India is the third largest manufacturer of two-wheelers in the world, and the largest manufacturer of three-wheelers. The major players in the Two Wheeler sector are Bajaj Auto, Hero Honda, Kinetic, LML and TVS Motors. Among two-wheelers, motorcycles have led the upsurge (88% growth) to result in a y-o-y growth of 42% for the sector. The Indian two-wheelers industry can be broadly classified into three major segments -- scooters, motorcycles and mopeds. With sales over 4.2 million (FY 2001-02), the industry is growing at the rate of nearly 16%. The motorcycle segment is the fastest growing with its share in two wheeler sales increasing from 37.21% in FY1997-98 to 68.65% in FY2001-02, to nearly 70% in FY 2002-03. In the last five to six years, the two-wheeler market has witnessed a marked shift towards motorcycles at the expense of scooters. In the rural areas, consumers have come to prefer sturdier bikes to withstand the bad road conditions.

In the process the share of motorcycle segment has grown from 48% to 70%, the share of scooters declined drastically from 33% to 22%, while that of mopeds declined by 4% from 19% to 15% during (FY 2001-03). Sale of scooters and mopeds segment decreased 51.20% and 47.93% respectively over the last five years. Scooters and mopeds are rapidly losing their place in the market to the more fuel-efficient, stylish and sturdy motorcycles. The Euro emission norms effective from April 2000 led to the existing players in the two- stroke segment to install catalytic converters. 4-stroke motorcycles are now replacing all the new models. Excise duty on motorcycles has been reduced from 32% to 24%, resulting in price reduction, which has aided in propelling the demand for motorcycles. Competition has intensified over the last couple of years. Recently, Honda Corporation of Japan announced its intentions to set up a 100% subsidiary to manufacture scooters and motorcycles. Other players in the two-wheeler industry include Bajaj Auto Ltd, Kinetic Motor Co Ltd, LML, TVS Motors and Yamaha. Low – interest regime has helped in reducing cost of loans, which will help in boosting sales of 2-wheelers, since 80% of the two- wheelers are credit – stimulated.


With more than 40 per cent of the motorcycle demand flowing from the rural sector, the success or failure of monsoon has a major influence on the sales volume. After a robust growth in the first quarter of the previous fiscal, motorcycle off take tapered during the second-half.


" both for their jarring ride.e. with a pedal crank mechanism to drive the rear wheel.HISTORICAL INDUSTRY DEVELOPMENT The invention of the first two-wheeler is a much-debated issue. Gottlieb Daimler (who later teamed up with Karl Benz to form the Daimler-Benz Corporation) is credited with building the first 4 . without pedals. propelled by the rider's feet pushing against the ground. bicycles with front and rear wheels of the same size. and were called "bone-crushers. and their tendency to toss their riders. in turn descended from high-wheel bicycles. The high-wheelers descended from an early type of pushbike. i. Those bicycles. used iron-banded wagon wheels. "Who invented the first motorcycle?" may seem like a simple question. Two-wheelers owe their descent to the "safety" bicycle. These appeared around 1800. but the answer is quite complicated..

API and Enfield were the sole producers. it set up a shop to manufacture them in technical collaboration with Piaggio of Italy. Bajaj Auto began trading in imported Vespa scooters and three-wheelers. foreign companies were not allowed to operate in India. Until 1958. Under the regulated regime. Automobile Products of India dominated the scooter segment. It was constructed mostly of wood. It was a complete seller market with the 5 . Bajaj Auto later overtook it. the wheels were of the iron-banded wooden-spoked wagon-type. In 1948. One wheel in the front and one at the back. it had a smaller spring-loaded outrigger wheel on each side. 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. Although various government and private enterprises entered the fray for scooters. in 1960.motorcycle in 1885. In the initial stages. Finally. The agreement expired in 1971. the only new player that has lasted till today is LML.

