Marketing Management Project On Hero Honda

Content Page
1.0 Introduction .. . 1 1.0.1 Management .. 2 1.0.2 The Hero Group .. 3 1.0.3 The Honda Motor Co. .................. 4 2.0 The Finances .. 5 2.1 The Financial Analysis . 7 3.0 Industry Development and Growth of Hero Honda .. 13 4.0 Primary Competitors .. 15 4.0.1 Bajaj Auto ... 15 4.0.2 Yamaha ...15 4.0.3 TVS 16 5.0 Comparative Studies ...17 6.0 Product Categorization and Segmentation ..21 6.0.1 Segmentation of Hero Honda Product .21 7.0 Marketing Strategies of Hero Honda ..............24 8.0 Finance Schemes of Hero Honda and Others .........26 9.0 Product Positioning 27 10.0 Competitors Product Positioning 29 11.0 Dealership Contact Initiative for Hero Honda . 31 12.0 Sales Promotion Strategies .. 33 12.1 Advertising Strategies ..... 33 13.0 Survey Findings .. 36 14.0 Hero Honda A S.W.O.T Analysis . 42 15.0 Annexure .. 45 16.0 Questionnaire ... 55
17.0 Bibliography .62

Executive Summary
Hero Honda is one of the most successful joint venture companies in India. It was the first company to manufacture four stroke motorcycle right from its inception. Recently it has become the worlds largest motor cycle manufacturing company. Its success can be attributed to high quality products and efficient service, improvement in cost rationalization, better working capital management, efficiency in manufacturing and higher productivity. 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 companys 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 its competitor in the luxury and economy segments. It doesnt 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 hasnt 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. It needs to introduce an improved version of Splendor within a short period so as to retain the market captured by Splendor. It needs a significant investment I Research & Development so as to come up with new technologies & products before the competitors reap that market. It has to come up with a new and catchy advertisement theme so as to be consistently in top of the mind awareness of the consumers. 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. Company needs to introduce a product so as to build an image which can be identified with youth. It should be eye catching, powerful and give a rough and tough image.

Introduction

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 customerfriendly 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 companys 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. Financial Year 1985-86 1989-90 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Sales (No. Of Units Sold) 43,000 96,200 5,30,600 7,61,210 10,29,555 14,25,195 16,77,537 2,070,157 2,621,400

Sales Performance, 2004 and 2005 (comparative) Jul'04 Domestic Exports 201577 4077 Jul'05 223150 6900 Apr'04-Jul'04 797698 17079 Apr'05-Jul'05 881176 36441

The mission statement of the company is as follows:

Introduction 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 groups 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! According to Munjal, his guiding principles throughout have been: Trusting his uncanny instincts A unique approach to people one from the heart Ahead of his time, every time! The ideal corporate citizen, showing others the way!

Today, Hero Honda employees constitute a family of about forty successful entrepreneurs.

The following table contains the details of the Board of Directors, Hero Honda:

Introduction Chairman Managing Director Joint Managing Director Whole-Time Director Director Director Director Director Director Director Director Director Director Director Director Director Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Miki Yamamoto Mr. Shinichi Nakayama Mr. Satyanand Munjal Mr. Om Prakash Munjal Mr. Satoshi Toshida Mr. Koji Nakazono Mr. S P Virmani Mr. N N Vohra Mr. Pradeep Dinodia Gen. (Retd.) V P Malik Mr. Analjit Singh Dr. Pritam Singh Dr. Vijay Laxman Kelkar Ms. Shobhana Bhartia

1.0.2 The Hero Group

"Hero", a household name in India, came into being in the year 1956. The brand symbolized the steely ambition of the enterprising Munjal brothers, who transformed the modest manufacturer of bicycle components in the early 1940s to what is today the worlds largest bicycle manufacturing company. The quest was fueled by a singular and unwavering vision - to build long-lasting relationships with everyone, including workers, dealers and vendors. This philosophy has paid rich dividends through the years. Today Hero is a multi-unit, multi-product, geographically diversified Group of companies. Through fully integrated operations, the Munjals roll their 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. 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."

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. A time line of the company is provided in the Annexure 1.0.

1.0.3 The Honda Motor Co

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). A time line of the company is provided in the Annexure 2.0.

Hero Honda-Finances

2.0 The Finances

The understanding of any company can never be complete without a look at its financial situation. The following is intended to serve this purpose. Un-audited Financial Results for the Quarter Ended June 30, 2005: (Rs. in Crores) Quarter ended June 30, 2005 Corresponding Year ended Quarter ended March 31, 2005 June 30, 2004 (Audited)

S.No. Particulars

1 2

No. of Motorcycles Sold Gross sales/ Income from operations Less: Excise duty Net sales/ Income from operations

687,567 2,286.03 308.97 1,977.06 30.57 2,007.63 1,684.79 (3.69)

609,123 1,993.55 271.27 1,722.28 22.93 1,745.21 1,436.85 5.51

2,621,400 8,596.81 1,175.16 7,421.65 141.03 7,562.68 6,257.14 (14.95)

3 4 5

Other income Total Turnover Total Expenditure [A] {Increase} / Decrease in stock in trade [B] Consumption of raw materials [C] Staff cost [D] Other expenditure

1,408.11 71.00 209.37 (0.30) 25.02 298.12 90.00 3.67

1,202.13 63.89 165.32 (0.15) 20.47 288.04 95.98 1.99

5,214.57 267.97 789.55 (1.09) 89.38 1,217.25 395.22 11.56

6 7 8 9

Interest (net) Depreciation Profit for the period before tax Provision for tax - Current - Deferred

