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CASE STUDY: Hero Honda Motors Ltd.: Aiming To Capture the Growing Market in India

Submitted By: Amit Yadav Section B/66

INTRODUCTION INDUSTRY FOUNDED : : Automotive January 19, 1984 in Gurgaon, Haryana, India HEADQUATERS: KEY PEOPLE : New Delhi, India Brijmohan Lal Munjal (chairman and founder) Toshiaki Nakagawa (joint managing director) Pawan Munjal (Managing Director & CEO) PRODUCT : Motorcycles, Scooters


Hero Honda is an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. The company is the largest two wheeler manufacturer in India. The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at #108.


HERO is the brand name used by the Munjal brothers for their flagship company, Hero Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited at Dharuhera, India. Munjal family and Honda group both owned 26% stake in the Company. In 2010, it was reported that Honda planned to sell its stake in the venture to the Munjal family. During the 1980s, the company introduced motorcycles that were popular in India for their fuel economy and low cost. A popular advertising campaign based on the slogan 'Fill it Shut it Forget it' that emphasized the motorcycle's fuel efficiency helped the company grow at a double-

digit pace since inception. The technology in the bikes of Hero Honda for almost 26 years (19842010) has come from the Japanese counterpart Honda Hero Honda has three manufacturing facilities based at Dharuhera, Gurgaon in Haryana and at Haridwar in Uttarakhand. These plants together are capable of churning out 3 million bikes per year Hero Honda has a large sales and service network with over 3,000 dealerships and service points across India. Hero Honda has a customer loyalty program since 2000.called the Hero Honda Passport Program. The company has a stated aim of achieving revenues of $10 billion and volumes of 10 million two-wheelers by 201617. This in conjunction with new countries where they can now market their two-wheelers following the disengagement from Honda. Hero Honda hopes to achieve 10 per cent of their revenues from international markets, and they expected to launch sales in Nigeria by end-2011 or early-2012. In addition, to cope with the new demand over the coming half decade, the company is coming up with their fourth factory in Neemrana, Rajasthan while their fifth factory is planned to be set up in Gujarat. Important Happenings1956Formation of Hero Cycles in Ludhiana (majestic auto limited) 1975Hero Cycles becomes largest bicycle manufacturer in India. 1983Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed 1984Hero Honda Motors Ltd. incorporated 1985Hero Honda motorcycle CD 100 launched. 1989Hero Honda motorcycle Sleek launched. 1991Hero Honda motorcycle CD 100 SS launched. 1994 Hero Honda motorcycle Splendor launched. 1997Hero Honda motorcycle Street launched. 1999 Hero Honda motorcycle CBZ launched. 2001 Hero Honda motorcycle Passion and Hero Honda Joy launched. 2002Hero Honda motorcycle Dawn and Hero Honda motorcycle Ambition launched. 2003Hero Honda motorcycle CD Dawn, Hero Honda motorcycle Splendor plus, Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Karizma launched. 2004Hero Honda motorcycle Ambition 135 and Hero Honda motorcycle CBZ* launched.

2005Hero Honda motorcycle Super Splendor, Hero Honda motorcycle CD Deluxe, Hero Honda motorcycle Glamour, Hero Honda motorcycle Achiever and Hero Honda Scooter Pleasure. 2007New Models of Hero Honda motorcycle Splendor NXG, New Models of Hero Honda motorcycle CD Deluxe, New Models of Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Hunk launched. 2008New Models of Hero Honda motorcycles Pleasure, CBZ Xtreme, Glamour, Glamour Fi and Hero Honda motorcycle Passion Pro launched. 2009New Models of Hero Honda motorcycle Karizma:Karizma ZMR and limited edition of Hero Honda motorcycle Hunklaunched 2010New Models of Hero Honda motorcycle Splendor Pro and New Hero Honda motorcycle Hunk and New Hero Honda Motorcycle Super Splendor launched. 2011New Models of Hero Honda motorcycles Glamour, Glamour FI, CBZ Xtreme, Karizma launched. New licensing arrangement signed between Hero and Honda. In August Hero and Honda parted company, thus forming Hero MotoCorp and Honda moving out of the Hero Honda joint venture. In November, Hero launched its first ever Off Road Bike Named Hero "Impulse". 2012-New Models of Hero Motocorp Maestro the Masculine scooter and Igniter the young generation bike are launched.