gaining a top slot. Motorcycle. with only three manufacturers viz Enfield. And the then market leaders .Escorts and Enfield . The first Japanese motorcycles were introduced in the early eighties. Four-stroke motorcycle is positioned as fuel-efficient and environment friendly vehicle.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.were caught unaware by the onslaught of the 100cc bikes of the four Indo-Japanese joint ventures. it is chain driven. the name is evolved from motorized cycle. resulting in Hero Honda . demand swelled. TVS Suzuki and Hero Honda brought in the first two- 6 . wheels and chain exposed. Two-stroke motorcycles are positioned as power bikes by making use of their high power delivery to cater the young generation. Ideal Jawa and Escorts. A motorcycle has an engine.then the only producer of four stroke bikes (100cc category). Jawa and the Rajdoot were two-stroke bikes. The motorcycles segment was no different. Moreover.waiting period for getting a scooter from Bajaj Auto being as high as 12 years. While Enfield bullet was a four-stroke bike. With the availability of fuel-efficient low power bikes.

resulting in a production loss of 0. inclined towards moped purchases. The industry witnessed a steady growth of 14% leading to a peak volume of 1. In 1990. the entire automobile industry saw a drastic fall in demand. The industry saw a sudden growth in the 80s. which grew at a rate of nearly 33% CAGR in the last five years. the scooter segment has consistently lost its part of the market share in the two-wheeler market. towards buying scooters. The industry had a smooth ride in the 50s. In the 90s. In line with this. This resulted in a decline of 15% in 1991 and 8% in 1992.stroke and four-stroke engine motorcycles respectively. The entry of Kinetic Honda in mid-eighties with a variometric scooter helped in providing ease of use to the scooter owners. In the 90s the major growth for motorcycle segment was brought in by Japanese motorcycles. this trend was reversed with the introduction of scooterettes. Barring Hero 7 . and later on progressed to indigenous manufacturing.9mn vehicles in 1990. These two players initially started with assembly of Complete Knocked Down Kits. who were earlier. This helped in inducing youngsters and working women. 60s and 70s when the Government prohibited new entries and strictly controlled capacity expansion.4mn vehicles.

all the major producers suffered from recession in FY93 and FY94. TWO WHEELER INDUSTRY: THE CURRENT SCENARIO 8 . Hero Honda showed a marginal decline in 1992.Honda.

Bajaj Auto. Besides. But it appears that the time has come for this segment to align itself with the overall industry growth. Kinetic Motors and Hero Honda Motors. The overall sales growth rates appear to have been capped. The growth in two-wheeler sales has been quite steady over the past eight years and right now. in fact. the industry size has become too big to 9 . are battling for the motorcycle segment. 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. The Indian consumer being sensitive to prices would certainly take the lead. could be a spiel for a fall in growth in penetration levels after a decade of steady growth.If Automobile companies have been showing poor growth rates. one can argue that the higher base has been partly achieved through generous financing packages and discount schemes. LML. More specifically. TVS Motors. All major two-wheeler players. 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. there is no reason to expect an upturn. There.

3 per cent between 1997 and 2000. As a result. Now. expects motorcycle growth rates to move towards the overall industry growth rate in the next one to two years. 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. an improvement may not be possible. The overall Compounded Annual Growth Rate in two-wheeler sales was 8. Over the same period. 10 . MSDW as a result. MSDW has lowered its rating on Hero Honda and TVS Motors to neutral. This strong growth was fuelled by a shift away from scooters. while Bajaj Auto was already neutral. the CAGR for motorcycles was 22. given the share of 53.5 per cent. motorcycles have less room to grow at the expense of scooters.6 per cent in the total two-wheeler sales. lower margins will follow and supernormal returns would no more be possible. On a high base. As a result.sustain the growth rates. Hero Honda will eventually have to compete on equal terms.

The two-wheeler industry is expected to undergo a period of transformation. Both Bajaj Auto and TVS Motors have already built in these pressures in their valuations while Hero Honda has not. Their scooter brands could cause a ripple in the two-wheeler industry and slow the extent of migration to motorcycles from scooters. This is bound to lead to profitability pressures for the two-wheeler industry as a whole. after which it expects the company's growth to decelerate. INDUSTRY STRUCTURE 11 . Bajaj Auto and TVS Motors are targeting volumes in the 4-stroke motorcycle segment at the expense of margins. even subjecting Hero Honda to competitive pressures. Growth expectations for Hero Honda.The recent acceleration in motorcycle sales has led to a serious rethinking in strategies in the two-wheeler market. in MSDW's opinion are valid only for the next one-year. which would involve lower margins and profitability pressures. Honda and Piaggio have announced their plans to enter the Indian scooter market.