Hero Honda-Finances 10 11 Net profit (8-9) Paid-up Equity Share Capital Face value per equity share (Rs.) 12 13 14 Reserves excluding revaluation reserve Basic/diluted earnings per share Aggregate of nonpromoters shareholding Number of shares Percentage of holding (to total holding) 204.45 39.94 2.00 10.24 (Rs. 2.00 per share) 89,945,570 45.04% 39.94 2.00 9.52 (Rs. 2.00 per share) 89,945,570 45.04% (Rs. 2.00 per share) 89,945,570 45.04% 190.07 810.47 39.94 2.00 1,453.44 40.59

2.1 The Financial Analysis

Hero Honda-Finances The analysis of the statement is shown below:

HERO HONDA MOTORS LIMITED since its inception has consistently created value and maximized returns to its shareholders. The following facts present a true analysis of the growth and progress that Hero Honda has made over the last few years especially as compared with the best in the industryPROFITABILITY 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 0301-02 020304 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 The highlights of the analysis are: Sales grew by 32.24% to Rs 5997 in 03-04 as compared to 5195 in 02-03. Whereas that of Bajaj grew by 13.83% and of TVS Motor grew by 4.78%. This is the vital reason of the rapid growth and success of the company. It is this rapid growth which enabled the company to increase its market share to 48% from 37% in motorcycle and 2 wheeler segment. Operating Profit Before Depreciation , Interest and Tax(OPBDIT) grew by 16.7% from Rs 854cr in 02-03 to Rs 979cr in 03-04. This is despite the fact that cost of raw material as a %age of total sales has increased from 68% to 69.1% owing to a change in sales mix & higher steel prices. Continuous focus on cost management & operating efficiency has enabled Co. to improve OPBDIT margin (OPBDIT as a % of net sales) from 16.7% in 02-03 to 16.8% in 03-04. PAT grew by 24.44% from Rs 581cr to Rs 728cr in 03-04.

RETURN RATIOS: The following ratios show the income earned by the company taking different bases. Hero Honda Bajaj Auto (Rs in crores) TVS Motors

Hero Honda-Finances 01-02 Gross Revenue(R s) PAT(Rs) PAT as a % of Gross Revenue(% age) PAT as a % of Total assets ROAE(%a ge)* ROACE(% age)** 4539 0203 5195 0304 5997 01-02 4172 0203 4831 03-04 5525 01-02 2214 02-03 3111 03-04 3260

463 10

581 11

728 12

360 8.63

533 11

633 11.46

54.58 2.47

123.17 3.96

138 4.23

30.41

26.1 7 66.6 % 94%

25.4 4 61.4 % 85%

9.13%

11.5 9% 17.5 % 21.4 5%

11.67 % 18.26 % 20.91 %

6.48

12.71

11.78

67.7% 95.3%

13.13 % 16.74 %

16.05 20.86

33.02 42.20

28.01 37.24

* ROE=PAT/Average Equity during the year **ROCE=PBIT/Average Capital Employed during the year 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. Hero Honda Bajaj Auto TVS Motors 01-02 02-03 03-04 01-02 02-03 03-04 01-02 02-03 03-04 Long term .172 .156 .153 .218 .259 .273 .409 .250 .202 debt/Equity 21.23 33.85 42.76 161.91 464.14 981.16 5.63 Interest 18.47 21.77 coverage ratio*** ***Interest coverage ratio=PBIT/Interest expense From the above table we can make the following conclusions: Hero Honda is making a continuous effort to become debt free which is in line with the trend in the industry. To achieve this, the company repaid a loan 0f Rs9.67 cr during the year as a result its D/E ratio has fallen from 0.172 on 313-02 to 0.153 on 31-3-04. A lower D/E ratio means the interest cost of servicing the loan would be very low and the control of the outsiders in the business would be minimal as a result there is no such risk of the company entering into a debt trap. This will reduce the risk of the equity shareholders and increase the wealth of the shareholders. 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

LIQUIDITY (WORKING CAPITAL) RATIOS: HERO HONDA 0102 1.48 0203 1.40 0304 1.31 BAJAJ AUTO 0102
1.75

TVS MOTORS 0304

1.44

0203
1.12

Current ratio=Current Assets/Current Liability.

0102 1.1

0203 .86

0304 .78

Hero Honda-Finances Quick/Liquid ratio Raw material inventory(days consumption) Finished goods inventory(days consumption) Receivables(days gross sales) Creditors(days cost of sales) 0.25 1.21 10.71 9.62 1.3 1.01 10.53 7.71 .77 9.8 1.57 11.2 .47 .31 .23 14.08 11.52 11.49

2.33

4.76

3.31

8.3

9.01

6.41

13.80 16.16 14.49

2.74

10.12 8.15

9.02

12.85 17.53 16.36 7.05

6.72

52.84 35.57 38.79 56.18 43.24 48.74 58.62 60.81 60.02

The above table gives the following inferences: Current ratio of Honda has fallen to 1.31 and whereas quick ratio is 1.30. This indicates that the company does not maintain stock or maintains a very minimum stock. So it can be interpreted that the company is following a Just in Time method of inventory control. Thus it reduces the carrying cost of holding inventory.

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 Hondas 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.

