Hero Honda

Group 1

Abhay Binani Harsh Sanghavi

Kartik Nallappa Rishabh Chudgar

 Company Background
• Hero is the brand name used by
Munjal brothers for their flagship
company Hero Cycles Limited
• In 1984 there was a joint venture
between Hero Group and Honda
Motor company
• Hero Honda Motors Limited was
established
• Hero Honda is the worlds largest
manufacture of two wheelers –
 Company Background
• Customer base of more than 30
million
• It controls 48% of the domestic two
wheeler market
• Hero Honda Motor Limited sales have
increased from Rs 2621 cr in March
2005 to Rs 4600 cr in March 2010
• Profits have increased from Rs 971 cr
to Rs 2232 cr
 Industry Background
• Overall sales in the two wheeler
market has increased from Rs 6576
cr 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, Kinetic
Engineering Limited, Royal Enfield,
Majestic Auto and Honda
Motorcycle and Scooter India
 Industry Background
• Products available in the two wheeler
industry are: Motorcycles, Scooters
and Mopeds
• Motorcycles comprise major segment
of the Indian two wheeler industry
• Scooters account for 13% of the
market
• Mopeds account for 25% of the
market
 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)

vWeakness
• Dependence on Honda Motors
• Brand recognition due to Honda
Motors
• Limited global presence under the
terms of JV
 (exports only about 100,000 to Sri
Lanka, Bangladesh, Nepal and some
Latin American countries)


•

vOpportunities
• Global market
• Focus on women segment
• Bajaj Auto gradually pulling out of
scooter segment is opening a huge
market
• Introducing high CC bikes in Indian
market under the JV to tap the high
demand in that segment due to
increasing personal disposable
income
• Low rate of interest on loans will tend to
increase the demand
• Developing Gas-based technology
• Govt. proposal to reduce minimum age
v Threats
• Low recognition of ‘Hero’ brand after end of
JV with Honda Motorcycles and Scooters
India (HMSI)
• HMSI eating the present market of Hero
Honda after the JV is called off
• Govt. norms-FDI increased to 100% in
automobile sector
• High cash reserves of competitors-Bajaj
Auto is threatening considering the
financial advantage for Bajaj Auto if the
Hero Honda JV ends
• New entrants like M&M and likes of Harley
Davidson
• Many motorcycle giants entering Indian
market targeting the niche market with
 PESTEL Analysis
Ø Political Factors
• 100% foreign equity investment without any minimum investment
criteria
• Assist development of vehicles propelled by alternate energy
source
• Formulation of auto fuel policy ensuring availability of appropriate
fuel 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 and
R&D activities
• Govt. impetus on improving connectivity and infrastructure of
roads
• Various Govt. policies aim to promote integrated, phased and self-
sustained growth Indian automotive industry
• Govt. encouraging establishment of international hub for
manufacturing small, affordable, passenger cars and a key
center for manufacturing tractors and two-wheelers in the
world
Ø Economic Factors
• Increasing employment opportunities
• Constant increase in per capita income and disposable
income
• Credit facility available at low rate of interest for
purchasing automobiles
• Government encourages joint ventures with global
players 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 to
various government schemes
• Govt. granting concession like reduced interest rates
for export financing
• Govt. ensures balanced transition to open trade at a
minimal risk to the Indian economy and industry
Ø Social Factors
• Increase in per capita income
• Increasing per capita disposable
income
• 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 innovation
and new technology
Ø Technology Factors
• Increasing importance laid on R&D
carried out by companies in India
• Government of India promoting
National Auto motive Testing and R&D
Infrastructure Project to support
growth of the auto industry in India
• Technological solutions help in
integrating the supply chain. Hence
reduce losses and increase
profitability
• Govt. policies steering India’s software
into automotive technology
• Govt. encourages modernization of
industry and facilitate indigenous
design, research and development
Ø Environment Factors
• Govt. putting emphasis on
international emission norms
• Due to entry of global companies in
Indian market, advanced
technology in product and
production process have developed
• Development of alternate fuel is
encouraged
• Physical infrastructure like roads and
bridges affect the use of
automobiles. Better the roads,
Ø Legal Factors
• Legal provision relating to
environmental pollution by
automobiles
• Legal provision relating to safety
measures
• Govt. ensures balanced transition to
open trade at minimum risk to Indian
economy and local industry
• Indian government policy aimed at
promoting an integrated, phased and
conducive growth of Indian
automobile industry
• Government intends to harmonize the
regulatory standards with the rest of
 BCG Matrix
Question Mark Star
 Glamour FI  Karizma
H ig h