the fastest growing segment among the two-wheelers.. Till last year. However. the renewed version of Joy. was almost monopolized by Splendor. India’s highest selling bike. as Hero Honda’s Dawn. executive segment and the premium segment.   Motorcycles. the entry-level segment.The Indian two-wheelers Industry can be broadly classified into the following Segments: Scooters -Geared and Un-geared. garnering a sequential growth throughout the last four quarters. the executive segment. The motorcycles segment can be classified into three broad segments viz. Victor. is a distant 12 . has done the trick. the market leader has started showing signs of flagging. the flagship product of TVS. The entry-level segment continues to witness competition on the price-front. Bajaj has a stronghold of this segment with Boxer. with a host of new vehicles flooding the market.

second. It is this segment that is gradually eating away volumes from Scooters. These segments as shown below constitute the domestic two wheeler sales: 13 .

14 .

Flash Report on Sales [Including Exports] (A)AprMar (B)Apr-Mar (C)Apr2000-01 Mar 15 .

Scooters Bajaj Auto Ltd Honda Motorcycle & Scooter Kinetic Motor

1999-2000 12,33,781 5,70,702 -

8,76,224 3,56,512 -

2001-02 8,53,330 3,65,087 54,216

1,12,676 1,19,663 1,08,627 Company Ltd LML Limited 2,77,157 1,61,231 1,20,790 Maharashtra Scooters 1,46,671 96,755 61,456 Ltd. TVS Motors Ltd. 1,26,575 1,42,063 1,43,154 Motorcycles 17,61,439 21,14,693 28,93,618 Bajaj Auto Ltd. 4,25,704 5,36,103 7,06,012 Hero Honda Motors 7,51,639 10,19,267 14,12,279 Ltd. Kinetic Engg. Ltd. 44,309 LML Limited 36,160 44,723 Royal Enfield Motor 24,175 20,189 22,769 TVS Motors Ltd. 3,23,181 3,51,483 4,47,279 Yamaha Motor India 2,36,740 1,50,861 2,16,247 (P) Ltd. Mopeds 6,98,321 6,43,461 4,67,902 Bajaj Auto Ltd. 65,786 54,388 36,491 Kinetic Engg. Ltd. 1,58,022 1,47,532 96,434 Majestic Auto Ltd. 95,773 78,266 67,590 TVS Motors Ltd. 3,78,740 3,63,275 2,67,387 Total 2-wheelers 36,93,541 36,34,378 42,14,850 PRELUDE TO INDIAN TWO-WHEELER SECTOR


Ever since 1987, it is only during FY03 that the drought has been severe enough to officially declare it as ‘drought year’. The inflation is well under control at 3.40%, but concerns of burgeoning fiscal deficit still remain at large. While the 28% shortfall in precipitation would dampen agricultural output during the current year, indicators on industrial output and infrastructure activities undoubtedly point towards an economic recovery. The IIP {The Index of Industrial Production} witnessed a y-o-y increase of 6.1% as on September 2002, with Automobiles clocking a 4.9% growth. 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 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.


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, scooters held the upper hand in the contribution to overall sales. 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.


This should gradually decrease in the forthcoming years. The retention period of a two-wheeler in India is one of the highest in the world.STRICT ENFORCEMENT OF ENVIRONMENTAL REGULATIONS In the years to come. both selected models of Hero Honda (Splendor and CD 100) are the most eco friendly two wheelers. stringent regulations and environmental laws should increase replacement demand for two-wheelers. They have scored above average in vehicle and engine 19 . Among the two and three wheelers.

The major players are: 20 . The lowest score has been obtained by Kinetic Safari moped. The best performing two-stroke model ranks fourth amongst the two wheelers. which ranks third. four-stroke two wheeler fitted with any kind of pollution control equipment. There are a lot of companies in this Industry. MAJOR PLAYERS IN THE INDUSTRY The Indian two-wheeler contributes the largest volumes amongst all the segments in automobile industry. Though the segment can be broadly categorized into 3 sub-segments viz. some categories introduced in the market are a combination of two or more segments. Bajaj boxer. motorcycles and and are one of the very few. which obtained average scores in design and emissions and very poor scores in pollution control equipment and emissions. has scored well in vehicle and engine design but lacks in emission control equipment and comparatively poorer emission. scooters.

it is the market leader in the motorcycle segment with around 50% of the market share during FY 2003-04.1 two wheeler joint venture of Honda Motor 21 . which is expected to reach 6mn mark with the rural and semi-urban segment being the new class of consumers.Hero Honda Motors Ltd is one of the leading companies in the twowheeler industry. much ahead of its competitors an account of its superior and reliable product quality complemented with excellent marketing techniques.  Hero Honda continues to hold the coveted position of being the largest individual two wheeler companies in the world as also being the No. The company has been consistently addressing the growing demand for motorcycles and has a cumulative customer base of over 5 million customers. At present. The company has emerged as one of the most successful players.

