ASSIGNMENT OF “SWOT ANALYSIS OF HERO HONDA”

UNIVERSITY SCHOOL OF MANAGEMENT

Submitted to :Ms. Richa Aggarwal Faculty MBA

Submitted By :Shiv Kumar MBA(G), B Roll no. 116

PROFILE OF HERO HONDA
The joint venture between India's Hero Group and Honda Motor Company, Japan has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide. During the 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission. Now millions of Hero Honda two wheelers tread Indian roads today. These are almost as many as the number of people in Finland, Ireland and Sweden put together! Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Hero Honda bikes currently roll out from two globally benchmarked manufacturing facilities based at Dharuhera and Gurgaon in Haryana. These plants together are capable of churning out 3.9 million bikes per year. A third state of the art manufacturing facility at Hardwar in Uttranchal has been commissioned from April 2008 to cope with sustained customer demand. Hero Honda's extensive sales and service network now spans over 3000 customer touch points.Hero Honda values its relationship with customers. Having reached an unassailable pole position in the Indian two wheeler market, Hero Honda is constantly working towards consolidating its position in the market place. The company believes that changing demographic profile of India, increasing urbanization and the empowerment of rural India will add millions of new families to the economic mainstream. This would provide the growth ballast that would sustain Hero Honda in the years to come. As Brijmohan Lall Munjal, the Chairman, Hero Honda Motors succinctly points out, "We pioneered India’s motorcycle industry, and it's our responsibility now to take the industry to the next level. We'll do all it takes to reach there.''

HERO HONDA’S MISSION
Hero Honda’s mission is to strive for synergy between technology, systems and human resources, to produce products and services that meet the quality, performance and price aspirations of its customers. At the same time maintain the highest standards of ethics and social responsibilities. This mission is what drives Hero Honda to new heights in excellence and helps the organization forge a unique and mutually beneficial relationship with all its stake holders.

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

TWO WHEELERS IN INDIA
The feeling of freedom and being one with the Nature comes only from riding a two wheeler. Indians prefer the two wheelers because of their small manageable size, low maintenance, pricing and easy loan repayments. Indian streets are full of people of all age groups riding a two wheeler. Motorized two wheelers are seen as a symbol of status by the populace. Thus, in India, we would see swanky four wheels jostling with our ever reliable and sturdy steed the two wheeler. India is the second largest producer and manufacturer of two-wheelers in the world. It stands next only to Japan and China in terms of the number of two-wheelers produced and domestic sales respectively. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country. Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. In the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj Auto. Although various government and private enterprises entered the fray for scooters, the only new player that has lasted till today is LML. The motorcycle segment was initially dominated by Enfield 350cc bikes and Escorts 175cc bike. The two-wheeler market was opened to foreign competition in the mid-80s. And the then market leaders - Escorts and Enfield - were caught unaware by the onslaught of the 100cc bikes of the four Indo-Japanese joint ventures. With the availability of fuel efficient low power bikes, demand swelled, resulting in Hero Honda - then the only producer of four stroke bikes (100cc category), gaining a top slot. The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles respectively.

These two players initially started with assembly of CKD kits, and later on progressed to indigenous manufacturing. In the 90s the major growth for motorcycle segment was brought in by Japanese motorcycles, which grew at a rate of nearly 25% CAGR in the last five years. The industry had a smooth ride in the 50s, 60s and 70s when the Government prohibited new entries and strictly controlled capacity expansion. The industry saw a sudden growth in the 80s. The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990. In 1990, the entire automobile industry saw a drastic fall in demand. This resulted in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda showed a marginal decline in 1992. The reasons for recession in the sector were the incessant rise in fuel prices, high input costs and reduced purchasing power due to significant rise in general price level and credit crunch in consumer financing. Factors like increased production in 1992, due to new entrants coupled with the recession in the industry resulted in company either reporting losses or a fall in profits. Later with development of economic situation, sales of two wheeler rapidly increased. The to parts trend India. of of One India. owning of the two-wheelers chief is due is to poor a offer variety public a of great facts in deal peculiar many of factors transport

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two-wheelers

convenience and mobility for the Indian family. 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. All the new models are now being replaced by 4-stroke motorcycles. Excise duty on motorcycles has been reduced resulting in price reduction, which has aided in propelling the demand for motorcycles. Fierce competition has also forced players to cut prices in certain models. During the year 2006-07, 78.57 lakhs Two-wheelers were sold in India.

KEY FACTORS AFFECTING THE SALES OF MOTORCYCLES
Government policy impact on petrol prices: Petrol prices determine the running cost of two wheelers expressed in rupees per kilometre. Petrol prices are the highest in India as GOI subsidizes kerosene and diesel. But with the change in the GOI policy to reduce the subsidy, the prices of petrol will remain constant at the current prices. This will have a positive effect on two wheelers market. This trend would actually affect positively the whole automotive industry. Improvement in disposable income: With the increase in salary levels due to entry of multinationals following liberalization process the disposable income has improved exponentially over the years. This will have a multiplier effect on demand for consumer durables including two wheelers. This is already witnessed in improved demand two wheelers. Availability of credit for vehicle purchase: The availability and cost of finance affects the demand for two wheelers as the trend for increased credit purchases for consumer durables have increased over the past few years.

