Project on

TWO WHEELER INDUSTRY IN INDIA

Submitted by: Chintan Shah T.Y.BMS Semester V

Bhavan’s College Andheri (West)

Submitted to: The University of Mumbai 2004 - 2005
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TABLE OF CONTENTS
Sr.No
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Particulars
Acknowledgement Objectives of the Project Parameters of the project Executive Summary TWO WHEELER INDUSTRY IN INDIA Introduction Historical Industry Development Current Scenario Industry Structure Prelude to Indian Two Wheeler Sector Growth in the Last Two Years Environmental Regulations Major Players Company’s Share in the Market Sector Outlook Bajaj Group  Profile of the Company  Management  Objectives and Goals  Policies  Performance  Strategies used in the Past  Economics  Marketing  Management Information System  SWOT Analysis  International Marketing  Production and Operation Research  Total Quality Management  Current Strategies Suggested Hero Honda Group  Profile  Management  Consolidated Family Business  Glorious History

Pages From - To
I-I II - II III - III IV - V 1 3 7 10 14 15 16 17 31 32 – – – – – – – – – – 2 6 9 13 14 15 16 30 31 32

33 – 33 34 – 34 35 – 35 35 – 35 36 – 39 40 – 41 42 – 43 44 - 50 51 – 52 53 – 54 55 – 56 57 – 58 59 – 61 62 – 64 65 66 67 69 – – – – 65 66 68 69

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17. 18. 19. 20.

 Mission Statement  It’s Vision  Achievements and Awards  Areas of Management  Marketing  The Number Game  A Company Par Excellence  Exports Future Outlook of Two - Wheeler Sector Conclusion Recommendation Bibliography

70 – 70 70 - 70 71 – 74 75 – 79 80 - 87 88 – 89 90 – 92 93 – 95 96 – 105 106 – 109 110 – 118 119 - 120

OBJECTIVES OF THE PROJECT
 Study the Two-wheeler Industry.  The Industry structure.  The forces that are at play in the Indian two wheeler market.  Gauge the performance of the major players in this market.  To analyze the reason for a major shift from scooters to motorcycles.

PARAMETERS OF THE PROJECT

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I have tried to study the project through various areas of management such as:  Economics  Marketing  MIS  Production  Operation Research  Sales  Market share  Profits  Production  Exports  Brand awareness EXECUTIVE SUMMARY In stark contrast to the situation that prevailed in the 1990s. the twowheeler industry has now acquired the traits of any other consumer 4 .

In the past couple of years. Earlier. the profit margin of the top companies was not subject to the kind of strain that is being witnessed in the recent quarters. Apart from the capital expenditure. new product launches have an inflationary impact on expenses of a recurring nature. including promotional costs. Hero Honda and Bajaj were the only producers of four-stroke motorcycles. This has led to an increase in the number of models and a consequent reduction in product lifecycle. In the 1990s. Now. coupled with the discounts that are being forked out. The entry of more players into the fast-growing four-stroke motorcycle market.durable industry. Going forward. of price wars. This. LML along with Bajaj and Hero Honda are jostling for space in the four-stroke market. The pressure on margins is not fully manifest owing to the cost control and indigenization efforts undertaken by two-wheeler companies.stroke motorcycle models have hit the Indian roads. Kinetic. TVS Motor. at least until the volume growth manages to compensate this. more than ten new four. This has resulted in an increase in overall expenses. for the companies. has led to higher competitive pressure for the companies. celebrity endorsements and everincreasing sales and other promotional outgo. the constituents of the two-wheeler industry too would find profit margin being consistently under pressure once the scope for 5 . such as sales promotion and staff cost. could have a negative impact on the profitability of the two-wheeler industry in the near term.

6 . motorcycles and mopeds.cost control diminishes. The Indian two-wheelers industry can be broadly classified into three major segments -. motorcycles have led the upsurge (88% growth) to result in a y-o-y growth of 42% for the sector. and the largest manufacturer of three-wheelers.scooters. Hero Honda. Among two-wheelers. LML and TVS Motors. INTRODUCTION India is the third largest manufacturer of two-wheelers in the world. Growth in volume would be the key driver of financial performance even as the scope for margin expansion wanes. Kinetic. The major players in the Two Wheeler sector are Bajaj Auto.

65% in FY2001-02. The motorcycle segment is the fastest growing with its share in two wheeler sales increasing from 37. Sale of scooters and mopeds segment decreased 51. In the last five to six years. resulting in price reduction. Low – interest regime has helped in 7 .93% respectively over the last five years.stroke segment to install catalytic converters. Scooters and mopeds are rapidly losing their place in the market to the more fuel-efficient. which has aided in propelling the demand for motorcycles. stylish and sturdy motorcycles. Recently.21% in FY199798 to 68. the share of scooters declined drastically from 33% to 22%. Other players in the two-wheeler industry include Bajaj Auto Ltd. Competition has intensified over the last couple of years. the industry is growing at the rate of nearly 16%.With sales over 4.2 million (FY 2001-02). Kinetic Motor Co Ltd. Honda Corporation of Japan announced its intentions to set up a 100% subsidiary to manufacture scooters and motorcycles. to nearly 70% in FY 2002-03. In the rural areas. Excise duty on motorcycles has been reduced from 32% to 24%. LML. The Euro emission norms effective from April 2000 led to the existing players in the two. consumers have come to prefer sturdier bikes to withstand the bad road conditions.20% and 47. the two-wheeler market has witnessed a marked shift towards motorcycles at the expense of scooters. 4-stroke motorcycles are now replacing all the new models. while that of mopeds declined by 4% from 19% to 15% during (FY 2001-03). In the process the share of motorcycle segment has grown from 48% to 70%. TVS Motors and Yamaha.

reducing cost of loans.wheelers are credit – stimulated. Two-wheelers owe their descent to the "safety" bicycle. which will help in boosting sales of 2-wheelers. i. With more than 40 per cent of the motorcycle demand flowing from the rural sector. but the answer is quite complicated. with a pedal crank mechanism to drive the rear wheel. propelled by the rider's feet pushing 8 . The high-wheelers descended from an early type of pushbike. "Who invented the first motorcycle?" may seem like a simple question. bicycles with front and rear wheels of the same size. motorcycle off take tapered during the second-half.. in turn descended from high-wheel bicycles. without pedals. since 80% of the two. the success or failure of monsoon has a major influence on the sales volume. Those bicycles. After a robust growth in the first quarter of the previous fiscal.e. HISTORICAL INDUSTRY DEVELOPMENT The invention of the first two-wheeler is a much-debated issue.

The agreement expired in 1971. Bajaj Auto began trading in imported Vespa scooters and three-wheelers. the only new player that has lasted till today is LML. it set up a shop to manufacture them in technical collaboration with Piaggio of Italy. 9 . Although various government and private enterprises entered the fray for scooters. Finally. Until 1958. it had a smaller spring-loaded outrigger wheel on each side. used iron-banded wagon wheels. In 1948. the wheels were of the iron-banded wooden-spoked wagontype. Automobile Products of India dominated the scooter segment. Bajaj Auto later overtook it. API and Enfield were the sole producers. These appeared around 1800. Gottlieb Daimler (who later teamed up with Karl Benz to form the Daimler-Benz Corporation) is credited with building the first motorcycle in 1885. it definitely had a "bone-crusher" chassis! The Indian two-wheeler industry made a small beginning in the early 50s when Automobile Products of India (API) started manufacturing scooters in the country. and were called "bone-crushers." both for their jarring ride. and their tendency to toss their riders.against the ground. It was constructed mostly of wood. One wheel in the front and one at the back. in 1960. In the initial stages.

wheels and chain exposed. A motorcycle has an engine.Escorts and Enfield . The two-wheeler market was opened to foreign competition in the mid-80s. Enfield 350cc bikes and Escorts 175cc bike initially dominated the motorcycle segment. In the 90s the major growth 10 . Ideal Jawa and Escorts.then the only producer of four stroke bikes (100cc category). demand swelled.Under the regulated regime. And the then market leaders .were caught unaware by the onslaught of the 100cc bikes of the four IndoJapanese joint ventures. the name is evolved from motorized cycle. gaining a top slot. These two players initially started with assembly of Complete Knocked Down Kits. and later on progressed to indigenous manufacturing. Moreover. resulting in Hero Honda . The motorcycles segment was no different. Two-stroke motorcycles are positioned as power bikes by making use of their high power delivery to cater the young generation. TVS Suzuki and Hero Honda brought in the first two-stroke and fourstroke engine motorcycles respectively. While Enfield bullet was a four-stroke bike. With the availability of fuel-efficient low power bikes. Motorcycle. foreign companies were not allowed to operate in India. with only three manufacturers viz Enfield. It was a complete seller market with the waiting period for getting a scooter from Bajaj Auto being as high as 12 years. it is chain driven. The first Japanese motorcycles were introduced in the early eighties. Jawa and the Rajdoot were two-stroke bikes. Four-stroke motorcycle is positioned as fuel-efficient and environment friendly vehicle.

The industry witnessed a steady growth of 14% leading to a peak volume of 1. this trend was reversed with the introduction of scooterettes.4mn vehicles. In the 90s. all the major producers suffered from recession in FY93 and FY94. towards buying scooters. resulting in a production loss of 0. who were earlier. The industry saw a sudden growth in the 80s. Barring Hero Honda. In 1990. In line with this. The entry of Kinetic Honda in mid-eighties with a variometric scooter helped in providing ease of use to the scooter owners.for motorcycle segment was brought in by Japanese motorcycles. 11 . This helped in inducing youngsters and working women. This resulted in a decline of 15% in 1991 and 8% in 1992. the entire automobile industry saw a drastic fall in demand. inclined towards moped purchases.9mn vehicles in 1990. which grew at a rate of nearly 33% CAGR in the last five years. The industry had a smooth ride in the 50s. Hero Honda showed a marginal decline in 1992. the scooter segment has consistently lost its part of the market share in the two-wheeler market. 60s and 70s when the Government prohibited new entries and strictly controlled capacity expansion.

But it appears that the time has come for this segment to align itself with the overall industry growth. there is no reason to expect an upturn. The growth in two-wheeler sales has been quite steady over the past eight years and right now. The overall sales growth rates appear to 12 . can the two-wheeler industry be far behind? The two-wheeler segment of the industry had been bucking the normal trends exhibited by the automobile industry for the past few years.TWO WHEELER INDUSTRY: THE CURRENT SCENARIO If Automobile companies have been showing poor growth rates.

