Automobile industry

A brief view of automobile industry is being given for better understanding. The auto market is one
of the largest segments in world trade. The annual size of automotive export trade in the world has
grown to a massive level of over US$ 600 billion, which accounts for about 10 per cent of the
world export. Changing models, improving fuel efficiency, cutting costs and enhancing user
comfort without compromising quality are the most important challenges of the auto industry in a
fast globalizing world. Hence there is a need for exploring the industrial complementarities in the
region for better quality, favorable costs, fuel efficiency and attractive designs. Therefore, the
requirement of information exchange in the region is much more pronounced now than ever before
for keeping the auto industry afloat and competitive.

Pakistan Overview

Since its independence in 1947, Pakistan has been able to transform itself to a large extent, from a
completely agrarian economy to a fairly developed techno-industrial base. Besides textiles,
Pakistan’s exports are largely manufactured items such as consumer durables and engineering
products. However, it is also a fact that Pakistan has not been able to realize its potential due to
internal and external compulsions and thus it lags behind many developing countries of the world.
The existing population of automotive vehicles in Pakistan is 3.9 million. The annual demand is
estimated at 300,000, two thirds of which is being met from local sources and imports and the
remaining one third is left unmet. The market value of automotive vehicles in dollar terms is
estimated at more than 1 billion, out of which import constitutes around US$ 200 million. The
aftermarket of auto parts is estimated at US$ 500 million, imports and local production taken
together.
The Group

Atlas Honda Limited is a joint venture between the Atlas Group and Honda Motor Co., Japan. The
foundation of the Atlas Group was laid in 1962 with the establishment of Shirazi Investments (Pvt)
Limited with a capital of half a million rupees and three men doing business in trading shares and
real estate. The growth of the Atlas Group is the result of its focus on good corporate governance.
Today Atlas is a diversified group dealing in engineering, financial services and trading. It consists
of seven public limited companies out of which six are quoted on the Stock Exchanges in Pakistan,
and five private limited companies. Atlas shareholders equity now stands over 25 billion rupees;
assets have increased to over 60 billion rupees; personnel strength is over 7000 and annual sales
have crossed 60 billion rupees. The Group paid taxes of Rs. 15 billion over 2% of the total
government revenues.
All this progress is due to the Group's reliance on the intellectual capital, dedicated efforts and
team spirit of all the stakeholders. Every member is striving for excellence and taking pride in the
Group's motto:

MANAGEMENT

Maintaining a global viewpoint we are dedicate to supplying product of the `highest quality yet a
reasonable point for worldwide customer satisfaction. Honda remains its rich culture of customer
satisfaction, it being serving nation. For management we have following our management strategy.

 Proceed always with ambition and youthfulness.

 Respect sound theory, develop fresh ideas, and make the most effective use of time.
 Enjoy your work and encourage open communications.
 Strive constantly for a harmonious flow of work.
 Be ever mindful of the value of research and endeavor.
 Respect for all – man has priority over others.
MANGEMENT LIFE CYCLE

Planning

Controlling Organizing

Leading

Transportations Purpose

Two Wheeler Road

Transportation Strategy
Better quality at
Objective
economical rates
Produce different
Programs
models for different

customers

CD 70,CD 100, CG

125
CD 100 Economical
Policies
with speed specially for

middle-aged, CG 125

Speed specially for

Youngsters, CD 70

economical specially for

oldies
 Always on time delivery RULES

and return of defected

products entertained

SWOT ANALYSIS
Strengths:
 Qualified and well trained staff
 Biggest sale network
 Best production plant in the world
 Financial Strong
 Biggest market share
 People Trusted Products
 High Quality Products
 ISO Certified
 Resale value
 Customer Care
 Customized products
 Brand Image
 Availability of Spare parts
 Best delivery system (Transportations)

Weaknesses:
 High Price of Products
 Political instability
 Low per capita income of public
 Less overhead rates of competitors
 Increasing Prices of Oil
 Rising inflation
Opportunities:
 Industry expansion
 Technology upgrading
 Strong Position
 Market Integration opening up
 Opportunity growing in other countries
 Newly developed Areas/Markets (e.g. Gawader)
 Favorable govt. policies
 Big Market
 Economy is expanding
Threats:
 Chinese cheaper products challenges
 Free Trade & WTO
 Strong competition from competitors in near future
 Instability of Government
 High rate of Taxation

MARKETING STRAGETY

The marketing team rightly takes pride in achieving all-time high sales. The real achievement of

the company has been in shouldering its responsibility as the market leader in the growth of the

total motorcycle industry. Atlas Honda has taken some tough decisions in enhancing the total

customer base as well as dealing with the menace of the unorganized sector. On the achievement of

the landmark, Atlas Honda with the support of its large supplier network readjusted its prices to

pass on the benefit to its customers. Other players followed suit and the unprecedented adjustment

of prices changed the two wheeler market in the country in a way that has never been seen before

The volumes that have now become possible will provide the all-important base for more

investment and even better quality. In the process, Atlas Honda is now leading the two wheeler

industry towards a path that will enable it to become globally Competitive. The Company will
adopt the middle way of push and pull strategy because due to increasing demand pull strategy is

not suitable. Similarly push strategy does not give a good impression to the customer.

MARKETING MIX
PRODUCT

MARKET POSITIONING
PLACE PRICE

PRODUCTS
PROMOTION

PRODUCTS

Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality
yet at a reasonable price for worldwide customer satisfaction.

