Presented By : Group – 6 Section A, Gowri S, Rajat Agarwal, Sunny Malhi, Chintan Valia, Vishwanath Tiwari

Three major segments dominated by Motorcycles:
 Scooters
 Mopeds
2003 2004 2005 2006 2007

 Motorcycles

H1

FY2008

Mopeds Scooters Motorcycles

0.00% 20.00% 40.00% 60.00% 80.00%100.00%

This segment can be broken down into entry, executive & premium level bikes Entry level & executive level bikes dominate
9.8

41.6 Entry 48.7 Executive Premium

According to capacity of engines:
 < 75 cc
H1 2003 2004 2005 2006 2007

 75-125 cc  125-250 cc  >250 cc

FY2008 >250 cc 125-250 cc 75-125 cc <75 cc

0.00%

20.00%

40.00%

60.00%

80.00%

Oligopoly dominated by Hero Honda, Bajaj , TVS & Honda

In motorcycle segment Bajaj, Hero Honda & TVS occupy 90% market share
Entering & exiting the industry is costly Price-based competition with a focus on technology & value propositions Structure determines conduct & long-run performance

Sources of threat

• Substitution • Supplier consolidation • New entrants

Anticipated • Average above level of normal profits performance

STRENGTHS
Good Image among the consumers
High operational efficiency Access to superior models of Honda Good distribution network Highest market share

WEAKNESSES
Low presence in premium segment Less developed in house capabilities Weak on self product development Association with Honda put Restriction on export

Increasing demand
Increase in per capita income Economic reforms Low cost of production

Entry of bigger players Tough competition from Bajaj Tighter emission norms Introduction of Tata Nano

OPPORTUNITIES

THREATS

Ancillarisation Backward Integration Operational Efficiency Dealer Network

Margin

• Margins under pressure • Price-based competition

Sales

• Dwindling sales this year • Fear of economic slowdown
• Entry of international players • Value propositions by domestic players

Competition

Strengthen presence in premium segment Presence in gearless scooter segment Set up indigenous R & D facilities

Value added services for premium and gearless segment

Phase out some products to avoid customer confusion

Segment
Target segment

• Second largest – 80% of scooter market • 30% growth in 2007-08
Transportation need Translates to  Product features Product choice

Men/ Family

To carry load - carrying family, delivering goods etc

Strong, sturdy and powerful

Motorcycle/ Honda Activa

Women

To move around with ease and comfort, not to depend on others for commuting need – scooter is an agent of liberation

Great mileage, easy to maneuver and safe to ride

Scooty Pep / Hero Honda pleasure

Pleasure positioning

• “Why should boys have all the fun?” • Exclusionary – loses out on family segment • Just4her showrooms, Lady rider club etc • Correct positioning, no need to reposition solution is NPD

New product development funnel

Pleasure product

• 8 colors, features have good reviews, priced between Scooty and Dio • Value added features should be offered

New product

• For family segment • Monopoly for Activa (60% market share), take head-on • Positioning – Sound on engineering and attractive

3

• Product life cycle • Expiry of contract & competition Rationale with HMSI • Competitor innovation

2.5 2 1.5 1 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007

Hero Honda Motors Ltd Bajaj Auto Ltd TVS Motor Company Ltd

Recommendation

• Currently – development centre for Honda designs • Develop capabilities for idea generation, screening, approval and product design

Concept generation – change in reward schemes
• Dynamic cross-functional team over a time frame • Employees as idea generators – Toyota case - reward ideas, culture of innovation

Idea screening – structural changes
• Cross functional Idea committee – regular meetings • Idea manager - internal publicity

Idea approval – structural changes
• New product development committee • Design manager, idea manager, functional heads, senior management

Product design
• Dedicated team of engineers • Design manager

Poor record in launching new product  Few offerings in premium segment:

 Low margin  Market image  Overdependence on

Splendor brand

“Launch a superior product & market it well”

Premium Segment
• • • • Racing kits Customized coating of paints Riding gear Biking events

Gearless Segment
• Mobile charging point • Single key functions • Exchangeable body panels

Operations
• Accurate forecasts

Brand Dilution
• Focused positioning, marketing & targeting

Benefits Buyers & Suppliers
• Faster delivery for consumers

• Easier scheduling

• Easier to supply components

JV with another international manufacturer Indulging in price wars

Company owned dealerships

Parts bin exploitation

Yearly estimate of R&D expenses

2009-10

R&D Expense 2008-09 Recurring Cost Capital Cost

2007-08

0

50

100

150

200

250

* To be explained in detail in class with excel sheet

Consolidated estimates for premium segment until 2009-10
Premium Segment Total Sales Margins Gains Rs.3375 Cr. 15% Rs.506.25 Cr.

Costs

Rs.2868.75 Cr.

Estimated cost-breakups
Cost Operating Cost Capital Cost Year 2008-10 2007-08 2008-09 2009-10 Amount (Cr.) 2868.75 663 600 265

Partly outsource R&D of design & engineering

Explore the option of short term contracts with existing firms by paying more royalty Reverse Engineer products which have been successful elsewhere in the world