5 per cent. There. lower margins will follow and supernormal returns would no more be possible. This dramatic structural shift in the industry from scooters to motorcycles has been going on for the last five years and is expected to have been completed. the industry size has become too big to sustain the growth rates. As a result. Over the same period.Bajaj Auto. while Bajaj Auto was already neutral. Research outfit Morgan Stanley Dean Witter has estimated that profitability of players like Bajaj Auto and TVS Motors will probably suffer as intense competition between the companies sets in. are battling for the motorcycle segment. All major two-wheeler players. 13 . LML. More specifically. The Indian consumer being sensitive to prices would certainly take the lead. one can argue that the higher base has been partly achieved through generous financing packages and discount schemes. Kinetic Motors and Hero Honda Motors. This strong growth was fuelled by a shift away from scooters. TVS Motors. As a result. Besides. Hero Honda will eventually have to compete on equal terms. MSDW has lowered its rating on Hero Honda and TVS Motors to neutral. an improvement may not be possible. On a high base. The overall Compounded Annual Growth Rate in two-wheeler sales was 8.3 per cent between 1997 and 2000. the CAGR for motorcycles was 22. in fact. could be a spiel for a fall in growth in penetration levels after a decade of steady growth.have been capped.

This is bound to lead to profitability pressures for the two-wheeler industry as a whole. given the share of 53. which would involve lower margins and profitability pressures. Both Bajaj Auto and TVS Motors have already built in these pressures in their valuations while Hero Honda has not. expects motorcycle growth rates to move towards the overall industry growth rate in the next one to two years. after which it expects the company's growth to decelerate.Now. The two-wheeler industry is expected to undergo a period of transformation. MSDW as a result. The recent acceleration in motorcycle sales has led to a serious rethinking in strategies in the two-wheeler market. motorcycles have less room to grow at the expense of scooters. 14 . in MSDW's opinion are valid only for the next one-year. even subjecting Hero Honda to competitive pressures. Honda and Piaggio have announced their plans to enter the Indian scooter market. Their scooter brands could cause a ripple in the two-wheeler industry and slow the extent of migration to motorcycles from scooters.6 per cent in the total two-wheeler sales. Bajaj Auto and TVS Motors are targeting volumes in the 4-stroke motorcycle segment at the expense of margins. Growth expectations for Hero Honda.

INDUSTRY STRUCTURE The Indian two-wheelers Industry can be broadly classified into the following Segments:  Scooters -Geared and Un-geared.  Motorcycles. 15 .

as Hero Honda’s Dawn.The motorcycles segment can be classified into three broad segments viz. has done the trick. with a host of new vehicles flooding the market. the executive segment. These segments as shown below constitute the domestic two wheeler sales: 16 . the flagship product of TVS. executive segment and the premium segment. was almost monopolized by Splendor. India’s highest selling bike. the renewed version of Joy. the market leader has started showing signs of flagging.. the entry-level segment. the fastest growing segment among the two-wheelers. Till last year. The entry-level segment continues to witness competition on the pricefront. is a distant second. garnering a sequential growth throughout the last four quarters. Bajaj has a stronghold of this segment with Boxer. It is this segment that is gradually eating away volumes from Scooters. However. Victor.

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861 6.50.439 4.16.773 3.63. indicators on industrial output and infrastructure activities undoubtedly point towards an economic 19 .51.330 3.663 1. Majestic Auto Ltd.087 54.786 1.012 14.189 3.671 1.850 Motorcycles Bajaj Auto Ltd.676 2.321 65.532 78.53. 12.12.56. TVS Motors Ltd.022 95.08.76.512 1.65.33.25.26.98. Kinetic Engg.06. Ltd.639 24.14.46.216 1.47.781 5.23.279 44. While the 28% shortfall in precipitation would dampen agricultural output during the current year.181 2. Hero Honda Motors Ltd.491 96.67.693 5.483 1.790 61.Flash Report on Sales [Including Exports] (A)Apr-Mar 1999-2000 Scooters Bajaj Auto Ltd Honda Motorcycle & Scooter Kinetic Motor Company Ltd LML Limited Maharashtra Scooters Ltd.275 36.266 3. but concerns of burgeoning fiscal deficit still remain at large.61.704 7.93.103 10.769 4.160 20.58.51.755 1. Mopeds Bajaj Auto Ltd. Ltd.12.388 1.154 28.78.231 96.541 (B)Apr-Mar 2000-01 8.590 2.456 1.247 4.47.67.34.43.19.618 7.627 1.14.267 36.279 2.902 36.61.740 36.70. LML Limited Royal Enfield Motor TVS Motors Ltd.36.19.20. Total 2-wheelers PRELUDE TO INDIAN TWO-WHEELER SECTOR Ever since 1987.40%.42.309 44.157 1.93. TVS Motors Ltd.36.378 (C)Apr-Mar 2001-02 8.575 17.434 67. The inflation is well under control at 3.723 22.740 6.43.175 3.702 1. Kinetic Engg.461 54. Yamaha Motor India (P) Ltd.387 42.77. it is only during FY03 that the drought has been severe enough to officially declare it as ‘drought year’.224 3.063 21.

9% growth.recovery. with Automobiles clocking a 4. scooters held the upper hand in the contribution to overall sales. 20 . The two-wheeler sector witnessed a complete transformation in the level of competition and growth rates as motorcycles lead the way in offering a wider choice at competitive prices. The introduction of Hero Honda’s blockbuster product Splendor was instrumental in changing the scenario and the motorcycle growth continues to outsmart scooters till date. TWO-WHEELER INDUSTRY GROWTH IN THE LAST TWO YEARS The two-wheeler industry has seen a profound shift in the consumer preference towards motorcycles from scooters. Until 1999.1% as on September 2002. The strong surge in motorcycles had led the entire two-wheeler sector in posting an incredible growth of 41% in the first half of the last year. The IIP {The Index of Industrial Production} witnessed a yo-y increase of 6.

stringent regulations and environmental laws should increase replacement demand for two-wheelers.STRICT ENFORCEMENT OF ENVIRONMENTAL REGULATIONS In the years to come. Among the two and three wheelers. The retention period of a two-wheeler in India is one of the highest in the world. 21 . This should gradually decrease in the forthcoming years. both selected models of Hero Honda (Splendor and CD 100) are the most eco friendly two wheelers.

They have scored above average in vehicle and engine design and are one of the very few. four-stroke two wheeler fitted with any kind of pollution control equipment. The best performing two-stroke model ranks fourth amongst the two wheelers. some categories introduced in the market are a combination of two or more segments. Bajaj boxer. which obtained average scores in design and emissions and very poor scores in pollution control equipment and emissions. Though the segment can be broadly categorized into 3 sub-segments viz. MAJOR PLAYERS IN THE INDUSTRY The Indian two-wheeler contributes the largest volumes amongst all the segments in automobile industry. motorcycles and mopeds. which ranks third. There are a lot of companies in this Industry. scooters. The lowest score has been obtained by Kinetic Safari moped. has scored well in vehicle and engine design but lacks in emission control equipment and comparatively poorer emission. The major players are: 22 .

The Hero Honda Splendor has maintained its leadership as the World No. much ahead of its competitors an account of its superior and reliable product quality complemented with excellent marketing techniques. 23 . The company has emerged as one of the most successful players.Hero Honda Motors Ltd is one of the leading companies in the twowheeler industry. it is the market leader in the motorcycle segment with around 50% of the market share during FY 2003-04.1 two wheeler brands.  New model 'Dawn' recorded monthly sales of 10. which is expected to reach 6mn mark with the rural and semi-urban segment being the new class of consumers. At present.000 units within three months of launch. The company has been consistently addressing the growing demand for motorcycles and has a cumulative customer base of over 5 million customers. Worldwide.1 two wheeler joint venture of Honda Motor Co.  Hero Honda continues to hold the coveted position of being the largest individual two wheeler companies in the world as also being the No.

123 units of motorcycles as compared to 4.82 crores in the corresponding period last year. 359.885 crores and Profit after tax was 581 crores in the FY 2002-03. 745.1.  The company's sales volume during the first quarter of the year 2004 also recorded a splendid increase. The company offers the following products:  CD 100  CD 100 SS  Splendor  Passion 24 . 2004 from Rs.21 crores in quarter ended June 30. The total sales turnover of the company was Rs.  Profit before tax was Rs.1. 09. 58. with sales of 6.779 motorcycles sold during the first quarter of the last FY.

Basant Lok Vasant Vihar. New Delhi – 110057 Tel: 011 26142451 / 26144121 25 . CBZ  CD Dawn  Karizma  Ambition  Ambition 135  Splendor +  Passion Plus  CBZ Star Address: Registered & Corporate office: HERO HONDA MOTORS LIMITED 34 Community Centre.

From 1948 till 1959.herohonda.Fax: 011 26143321/ 26143198 / 26141830 / 26152453 / 26152132 URL:www. It then obtained a production license in 1959 and struck a technical collaboration with 26 . it imported scooters and three wheelers from Italy and sold them in India.com Established in 1945. it was incorporated as a trading company.

scooters. scooter production commenced in 1986. Its collaboration with Piaggio expired in 1971 and since then the Company's scooters and three wheelers are sold under the "Bajaj" brand name. three wheeler production commenced in 1987 and scooterettes and motorcycle facilities were commissioned in 1990 & 1991 respectively. From 1961 when the annual production was about 4000 units. This helped augment production capacities. 27 . three wheelers). The Company's second plant was set up in 1984 at Aurangabad. Under the "Horizontal transfer of technology" policy. today the Company has become a market leader with annual production in excess of 1. It is one of India's top ten companies in terms of market capitalization and among the top five in terms of annual turnover. Scooter production commenced in 1961. Production facilities are located at Satara.. Maharashtra Scooters Ltd.Piaggio of Italy in 1960 and continued with the same for the next two decades. Three wheeler productions followed in 1962. in Maharashtra State. was formed in 1975. In this plant. a Company with 24% equity participation by the Company and 27% participation from Maharashtra State Government's Western Maharashtra Development Corp. These scooters are marketed through the Company's distribution network and under the Company's brand name. motorcycles.35 million units and with product offerings in all segments (mopeds & scooterettes. in Maharashtra State.

Its main models are:  Chetak  Spirit  CT 100  Caliber 115 28 .

Bajajauto. : 020 772851. Fax No.com 29 . Tel No. Wind 125  Pulsar 150 KS  Pulsar 150 SS  Pulsar 180 SS  Eliminator Address: Mumbai . 773398. Akurdi. 776151. : +91-20 776387.Pune Road. Pune 411 035. URL: www.