123 units of motorcycles as compared to 4. 58. Profit before tax was Rs.779 motorcycles sold during the first quarter of the last FY.1. The Hero Honda Splendor has maintained its leadership as the World No.1 two wheeler brands. The company's sales volume during the first quarter of the year 2004 also recorded a splendid increase. 2004 from Rs. 359.1.21 crores in quarter ended June 30.82 crores in the corresponding period last year. Worldwide. 745.000 units within three months of launch.  New model 'Dawn' recorded monthly sales of 10. with sales of 6.    The company offers the following products:  CD 100  CD 100 SS 22 . 09.885 crores and Profit after tax was 581 crores in the FY 2002-03. The total sales turnover of the company was Rs.Co.

 Splendor  Passion  CBZ  CD Dawn  Karizma  Ambition  Ambition 135  Splendor +  Passion Plus  CBZ Star Address: Registered & Corporate office: HERO HONDA MOTORS LIMITED 34 Community Centre. New Delhi – 110057 23 . Basant Lok Vasant Vihar.

24 . From 1948 till 1959.Tel: 011 26142451 / 26144121 Fax: 011 26143321/ 26143198 / 26141830 / 26152453 / 26152132 Established in 1945. It then obtained a production license in 1959 and struck a technical collaboration with Piaggio of Italy in 1960 and continued with the same for the next two decades. it imported scooters and three wheelers from Italy and sold them in India. it was incorporated as a trading company.herohonda.

Scooter production commenced in 1961. Three wheeler productions followed in 1962. Its collaboration with Piaggio expired in 1971 and since then the Company's scooters and three wheelers are sold under the "Bajaj" brand name. It is one of India's top ten companies in terms of market capitalization and among the top five in terms of annual turnover. Under the "Horizontal transfer of technology" policy, Maharashtra Scooters Ltd., a Company with 24% equity participation by the Company and 27% participation from Maharashtra State Government's Western Maharashtra Development Corp. was formed in 1975. Production facilities are located at Satara, in Maharashtra State. This helped augment production capacities. These scooters are marketed through the Company's distribution network and under the Company's brand name. The Company's second plant was set up in 1984 at Aurangabad, in Maharashtra State. In this plant, scooter production commenced in 1986, 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, today the Company has become a market leader with annual production in excess of 1.35 million units and with product offerings in all segments (mopeds & scooterettes, scooters, motorcycles, three wheelers)

Its main models are:  Chetak  Spirit  CT 100
 

Caliber 115 Wind 125

 Pulsar 150 KS

Pulsar 150 SS

 Pulsar 180 SS  Eliminator


Mumbai - Pune Road, Akurdi, Pune 411 035. Tel No. : 020 772851, 776151. Fax No. : +91-20 776387, 773398. URL:

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". Financially, LML's turnover has grown from Rs.209.05 crores in 92-93 to Rs.832.71 crores in Sept '98. It plans to facilitate authorized dealers with a WAN (wide area network) and sell spare parts through the Net.


Bangalore. its 300-dealer strength is to be over 500 soon. it hopes to build up a base of 20. Kanpur. Besides. Calcutta and Noida).It is also working towards setting up five training schools (one each in Mumbai. to train mechanics and service personnel. Models Provided:  Freedom DX  Freedom Prima 110  Freedom Prima 125  Freedom Prima 125 DB  Freedom Topper  Graptor Address: 28 . Beginning with 120 people in the first quarter of 1999.000 trained mechanics over time.