Sleek Street Achiever Ambition 133, Ambition 135 CBZ, CBZ Star, CBZ Xtreme CD 100, CD 100 SS, Hero Honda Joy, CD Dawn, CD Deluxe, CD Deluxe (Self Start) Glamour, Glamour F.I Hunk Karizma, Karizma R, Karizma ZMR FI Passion, Passion Plus, Passion Pro

Pleasure Splendor, Splendor+, Splendor+ (Limited Edition), Super Splendor, Splendor NXG,Splendor PRO


In December 2010, the board of directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka and Nepal) and the termination would mean that Hero Group can now export. Since the beginning, the Hero Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone. The Japanese auto major will exit the joint venture through a series of off market transactions by giving the Munjal familythat held a 26% stake in the companyan additional 26%. Honda, which also has an independent fully owned two-wheeler subsidiaryHonda Motorcycle and Scooter India (HMSI)will exit Hero Honda at a discount and get over $1 billion for its stake. The discount will be between 30% and 50% to the current value of Honda's stake as per the price of the stock after the market closed on Wednesday. The rising differences between the two partners gradually emerged as an irritant. Differences had been brewing for a few years before the split over a variety of issues, ranging from Honda's reluctance to fully and freely share technology with Hero (despite a 10-year technology tie-up that expires in 2014) as well as Indian partner's uneasiness over high royalty payouts to the Japanese company. Another major irritant for Honda was the refusal of Hero Honda (mainly managed by the Munjal family) to merge the company's spare parts business with Honda's new fully owned subsidiary Honda Motorcycle and Scooter India (HMSI). As per the arrangement, it will be a two-leg deal. In the first part, the Munjal family, led by Brijmohan Lal Munjal group, will form an overseas-incorporated special purpose vehicle (SPV) to buy out Honda's entire stake, which will be backed by bridge loans. This SPV would

eventually be thrown open for private equity participation and those in the fray include Warburg Pincus, Kohlberg Kravis Roberts(KKR), TPG, Bain Capital, and Carlyle Group. Honda will continue to provide technology to Hero Honda motorbikes until 2014 for existing as well as future models.

HERO MOTOCORP TODAY THE COMPANY Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two - wheelers, based in India. In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date. MISSION Hero MotoCorp's mission is to become a global enterprise fulfilling its customers' needs and aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand advocates. The company will provide an engaging environment for its people to perform to their true potential. It will continue its focus on value creation and enduring relationships with its partners. VISION The story of Hero Honda began with a simple vision - the vision of a mobile and an empowered India, powered by its bikes. Hero MotoCorp Ltd., company's new identity, reflects its commitment towards providing world class mobility solutions with renewed focus on expanding company's footprint in the global arena. STRATEGY Hero MotoCorp's key strategies are to build a robust product portfolio across categories, explore growth opportunities globally, continuously improve its operational efficiency, aggressively expand its reach to customers, continue to invest in brand building activities and ensure customer and shareholder delight.

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To identify sales growth and progress of the company from the year 1990-2011 To know market position of Hero Honda bike in the market (1990-2011).

SPECIFICATION OF THE POPULATION AND ITS CHARACTERISTICS A population is a collection of data whose properties are analyzed. The population is the complete collection to be studied; it contains all subjects of interest. A sample is a part of the population of interest, a sub-collection selected from a population.

In this case: Population: wholes automotive industry Sample: Hero Honda Company is a sample

PLANNING FOR COLLECTION OF DATA Statistical Data: A sequence of observation, made on a set of objects included in the sample drawn from population is known as statistical data. (1) Ungrouped Data: Data which have been arranged in a systematic order are called raw data or ungrouped data. (2) Grouped Data: Data presented in the form of frequency distribution is called grouped data.

Collection of Data: The first step in any enquiry (investigation) is collection of data. The data may be collected for the whole population or for a sample only. It is mostly collected on sample basis.

Types of Data: There are two types (sources) for the collection of data. (1) Primary Data (2) Secondary Data (1) Primary Data: The primary data are the first hand information collected, compiled and published by organization for some purpose. They are most original data in character and have not undergone any sort of statistical treatment. Example: Population census reports are primary data because these are collected, complied and published by the population census organization.

(2) Secondary Data: The secondary data are the second hand information which is already collected by someone (organization) for some purpose and are available for the present study. The secondary data are not pure in character and have undergone some treatment at least once. Example: Economics survey is secondary data because these are collected by more than one organization like Bureau of statistics, Board of Revenue, the Banks etc.

Methods of Collecting Primary Data: Primary data are collected by the following methods:

Personal Investigation: The researcher conducts the survey him/herself and collects data from it. The data collected in this way is usually accurate and reliable. This method of collecting data is only applicable in case of small research projects. Through Investigation: Trained investigators are employed to collect the data. These investigators contact the individuals and fill in questionnaire after asking the required information. Most of the organizing implied this method. Collection through Questionnaire: The researchers get the data from local representation or agents that are based upon their own experience. This method is quick but gives only rough estimate. Through Telephone: The researchers get information through telephone this method is quick and give accurate information.

Methods of Collecting Secondary Data: The secondary data are collected by the following sources:

Official: e.g. The publications of the Statistical Division, Ministry of Finance, the Federal Bureaus of Statistics, Ministries of Food, Agriculture, Industry, Labor etc. Semi-Official: e.g. State Bank, Railway Board, Central Cotton Committee, Boards of Economic Enquiry etc. -Publication of Trade Associations, Chambers of Commerce etc. -Technical and Trade Journals and Newspapers.

Data collected from above analysis can of two kinds: Quantitative data are anything that can be expressed as a number, or quantified. Examples of quantitative data are scores on achievement tests, number of hours of study, or weight of a subject. These data may be represented by ordinal, interval or ratio scales and lends themselves to most statistical manipulation. Qualitative data cannot be expressed as a number. Data that represent nominal scales such as gender, social economic status, and religious preference are usually considered to be qualitative data.

