.15 TVS 400 TVS
0.1
200
0.05
0 0
1/4/01 to 1/4/02 to 1/4/03 to 1/4/01 to 1/4/02 to 1/4/03 to
31/3/02 31/3/03 31/3/04 31/3/02 31/3/03 31/3/04
Year Year
45 140
40
%age Growth
35 120
30 Hero Honda 100
%age Growth
25 Bajaj 80
20 Hero Honda
15 60
TVS Bajaj
10 40
5 TVS
0 20
0
1/4/03 to
31/03/2002
31/03/04
1/4/02 to
31/03/03
1/4/01 to
1/4/03 to
31/03/2002
31/03/04
-20
1/4/02 to
31/03/03
1/4/01 to
-40
Year Year
Annexure
1200 0
-100 Hero Bajaj TVS
Cash (in Crores)
1000
-200 Honda
200
100
0
Cash (in Crores)
Questionnaires 1-4
Questionnaire – 1
Q1) Please specify the age group to which you belong: (Tick one)
? Below 25 ? 25 to 30 ? 30 to 40 ? Above 40
Q2) Up to how much money are you willing to spend on a bike at this time:
Q4) Kindly rate the criteria based on which you would choose a bike (1 being the most
important, 2 the second most important, and so on)
Q5) Who are the people you consulted before deciding to come to Hero Honda?
? Family members
? Friends
? Any other, please specify: __________________________
? Nobody, independent decision
Q6) What were the factors that persuaded you to come to Hero Honda?
? Company advertisements:
? Television
? In magazines and newspapers
? Sign boards, posters, etc
? Dealer’s efforts:
Questionnaire
Q7) What (if anything) is it that you don’t like about Hero Honda and/or Hero Honda
products?
Q8) What other vehicle models did you consider before coming to a decision?
Q9) What made you choose Hero Honda over and above your other options?
Q10) What would have been your second preference, after Hero Honda?
Questionnaire – 2
Q1) Approximately how many times have you faced any problems with your vehicle?
Questionnaire
Q2) Did any of the problems you faced with your vehicle recur again?(Yes/No)
Q3) How would you rate the technical expertise of the staff that helped you with your
problem? (Disappointing/Avg./Good/Very Good)
Q5) How would you rate the service facilities? (Disappointing/Avg./Good/Very Good)
Q6) Were the employees at the service station courteous and friendly?
(Disappointing/Avg./Good/Very Good)
Questionnaire – 3
Q1) Did you receive any training from Hero Honda? (Yes/No)
Q2) What are the sales promotion methods recommended by the company?
Questionnaire
Q3) What sales promotion methods do you practice independent of the company?
Q4) What are the advertising strategies that you have used?
Q6) How often do you meet with company officials to discuss customer needs?
Questionnaire – 4
Q1) Please specify the age group to which you belong: (Tick one)
? Below 25 ? 25 to 30 ? 30 to 40 ? Above 40
Q2) Up to how much money (in INR) would you like to spend on a bike? (Tick one)
Q4) When you think of a motor cycle, which brand /model comes to your mind first?
Q7) Kindly rate the criteria based on which you would choose a bike (allot them marks
such that they add up to a hundred, give higher marks to the criteria you find more
important and less to the criteria that is less important to you.)
? Fuel Efficiency
? Price
? Brand name
? Free gifts/discounts
? Resale value
Q8) Who are the people you would normally consult before deciding to buy a bike?
? Family members
? Friends
? Any other, please specify: __________________________
? Nobody, independent decision
Q9) What were the factors that persuaded you to come to your chosen brand? (If you
have already bought a bike)
? Company advertisements:
? Television
Questionnaire
? In magazines and newspapers
? Sign boards, posters, etc
? Dealer’s efforts:
? Sponsorship by the company.
? Free test drive
? Discounts/free gifts
? Proximity to area of residence
? Reputation of dealer
? Overall reputation of the brand.
Q11) What would have been your first preference, if u could spend more money?
PRICE
FUEL
EFFICIENCY
STYLE
PRICE
BRAND
AFTER
SALES
SERVICE
Questionnaire
Bibliography
Bibliography
1. http://www.bsmotoring.com/roads/index.htm
2. http://www.herohonda.com/site/home/home.asp
3. http://www.bajajauto.com/
4. http://www.tvsmotor.co.in/default.asp
5. http://www.yamaha-motor.co.jp
6. http://www.siamindia.com/
7. http://www.indiainfoline.com