B u sin e ssDog Cash Cow

G ro w th Pleasure Splendor
R a te
Achiever
 CD Dawn

Hunk CD Deluxe

Joy Passion
Lo w Ambition

Lo w M a rke t sh a re H ig h
qCash Cows
- The 4 bikes mentioned have been

pumping in most of the sales

revenues with increasing demand
every year
- Splendor launched in 1994 and today

1 splendor is sold every 30 seconds


qStar
- Karizma is the sole 225cc bike when

launched. It caters do that segment

succesfully and still does. With demand
rising for even after 7 years from the
launch of the product, it remains a star
product as value addition is made at
every stage to this product.
- CBZ requires huge raw materials. Its

segment was a differentiation and it still

is one of the contenders for high power
and pick up
qQuestion Mark
- Glamour FI launched with a new

technology first time in India.

Launched in 2009 it was a potential
market in 125cc segment. The
problem till now has been customer
awareness of the technology change
qDogs
- Achiever, Ambition etc. were well

planned models but did not

materialize in terms of volumes and
sales
Porters five force model
 Rivalry amongst existing
competitors
• The main rivalry that HERO HONDA is
facing is from Bajaj Auto Ltd (Bajaj
Auto) and TVS Motor Company Ltd
(TVS)
• Hero Honda is given a stiff run for
their money by Bajaj’s Discover
and Pulsar priced at 40,000/-

 Threat of new entrants
• Mahindra and Mahindra has acquired
the business assets of Pune-based
Kinetic Motor Company Ltd. (KMCL)
for Rs 110 crore
• M and M plans to design and market a
range of scooters, value engineered
motorcycles and high-end bikes for
the Indian as well as global markets
• Honda plans to spend $76 million (2.4
billion Baht) in the next three years on
four to five new models and
increasing annual manufacturing
capacity from 1 million vehicles to 1.2
million by 2010
 Threat of substitute
products
• There is no perfect substitute to two-
wheelers
• Cars never directly compete with
two-wheelers. However low priced
4-wheelers pose an indirect threat
to the 2-wheeler industry
 Bargaining power of
suppliers
• Owing to backward integration of
Hero Honda, the suppliers have a
low bargaining power
• Hero Honda has long term
relationship with its suppliers that
further increases their bargaining
power over the suppliers
 Bargaining power of customers

• Variety of options to choose from

gives customer a high bargaining
power
• Also the price sensitivity has reduced
due to competition by various
competitors
  AnsoffMatrix
 Existing product
New product
Splendor A new 250 cc bike
 CD Dawn
M a rke t

CD Deluxe
E xistin


CBZ N ew
pKarizma
ro d u ct
g

Passion etc.

Hero Honda CD DAWN Passenger car ( in talks for JV
m a rke t

Hero Honda PASSION PLUS with Malaysia’s national

Hero Honda SPLENDOR carmaker Proton Holding )
N ew

NXG (export of motorcycles to

Africa)
• Existing product – Existing
market
- Hero Honda sells Splendor, CD Dawn,

CBZ, Karizma, Passion etc to the

existing market


• Existing Market – New Product

- A new 250 cc bike priced at Rs 1.5

lakh is going to be launched thereby

entering the 250 cc market
- This is priced 1.2 lakh lesser than

that of Kawasaki which costs about

2.7 lakh.
• New market - New Product
- Passenger car - in talks for JV with

Malaysia’s national carmaker Proton

Holding
- Is in final stages of negotiations with

the Hero Group to produce cars in

India
•
• New Market – Existing product
- Possibility of selling 100 cc bikes to

Africa

Strategy maps
 Strategy
• To constantly innovate, create value
and deliver new technology to the
customer at affordable prices to
lead the growth of 2 wheeler
market in India
• Customer perspective
üPrice is competitive for 125 CC
segment and probably charge
higher for emphasizing on product
differentiation
üAdd value to brand name
üValue for customer will increase ,
providing them with first of its kind
technology in India
• Internal perspective
üImproved processes to match the
equation of creating value and
delivering it successfully
üManage customers by meeting the
new demand and catering to
service
• Learning and Growth
üHave right talent pool and availability
of capital to improve technology
and safeguard it
• Financial perspective
üGive deeper penetration into the
market for 125 CC models, pump in
more revenue
üThis would lead to increase in market
share
üSales will increase and value of the
company will also increase for the
shareholders
• Thank you