Models Provided:  Freedom DX  Freedom Prima 110  Freedom Prima 125  Freedom Prima 125 DB  Freedom Topper 30 . its 300-dealer strength is to be over 500 soon. Besides. Financially. Beginning with 120 people in the first quarter of 1999.000 trained mechanics over time.LML is one of the leading scooter manufacturers in the country. with a 30% market share in volume terms with its popular scooter brand "Supremo".209. Calcutta and Noida).71 crores in Sept '98. Bangalore. it hopes to build up a base of 20. Kanpur.832. It plans to facilitate authorized dealers with a WAN (wide area network) and sell spare parts through the Net. to train mechanics and service personnel.05 crores in 92-93 to Rs. It is also working towards setting up five training schools (one each in Mumbai. LML's turnover has grown from Rs.

is the leading manufacturer and exporter of 2-wheelers. K.208 022 Kinetic Engineering Ltd. heart . 31 . Born of the vision of the late Shri H. it has produced useful. Firodia. founded in the year 1970.. Kanpur . Graptor Address: Registered Office: C 3 Panki Industrial Estate.winning products for over two decades.

Kinetic Engineering are also the promoters of Kinetic Honda Motor Ltd. Scooters and Motorcycles that are very popular in the country and are well recognized for their fuel economy. The company has always been conscious of quality and customer oriented production. a joint venture with the internationally known Honda Motor Company of Japan. with the capacity to manufacture 4 lakh vehicles per year. quality and reliability..KEL manufactures a wide range of Mopeds. The company also exports these vehicles to countries like USA. KEL has 3 manufacturing plants. Sweden. Canada. Their well endowed technologically advanced manufacturing set up has enabled them to reach high quality standards. A strong service network set up across India backs Kinetic Engineering Ltd. Denmark and the Middle East. The Models provided are:  Nova EX / DLX / 135  ZX Zoom  Zing STD  Zing Rockin 80  Rock in Zing 32 . Latin America.

MIDC Chinchwad. 18/2. Pune. Boss  Boss SP  Boss 115  Boss EX  GF – 170  Laser  Velocity  King DLX  Aquilla Address: D-1 Block.411 019 Tel: (020) 7474301-5 Fax: (020) 7475842-3 33 . Plot No.

is one of India's leading two-wheeler manufacturers.5 million happy customers. 34 . part of the TVS Group.TVS MOTOR COMPANY TVS Motor Company Limited. scooters. With a turnover of over Rs.2800 crores. mopeds and scooterettes. Little wonder. the Company manufactures a wide range of motorcycles. it boasts of more than 9.

Products offered by the Company:  Max 100  Max R  Centra  Victor GL  Victor GLX  Fiero F2/FX 35 . For it was this year that saw India's first two-seater moped. 1018 Authorized Service Centres and over 864 Certified Service Points. For some it was freedom to move. With a strong sales and service network of 500 Authorized Dealerships. TVSSuzuki became the first Indian company to introduce 100 cc IndoJapanese motorcycles in September 1984. rolling out on the Indian roads. TVS is growing from strength to strength. With the joint venture with Suzuki Motor Corporation in 1983. was a year to remember for the Indian twowheeler industry. Through an amicable agreement the two companies parted ways in September 2001. TVS 50.The year was 1980.

Haddows Road Chennai . Scooty PEP DLX  Scotty KS  Scotty ES Address: Jayalakshmi Estates V Floor 8.600006 Ph: 044-8272233 Fax: 044-8257121 COMPANY’S SHARE IN MARKET 36 .

TVS Motor Ltd is taking its chances with the massive R&D and capacity expansion plans.SECTOR OUTLOOK The motorcycles segment is bubbling with a spate of models launched in the last four quarters. Among the two-wheeler majors. the competition should ultimately give each player its share. LML is banking on its new products for growth and is coming out with a 37 . On similar lines. With more players joining the fray in the motorcycle segment.

where the growth is highest. But the major concern for all the players is the acute pressure on pricing that may impact the margins for all of them. and was deeply involved in the effort for freedom.flurry of new models in the executive segment of the motorcycles. dedication. was a confidante and disciple of Mahatma Gandhi. BAJAJ GROUP Profile of the company The Bajaj Group came into existence during the turmoil and the heady euphoria of India's freedom struggle. The integrity. The current fiscal should bring in considerable bottom-line growth to all the two-wheeler players due to positive demand outlook for the sector. Jamnalal Bajaj. resourcefulness and determination to succeed which are 38 . founder of the Bajaj Group.

to last years. impressive figure of Rs. Bajaj is currently India's largest three-wheeler manufacturer and one of the biggest in the world. Bajaj Auto is the flagship of the Bajaj Group of Companies. Balaji Rao D.J. Podar Shekhar Bajaj D. Management A team of seasoned professionals ably manages Bajaj Auto Ltd. We have long left behind our annual turnover of Rs.72 million (1968). Rahul Bajaj is the Head of the Group. Board of Directors Rahul Bajaj Madhur Bajaj Kantikumar R. He has been the Chief Executive Officer of Bajaj since 1968 and is recognized as one of the most outstanding business leaders in India.characteristic of the Company today. As dynamic and ambitious as his illustrious predecessors.S. are often traced back to its birth during those long days of relentless devotion to a common cause. he has been recognized for his achievements at various national and international forums.39 billion (US$ 920 million). Mehta Chairman & Managing Director Vice Chairman & Whole-Time Director Director Director Director Whole-Time Director 39 . Today.

Khan Naresh Chandra Chairman Objectives and Goals The main objective of Bajaj Auto is not only on sharp increase in output but also on:  Transparency: A commitment that the business is managed along transparent lines.J.N. Balaji Rao J.H.J. 40 . Khan Rajiv Bajaj Mrs.H. Godrej Naresh Chandra Remuneration committee Chairman D. Suman Kirloskar Naresh Chandra Nanoo Pamnani Committees of the Board Audit Committee Director Director Joint Managing Director Director Director Director S.N. Khan J. Godrej S.J. Godrej Nanoo Pamnani D. Balaji Rao S.J.N.  Disclosure: Of all relevant financial and non-financial information in an easily understood manner.  Fairness: To all stakeholders in the Company. but especially to minority shareholders.H. Balaji Rao Naresh Chandra Chairman Shareholders’ & Investors’ Grievance committee D.

 They organize themselves for a transparent and harmonious flow of work. Bajaj Performance  The market for the so-called 'mature' segment. step-thru's and three-wheelers. which according to Mr. Supervision: Of the Company's activities by a professionally competent and independent board of directors. And they make their workplace a source of pride.Rajiv Bajaj (joint managing director) included. The 41 .  They respect sound theory and encourage creative experimentation. Policies  They approach their responsibilities with ambition and resourcefulness. geared scooters.  The geared scooter market in which Bajaj is clearly the market leader with its Chetak and Super's till ruling strong. mopeds.

But the good part of the story ends right here. This vehicle is well received by customers. Bajaj will try to capture market share by introducing top-of-the-line scooters.  Next. As this market is a mature one.company has a stranglehold in the southern and western regions of the country with a market share ranging between 80% to 90%.  Going forward. Bajaj Introduced the four-stroke 'Chetak' in November 2000 giving 65 kms/liter fuel economy and the 'Fusion' and 'BravoHP' in October 2000 to give LML something to think about. It incorporates a new engine that delivers higher power. comes the largest market of the north (55% of total scooter market). growth opportunities are limited and Bajaj has come around to accept that only too well. Here too Bajaj is relatively well placed with only LML to worry about.  Sale of Company's new products introduced during 1998 .1999 viz.. better fuel economy and significantly lowers emissions.  In Step-thrus. M-80 four strokes will 42 . which match its competitors in terms of style and technology. Spirit. its strategy would be to position itself in the fueleconomy segment at a competitive price point. Towards this. the upgraded M-80 Major was introduced in August 1999. Secondly. Bravo. Legend and Caliber was 30% of the total number of two wheelers sold during the period.

Starting with the entry level Boxer series.  With the Indian two-wheeler industry focused on the motorcycle segment.  Bajaj has consistently rolled out successful models for example one of the feathers in its crown is the Bajaj Pulsar…. With this. the Company expects to become India's largest scooterette manufacturer. 1999. This was followed by a new scooterette in the next quarter.be introduced in the current quarter.a premium bike segment motorcycle which has been a very successful model. ‘Caliber 43 . As a result. Caliber 115 has also enjoyed a fair degree of success.  The success of Pulsar has helped the company to stay clear of adopting an aggressive price reduction strategy.000 units per month.  Sale of Spirit scooterette has crossed 6. With this introduction Company's step-through market share should exceed 60%.. the company has been able to hold its ground in the times of recession.  Commercial production of Saffire. Bajaj Auto now becomes the only Indian company with offerings in each user segment. the company’s range includes ‘Caliber’. aided by its cash-rich status. four-stroke automatic scooter commenced at Bajaj Auto's new plant at Chakan (Pune) on October 20. Bajaj Kawasaki is one other bike which created quite a stir in the industry.

 In motorcycle segment.639 558.Croma’ and ‘Aspire’ in the executive bike segment.508 August Upto August 2003 394.401 August For 2003 76.900 8.314 23.457 14.205 1.299 120. Sales in number For and Upto the Month of August 2004 Products Motorcycles Scooters Geared Scooters Ungeared Step thrus Total wheelers Two For 2004 106.071 15. Pulsar is being manufactured at Bajaj Auto’s state-of-the-art facilities at Chakan near Pune where all the stylish un-geared scooters such as Bajaj Spirit and Bajaj Saffire are manufactured.898 3.256 501.487 12.427 3.100crores has been invested in developing ‘Pulsar’ and the project took 36 months from conceptualization to commercial production of the vehicle.791 48.570 5.  An estimated Rs. Pulsar in the premium bike segment. and the only cruiser bike of India the ‘Eliminator’.745 8. CT and Caliber has been very encouraging.010 44 . introduction of new Boxer AT.983 68.024 97.147 August Upto 2004 485.

 Vast expansion supported by Quality circles. cities and even villages. Volume Leadership:  Retain the high reliability and work on easing out immediate availability. 45 . establish cost leadership and reduce the respond time and bring in. just-intime and high automation.  Expanded the dealer network to reach town. kanban.Strategies used in the Past Bajaj strategic plan was to establish in three main areas viz establish volume leadership.