CASH FLOW ANALYSIS: The net cash flow position can be depicted in the following table: Hero Honda 03-04 02-03 Cash from Operating 971.22 619.01 activities Cash from Investing (376.38) (484.67) activities Cash from Financing (581.92) (218.94) activities Bajaj Auto 03-04 02-03 572.92 836.72 (641.09) 73 (811.09) 23.71 Rs in crores TVS Motor 03-04 02-03 280.73 233.78 (215.94) (45.07) (247.92) (54.29)

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 companys 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.

ECONOMIC VALUE ADDED (EVA) EVA, a measure of corporate value creation, indicates whether the management of a Company generates returns that cover the weighted average cost of capital. By explicitly including the cost of equity, EVA recognizes that capital is scarce and investors, who claim the residual share of a firm's earnings, need to be compensated adequately for assuming the risk of investing. The EVA of Hero Honda has increased from Rs.481 Crore in 2002-03 to Rs.569 Crore in 2003-04. This shows the strong fundamentals on which the company is built and the core competencies with which it operates.

Hero Honda-Finances

Hero Honda-Growth

3.0 Industry Development and Growth of Hero Honda

In the last eight to ten years, the two-wheeler market has witnessed a marked shift towards motorcycles at the expense of scooters. In the rural areas, consumers have come to prefer sturdier bikes to withstand the bad road conditions. In the process the share of motorcycle segment has grown from 48% to 58%, the share of scooters declined drastically from 33% to 25%, while that of mopeds declined by 2% from 19% to 17%. The Euro emission norms effective from April 2000 led to the existing players in the twostroke segment to install catalytic converters. All the new models are now being replaced by 4-stroke motorcycles. Excise duty on motorcycles has been reduced from 32% to 24%, resulting in price reduction. This has aided in propelling the demand for motorcycles. Fierce competition has also forced players to cut prices of certain models. 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 4stroke 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 cashrich and has been effectively utilizing its surplus resources combined with prudent working capital management. The lowinterest 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 creditstimulated 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 increased their competitive strength. It has planned to bring in operational efficiencies with special focus on distribution, dealerships and pricing and the successful

Hero Honda-Growth implementation of SAP R/3 (ERP- Program-" Project Synergy ) has enabled proper planning and company wide efficiency.

Hero Honda-Competitors

4.0 Primary Competitors

The following is a concise analysis of the companies besides Hero Honda which are major players in the motorcycle sector. These companies form the major competition for Hero Honda, and hence assume importance in the context of this study. The primary major competitors are Bajaj Auto and Yamaha.

4.0.1 Bajaj Auto

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 Indias 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

5.0 Comparative Studies

The following tables enable us to get a broad view of how other competitors have been faring in general. Hero Honda Limited: Model Karizma CBZ Passion/ Splendor CD 100/CD 100 SS/Sleek CD-Dawn Sales 9736 16935 34782 38401 11099 1880

Hero Honda Sales Distribution

10%

2%

9% 15% Karizma CBZ Passion/ Splendor CD 100/CD 100 SS/Sleek CD-Dawn 31%

33%

Bajaj Auto Ltd.:

Hero Honda-Comparative Studies Products Plying On Roads Pulsar Discover CT 100 Wave M-80 4S Chetak 4S Eliminator Avenger Wind Sales Figures (Quarter Ending June 05) 29003 18957 229880 2397 2106 7843 Stopped Manufacture 450 1900
Bajaj Auto

1% 0%

10% 7%

Pulsar Discover CT 100 Avenger Wind

82%

TVS Motors: Products Plying On Roads Sales Figures (Quarter Ending June 05)

Hero Honda-Comparative Studies

Centra Victor Fiero Star Scooty 30903 45891 17693 5039 18240

TVS

5% 18% 31%

Centra Victor Fiero Star

46%

Yamaha Motors: Products Plying On Roads

RX 135 Enticer Fazer Libero Crux

Sales Figures (Quarter Ending June 05)

20349 1038 11293 19439 3209

Hero Honda-Comparative Studies

YAMAHA

6%

37% 35% RX 135 Enticer Fazer Libero Crux

2% 20%

Customization And Segmentation

6.0 Product Categorizations and Segmentation

Indian motorcycle market
Price Range Bajaj Motors Eliminator / Avenger Fazer, Enticer TVS motors

Segments Luxury

Hero Honda

Yamaha

> 65000 Executive Higher Executive Middle Executive Lower Executive Lower Economy

Karizma

>50000 40000 45000 35000 40000

CBZ/CBZ Plus Passion/Passion plus/Splendor/Splendor Plus

Pulsar

Fierro

Discover CT 100

Victor Centra

RX 135 Libero

<35000

CD100/CD100SS/CD Dawn/CD Deluxe

BYK

STAR

Crux

6.0.1 Segmentation of Hero Honda products

Segments Hero Honda Bajaj TVS Yamaha
Strengths and Weakness 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 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.

Luxury

Karizma

Eliminator/Avenger

N/A

Enticer

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 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. 4. Colors and stickers are 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 5. After sales service is good as it is an old brand 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

Higher

CBZ

Pulsar

Fiero

Fazer

Middle Higher

Passion/Splendor

Discover

Victor

RX 135

Middle Lower

CD 100/CD 100 SS/Sleek

CT 100

Centra

Libero

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 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

Lower

CD-Dawn

CT 100

Star

Crux

Hero Honda-Marketing Strategies

7.0 Marketing Strategies for Hero Honda

Product:

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 companys 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 customers 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 havent 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.