KEL has 3 manufacturing plants.208 022 Kinetic Engineering Ltd. quality and reliability. founded in the year 1970.winning products for over two decades. KEL manufactures a wide range of Mopeds. heart . K. Born of the vision of the late Shri H.Registered Office: C 3 Panki Industrial Estate. Firodia. is the leading manufacturer and exporter of 2-wheelers. Their well endowed 29 . Scooters and Motorcycles that are very popular in the country and are well recognized for their fuel economy. Kanpur . with the capacity to manufacture 4 lakh vehicles per year.. it has produced useful.

technologically advanced manufacturing set up has enabled them to reach high quality standards. The company also exports these vehicles to countries like USA, Canada, Sweden, Latin America, Denmark and the Middle East. The company has always been conscious of quality and customer oriented production. A strong service network set up across India backs Kinetic Engineering Ltd. Kinetic Engineering are also the promoters of Kinetic Honda Motor Ltd., a joint venture with the internationally known Honda Motor Company of Japan. The Models provided are: Nova EX / DLX / 135

 ZX Zoom  Zing STD  Zing Rockin 80  Rock in Zing

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

TVS MOTOR COMPANY TVS Motor Company Limited, part of the TVS Group, is one of India's leading two-wheeler manufacturers. With a turnover of over Rs.2800 crores, the Company manufactures a wide range of motorcycles, scooters, mopeds and scooterettes. Little wonder, it boasts of more than 9.5 million happy customers. The year was 1980, was a year to remember for the Indian two-wheeler industry. For it was this year that saw India's first twoseater moped, TVS 50, rolling out on the Indian roads. For some it was freedom to move.

Through an amicable agreement the two companies parted ways in September 2001. With a strong sales and service network of 500 Authorized Dealerships. Products offered by the Company:  Max 100  Max R  Centra  Victor GL  Victor GLX 33 . 1018 Authorized Service Centres and over 864 Certified Service Points.With the joint venture with Suzuki Motor Corporation in 1983. TVS-Suzuki became the first Indian company to introduce 100 cc Indo-Japanese motorcycles in September 1984. TVS is growing from strength to strength.

600006 Ph: 044-8272233 Fax: 044-8257121 COMPANY’S SHARE IN MARKET 34 . Haddows Road Chennai . Fiero F2/FX  Scooty PEP DLX  Scotty KS  Scotty ES Address: Jayalakshmi Estates V Floor 8.


TVS Motor Ltd is taking its chances with the massive R&D and capacity expansion plans. where the growth is highest. Among the two-wheeler majors. The current fiscal should bring in considerable bottom-line growth to all the two-wheeler players due to positive demand outlook for the sector. But the major concern for all the players is 36 . the competition should ultimately give each player its share. On similar lines. With more players joining the fray in the motorcycle segment.The motorcycles segment is bubbling with a spate of models launched in the last four quarters. LML is banking on its new products for growth and is coming out with a flurry of new models in the executive segment of the motorcycles.

The integrity. 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 acute pressure on pricing that may impact the margins for all of them. resourcefulness and determination to succeed which are characteristic of the Company today. was a confidante and disciple of Mahatma Gandhi. founder of the Bajaj Group. and was deeply involved in the effort for freedom. Jamnalal Bajaj. are often traced back to its birth during those long days of relentless devotion to a common cause. 37 . dedication.

J. to last years.S. As dynamic and ambitious as his illustrious predecessors. he has been recognized for his achievements at various national and international forums. Podar Shekhar Bajaj D.Today. Bajaj is currently India's largest three-wheeler manufacturer and one of the biggest in the world. We have long left behind our annual turnover of Rs. Bajaj Auto is the flagship of the Bajaj Group of Companies. Management A team of seasoned professionals ably manages Bajaj Auto Ltd. Khan Chairman & Managing Director Vice Chairman & Whole-Time Director Director Director Director Whole-Time Director Director Director 38 . Mehta J. He has been the Chief Executive Officer of Bajaj since 1968 and is recognized as one of the most outstanding business leaders in India. Balaji Rao D. Godrej S. Board of Directors Rahul Bajaj Madhur Bajaj Kantikumar R. impressive figure of Rs.N. Rahul Bajaj is the Head of the Group.72 million (1968).H.39 billion (US$ 920 million).

N.J.H. Khan Chairman J.J. Balaji Rao Chairman S.Rajiv Bajaj Joint Managing Director Mrs. Godrej Naresh Chandra Remuneration committee D. Khan Naresh Chandra Objectives and Goals The main objective of Bajaj Auto is not only on sharp increase in output but also on: 39 . Balaji Rao Naresh Chandra Shareholders’ & Investors’ Grievance committee D.H.J. Balaji Rao Chairman J. Suman Kirloskar Director Naresh Chandra Director Nanoo Pamnani Director Committees of the Board Audit Committee S.N. Godrej Nanoo Pamnani D.