 After exploiting value addition micro and macro chain further establishing the cost leadership. cost cutting exercises.  Cashed on branding. Improve the genuine spares availability. through free test rides.e.  Macro value addition suppliers offering them hi-tech automation. dealers and distributors.  Came up with easy financing scheme and several occasional discounts to establish volume leadership. image to penetrate into rural areas than competitors. Cost Leadership:  Macro value addition chain was exploited through out the companies operation but also spread within micro value addition chain i. registration and insurance schemes. Response Time: 46 . by keeping and improving the productivity.  Reduce the prices drastically to match local specious parts. was adopted to ultimately reduce the cost of 58% to a target of 55%.

any range or access to definite information directly. The aim of economic forecasting is to reduce the risk or uncertainties that the firm faces in its short-term operational decision-making and in planning for its long-term growth. what price to charge. Demand Forecasting: Forecasting means to know the trend or behaviors after a period of time. distribution and works through online.  Delivery within 24 hours of any variant within the circle. and how much to spend on advertising.  Make available any variant.  Improves ecstatic and added variants to support the wide range. Economics 1. One of the techniques of forecasting is:  Moving Averages 47 . Example: Bajaj scooter customers change over to Bajaj motorbikes. A firm must decide how much of each product to produce. and it must also plan for future growth of the firm. Improve to customer’s perception and loyalty to product with widening the base and strengthening the brand loyalty. Total transparency within the dealer.

the forecasted value of a time series for the next period is given by the average value of the time series in the previous three method. etc) is equal to the average value of a time series in a number of previous periods e. 48 .The simplest smoothing technique is the moving average technique. with a three period moving average. Here the forecasted value of a time series in a given period (Month. Cost cutting: A) At Akurdi Plant:  Replacement of 40/60 W incandescent bulbs by 7 W PL lamps in office building.  Installation of auto control panels for minimum use of garden lights. year.  Use of thermo sol fuel activities for LDO for better combustion efficiency. quarter. fountain and road lights.  Installation of automatic temperature controllers in standard room and water chilling plant at general canteen and use of solar energy systems for canteens and paint shop. 2.g.

persons. events. Products that can be marketed include Physical goods. switchoff of lights. information.B) At Waluj Plant:  Reduction of avoidable losses (replacement of capacitors. services. and ideas. properties. places. cooling water pumps etc. pumps. fans. Components of a market offering: Value based prices Attractiveness of 49 . organizations. Marketing Four P’s of Marketing Mix 1.)  Plant voltage optimization. changed temperature setting of air conditioning system etc. at identified locations during identified hours). experiences.  Fine turning of equipment (thereopac. Product The term "product" is anything that can be offered to a market to satisfy a want or need.

the trunk and the petrol tank. the company needs to think thru five levels of the product. Third level. and the five constitute a customer value hierarchy. First level. a set of attributes and conditions buyers normally expect when they buy the product. Here in case of two wheelers it is the warranty. is the core benefit. (Means for transportation) Second level. the rear view mirrors. The essential accessories that would make the product useful. At Bajaj they have special customer care service tips which are accessible even on its website. which are exclusive to each The fundamental service or benefit that the customer is really buys. They have a 24-hour service whereby the customers can post their queries to the company and they try to answer the queries within a span of 7 days. the leather seat. the after sales service that the customers expect. vehicle. The basic product would include the gears. the company has to turn the core benefit into a basic product. the company prepares an expected product. Each level adds more costumer value. Here in Bajaj the core product is the 50 .Market offering Product features and Quality Services mix and Quality Product Levels In planning its market offering. They have personalized service charts.

Bajaj Auto Finance Ltd (BAFL). Fourth level. Auto finance is one such feature which is an unexpected service though these days it’s no more a pleasant surprise almost all leading companies offer finance which works as an incentive for the buyers. At Bajaj also the cost factor is taken into consideration while deciding the prices for the products. The consumers demand quality products at low prices which is as good as a tightrope walk for manufacturer as he needs to control the cost in order to reduce price but at the same time also maintain good quality. Price Pricing is an important part of the marketing strategy. This enables the customer to get the right way of taking care of his vehicle. the marketer prepares an augmented product that exceeds customer expectations. 51 . The basic price-deciding factor in any product is the cost. So now we have more and more products trying to find space in the market. 2. For products like Twowheeler the positioning of the product as well the price of the product is quite important.model. which makes them. Augmented product adds cost and soon becomes expected product. a group company of Bajaj Auto Ltd is one of the biggest retail financing companies in the country today. take every possible step to eat into each others share.

485 29.301 40.Motorcycles  Chetak – 4 Stroke  Spirit  CT 100  Caliber 115  Wind 125  Pulsar 150 KS  Pulsar 150 SS  Pulsar 180 SS 39.312 65.042 57.062 51.083 46.840 52 .386 61.

602 3. 53 . The company has been operating in the two-wheeler industry since decades and enjoys a favorable logistics position. Considering that the industry demands a good availability of service stations Bajaj definitely has a distinct edge over its competitors due to the presence of a widespread dealer and service station network in the remotest region of India. There is a general complain from the dealers that by the time they come to know of a product in totality. Place Bajaj has a very wide spread dealer network of 219 dealers across the country and abroad which provide excellent customer service. Dealer Preparedness The company must ensure that the dealers are well aware of the product when it is launched and the dealers are equipped to provide the after sales services as well. Eliminator 95.

Bajaj Pulsar 54 . Promotion Bajaj Auto is an aggressive advertiser. With the launch of products with new technologies.the company launches a new product. proper training must also be imparted to the employees at the dealerships. 4. Bajaj has a distinct style of promoting its products. The advertising Budget of Bajaj Auto is more than Rs. developing the firm-positioning platform. One of the successful campaigns from the Bajaj has been the commercial for the launch of Bajaj pulsar. So to ensure that no such complaints arise the dealers must be asked to do a prior homework.100 Crore. for every product launched there’s a new and fresh advertising strategy.

as Bajaj introduced low priced motorcycles.. "Pulsar". The premium segment 125cc+ is small at 13% of the total market. .. definitely male Market Segmentation rather than Product Differentiation Over the past two years. three girls walk by a line of motorbikes. The economy segment’s share of the total motorcycle market has ballooned to 31% from about 20% three years ago....Chatting merrily. She pulls it away slowly to reveal. However. The 100cc executive segment continues to dominate the motorcycle market-it forms about 56% of the total motorcycle sales..making her turn in consternation.. . MVO: Bajaj Pulsar.. It can be clearly seen that an attempt has been made by all the motorcycle producing companies to lure the customers to buy their 55 . this premium segment is expected to be the future growth driver. the 100cc economy segment has taken off. One's dupatta skims over the bikes and then gets stuck. The logo.

Indian organizations are no exception to this. This resulted in a 4-phase implementation: 56 . Management Information System Bajaj . right from the beginning the IT strategy has been to focus on the current business needs and to use the available technology to help in achieving the business objectives at that time. However.The IT Effect In the dynamic environment within which all organization has to function IT certainly has started playing a vital role.bikes in the entry level segment with one of the long term objectives to gain their loyalty towards the company so as when these customers tend to shift towards higher segments they prefer their brands again. IT planning and implementation in such a changing environment has become a challenging task.

Online computers were used during this phased to help in achieving production targets. Phase IV.the focus changed to manufacturing.in this phase Bajaj auto used the exploding technology in the areas of CAD/CAM. new product introduction. Phase III .started with use of computers in accounting. The my SAP Enterprise Portal will cover 100 sales field employees.Phase I . new product releases. Phase II . internal market-place. etc. 350 dealers in the first phase and the remaining will be covered in second phase. 57 . improving quality and reducing costs which were the major issues at a time when the company was in the sellers market. dealer discussion groups. Networking and Communications and Office automation in the strategic areas of marketing and engineering. in addition to operating information.in this phase Bajaj auto used SAP. improving men and machine productivity. provides access to unstructured information like news items. Marketing and dealership computerization was brought into effect. The dealer portal.

 Global-scale production. Japan.  Extensive service and dealer networks.  Higher labour productivity and greater automation. in collaboration with Kawasaki Heavy Industries. 58 .  Worlds lowest cost manufactures in the market.SWOT Analysis Strength:  Technical expertise.

 Not considered living with times.  Focusing more on motorcycles to capture the urban market.  Fuel efficiency which is much higher than competitors.  Bajaj plans to offer CNG models with euro-II compliant. Opportunities:  Launching of new products and variants of existing models backed up by appropriate marketing efforts. Threats: 59 . Weaknesses:  In the late seventies there was skid in production due to intermittent labour problems.  Underutilization of capacity. Lined up a range of 17 two wheelers covering the entire spectrum from motorcycles to scooters.  Virtual zero maintenance among the products.

 Increase of secondary or resale market for two-wheelers. Colombia. Germany. in Uruguay with 30% of the motorcycle market and in Bangladesh with 95% of the three-wheeler market. Italy. Iran and Egypt. Bangladesh. Bajaj leads Colombia with 65% of the scooter market.  Dealers not adjusted with changing realities. Sweden. 60 .  Change in tastes of consumers. Peru. Hero Honda's switch start automatic transmission 100cc scooter. Sri Lanka. Argentina.  Competition from MNC's.  Government regulations. The countries where our products have a large market are USA. International Marketing Based on our own brand of globalization. we have built our distribution network over 60 countries worldwide and multiplied our exports from 1% of total turnover in Fiscal 1989-90 to over 5% in Fiscal 1996-97.

We offer a full range of services to such business partners:  Training in sales. which would be in a position to invest in the project and which would also entail manufacturing activities apart from marketing.Several new models are being developed specifically for global markets and with these we will progressively endeavor to establish our presence in Europe too.  Active supports for setting up manufacturing facilities overseas including transfer of technical know how. In countries where we perceive a good market potential. 61 . distribution and after sales services through a well-established nation-wide network. we seek a tie up with one of the major industrial establishments. service and spare parts management based on the Bajaj distribution system.

Production and Operation Research R&D Objectives and Set-up 62 .  Select machinery and equipment. training of technical personnel. Assistance in setting up an assembly plant for assembly of vehicles from complete knocked down (CKD) kits. all in a phased manner as required by the regulations in the recipient country.

We intend to use R&D not only to develop products better and faster. with transfer of the latest technology and R&D assistance. like Kawasaki. Our foreign technology partners. manufacturing engineering. better. Kubota and Tokyo R&D. collaborate closely with the platform teams. we intend to achieve this objective by giving priority to environmental concerns. At Bajaj Auto. more fuelefficient and cost effective. The primary objective of these platforms is to develop newer. component development. project management and quality assurance. These platforms comprise of engineers skilled in product engineering. Our strength in R&D comprises 500 dedicated professionals who work as team members on a platform concept.The objective of Bajaj Auto's R&D is to contribute towards making life a better experience for society as a whole. 63 . but to also evolve technologies that are eco-friendly. which include minimizing toxic emissions and optimizing the use of natural resources while also keeping in mind the exact requirements of the customers in a fast changing world racing towards modernization. Our designs are also subjected to an exacting and critical assessment from our technology partners. more efficient and less polluting vehicles for both the Indian and International market.