Bajaj Model Byk Boxer CT New Pulsar 150 DTS-i Pulsar 180 Avenger Wind 125 Discover (Electric Start) TVS Motor Star Centra Victor GX Victor GLX Disc Fiero FX Disc Product Quality High

Price ('000) 28.8 32.9 55.5 58.1 62.6 42.2 42.2 Price ('000) 31 34.9 40 45.3 50

Hero Honda Splendor Plus Passion Plus CD Dawn CD Deluxe Super Splendor kick start CBZ (Disc) Karizma Yamaha Crux Enticer Libero Fazer DLX

Price (000) 42.5 44.4 30.8 33.9 45.1 50.1 70.9 Price ('000) 33 46.4 41.3 48.1

Product Price Proposition High Pulsar/Karizma/CBZ Medium Splendor/Passion low CT100/Star CD Dawn/CD Deluxe Byk/Max 100

Medium Low

Enticer/Fazer/Fiero

Wind/Victor/Discover/Libero Centra

Hero Honda-Finance Schemes

8.0 FINANCE SCHEMES OF HERO HONDA AND OTHERS

The market is buzzing with financing options for different products and twowheelers are no exception. Ahead of the festive season, there are often a slew of options available for consumers. The impact of finance schemes on sales has been so enormous that almost every manufacturer has an exclusive tie up with a banks/financial institution. Hero Honda does not have a finance scheme of its own but is in tie up with Banks/NBFCs to finance its customers. Hero Honda has a tie up with ICICI , HDFC among others to take forward the finance scheme. The officials of these banks have their representatives in the showrooms of Hero Honda to provide on spot assistance and to avoid any delay in executing a finance contract. Other banks also in tie up with Hero Honda are Canara Bank, UTI, etc. The customers can get the finance at an interest rate of 8-9% depending on market conditions. The customers do need to fulfill a number of formalities before the finance is granted. They may also be asked to provide security on basis of which finance will be given 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 Autos 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 dont miss to catch on the various offerings.

Hero Honda- Product Positioning

9.0 PRODUCT POSITIONING

The product of Hero Honda is classified into following 3 segments: ECONOMY SEGMENT: The characteristics of products from this segment focus on basic transportation from one point to another. The emphasis is on fuel efficiency and comfort. The promotion strategies used in this segment can be discussed through the following products : CD DAWN Public ka naya transport & value naye zamane ki

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. CD Deluxe Jiyo deluxe..chalo deluxe true

The main focus of promotion campaigns for CD Deluxe is on style and a Value for 100cc motorcycle. CD 100SS tough and rugged

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: SPLENDOR designed to excel

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 worlds best selling motorcycle which got better with the Splendor Plus model. PASSION when style matters more

Hero Honda- Product Positioning Though this product shares the same engine as that of Splendor it differs on the styling front. It is targeted at young urban male who want a stylish and attractive looking vehicle without compromising in fuel efficiency. In the starting it came up with an add campaign of born in a studio not in a factory but later it has modified it to when style matters more SUPER SPLENDOR Sarva guna sampanna

Super Splendor is another product which company lunched very recently. it promotes itself by saying Sarva guna sampanna means something that is good at everything. the design is a derivative version of splendor and it uses an 125 cc engine. Company claims it to be better than splendor in all respect including power and fuel efficiency. Hero Honda believed some of those 100 cc bike owners would eventually shift to higher segments in the long run. So it wants to retain all these Splendor buyers with in Hero Honda by providing a higher version of Splendor. GLAMOUR Leave the G life

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 upperend 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 Motorcycling unplugged

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

Jet set go

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

10.0 COMPETITORS PRODUCT POSITIONING

BAJAJ AUTO Inspiring leadership

BAJAJ PULSAR

Definitely male

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 wouldnt compromise for fuel efficiency or style. BAJAJ DISCOVER The last temptation

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. BAJAJ WIND Wind biking

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. BAJAJ CT100 Jackpot

It is promoted as a value for money bike. It provides the maximum fuel efficiency in its class. Recently it has been ranked as the second largest selling bike, though it is subject to argument. BAJAJ AVENGER Feel GOD like

It uses the latest technology which delivers a linear and smooth power delivery. This is the only Cruiser bike launched by Bajaj.

TVS MOTORS

Inspiration in motion

Competitor Product Positioning VICTOR GLX 125 Smiles forever

It provides excellent mileage as it uses temperature sensors when the temperature is low. Thus it allows the bike to start faster and use lower fuel by activating spark plug and advancing the ignition timing. VICTOR GX More smiles per hour

It uses a 110cc engine which generates 6kw of power for awesome power delivery. TVS STAR Damdar nai tvs star

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. TVS FIERO F2 Advanced biking

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 CRUX S Ready for responsibility

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. YAMAHA G5 Grab attention

This bike is positioned on the basis of its beauty, grace and rhythm. The affordable price would be a major point of attraction.