During the year 2006, the company launched new models. In the 125cc segment Honda CG-125
Deluxe was launched. Modern styling, added power and a disk brake function has made it the
choice purchase for a selected segment that was looking for added value in the existing popular
CG-125. In addition to this, the regular CG 125 also underwent a Minor Model Change (MMC)
which proved to be huge success. A 53 growth in sales on year to year basis in the 125 cc category
is a testament to the success of the new model and the CG-125 MMC. The MMC has been a major
success and Honda CD-70 is the best-selling motorcycle in the market with sales of over 300,00
annually. A 25 % increase to last year is a measure of popularity of this model.
Currently we have following products to fulfill the needs of market.
 Honda CD 70

 Honda CD 100

 Honda CG 125
 PRICE
Atlas Honda products are well known due to its quality and reliability. Company commitment is
not to just sale products for profits but quality which enables us to win the confidents of people and
customer satisfaction.

MODEL PRICE
Honda CD 70 Rs 65,000 /-
Honda CD 100 Rs 80,000 /-
Honda CG 125 Rs 10,5000 /-

PLACE

Atlas Honda has developed Pakistan’s largest after sale services network. The company has
made its 1 to 5 S dealers through out the country.
These 5S stands for
 Sales
 Services
 Spare Parts
 Second Hand Exchange
 Special Sales (credit)

According to the company these are not the simple selling points but these are the complete
HONDA Company. The company has made Dealer Development Department, which is
responsible for the co-ordination with dealers and training of mechanics.

The year 2006 saw improvement in almost all the major marketing areas. The 5‘S’ dealer
network was further expanded dealers have upgraded their dealerships to a modern, global
standard. The resultant image enhancement in the eyes of the public has generated more
customers for the company. The effective media promotion has made your company and its
products household names. The recall value of the promotion has been rated as one of the highest
ever. This policy has further cemented the value of the product and a greater number of first time
users are now Atlas Honda customers.
 PROMOTION

The company focuses on its promotion campaign very seriously. There are several internal and
external programs to increase its sale.

INTERNAL PROGRAMS

Service Development Department

The company has made Service Development Department, which is responsible for the co-
ordination with dealers and training of mechanics. Department conducts massive campaigns to
familiarize and train the service and sales dealers about the technical features of new models. In
2006, there were different training programs. These attended by 931 Service dealers, 80 Antenna
dealers and 3650 Honda 4 stroke mechanics. Moreover, 296 sales dealer’s staff and 85 Marketing
staff of AHI were familiarized with the features of new models.

The company is mostly using push strategy to promote its motorcycles.

 As CD-100 is their new product to promote it they force the dealers to keep a CD-100 bike
with them so that when customers come they offer him to try the new bike.
 The company is offering package to dealers that for every ’x’ bikes of CD 70 or CG 125
you have to take “y” bikes of CD 100. This also forces the dealers to try to sell this new
product.

Dealer Promotion
For the promotion of its dealers the company arranges meetings and buffet dinners. One
promotion activity was held on 27th of April 2006 in Mughal-e-Azam near university campus.

Technicians Training
 For the promotion of its products the company has trained 7000 mechanics. These mechanics
are not only providing repairing services to the people but also publicize the products of company
by word of mouth.

EXTERNAL PROGRAMS
Honda Company organizes different types of promotion activities, some of them are following;
For the promotion of its products the company arranges rallies.

MARKETING RATIO ANALYSIS FOR THE YEAR 2015

1. OPERATING PROFIT / TOTAL MARKETING INVESTEMNT

3785703000 / 434257000

2. OPERATING PROFIT / SALES REVENUE

3785703000 / 37764159000

10.024 %

3. SALES REVENUE / TOTAL MARKETING INVESTEMENT

37764159000 / 434257000

86.9626 %

4. SELLING COST / SALES REVENUE

 32991341 / 37764159000

87.36 %

5. ADMINISTRITIVE COST / SALES REVENUE

319940000 / 37764159000
0.84 %

6. PROMOTION COST / SALES REVENUE

197757000 / 37764159000

0.52 %

7. EARNING PER SHARE

2014 – Rs 7.52
2015 - Rs 22.5

Percentage change in EPS 33.42 % increase in EPS against last year i.e. 2014.

Conclusion:
The reduction in tariff rates liberalization and global image of Pakistan has resulted in substantial
growth in foreign investment and exports. At the same time, there are significant challenges that
can be a threat if not addressed timely. The company is faced with a great cost increase problem
due to the continuous rise in input raw material especially steel prices, rubber and petroleum
products.
The year 2005-06 turned out much as planned, although the task was made harder by the burden of
global raw material price hike. Next year will be a difficult year for the country economy. The
business environment and the economy are becoming more open and the business environment
more difficult. The automobile industry policy of deletion and “forced” localization have been
abandoned by the government. The implications are severe i.e. “survival of fitness”. In this
environment, competitiveness is the key success factor. However, your company is well positioned
in terms of capacity & efficiency. Barring any unforeseen economics adjustment, Atlas Honda
should maintain its growth momentum. There is excepted strong competition from Chinese and its
Japanese competitors. So Honda should recover from its internal and external expenditures hence it
would reduce cost of production. Customers will buy more Atlas Honda in case if price still low.
It is strongly believed that under WTO agreements the developing countries’ economies
will be seriously affected. The auto industry, and especially the motorcycle industry, is
poised for growth. The results speak for themselves. This is the time to further nurture the
industry otherwise a great opportunity to diversify the industry will be lost to the country.