At Bajaj. They believe that poor quality is the greatest productivity deterrent of all. The constant drive for perfection and the single-minded pursuit of excellence of the employees makes Bajaj one of the largest manufacturers of two and three-wheelers and gives it the resilience to 64 .Total Quality Management The core competency of Bajaj Auto lies in the quality provided to the customers. they are committed to high quality standards with a motive for productivity behind it.

At Bajaj. has been possible only because every aspect of the operations is managed to perfection through effective management systems. Acutely tuned to lifestyles and social conditions. They are an expression of creative and innovative energies. profitability and market share. The phenomenal growth in volumes. Bajaj engineers are trained to develop products that precisely match consumer needs. in which technology plays a passionate role. 65 . year after year. The Process: The process of achieving such high levels of quality begins at the product development stage itself and continues right up to the time the vehicle stands gleaming in a dealer showroom. products are more than just a process output. HRD initiatives and quality assurance and control. And in the midst of all this. This commitment starts with the top management and extends to every worker on the shop floor. Bajaj has never lost sight of the human factor.take on competition from the world's biggest players.

and equipment . mistakes are not rectified. Besides supervising the pre-production process. material. Cell members conduct a scrupulous self-inspection of components while Quality Control experts measure and improve manufacturing processes. Every engine and transmission assembly. Quality Assurance lays down norms for their vendor force. The determined effort to optimize employee output has led to the adoption of the unique V1-V10 system of cellular manufacture. Workshops are manned by skilled company-trained mechanics and equipped with appropriate tools. through the application of statistical tools. where every dealer conducts an extensive predelivery inspection before a vehicle is delivered to a customer. testing facilities and adequate stocks of spare parts. The close interaction ensures that agreed quality levels are unfailingly maintained on the shop floor. This model calls for a continuous minimization of all inputs . men.During the elaborate development procedure. prototypes over three different stages are subjected to a battery of laboratory and field tests.space.they are prevented. Results: 66 .to achieve the same level of output. The process of quality control is extended to its dealerships and sales and service outlets. and finally every vehicle goes through a series of static and dynamic product verification checks by 'Quality Control' before clearance for dispatch to the dealers.

in August 1997. especially overheads including salaries. 67 . Manpower productivity measured in terms of number of vehicle per man-year has grown by 88% in this decade alone. the increase in capacity at Bajaj in recent years has been largely due to a surge in productivity rather than a rise in investment. in December 1994. to the Moped and Motorcycle Division of the Company at Waluj. Aurangabad. ISO 14001 Certificate awarded by the Bureau Veritas Quality International (BVQI) to the Company's Plant at Waluj. Quality Management: ISO 9002 Certificate awarded by the Bureau Veritas Quality International (BVQI).Results have been creditable. More significantly. Current Strategies Suggested  Bajaj auto must come out with new models in 2 and 3-wheeler segment to sustain its market share in the comparative domestic market. Aurangabad.  Bajaj auto should tighten up the supply chain mechanism and gearing up of the distribution system. It is advised also Bajaj auto to take steps for cutting costs.

 Stung by the a declining portfolio scooter sales.thru scooters.scooters. step.  Bajaj should strengthen its marketing and sales department by creating a separate team for different products in the coming months. It should increase focus on its 5 different products. It should also work in tandem with vendors to identify for bringing down the cost at the latter's end. 68 .  There is a need for greater decentralization at the plant level to ensure that each worker adds value. motorcycles.  In a bid to cut costs.  Bajaj auto has started a component procurement and product development restructuring exercise called 'Scorpio'. Bajaj by auto should the undertake re-shuffles exercise which motorcycles division will be main growth vehicle of the company. This will reduce the company's inventory levels and cut the vendor base by half.  It should gear up towards improving its productivity levels and they should be able to double the output with the current workforce. the company should work towards in pushing up indigenization for its 2-wheeler models and reduce waste at the factory level. scooterettes & 3 wheelers-from productions to dealer’s front.

and this needs to be done for the Waluj plant as well. Technological Up-Gradation Bajaj should plan to upgrade its technical performance with a manufacturer who has the desired expertise and the technology for making the power bikes. It has been successful to a certain extent in reducing the costs at its Akrudi pant. Bajaj is about to launch its chopper style Eliminator motorcycle. 69 . New players like Kinetic Engineering and Kanpur based LML are coming into the picture and the competition is bound to increase. In such a scenario the company should be proactive rather than being reactive. The cost if controlled shall help it in competing against competitions.Cost/Price Monitoring Bajaj should concentrate more at reducing the costs and thereby translate this in the price of the vehicle.

HERO HONDA GROUP

Profile of the Company
"Hero", the brand name symbolizing the steely ambition of the Munjal brothers, came into being in the year 1956. From a modest manufacturer of bicycle components in the early 1940's to the world's largest bicycle manufacturer today, the odyssey was fueled by one vision - to build long-lasting relationships with everyone, including workers, dealers and vendors. This philosophy has paid rich dividends through the years.

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Management
Chairman Managing Director Joint Managing Director Director Director Director Director Director Director Director Director Director Director Director Mr. Brijmohan Lall Munjal Mr. Pawan Munjal Mr. Akio Kazausa Mr. Shinichi Nakayama Mr. Satyanand Munjal Mr. Om Prakash Munjal Mr. M P Wadhawan Mr. S P Virmani Mr. O P Gupta Mr. M. Sudo Mr. S Toshida Mr. N N Vohara Mr. Pradeep Dinodia Gen. (Retd.) V P Malik

Consolidated Family Business
The Hero Group is a strong family business - there is no other Group that has so successfully managed to stay together for over 40 years. The system is to bring in any new family member, coming of age,

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within the fold of the existing business or set him up in a new business. The third generation is already actively involved in existing as well as the new initiatives within the Group. The second and the third generations of the family, aided by workers who typify the hardy spirit of the Punjab, are consolidating the Group’s future with the same zeal. Hero, a name synonymous with two wheelers in India is today a multiunit, 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." Thus apart from being customer-centric, the Hero Group also provides its employees with a

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partners. Today the Hero Group has a number of accolades and achievements to its credit. Glorious History The Legend of Hero Honda 73 . "Engineering Satisfaction" is the prime motive of the Hero Group and it has become a way of life and a part of the work culture of the Group. yet consumer requirements and newer technologies provide fresh challenges every day and at Hero the wheels of progress continue to turn. adopt faster technology and create quality driven products to the utmost satisfaction of customers. dealers and vendors.fine quality of life and its business associates with a total sense of belonging. This is what drives the Group to seek newer vistas.

29. Started with the initial investment of Rs. Driven by the trust of over 5 million customers.195 units 16. and human resources to provide products and 74 . Hero Honda Motors Limited gave India nothing less than a revolution on two . it came into existence on January 19.000 units 96. This is proved by the 1985-86 1989-90 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 43. the Hero Honda product range today commands a market share of 50% making it a veritable giant in the industry. Add to that technological excellence.555 units 14.210 units 10.friendly companies. 61. and reliable after sales service and you have one of the most customer.wheels. the world's largest bicycle manufacturers and the Honda Motor Company of Japan. an expansive dealer network.200 units company's sales over the years 5.55 crores. 25.600 units 7. made even more famous by the 'Fill it .147 units Mission Statement We at Hero Honda are continuously striving for synergy between technology. has today become the World's single largest two wheeler Company. 70. systems.Forget it ' campaign. 77.What started out as a Joint Venture between Hero Group.537 units 20.Shut it . 1984. 30.

and develop teams that keep the momentum going to take the company to excellence in the new millennium. Constantly innovate products and processes. systems and human resources." Brij Mohan Lall Munjal . performance and price aspirations of the customers. While doing so we maintain the highest standards of ethics and societal responsibilities. 75 . to produce products and services.Chairman Hero Group. Achievements and Awards 1990:  Pegasus Award from Readers Digest for campaigning 'One Litre Road'. It’s Vision It’s our mission to strive for synergy between technology.services that meet the quality.

Navy & Air Force with its 100cc motorcycles.by Business India Group of Publications.  The Analyst Award 1995 presented to Hero Honda Motors Limited on being ranked 9th amongst the most investor rewarding Companies in India.  Hero Honda moved into India's Top 100 Companies .1991:  Economic Times-Harvard Business School Award for Excellent Governance to Hero Honda Motors Ltd. 1995:  National Award for Outstanding contribution to the Development of Indian Small Scale Industry (NSIC Award .Presented by President of India).Ranked 87. Mr. 1996:  Hero Honda becomes first company to server Army. 1994:  The Businessman of the Year award is conferred upon the Chairman. 1997: 76 . 1992  Honorary Membership Indian Institution of Industrial Engineering. Brijmohan Lall Munjal .

 Sir Jehangir Ghandy Medal for Industrial Peace conferred upon the Chairman. by XLRI. by Overdrive Magazine. Brijmohan Lall Munjal by. PHD Chamber of Commerce & industry.  Winner of the Review 200 . 2000:  Splendor declared World No. 2001:  Bike Maker of the Year. Brijmohan Lall Munjal. Mr. Brijmohan Lall Munjal. Distinguished Entrepreneurship Award conferred upon the Chairman Mr. 1 . 77 . Mr. 1999:  Best Productivity Award for the best performance in Automobile & Tractor Sector by National Productivity Council presented by Vice President of India.largest selling single twowheeler model. by Business Baron. 1998:  Business Leader of the Year conferred upon the Chairman.Asia's Leading Companies Award (9th Rank amongst top 10 Indian Companies). Jamshedpur.

Mr. by Overdrive Magazine.  Winner of the Review 200 . Brijmohan Lall Munjal. by Business Standard. Brijmohan Lall Munjal. Brijmohan Lall Munjal.Asia’s Leading Companies Award (4th Rank amongst top 10 Indian Companies)  Entrepreneur of the Year Award conferred upon on the Chairman. Mr.  Three Leaves Award for Environment to Hero Honda by Centre for Social & Environment Green Rating Project. 2002:  Bike Maker of the Year.  Business Leadership Award conferred upon on the Chairman.Asia's Leading Companies Award (3rd Rank amongst the top 10 Indian Companies).  Company of the Year for Corporate Excellence. Mr. by Madras Management Association. 2003:  Winner of the Review 200 .  Giants International Award to the Chairman. 78 . Mr. Entrepreneur of the Year Award conferred upon the Chairman. Brijmohan Lall Munjal. by Ernst & Young. in the field of Business & Industry. by the Economic Times.