FAZER DX

Ignite your life

Competitor Product Positioning Experience the thrill of real biking with Fazer - an exhilarating combination of pick-up and International Design. The counter balance in engine gives a smooth and vibrant free ride. LIBERO LX City cruiser

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

11.0 Dealership Contact Initiatives for Hero Honda

The Company appoints a Service Engineer for each zone (For Example: One for Bhubaneswar). These Service Engineers keep in touch with the technicians of the dealers within the zone for technical support. All equipments needed for after sales service is also provided to the technicians by the Service Engineer. The Company follows two levels of contact with the dealers. One is with the owners and the other with the managers of the showrooms owned by. Once every quarter the Managers of the showrooms from a region meet at a forum where the zonal representatives from Hero Honda are also present. (For Example: Calcutta for East region). Some of the important issues for discussion are the sales targets, the customer feedback on problems faced by specific models and their remedies. Occasionally training programmes for launching strategies for new products for Hero Honda are also done. Once a year the Owners of all Dealerships across India meet up at Delhi with the company Top Brass for discussions on various company initiatives pertaining to sales targets, strategies with a view on the market. In addition to these, the company also provides technical training to technicians but no training programmes are provided to the managers of the showrooms or to salesmen.

Hero Honda - Sales Promotion And Advertisement Strategies

12.0 Sales Promotion Strategies

The company follows various strategies for sales promotion. Some of the methods involved at the Dealer level are: I. Test Drives for prospective customers. II. Sponsorship Schemes for customers in association with HDFC and ICICI banks. III. Advertisement in showrooms on a company-dealer 50-50 basis partnership. IV. Mobile Vans in remote areas for customer services i.e. after sales service. V. Periodic rural fairs and to showcase the company models for prospective buyers. VI. Musical Nights conducted at important cities with a view to promote products.

12.1 Advertising Strategies

The company mainly uses Billboards and signboards at major business districts and major routes. Newspaper and TV advertisements to improve consumer recall are also very prevalent. At the dealership level, the customers are sent promotional material in the form of leaflets to initiate further contact and increase customer awareness. The advertisement expenditure for the various companies is as follows:

Company Hero Honda Bajaj TVS

Year 2003 -2004 124.46 129.32 112.94

2002 -2003 121.86 129.06 105.94

The figure below shows various distribution in the graphical format:

Hero Honda - Sales Promotion And Advertisement Strategies Ad Expenditure

140 120 100 80 60 40 20 0 Hero Honda Bajaj TVS 2003 -2004 2002 -2003

Here is a brief comparison of various brands in terms of Customer Satisfaction done by TNS Automotive for 2004[1].

Hero Honda - Sales Promotion And Advertisement Strategies

This clearly shows Hero Hondas comparative advantage in customer perception.

Survey Findings

13.0 Survey Findings

The factors that motivate people to buy Hero Honda bikes are as follows:
Motivator No of Person consulting Family Friends Independent Magazines Numbers 17 10 9 2

Motivator Distribution Chart

5% 24% 45% Independent Magazines 26% No of Person consulting Family Friends

Promotion strategies for the Hero Honda bikes are as follows

Promoters Over All Reputation Proximity of the dealer to the area of residence Test Drive

Numbers 25 2 1

Survey Findings

Promotions Distribution Chart

7%

4% Over All Reputation Proximity of the dealer to the area of residence Test Drive

89%

top of the mind aw areness 8 7 6 5 no of person as 4 there first recall 3 2 1 0 Hero Bajaj EnfieldYamaha Others honda pulser bullet RX splendor/ 135,RX 100

brand/model

Preference of model across the age group:

Survey Findings
Type Of Bikes Age <25 25 -30 30 -40 >40 Splendor/Splendor+ 3 4 7 Passion/Passion+ 1 4 3 1 Karizma 1 CD Dawn 1 CD Deluxe 2 2 1 Super Splendor 2

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.
Agewise Break Up of Preferences of Customers

250 8

200 89

40+
150 8 6 26 100 111 65 50 28 0 27 27 17 23 61 78 84 68 36 15 13 35 18 2 22 3 30 42 4 39

Scores

30-40
3 33 7 28

25-30 <25

Power,Pick Up, Speed

Brand Name

Comfort(Seating,Suspension)

Free Gifts/Discounts

Design and Style

Fuel Efficiency

Price

Attributes

Preference of model across different Budget Ranges:

Type Of Bikes CBZ Karizma

Budget

Splendor/Splendor+

Passion/Passion+

CD Dawn

After Sales Service

CD Deluxe

Super Splendor

Survey Findings
<35000 35000 - 40000 40000 - 45000 45000 - 50000 >50000 1 1 8 3 2 1 8 1 2 3 1 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. Super splendor found one customer each in 40000-45000 and 45000-50000.

Survey Findings
Budget wise Breakup of Customer Prefrrences

40

35

30 2 8 25
Scores

6 5 8 6 5 8 6

4 3 7

20

4 2

>50000 45000 - 50000 40000 - 45000 35000 - 40000 <3500

15

8 5

10

7 3 4 3 2 2 7 5

3 5 8 3
Brand Name Comfort Price

6 1 1 2 1 1
Free Gifts

4
After Sales Service

0
Design n Style Power pickup Fuel

Attributes

Preference of Attributes According to Age Range: 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. Preference of Attributes According to Budget Range: 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. Preference of Brand according to Attributes: 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:
Attributes Power Fuel Efficiency Style Comfort High Price Brand Name After Sales Service Discount Hero Honda 7 9 7 8 8 9 8 7 Bajaj 9 8 9 7 7 8 7 9 TVS 6 7 8 9 7 6 7 7 Yamaha 8 6 5 7 9 7 6 5