Key players in the Two-wheeler Industry:
There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS). The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).

Types of Two-wheelers in India:
There are mainly three types of two-wheelers available in India. They are Motorcycles, Scooters and Scooterettes/Mopeds.

Motorcycles in India:
Bikes comprise a major segment of Indian two wheeler industry.

Company : Bajaj Auto Ltd.
* Bajaj Avenger * Bajaj CT 100 * Bajaj Platina * Bajaj Discover DTSi * Bajaj Pulsar DTSi * Bajaj Wave * Bajaj Wind 125

Company : HERO HONDA
* Sonic DTSi * Hero Honda Achiever * Hero Honda CD Dawn * Hero Honda CD Deluxe * Hero Honda Glamour * Hero Honda Glamour-Fi * Hero Honda Karizma * Hero Honda Passion Plus * Hero Honda Pleasure * Hero Honda Super Splendor * Hero Honda Splendor NXG * Hero Honda CBZ X-Treme * Hero Honda Hunk

Company: Kinetic Motor
* Kinetic Aquila * Kinetic Boss * Kinetic Challenger * Kinetic Comet * Kinetic GF

Company: TVS Motor
• • • • • • • • • • • • • • • • • • • • • • •

TVS Ind Suzuki AX 100 TVS MAX 100 TVS MAX R 100 TVS Supra TVS Suzuki Samurai TVS Suzuki Shogun TVS Suzuki Shalion TVS Suzuki Fiero TVS Fiero TVS Star TVS Star City TVS Star city deluxe TVS Star Sport TVS Fiero F2 TVS Fiero FX TVS Centra TVS Victor (110 cc) TVS Victor GLX (125 cc) TVS Victor EDGE (125 cc) TVS Flame (125 cc,ccvti technology) TVS Apache (150 cc,13.7 Ps @8500rpm) TVS Apache RTR 160 TVS Apache RTR 160 EFI (Electronic Fuel Injection)

Company: Yamaha Motor India
* TVS Victor * Yamaha Crux * Yamaha G5 * Yamaha Gladiator

Key Officials
BRIJMOHAN LALL MUNJAL PAWAN MUNJAL PRADEEP DINODIA RAVI SUD ILAM C. KAMBOJ Chairman Managing Director & CEO Director Sr. Vice President & CFO Sr. G.M. Legal & Company Secretary

Hero Honda Motors Ltd.
Industry Business Group Incorporation Date Company/Business Registration No Auto - 2 Wheelers. Hero Group 19/01/1984 INE158A01026

Share Holding Pattern Holder's Name Promoters Other Companies Foreign NRI Foreign Institutions Foreign Industries Others Banks Mutual Funds General Public Financial Institutions Foreign Promoter

No of Shares 57833555 1500702 180204 48428475 1250 1311172 7549210 14662220 16301962 51918750

% Share Holding 28.96% 0.75% 0.09% 24.25% 0.00% 0.66% 3.78% 7.34% 8.16% 26.00%

List of Exchanges:
• • • • • • • • • • • • Bangalore Stock Exchange Ltd. Calcutta Stock Exchange Association Ltd. Cochin Stock Exchange Ltd. Delhi Stock Exchange Assoc. Ltd. Hyderabad Stock Exchange Ltd Inter-connected Stock Exchange of India Ludhiana Stock Exchange Assoc. Ltd. Madras Stock Exchange Ltd., National Stock Exchange of India Ltd. Over The Counter Exchange Of India Ltd. The Stock Exchange, Mumbai Uttar Pradesh Exchange Assoc Ltd.

SWOT ANALYSIS OF HERO HONDA COMPANY
A) STRENGTH:a) Achievement:
Retained the coveted position of World No 1 two-wheeler company for the seventh consecutive year.

b) High Sales Growth:
Hero Honda experienced great growth throughout its early days. The Munjal family started a modest business of bicycle components. By 2002 Hero Group had sold 86 million bicycles producing 16000 bicycles a day. Today Hero Honda has an assembly line of nine different models of motorcycles available. It holds the record for most popular bike in the world by sales for Its Splendor model. Hero Honda Motors Limited was established in joint venture with Honda Motors of Japan in 1984, to manufacture motorcycles. It is currently the largest producer of Two Wheelers in the world. It sold 3 million bikes in the year 2005-2006. Recently it has also entered in scooter manufacturing, with its model PLEASURE mainly aimed at girls. HUNK is the latest offering from the HHML stable.
SALES PERFORMANCE