Areas of Management Hero Group > Growth Models 79 .  Bike Maker of the Year by Overdrive Magazine. Most Respected Company in Automobile Sector. by Business World.

recognition.The Hero Group has done business differently right from the start and that is what has helped them to achieve break-through in the competitive two-wheeler market. The Group boasts of superb operational efficiencies. vendors and dealers. The growth of the Group through the years has been influenced by a number of factors: employees. The Group's low key. Every assembly line worker operates two machines simultaneously to save time and improve productivity. but focused. 80 . style of management has earned the company plaudits amidst investors. as also worldwide Inventory Control The Hero Group through the Hero Cycles Division was the first to introduce the concept of just-in-time inventory.

has resulted in low inventory levels. There are over 300 ancillary units 81 . In Hero Cycles Limited. The raw material vendors bring in the goods get paid instantly and by the end of the day the finished product is rolled out of the factory. Ancillarisation An integral part of the Group strategy of doing business differently was providing support to ancillary units. Those vendors are located in the vicinity of the plants and company is moving towards full employment of “Just In Time” policy wherein the components arrive. the just-in-time inventory principle has been working since the beginning of production in the unit and is functional even till date. This is the Japanese style of production and in India.The fact that most of the machines are either developed or fabricated in-house. Most vendors supply the components & HHML shares a very nice relationship with the vendors. resulting in substantial savings in terms of inventory costs. just before they are required to be installed on the bikes. Hero is probably the only company to have mastered the art of the just-intime inventory principle. Purchase Policy 80% of the components in the manufacturing of a bike today are outsourced to the vendors.

further ahead of the industry norms.today. "… never wanted to march alone. Brijmohan Lall. making it a point to extend technical and managerial support to these ancillaries. The philosophy with regard to labour management is "Hero is growing." When it comes to workers' benefits. ex-employees or close associates of the Munjal family since the Group patriarch. relatives. the Hero Group is known for providing facilities. There is no organized labour union and family members of employees find ready employment within Hero. the plant has never had any stoppage of work. Mr. grow with Hero. At Hero Cycles Limited. the flagship unit of the Group it is claimed that except for a few days during Operation Bluestar. The Munjals have gone much beyond the conventional definition of ancillarisation. These ancillary units are manned by friends. as well as House Rent Allowance (HRA) and Leave Travel 82 . Hero was giving its employees a uniform allowance. whose production is dedicated to Hero's requirements and also a large number of other vendors. Long before other companies did so." Employee Policy Another Striking feature within the Hero Group is the commitment and dedication of its workers. which include some of the betterknown companies in the automotive segment.

manufacturing and marketing. where the first indigenously designed moped. Lall has actively looked at diversification. the Group Chairman. Mr. Then came Hero Motors that introduced Hero Puch. Diversification Throughout the years of mammoth growth. Hero Cycles Limited has one of the highest labour productivity rates in the world. but also for the immediate family members. Group Company. In Hero Honda Motors Limited. Then there were the expansion into the automotive segment with the setting up of Majestic Auto Limited. went into commercial production in 1978. the focus is on financial and raw material management and a low employee turnover. Munjal Auto Components and Munjal Showa Limited amongst other component-manufacturing units. Financial Planning The Hero Group benefits from the Group Chairman's financial acumen and his grasp on technology.Allowance (LTA). Extra benefits took the form of medical check-ups. in collaboration with global technology leader Steyr Daimler Puch of 83 . not just for workers. Hero Majestic. Munjal and Sunbeam Castings. A significant level of backward integration in its manufacturing activities has been substantial in the Group's growth and led to the establishment of the Hero Cycles Cold Rolling Division.

Further expansion is expected in the areas of Insurance and Telecommunication. Marketing P’s A. a close watch on costs and the dynamic leadership of the Group Chairman. partners. vendors and dealers and customers. In Conclusion The Hero Group's phenomenal growth is the result of constant innovations. information technology. financial services. of right attitudes and building stronger relationships with investors. Hero Honda Motors was established in 1984 to manufacture 100 cc motorcycles. which includes customer response services and software development.Austria. characterized by an ethos of entrepreneurship. Product & Price: Hero Honda 84 . The Munjals also took a foray into other segments like exports.

218 45.741 59.219 56.193 35.352 85 .580 50.170 53.217 76.580 49.778 48.034 46.793 53. CD 100  CD 100 SS  Splendor  Splendor (Disc)  CBZ (Disc)  CBZ (Self)  CD Dawn  Karizma  Ambition (Disc)  Ambition (Drum)  Ambition 135 (Drum)  Ambition 135 (Drum – Self)  Splendor + (Disc)  Splendor + (Drum) 42.225 65.616 43.

256 26. Passion + (Disc)  Passion + (Drum)  CBZ Star 50.407 Product Range and New Models The Company's product range includes "Splendor" which is the largest selling motorcycle brand in the world with over 6.883 47.9 lakhs vehicles sold 86 .931 59.615 27.196 Hero Motors  Smart  Sting  E Zee SX 23.

A cumulative over 5 million customers are the real foundation of the company's strength. the economy of a moped. the mini-motorcycle designed by Ferdinand Porsche combined the power (4. Place Dealer Network 87 .in 2000-01. B. Hero Puch was born which marked a new chapter in the two-wheeler scenario of the country. Hero Puch. When Hero Motors entered into a technical collaboration with Steyr Daimler Puch of Austria.15 bhp) and ease of a motorcycle and at 91 km/hr.Hero Puch and Hero Winner. The identity of Hero Motors in the market has been established through two of its leading international products .

500 bicycle dealers. There are more than 1000 committed dealers & service outlets spread across the country.120 crores was the Annual budget for 88 . turnover. Rs. Having your motorcycle serviced at an authorized workshop ensures highest standards of service quality and reliability. The authorized workshop have well laid out standards for motorcycle servicing supported by fully equipped infrastructure in terms of quality precision instruments. 350 dealers for mopeds and 225 franchise holders for motorcycles. pneumatic tools & a team of highly trained service technicians. Strong dealer company relationship with a deep sense of belonging to the Hero fraternity. visiting dealers and send back daily postcards with information on the stock position that day.At Hero essentially they have a completely customer-driven approach. C. ensures convenient access to the Group's products across the country. the Group's dealer network has catalyzed growth and acted as a strong bridge between the customers and the Group. Sales agents from Hero travels to all the corners of the country. anticipated demand and also competitor action in the region. which is known for its innovative & Aggressive Marketing. Promotion HHML is an organization. A nation-wide dealer network comprising of over 3. fresh purchases.

Zaheer Khan and Sourav Ganguly as Brand Ambassadors. It is also the sponsor of the ICC world Cup 2003 and half of the Indian team represents Hero Honda. environment and friendliness Also. 89 . magazines. be it print or mass media like T. HHML has print ads that the customer gets to see almost every day in newspapers. etc. They will endorse the company products. Mohammad Kaif. Those players are Virender Sehwag. in which HHML also contributes to help dealer promote the dealership in the local area. attend corporate and brand events and help promote its "We Care" campaign comprising safety riding. This has increased the brand recall by a significant number. They also have their bikes featured in various TV programs like top drive on star news and others which act as a strong reference. Some of the Events Sponsored During the Years 1993  Hero Cup – Five Nation Cricket Tournament. Harbhajan Singh. Superstar Hrithik Roshan is also a Brand Ambassador for Hero Honda Company.V & hoardings.market for the financial year 2002-2003. advertising is done at a local level by dealers. All the mediums are used extensively. Yuvraj Singh. HHML also promotes sports in the country.

 Stardust Hero Honda Millennium Honors Award.  Masters Golf Championship.1999  Masters Golf Championship. 2003  8th Cricket World Cup in South Africa.  Masters Golf Championship.  20th Cinema Express Award. 2004  ICC Champions Trophy in England.  21st Cinema Express Award.  First Indian Television Academy Award. Brand Ambassadors 90 .  India-England Test Series.  Second Indian Television Academy Award.  7th Cricket World Cup in England. 2002  India-England Women's Cricket Series. 2000  NKP Salve Challenger Trophy.

91 .

The Number Game 92 .

in the main earners and young adults segment. The years 1994 and 1995 saw an increase in ranking with the rank increasing to 44 and then to 42. At that time. as demand and brand acceptability picked up in rural areas. despite the fluctuations. Hero in 1992 had a rank of 40 and a power score of 26. Its worst performance was amongst housewives. In the early 1990s. saw the brand's ranking fall nine places to 49. Brand preference was stronger amongst rural consumers than urban ones and amongst lower-income-groups than the higher-income earning segment. The year 1993. But unfortunately. have never managed to go out of the A&M Top Brands Survey. The creative route taken by the group was by taking parallels from popular Hindi movies to deliver the intended message.Hero is one of the few vehicle brands that. Its best performance across segments 93 . that was at the cost of popularity in urban areas. But its popularity (in terms of brand awareness and recall) does seem to be facing a somewhat downward trend. This is probably because of its envious high-sales record in the two-wheeler market. in order to break into the rural market. This. Atlas. needless to say. Hero had started an aggressive rural-oriented campaign for its motorcycles. has been Hero's highest rank and power score till date. Hero had a higher ranking than its main competitor in the bicycles market. The campaign generated high interest and the strategy did work.

Hero Honda was still the largest selling motorcycle company but other companies such as TVS. the brands ranking has picked amongst housewives. 1998. Suddenly. the main-earning segment and in the Hindi-speaking regions. the brand suffered a huge fall of 14 places to land at rank 56. But a worrisome trend emerged. Hero was doing badly in almost every segment and Waking up to this sudden dip in popularity. This led to Hero's rank decreasing to a low of 54 in 1999. thus increasing its overall ranking to 45.was amongst young adults. A Company Par Excellence 94 . Hero started with a new advertising campaign. Hero has lost scores in around 12 segments out of 14. in 1996. saw only a minute decrease in ranking with the rank falling one place to 46. Hero's performance in the urban segment also improved due to the launch of new models. Bajaj and Yamaha had started to catch up. And by 1997. The next year. young males and the western and southern regions. Its performance in urban areas had dragged it down a few notches.

Hero Honda is the market leader in motorcycles. Customer-centric 95 . Hero Honda is at present the largest-selling Indian motorcycle and the most fuel-efficient in its category .2 million motorcycles.5 million motorcycles in the coming years. The Market Leader Today Hero Honda has managed to achieve indigenization of over 95 percent. a Honda record worldwide. an uncompromising pursuit of the goals to attain quality along with customer satisfaction.the outcome of Hero Group's foresight and another classic example of how the group strives to provide the customer with excellence and satisfaction. reasonably priced products. which shall be enhanced to 1.A rich background of manufacturing high value. pollution control and quality. It has a production capacity of 1. Honda Motor Company of Japan and the Hero Group entered a joint venture to setup Hero Honda Motors Limited in 1984. Hero Honda became the first company in the country to introduce four-stroke motorcycles and set the standards for fuel efficiency. with sales of over Two million motorcycles in last year and a strong market share of 50%. bringing forth a market leader. It has an excellent distribution and service network spread throughout the country.brought the world's largest manufacturer of motorcycles in collaboration with the world's largest bicycle manufacturer. the resulting affinity in working cultures .