Annexure

14.0 Hero Honda - A S.W.O.T. Analysis

As has been established by now, Hero Honda is Indias premier two wheeler company. The company produces economical products within a large price range, and is the market leader. The motorcycles that are produced by this company are fuel efficient and exhibit longevity. Among all the motorcycles sold by Hero Honda, the Splendor alone contributes around 50% of the revenue. 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) Net sales Other income Total revenues Operating profit Depreciation PBIT Interest PBT Extraordinary Items Tax Net Profit Net profit margin Number of shares (m) Face Value (Rs) DPS (Rs) EPS (Rs) FY00 FY01 FY02 FY03 FY04 1.03 221 1.43 767 1.68 956 2.07 1,681 22,464 31,687 44,654 51,017 58,324 204 22,668 31,907 45,422 51,973 60,005 3,070 4,285 6,807 8,636 9,801 347 47 -34 925 443 25 -268 510 15 -105 580 17 733 17 2,724 3,843 6,297 8,056 9,068 2,880 4,038 7,049 8,995 10,732 (149) (7) 1,301 2,315 3,038 3,441

Motor Cycles sold (m) 0.76

1,921 2,469 4,629 5,808 7,283 8.6% 39.9 10.0 10.0 48.1 7.8% 2.0 3.0 12.4 12.4 10.4% 11.4% 12.5% 2.0 17.0 23.2 23.2 2.0 18.0 29.1 29.1 2.0 20.0 36.5 36.5

Operating profit margin 13.7% 13.5% 15.2% 16.9% 16.8% 199.7 199.7 199.7 199.7

Fully Diluted EPS (Rs) 9.6

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 reengineered 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. Hero Hondas range of products can be found in Annexure 3.0.

Annexure

Annexure 1.0
The Hero Group A Timeline 1956 1961 1963 1971
Hero Cycles Limited is established. Rockman Cycles Industries Limited established, which today is the largest manufacturer of bicycle chains and hubs. It pioneered bicycle exports from India - a foray into the international market. 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. Hero Cycles Limited became the largest manufacturer of bicycles in India. Majestic Auto Limited was formed and the Hero Majestic Moped was introduced. Munjal Castings established. Hero Honda Motors Limited established in joint venture with Honda Motors of Japan, to manufacture motorcycles. Munjal Showa Limited established to manufacture shock absorbers and struts and is today among the top two shock absorber manufacturing companies in India. The 100 cc Hero Honda Motorcycle arrived and by 1988 was the No. 1 among all motorcycles in India. Hero Cycles Limited entered the Guinness Book of Records as the largest bicycle manufacturer in the World. Hero Motors, a division of Majestic Auto Limited set up in collaboration with Steyr Daimler Puch of Austria. 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. Sunbeam Auto Limited, earlier a unit of Highway Cycles Limited, established as an ancillary to Hero Honda. It is the largest die casting plant in India. 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. Hero Cold Rolling Division established and is one of the most modern

1975 1978 1981 1984 1985

1985 1986 1987 1987

1987

1988

1990

Annexure
steel cold rolling plants.

1991 1991 1992 1993 1995 1996 1996 1998 1998 2000

Hero Honda receives National Productivity Council's Award. Hero Honda receives the Economic Times - Harvard Business School Association Award against 200 contenders. Munjal Showa Limited receives National Safety Award. Hero Exports established as the International Trading Division for Group and non-Group products. Hero Corporate Services Limited as the service segment for the Hero Group Companies, ancillaries, suppliers, dealers and other associates. - Hero Winner, a large-wheeled scooter was introduced by Hero Motors Limited with a choice of 50 cc and 75 cc engines. Munjal Showa Limited receives British Council's National Safety Award. - Hero Briggs and Stratton Auto Private Limited was set up to produce 4-stroke two-wheeler engines in various cubic capacities. Munjal Auto Components established to manufacture gear shafts and gear blanks for motorcycles. The Hero Group diversifies into IT and IT enabled services through its service segment Hero Corporate Services Limited. over a million motorcycles and a strong market share of 47%.

2000-2001 Hero Honda emerges as the market leader in motorcycles with sales of 2001
Hero Global Design established to offer engineering services in CAD/CAM/CAE related to New Product Development, Design, Engineering and Manufacturing. Hero Cycles ties up with National Bicycle Industries, part of Matsushita Group to manufacture high-end bicycles. Fastener World Established. Easy Bill Established to offer utility bill collection & retail services. Tie up with Livebridge Inc., USA. Tie up with Bombardier - Rotax GmbH for scooter engines. Tie up with Aprilia Scooters, Italy. Hero Honda continues as the World's largest manufacturer of twowheelers with annual sales volume of 2.07 motorcycles and a market share of 48%. Retail Insurance business established.

2002 2002 2002 2003 2004 2004 2004

2004

Annexure

Annexure 2.0
Head Office 2-1-1 Minami Aoyama, Minato-ku Tokyo 107-8556, Japan Tel: +81-(0)3-3423-1111 Established: September 24, 1948 President & CEO: Takeo Fukui Capital: 86,067 million (as of March 2004) Sales (Results of fiscal 2004): Consolidated: 8,162,600 million Unconsolidated: 3,319,793 million Total number of employees Consolidated: 131,600 (as of the end of March 2004) Unconsolidated: 27,187 (as of the end of March 2004) Consolidated subsidiaries: 317 subsidiaries (as of the end of March 2004) Chief Products: Motorcycles, automobiles, power products

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:
4-stroke, single cylinder , air - cooled, OHC 156.8cc Manual Multi-plate wet 5-speed constant mesh Roller chain Electronic Kick starter Tubular single cradle Telescopic hydraulic fork Swing arm with hydraulic damper- 5-step adjustment 2100*755*1130mm 1335mm 160mm 138 kg 2.75*18-42P/100/90*18-56P 12.8 PS@8000 rpm 100 kmph 12.5 1tr(2.5 ltr reserve)