In this case given data is:

Quantitative Data Secondary Data Grouped Data


YEAR 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOATL NUMBER OF YEAR'S 22

TOTAL INCOME(IN MILLION RUPEES) 1523.3 2187.0 2757.3 3134.7 3667.1 5087.1 6187.1 7840.3 11642.2 15655.3 22698.0 32060.0 45132.7 51520.3 67864.8 86656.2 101879.5 105170.0* 125650.0* 160990.0* 196700.0* 239436.0* SUM
http://www.hero nin/investors/fina ncials-annual report

*Source: report


STATISTICAL ANALYSIS: Statistical analysis refers to a collection of methods used to process large amounts of data and report overall trends. Statistical analysis is particularly useful when dealing with noisy data. Statistical analysis provides ways to objectively report on how unusual an event is based on historical data. We usually prefer statistical analysis to more traditional forms of technical analysis because statistical analysis makes use of every print. Statistical analysis looks at more data, and typically requires a computer. FORMULA USED: 1. Mean : The arithmetic mean of a set of observations is their sum, divided by the number of observations. It is generally denoted by x,


Median: In simple words, Median is the middle value in the list of numbers. To calculate the Median value, the list should be arranged in the ascending order first, then the formula is stated as: If the total number of numbers (n) is an odd number, then the formula is given below:

If the total number of the numbers (n) is an even number, then the formula is given below:

3. Variance and Standard Deviation Standard deviation is the square root of sum of the square deviations of various values from their arithmetic mean divided by the sample size minus one. Variance is the square of standard deviation. Sample variance is the sum of squared deviations of various values from their arithmetic mean divided by the sample size minus one.

We define the variance to be

And the standard deviation to be

4. Kurtosis Kurtosis measures the amount of peakedness of a distribution. A flatter distribution than a normal distribution than a normal distribution is called platykurtic .a more peaked distribution than the normal distribution is referred to as leptokurtic. Between these two type of distribution which is more normal in shape, referred to as meskuric distribution.

5. Skewness The distribution of data may or may not be symmetrical. A distribution where the right half is the mirror image of the left half is said to be symmetrical. If the distribution is not symmetrical, it is said to be asymmetrical or skewed. In this case after processing given data in MS EXCEL we found some data given below. DESCRIPTIVE STATISTICS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. MEAN MEDIAN STANDARD DEVIATION SAMPLE VARIANCE KURTOSIS SKEWNESS RANGE MINIMUM MAXIMUM SUM COUNT 58883.58636 2000.5 69617.92838 4626353409 0.956964807 1.317403747 237912.7 1523.3 239436.0 1295438.9 22

TOTAL INCOME 260000 240000 220000 200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 1990 1523.3 2187.0 2757.3 3134.7 3667.1 5087.1 6187.1 7840.3 11642.2 1991 1992 1993

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

22698.0 32060.0 45132.7 51520.3 67864.8 86656.2 101879.5 105170.0 125650.0 160990.0 196700.0




Graphical summary of Hero Honda Motors (1990-2011)


DRAWING CONCLUSION After analysing Hero Honda motors annual income report (1990-2011) we can conclude that The revenue for the company, Hero Honda, that has the largest market share increased by 5.42% from March 2011 quarter of Rs 5390 to Rs 5683.33 crore in June 2011. Its quarterly sales stand at 1529577 units registering a growth of 24%. According to the company's press release this is the highest unit sales for the company in any quarter. The two-wheeler giant recorded a turnover of Rs 5683.33 crore, registering a growth of 32% over the corresponding quarter of last year.Its profit after tax was at Rs 557.89 crores and the operating margin for the quarter was 10.17% in the quarter. Hero Honda Motors (HHML), the world's largest two wheeler manufacturer continued its dominance of two-wheeler market by recording sales of 501,111 units in the month of December10, a surge of 33% over the corresponding month in '09. The year 2010 also marked the best ever calendar year for the company with cumulative sales of over 5 million units, a growth of 16.4% over the calendar year 2009. During the year, the company also witnessed 5 lakh plus monthly sales in October and December and also recorded 4 lakh plus monthly sales for eight consecutive months. The Q3 of FY11 also marked the most successful quarter for Hero Honda, with sales of 14,28,030 units, up by 29% over the corresponding quarter in FY10, when the company had sold 11,11,372 units. Company Performance after Termination of Joint Venture: Despite fears of a slowdown, Hero MotoCorp continued to display a stellar performance in the third quarter of 2011-12; posting net sales of Rs 6,032 crore, the highest ever till date. This 17% jump in sales over the past year was triggered by both higher volume growth (up by 11%) and better realization (up by 5%).The company also posted a net profit growth of 43% in the third quarter. Improving market share: Hero MotoCorp continued with its average growth, which was better than the industry growth, in this quarter and improved its domestic market share by around 1% to 56%.
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Overall companys performance in year 2013 is given in table:



Overall Hero motocorp has captured 38% of automotive industry with higher number of sale every year and still increasing.
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