The Company's success has been driven by customer centric policies and teamwork to achieve progress and productivity. The philosophy of Hero Honda emphasizes the "Pursuit of Excellence" in designing and manufacturing technologically and qualitatively superior products and in creating economic value for its stakeholders. It takes care of its customers through value based competitive pricing and good after sales service. Excellent marketing, finance and loan services, an efficient dealer network, tactical promotion comprising of fuel conservation campaigns, mobile workshops, safety driving courses and others, all placed Hero Honda in a league distinct from the conventional. The Company focuses on providing "Value for Money" through its pricing strategies and after sales services.

Excellent Collaborator Relationship
Hero Honda is now the leading two-wheeler Company in India in terms of net sales. It is both the leading two wheeler manufacturer and sales operation among Honda's worldwide operations. The Company has maintained excellent relationship with all stakeholders including its collaborators. Hero Honda has emerged as the most successful joint venture Company of Honda in the world, their relationship over 116 years old now.

ERP Implementation

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The Company has successfully implemented SAP R/3 (ERP Program "Project Synergy") thereby enabling proper planning and company wide efficiency. The modules were implemented and stabilized in a record 10 months period. It speaks of the commitment of the management and the implementation team towards making it processes accountable and efficient.

Exports

97

HERO CYCLES

HERO HONDA

HERO PUCH

HERO CORPORATE SERVICES

MUNJAL SHOWA LIMITED As early as in the 1960s' very few Indian bicycle manufacturers were interested in exports. However, the Hero Group's foray into the

98

The unit is designed to match international standards and is an Export Oriented Unit (EOU). 99 . Germany. Its products are supplied to the International Markets of developed countries like U. etc. Hero Puch is perhaps the first Indian two-wheeler to be homologated abroad (in Spain) and has assembly plants in Mauritius and Egypt. While initial exports were restricted to Africa and the Middle East. The Group has been continuously upgrading technology and has set up special units . The Group's exports have gone beyond cycles and their components. to meet international quality standards. Munjal Auto Industries Limited has state-of-the-art equipments imported from Europe and Taiwan. France. The success of the Hero Majestic moped did not remain confined to Indian shores. it became the largest exported moped from India.like Gujarat Cycles Limited (now Munjal Auto Industries Limited).overseas markets in 1963 pioneered Indian exports in the bicycle segment. today more than 50 percent of the exports from Hero Cycles Limited meet the demands of sophisticated markets in Europe and America. Finding enthusiastic buyers across the world. This is primarily because of appropriate product development and excellent quality that Hero offers.K. It was a move prompted essentially by the need to remain attuned to the global market place.

Mexico. Group Company.Today Hero Puch mini-motorcycles can also be seen in Paraguay. Munjal Showa Limited is one of the largest suppliers of shock absorbers to major auto giants in Japan. The Government of India recognizes Hero Exports as a Trading House. Turkey and Holland. amongst other developed markets. United States and the United Kingdom. And the latest diversification for the Group in the export market is in the area of Software exports and the development of overseas relationships in the domain of IT and IT enabled services through Hero Corporate Services Limited. Argentina. FUTURE OUTLOOK OF TWO-WHEELER SECTOR 100 . In 1993 Hero Exports was established as the International Trading Division for Group and non-Group products.

In absolute terms. As is evident from the graph below.The dynamics of the Indian two-wheeler industry has changed significantly over the last six years.9 m units in FY02).6% Scooters 42.6% Mopeds 15.1% Stepthrus 9.3 m units. Year All Twowheelers Motorcycles Ungeared Geared scooters 8. There is a continuation of shift in demand towards motorcycles from geared scooters.8% 1995 2208231 23.9% 101 . motorcycles have got a lion’s share in a matter of just six years (66% of total two-wheeler sector volumes or 2. total industry volumes in Financial Year 2002 were 4.

4% 9.9% 8.0% 1999 3403471 34.8% 8.9% 9.6% 2000 3776719 42.7% 25.8% 1997 2965474 27.7% 16.7% 2001 3745516 54.8% 7.3% 2.1% 10.1% 8.6% 14.7% 9.3% 9.0% 12.4% 32. This comes in two forms.0% 10.7% 6.5% 10.9% 8.3% 10.1% 3.1% 12.6% 38.1996 2660005 24.4% 35.5% 14.2% 8.2% The factors that have prompted the change are:  Affordability. 102 .2% 2003 5053562 74.1% 2002 4318531 66.5% 40.1% 1998 3042347 30.8% 16.3% 6.3% 6.9% 16.5% 15.

Secondly. the top selling models were Hero Honda’s ‘CD 100’ and ‘Splendor’. But with the advent of competition. twowheelers bought through vehicle financing stands at around 1. Just to put things in perspective. 36. It will be safe to assume higher numbers for the industry as well. For quantification purpose. 30. as much as 40% of its motorcycle sales are financed.7 million units. Eventually. the consistent fall in interest rates has also benefited the industry immensely. in absolute terms. This had also aided the shift in demand. 000 per unit.  Rising double income families and urbanization. the price difference between a ‘boxy’ geared scooter and a ‘sleek-cum-trendier’ motorcycle had narrowed. In an analyst meet of TVS Motors in mid 2002. have also led the change in consumer preference. the company said that.000 per unit. in 1996. this had declined with entry level of Bajaj’s ‘Boxer’ available at less than Rs.Firstly. the NCAER estimate suggests that the consuming class as a percentage of total households in India in financial year 103 . ‘Kawasaki Bajaj’ and TVS Max-100 R with an average entry-level model starting with prices above Rs.

which shows the correlation between GDP and the two-wheeler sector.1995 was 29 million (17%). The graph below. This has also been a driving factor for the industry in the last few years. But over the longerterm horizon of 3-5 years. we remain positive on the sector. Growth in volumes will take place due to the following factors: 104 . highlights this significance. NCAER expects the mix to change considerably with the consuming class expected to touch 91 million households in financial year 2007 (46%).

 Urbanization.  Increasing percentage of young population. Honda’s launch of ‘Dio’ and Kinetic’s ‘Nova’.  Declining interest rates. Bajaj Auto and TVS expect the decline in geared scooter and moped sales to stabilize in the near future. ungeared scooter manufacturers will also see a sustained rise in volumes. which could unlock significant value from the rural markets. Which company will benefit in the future? 105 .  Decreasing product life cycles. Apart from motorcycle segment.  Continuing poor public transport system.  Double income families. are both launches in the ungeared scooter segment.  Improving road connectivity.  Wider availability of finance. Increasing contribution from the services sector.

Hero Honda sold over one million motorcycles last year. continuous efficient product operations.000 vehicles a month. Hero Honda’s legacy of a solid after sales service and brand equity will continue to drive volume growth. Hero Honda. individual motorcycle-making company. Hero Honda's brand equity. The company has earned the distinction of being the world’s largest Hero Honda has a 50% share of the motorcycles segment . It has been leading the world since 3 consecutive years. Hero Honda's Splendor is already the world's largest selling two-wheeler. It generates a return of over 50% on its capital employed in the business. The remaining stake is in the hands of financial institutions and the public. It has achieved sales of more than 2 millions in the last FY. TVS Motor and Bajaj Auto seem to be well poised to capitalize on the growth opportunity purely due to a wider distribution network and an impressive new model launch. Honda Motor Co. over the last five years. 26:26 joint venture between the Hero group and Japanese major. Hero Honda Hero Honda Motors Limited (HHML) is a. 106 .a. quality products coupled introductions shall spruce up the sales. Passion is already selling more than 15. its distribution with network. The volumes of HHML have been growing at 40% p. Hero Honda is operating on a negative working capital since Financial Year 1996.As far as the motorcycle segment is concerned.

With LML and now BAL coming into their own with newer models. it's only a matter of time before the Splendors of the world start fading away. This also raises concerns on the future growth of the company. It is strongly believed. while operating margins for BAL stands at less than 7% (excluding other income). which now contributes over 65% of sales. TVS and others earlier allowed HHML to dominate and benefit from the massive shift in consumer preferences from scooters to motorcycles. An upgraded Boxer and introduction of new models like Eliminator and Pulsar are a clear market segmentation exercise from BAL.HHML’s success comes from an unprecedented success of its Splendor model. that the lack of suitable product offerings from BAL. Sure CBZ and Street have clocked decent volumes. but they look pale in comparison with Splendor. which is already beginning to show results. HHML being a pure motorcycle company has been working at an operating spread of around 13%. It is also worth noting that the 26% shareholding of the Munjal family is a joint holding of every fraction of the family and transmission to any one fraction of the next generation is unlikely to be automatic. BAL with its Caliber has threatened the seemingly unstoppable growth of Splendor. The past is history. And adding fuel to the entire future of HHML is a growing interest amongst some family members to foray into IT-enabled services and 107 .

108 .1800 crores. With a turnover of over Rs. Such diversifications would only mean less dedication to the core business of HHML by the new generation of Munjals. Will it be Munjal. So. Honda or a JV or…well. the Company manufactures a wide range of motorcycles. part of the TVS Group. is one of India's leading two-wheeler manufacturers. TVS Motor Co TVS Motor Company Limited.the likes. we have some unanswered questions with regards to ownership of HHML in the future. one can only wait to see how the dice eventually rolls out.

‘Fiero’ and ‘Scooty’ for growth and absence of models in the entry level segment would mean a slower growth in its market share in the medium-term. Little wonder. LML LML is one of the leading scooter manufacturers in the country. it boasts of more than 5 million happy customers. TVS’s heavy reliance on few models like ‘Victor’. TVS is growing from strength to strength. Twowheeler manufacturer LML in June 2003 recorded a six-fold growth on a year-on-year basis in its motorcycle sales. It has a strong sales and service network of 430 Authorized Dealerships. The company's 109 .scooters. The Fiero F2 and Scooty Pep both had been designed to set new standards in style and performance as also convenience. 1018 Authorized Service Centers and over 864 Certified Service Points. mopeds and scooterettes.

ft. This impressive growth signals the company’s turnaround. In January 2003 the company also introduced the premium version of the Freedom in select markets. 80. This phenomenal growth in motorcycles comes entirely from the Freedom. Motorcycle sales. which was launched in Uttar Pradesh in July 2002 and progressively in other parts of India in September-October 2002. which has also been extremely well received. stood at 55.781 units in June 2003. LML has decided to brand its new generation primary dealerships as ‘LML Global’. for the first three months of the financial year 200304. The showrooms will have tea and coffee vending machines and a cybercafé.278 units in the previous year. These will showcase all LML scooter and motorcycle models in a roomy environment ranging from 1.398 units in June 2002 to 16. The growth in motorcycle sales comes from Freedom model. whose total population on road had crossed 1.000 sq. CONCLUSION Changing Landscape of the two-wheeler industry 110 . representing a six-fold increase.259 units compared to 7.000 units within a year of its launch.000 to 2.motorcycle sales grew from 2.