Engine Displacement Clutch Type Clutch Primary Clutch Secondary Transmission Final Drive Ignition Starting Frame Suspension (Front ) Suspension (Rear ) Dimensions (L*W*H) Wheel Base Ground Clearance Kerb Weight Tires: Front/Rear Max. Power Max. Speed Fuel Tank Capacity

b) Splendor Plus:
Engine 4-stroke, single cylinder lair-cooled, OHC

Annexure
Displacement Transmission Ignition Head light Frame Suspension (front) Suspension (rear) Wheelbase Ground clearance Kerb weight Tire (front) Tire (rear) Type of brake (front) Optional Type of brake (rear) Max power Max speed Fuel tank capacity 97.2.cc 4-speed constant mesh Electronic 12V 35/35W multi-reflector with lamp Tubular double cradle type Telescopic hydraulic fork Hydraulic spring loaded type with both side action 1230 mm 159 mm 109 kg 2.75*18-4 PR 2.75*18-6 PR Drum type (130 mm diameter) Disc type (240 mm diameter) Drum type (110mm diameter) 7.5PS @ 8000 rpm / 5.5 KW @ 8000rpm 85 kmph 10.5 litres (reserve 1.4 litres)

c) Passion Plus: Engine Displacement Maximum Power Gear Box Clutch Max. Speed Frame 4-stroke, Single Cylinder, Air - Cooled OHC 97.2 cc 7.5 Ps at 8000 rpm 4 Speed Constant Mesh Multi-Plate Wet Type 85 Kmph. Tubular Double Cradle

Suspension (Front) Telescopic Hydraulic Fork Suspension (Rear ) Swing Arm with 5 step adjustable hydraulic damper. Tire Size (Front ) Tire Size (Rear ) Brakes (Front) Brakes (Rear) Final Drive 2.75 * 18- 4 PR /42 P 3.00*18-4/6 PR Internal Expanding Shoes Type (130mm)/ Hydraulic Disc Type (Optional) Internal Expanding Shoes Type (130 mm) Roller Chain

Annexure
Battery Ignition 12 V-2.5 Ah Electronic CDI

Starting Wheelbase
Ground Clearance Length Width Height Kerb Weight Fuel Tank Capacity Head light

Kick Starter 1235 mm

160mm 1980 mm 720 mm 1060 mm 116 kg 12.8 litres (Reserve 1.1 litres) Halogen Bulb 35 W / 35 W

d. CD Deluxe:
Engine Bore X Stroke Displacement Compression Ratio Max Power Torque Clutch Transmission Final Drive Ignition Starting Frame Suspension Dimensions (LXWXH) Wheel Base Ground Clearance Kerb Weight Tires Brakes Fuel Tank Capacity 4-Stroke OHC, Single Cylinder, Air Cooled 50 X 49.5 mm 97.2 cc 8.8 : 1 5.44 KW (7.4 PS) @ 8000rpm 0.79 Kg.m @ 5000 rpm Multi Plate Wet Type 4-Speed Constant Mesh Roller Chain Capacitor Discharge Ignition Kick Start Tubular Double Cradle Front : Telescopic Hydraulic Fork Rear : Swing Arm with Hydraulic Shock Absorbers 1970 X 720 X 1045 mm 1230 mm 159 mm 108 Kg Front : 2.75 X 18 - 4PR Rear : 2.75 X 18 - 6PR Front : Internal Expanding Shoe Type - 130 mm Dia Rear : Internal Expanding Shoe Type - 110 mm Dia 10.5 Ltrs

Annexure
Head Light Rectangular Multi Focal Reflector - 35/35W (Halogen Bulb)

d) CD Dawn:
Engine Displacement Clutch Gear box Frame Battery Head lamp Suspension(front) Suspension(rear) Wheelbase Dimensions (LxWxH) Ground clearance Kerb weight Tire (front) Tire (rear) Max power Max torque Bore x Stroke Compression ratio Starting Fuel tank capacity 4-stroke, air-cooled, single cylinder OHC 97.2cc Multi-plate wet 4 speed constant mesh Tubular double cradle 12V - 2.5 Ah 35W / 35W - Halogen bulb Telescopic hydraulic shock absorber Swing arm with hydraulic shock absorber 1230 mm 1980x720x1045 mm 150 mm 108 kgs 2.75 x 18-4 PR 2.75 x 18-6 PR 7.4 PS @ 8000 rpm 0.79 Kg-m @ 5000 rpm 50.0 x 49.5 mm 8.8: 1 Kick start 10.5 litres (reserve 1.8 litres)

e) CD 100SS:
Engine Displacement Clutch Type Clutch Primary Clutch Secondary Transmission Final Drive Ignition Starting 4-stroke, single cylinder, air - cooled, OHC 97.2cc Manual Multi-plate wet 4-speed constant mesh Roller chain Electronic Kick starter

Annexure
Frame Suspension (Front ) Suspension (Rear) Dimensions (L*W*H) Wheel Base Ground Clearance Kerb Weight Tires: Front/Rear Max. Power Max. Speed Fuel Tank Capacity Back bone type Telescopic hydraulic fork Spring loaded hydraulic type with both side action 1960*720*1050mm 1225mm 165mm 112kg 2.75"*18"-4PR/3.00"*18"-4PR 7.2 PS @ 8000 rpm 80 kmph 10.1 1tr(2.8 ltr reserve)