HERO HONDA SALES IN SEPTEMBER ONCE AGAIN CROSS THE MAGIC THREE LAKH NUMBER SEPTEMBER ‘07 SALES AT 314,567; 4.31% M-O-M GROWTH

c) Fuel economy:
Over all fuel consumption by its products is less in compare to other brand’s product. They have so far been able to give better mileage output. Because of this Hero Honda splendor has magical sales record.

d) Quality policy:
Total quality management is the chore philosophy of the company and it is thus always focussed on product innovation and performance.

e) Service schedule:
Hero Honda offers free services on all its two-wheelers. Customer should avail all these service within the stipulated time period or km range, whichever condition gets satisfied earlier from the date of purchase. After the completion of free services or its validity period one must continue availing paid services as per the recommended service schedule

e) High financial performance:
The Hero Honda financial chart clearly shows that it has strong financial background in terms of asset, sales, profit more over, Hero Honda Motors Ltd. (HHML), the world’s largest two-wheeler manufacturer, today reported 31% per cent growth in profit after tax (PAT) at Rs 275 crore for the third quarter (October-December) of this financial year (2007-08). Hero Honda’s profit after tax in the corresponding period last fiscal stood at Rs 209.18 crore. Total Turnover (sales turnover plus other income, net of excise) grew to Rs 2795.17 crores, a growth of 3.54 per cent over Rs 2699.63 crores recorded in the corresponding period last fiscal. The company has recorded an EBIDTA margin of 13.95% in the quarter. The EBIDTA margin in the previous quarter (July-September’07) was 12.39%. This strong financial performance comes close on the heels of the company’s good overall sales even in the face of the prevailing slowdown in the two wheeler industry. Hero

Honda’s cumulative total turnover for the first three quarters (April–December 2007) of this financial year stood at Rs. 7673.43 crores. Hero Honda's strategy for aggressive top line growth through new product launches, brand building initiatives backed by innovative communication has resulted in market share gain across every segment. Indeed, Hero Honda’s share in domestic motorcycles market has been growing upward of 50 per cent, despite the slowdown in the two-wheeler industry.

B) Weakness:
a) Less promotion:
The promotions and ads of Hero Honda are very less as compared to its competitors.

b) High maintenance:
Some of the products of hero Honda like Karizma require high maintenance.

c) Lack of recycling scrap:
It expected that by 2020 scrap generated by end of life vehicles in India would be about 2.5 million tonnes and 40% of it will come from two wheeler.But hero honda is not capable enough to recycle the scrap generated and may impose environmental threat. TVS Company has this facility and is future threat to this company as it can affect the future sales as well.

d) Labor relations:
In Hero Group there is no organized labor union and family members of employees find ready employment within Hero. The philosophy with regard to labor management is "Hero is growing, grow with Hero." Hero workers receive a uniform allowance, as well as House Rent Allowance (HRA) and Leave Travel Allowance (LTA). Extra benefits include medical checkups not just for workers, but also for the immediate family members. For the majority of the production workers, who are hired through contractors, these benefits are out of reach. This and other problems lead to a strike and factory occupation by 4,000 temp workers in the Gurgaon plant in spring 2006.

C) Opportunities:
a) High GDP & increasing income level of consumer:
Supported by strong demand impulses, especially in the manufacturing and service sector, India’s gross domestic product grew at 8.9 per cent. This is the fourth successive year in which the country’s growth has exceeded 8 per cent growth, and India is now in a select club of 12 countries with a trillion dollar plus economy. As a nation, India has prospered. People living in households with incomes ranging from 2 lakh – 10 lakh a year has grown from 15 million in 1991 to 100 million in 2005-06. Not surprisingly, therefore, between 1991 and now, the two wheeler market has grown more than four times. Urban India is growing at a rapid pace. NCAER data for top 24 cities in India shows migration to higher income levels growing at over 40 per cent per annum. Prosperity in rural India is also a significant phenomenon, with 43 per cent of households in middle and the high income groups coming from rural India. More incomes per person, more persons will lead to a quadrupling of India’s consumer markets in the next two decades, a 2007 study by McKinsey Global institute has projected. And this will provide Company the ballast to sustain and consolidate its leadership position.

b) Good will of the company:
If the company utilizes the good will they have gained so far from their customers, they can increase the sales performance by economizing the cost and few technical renovation of the product. With new launch they can be benefited at present market scenario like Karizma, Hunk has huge attraction towards the younger generation because of its style, sporty look, and high accelerating power and is stable at its feet even at high speeds.

D) Threats:
a) Finance assistance:
Easy availability of finance is the main cause of sales growth and any restriction will hamper its growth prospects.

b) Inflation:
If inflation increases cost of raw material used in production will go high and selling price may go high that may decrease demand of the two wheeler.

c) Technical renovation aspect:
Competitor bike like pulsar and apache are threat to Hero Honda product like Karizma and Hunk in respect to fuel economy. So if they don’t short out in the new launches and give something extra in its engineering performance it may affect in demand of this company product.

References :1. 2. 3. 4.

“ www.herohonda .com” “www.google.co.in” “www.nestie.com” “ Annual Report 2008-09 ”

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