Attractive growth rates in the motorcycle segment. but not so for two-wheeler stocks. monsoon failure and growing competitive pressure have changed the underlying basics of the industry. there is growing competitive pressure from existing domestic producers as well.The two-wheeler industry is passing through a very interesting phase. Apart from international companies. have now entered the motorcycle segment. effective sales and marketing skills will likely determine future success. a divergent trend in share price and the sharp swing in the price-earnings multiple. Hero Honda and TVS Motor is explained by the robust demand for motorcycles. The year ended March 2002 may not have been particularly good for the stock market. which recently severed its ties with TVS Motor Company. As a result. has now decided to set-up manufacturing facilities in the country. the battle for market share is set to intensify further. LML and Kinetic. It is believed that there will be 111 . price discounts offered by producers. Suzuki. The market's affinity for two-wheeler stocks .Bajaj Auto. whose presence hitherto was confined to the scooter market. has intensified competitive activity in the past two years. the global major. The impact of these developments is reflected in a change in market share. With product configurations across players converging. Developments such as the entry of more number of players into the motorcycle market.

Bajaj on the other hand. Our population profile (skewed towards the youth) and a rising service class tilts the balance in favor of motorcycles. It has placed most of its bikes in the early stages in the Utility segment appealing to the masses. Hero Honda had been the first company in the Indian market to have envisaged the motorcycle market as an opportunity market and invested wholeheartedly in it. But Hero Honda has surely held the first mover advantage. has been the second mover in the segment. a gradual move up in the value change and a tight leash on costs by industry leaders to effectively counter sporadic price-led competition. Motorcycles embody the best features of a two-wheeler such as fuel efficiency.continuity of market growth. Due to its superior and reliable products and excellent services reached the number 1 position. Currently all the major players in the industry. with the rest of the players lagging behind in the run. Realizing the potential of the motorcycle segment it started looking into it and due to its focus and continued efforts and ability to understand the market has been able to give Hero Honda a run for its 112 . which has also attracted other players in the market and driven growth in the sector. Its product positioning has also been very good.Hero Honda. ruggedness and greater product differentiation. Bajaj Auto and TVS Motors have nearly equal scores in all the competitive positions.

money. It has provided the consumers cheaper and more fuel efficient bikes, increased product lines and above all has now taken a substantial market in the Premium segment. Other players in the market are following suite to both Hero Honda and Bajaj Auto. TVS Motors and Yamaha have been forced to tow the line and upgrade their products from two-stroke to four-stroke bikes in line with the emission norms specified. They could not analyze the market potential by themselves, thus lag behind. Bajaj Auto has been the faster of the two since it has come to terms with the motorcycle market potential. Its new product launches are an example to this fact as it is launching a product in all the three segments to garner more volume base and customer loyalty by providing customers products that provide an alternative as well as value for money. Exports now constitute about 4% of total two-wheeler sales. This is expected to increase to 12% in FY 2005. Kawasaki, Bajaj’s technical partner, has decided to outsource its sub-200cc motorcycle requirements from Bajaj. This can be the singular reason for concern for the other players in the market.

Only Yamaha Motors has the financial muscle and product range to compete with the three giants Hero Honda, Bajaj and TVS Motors. It has the technical know-how and good products in international arena. It has to understand the Indian market and the Indian customer in

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order to have a good product mix in India. It is expected that Yamaha to make a place for itself in the industry in the next three to four years by setting up its own subsidiary in India or through a collaboration with one of the Indian company. In regards to TVS Motors, it has to launch products in all the three segments to build in from here. It cannot rely on a single product Victor to see it through this intense competition. Its ability to launch new reliable and quality products has decreased due to an end in its technical collaboration with Suzuki. I feel in the next two years there will be a change in the segmentation of the market with newly defined segments in terms of price and engine capacity. All the three segments will move in an upward direction in terms of engine capacity.

RECOMMENDATIONS
Opportunities and Threats for the Industry

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 Motorcycles race ahead There are no signs of a reversal in the growing consumer preference for motorcycles to scooters. Riding comfort, better control and superior mileage have attracted consumers to motorcycles. Also, the soft interest rate regime over the last two years has resulted in a steady drop in lending rates. As a result, the cost of retail loan has fallen steadily which, in turn, has prompted consumers to go in for motorcycles, though they are a costlier than scooters. In the motorcycle market, the consumer preference has tended to be skewed in favour of four-stroke models. With petrol prices ruling firm, it is not all that surprising to find the growing consumer preference for four-stroke bikes that offer superior mileage. As a result, two-stroke motorcycles have lost ground heavily in recent years. Bajaj Auto has practically stopped producing twostroke bikes, while other two-stroke producers such as Yamaha and TVS Motor have also turned to four-stroke models.

After some sharp drop in volumes, TVS Motor found the demand for its two-stroke bikes picking up after it cut prices. This has lured the Kinetic group and LML. LML launched Energy and Adreno models, while Kinetic Engineering came up with Challenger.

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With a series of successful launches such as Boxer.  Scooters on a downhill ride Scooters continue to lose favour at the market place. the lack of choice and practically. design and styling have driven 116 . In the geared scooter segment. Caliber and Caliber Croma. no major improvement in product features. Bajaj has turned out to be a star performer in terms of improvement in turnover and increase in market capitalization.Existing majors — Hero Honda and Bajaj — have taken efforts to enhance their presence in the fast growing four-stroke segment.

this product segment has seen more product launches compared to the geared models. scooters could stage a comeback in the two-wheeler market. If the companies manage to come up with more such products. especially among women. In the sub-100cc category. Scooty continues to be the market leader. Bajaj continues to dominate the geared scooter market with LML a distant No 2. Honda Motor of Japan has launched the Activa model produced by its local subsidiary.  Mopeds losing out After growing at a steady pace during the mid-1990s. In the scooter market. mopeds appear to be losing their prominence in the two-wheeler market. The recent success of Activa is a pointer that a good product with different style and design would always find market acceptance. the ungeared models could turn out to be the dark horse. Kinetic Motor launched its Marvel model. while Bajaj (through Spirit) and Kinetic (through Style) have a presence in this product category.consumers away. The drop in the price of motorcycle (second-hand bikes. The ease of usage and relatively lower product weight make ungeared scooters a popular choice. in 117 . while Bajaj came up with Saffire. Moreover.

particular) has affected moped demand. the depressed scenarios in the farm sector and the pressure on crop realizations have affected demand from the key rural market segment. the related expenses such as advertisement and other promotional outgo are 118 . With more models coming up. Mopeds also appear to be losing their earlier image of an ideal entry-level vehicle. which might revive demand. it is evident that model launches are critical for survival and growth. This apart. TVS Motor. The market leader. While the moped demand could see a revival.  New models hold the key Given this backdrop. industry leaders feel that it is unlikely to reach earlier levels. has decided to launch four-stroke mopeds.

sure to go up. Hero Honda and TVS Motor have gone a step ahead by roping in celebrities as brand ambassadors. The bottom-line is that the scope for any major expansion in profit margin may be relatively limited from current levels. With competitive pressure on the rise. while TVS has signed a contract with Sachin Tendulkar. This has 119 . three others are fighting for a place in the segment. which could bring pressure on profit margins. the necessity to launch models at regular interval would also push up development and other related expense such as technical know-how and royalty payment. Hero Honda has launched an advertisement featuring Sourav Ganguly and Hrithik Roshan. the companies would raise the load of promotional activities. This apart. Industry majors have already upped their ad-spends over the recent years. Besides the top three companies. The earnings growth would be driven more by volumes.  Competition on the rise The growing popularity of motorcycles has resulted in more players vying for a place in this market.

it came up with Passion. With more products vying for consumer attention. This has already been evident in Bajaj's and TVS' recent performance. After a considerable time. which has enjoyed reasonable success at the market place. This would be the single-most important factor for success.000 mark is probably a serious psychological barrier. Porters 5 Forces of Competition 120 . There would be a limited market potential for higher priced products. This. the product lifecycle could get shortened. Other offerings such as CBZ and Street enjoyed muted success. Backed by successful model launches. has led to an improvement in their financial performance.resulted in the market place becoming crowded with numerous models. in turn. But we would be interested in such products as it helps in developing our technical capabilities though we may not always make money. The Rs 50. both have managed to enhance their market share in the motorcycle market. Below this price segment is where there would be huge volumes. it would be all the more imperative for companies to launch models at fairly frequent intervals. As a result.

The state of competition in an industry depends on five basic forces: Customers. Knowledge of the underlying sources of competitive pressure provides the groundwork for a strategic agenda of action. They highlight the critical strengths and weaknesses of the company. The collective strength of these forces determines the ultimate profit potential of an industry. animate the 121 . Substitutes & the Industry. Suppliers. Potential Entrants.

the demand for two-wheelers will rise. If the demand for cars falls. With the increase in disposable income & increase in bank finance people prefer to have cars rather than two wheelers.  Threat of Substitute Product – High The two-wheeler industry faces direct competition from the automobile sector. There are also some small players who are gaining market share such as LML & Kinetic. Hero Honda & T V S Motor Co. The industry is constantly witnessing price-cuts. Thus the demand for cars affects the demand for two-wheelers.  Rivalry among existing firms – High The two-wheeler industry is categorized by intense competition mainly between the three majors – Bajaj Auto. highlight the places where industry trends promise to hold the greatest significance as either opportunities or threats. clarify the areas where strategic change may yield greatest payoff.positioning of the company in its industry.  Barriers to entry –High 122 . freebies & product launches.

. executive & premium category. The industry attractiveness is low not due to profit margin but due to intense & well established competitors. It has been observed that companies which have ignored the customers have suffered – Bajaj Auto. With this I end my memorable odyssey………. The customer is treated “as a king”.  Bargaining power of buyers –High The bargaining power of the buyers is high.90% of the product is outsourced thus the suppliers have a direct impact on the companies cost & profitability. but instead had a dispatch department. Thus the bargaining power is poor. rely on only a few selected vendors.  Bargaining power of suppliers – Poor The two-wheeler industry. Thus it is very difficult for newcomers to enter this sector. The customer should be the focus of all activities. The investment required to compete with these giants would be significant. which once operated without a marketing department. 123 .The barriers to entry & exit are high. Around 60% . There are a variety of products available to customers to choose from. However the rules of the game have changed. The marketers have segmented the market into three categories namely entry level. All activities Production & Marketing should be done keeping the consumer in mind.

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