Hero Hondas Market Share

Market Share - Motorcycles India

Hero Honda Motor 13% 0% 48% 1% 3%1% Honda Motorcycle Bajaj Auto Ltd. Royal Enfield Motors TVS Motor Co. 31% 3% Kinetic Engg.Ltd. Yamaha Motor India LML Limited

Annexure

Return On Average Equity

80 70 60 50 40 30 20 10 0 1/4/01 to 31/3/02 1/4/02 to 31/3/03 Year 1/4/03 to 31/3/04 120 Return %age 100 80 60 40 20 0

Return On Capital Employed

Return %age

Hero Honda Bajaj TVS

Hero Honda Bajaj TVS

1/4/01 to 1/4/02 to 1/4/03 to 31/3/02 31/3/03 31/3/04 Year

Graphs Analyzing Financial Statements

Annexure

Debt-Equity Ratio
0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 1/4/01 to 1/4/02 to 1/4/03 to 31/3/02 31/3/03 31/3/04 Year 1200 1000 No of times Hero Honda Bajaj TVS 800 600 400 200 0

Interest Coverage Ratio

Ratio

Hero Honda Bajaj TVS

1/4/01 to 1/4/02 to 1/4/03 to 31/3/02 31/3/03 31/3/04 Year

Growth of Sales
45 40 35 30 25 20 15 10 5 0 1/4/01 to 31/03/2002 1/4/02 to 31/03/03 1/4/03 to 31/03/04

Growth of Profit After Tax

140 120 100 80 60 40 20 0 -20 -40

%age Growth

Bajaj TVS

%age Growth

Hero Honda

Hero Honda Bajaj TVS 1/4/01 to 31/03/2002 1/4/02 to 31/03/03 1/4/03 to 31/03/04

Year

Year

Annexure Cash From Operating Activities

1200 Cash (in Crores) 1000 800 600 400 200 0 Hero Honda Bajaj Companies TVS 1/4/02 to 31/3/03 1/4/03 to 31/3/04 Cash (in Crores) 0 -100 -200 -300 -400 -500 -600 -700 -800 -900

Cash from Investing Activities

Hero Honda

Bajaj

TVS

1/4/02 to 31/3/03 1/4/03 to 31/3/04

Companies

Cash from Financing Activities

200 100 0 -100 -200 -300 -400 -500 -600 -700

Cash (in Crores)

Hero Honda

Bajaj

TVS 1/4/02 to 31/3/03 1/4/03 to 31/3/04

Companies

Questionnaire

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: ? <35000 ? <40000 ? <45000 ? <50000 ? Price not a factor

Q3) Which bike do u have or planning to have? ? Splendor/Splendor+ ? CBZ ? Glamour ? Karizma ? Passion/Passion+ ? CD Dawn ? CD 100 ? Super Splendor 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) ? ? ? ? ? ? ? ? Power, pickup, speed, etc Fuel Efficiency Design and style Comfort (Seating, suspension, etc) Price Brand name Free gifts/discounts After sales service

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 ? Dealers efforts:

Questionnaire ? Free test drive ? Discounts/free gifts ? Proximity to area of residence ? Reputation of dealer ? Overall reputation of Hero Honda products

Q7) What (if anything) is it that you dont 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)

Q4) Was the service swift and timely? (Yes/No)

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)

Q7) Will you recommend Hero Honda to others? ? Yes, strongly ? Yes ? Will not recommend ? Will discourage

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?

Q5) How many events you have sponsored in last 1 year?

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) ? <35000 ? <40000 ? <45000 ? <50000 ? Price not a factor

Q3) Do/Does you/your family already own a two wheeler? Y/N

Questionnaire

Q4) When you think of a motor cycle, which brand /model comes to your mind first?

Q5) Which companys bike do you have or are planning to buy? ? Hero Honda ? Bajaj ? TVS ? Yamaha ? Others Q6) Which model are you looking forward to buy?

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.) ? Power, pickup, speed, etc ? Fuel Efficiency ? Design and style ? Comfort (Seating, suspension, etc) ? Price ? Brand name ? Free gifts/discounts ? After sales service ? 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 ? Dealers efforts: ? Sponsorship by the company. ? Free test drive ? Discounts/free gifts ? Proximity to area of residence ? Reputation of dealer ? Overall reputation of the brand.

Q10) Why do you prefer your model/brand over others?

Q11) What would have been your first preference, if u could spend more money?

Q12) Please indicate your preferences of on the following attributes HERO HONDA POWER PRICE FUEL EFFICIENCY STYLE PRICE BRAND AFTER SALES SERVICE BAJAJ YAMAHA TVS LML KINETIC

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 8. ISI emerging markets Database 9. Auto India May,2005 10. Overdrive May 2005,June 2005,July 2005 11. AutoCar India June 05

Filename: Marketing Mangement project (Hero Honda) Directory: C:\Documents and Settings\tapan\Desktop Template: C:\Documents and Settings\tapan\Application Data\Microsoft\Templates\Normal.dot Title: 1 Subject: Author: user Keywords: Comments: Creation Date: 12/13/2007 2:55 PM Change Number: 3 Last Saved On: 12/13/2007 2:56 PM Last Saved By: tapan Total Editing Time: 2 Minutes Last Printed On: 12/13/2007 3:11 PM As of Last Complete Printing Number of Pages: 67 Number of Words: 10,744 (approx.) Number of Characters: 61,245 (approx.)