   Policies They approach their responsibilities with ambition and resourcefulness.  40 . but especially to minority shareholders. Disclosure: Of all relevant financial and non-financial information in an easily understood manner. Fairness: To all stakeholders in the Company. Transparency: A commitment that the business is managed along transparent lines. Supervision: Of the Company's activities by a professionally competent and independent board of directors.

They respect sound theory and encourage creative  experimentation. The company has a stranglehold in the southern and western regions of the country with a market share ranging between 80% to 90%. geared scooters. Bajaj Performance  The market for the so-called 'mature' segment.Rajiv Bajaj (joint managing director) included. mopeds. They organize themselves for a transparent and harmonious flow of work. step-thru's and threewheelers.  The geared scooter market in which Bajaj is clearly the market leader with its Chetak and Super's till ruling strong. which according to Mr. 41 . And they make their workplace a source of pride.

Here too Bajaj is relatively well placed with only LML to worry about. Bajaj will try to capture market share by introducing top-ofthe-line scooters.  Sale of Company's new products introduced during 1998 1999 viz. Towards this. Bravo. its strategy would be to position itself in the fuel-economy segment at a competitive price point.  Going forward. As this market is a mature one. But the good part of the story ends right here. Secondly. Spirit. the upgraded M-80 Major was introduced in August 1999. growth opportunities are limited and Bajaj has come around to accept that only too well. 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.. which match its competitors in terms of style and technology. It incorporates a new engine that delivers higher  42 . Next. comes the largest market of the north (55% of total scooter market). Legend and Caliber was 30% of the total number of two wheelers sold during the period. In Step-thrus.

Caliber 115 has also enjoyed a fair degree of success. the Company expects to become India's largest scooterette manufacturer. aided by its cash-rich status.000 units per month.   Commercial production of Saffire. With this. M-80 four strokes will be introduced in the current quarter.power. As a result. With this introduction Company's step-through market share should exceed 60%. This vehicle is well received by customers. This was followed by a new scooterette in the next quarter.  The success of Pulsar has helped the company to stay clear of adopting an aggressive price reduction strategy. the company has been able to hold its ground in the times of recession..  Bajaj has consistently rolled out successful models for example one of the feathers in its crown is the Bajaj Pulsar…. 1999. four-stroke automatic scooter commenced at Bajaj Auto's new plant at Chakan (Pune) on October 20.a premium bike segment motorcycle which has been 43 . better fuel economy and significantly lowers emissions. Sale of Spirit scooterette has crossed 6.

CT and Caliber has been very encouraging. Starting with the entry level Boxer series. ‘Caliber Croma’ and ‘Aspire’ in the executive bike segment. 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. An estimated Rs.100crores has been invested in developing ‘Pulsar’ and the project took 36 months from conceptualization to commercial production of the vehicle. Bajaj Auto now becomes the only Indian company with offerings in each user segment. the company’s range includes ‘Caliber’.a very successful model. and the only cruiser bike of India the ‘Eliminator’. Bajaj Kawasaki is one other bike which created quite a stir in the industry.   44 . In motorcycle segment. introduction of new Boxer AT.  With the Indian two-wheeler industry focused on the motorcycle segment. Pulsar in the premium bike segment.

Sales in number For and Upto the Month of August 2004 Products For August Upto August For 2004 Motorcycles 106.024 97.570 5.427 3.487 12.639 558.147 wheelers 2004 485.205 Un-geared Step thrus 1.457 14.791 48.745 Scooters 8. Volume Leadership: Retain the high reliability and work on easing out immediate availability.898 Geared Scooters 3.314 23.256 501. 45  .071 15.900 8.010 STRATEGIES USED IN THE PAST Bajaj strategic plan was to establish in three main areas viz establish volume leadership. establish cost leadership and reduce the respond time and bring in.299 Total Two 120.983 68.401 August 2003 76.508 Upto August 2003 394.

image to penetrate into rural areas than competitors. registration and insurance schemes. Improve the genuine spares availability. cities and even villages. through free test rides. just-intime and high automation. dealers and distributors. Reduce the prices drastically to match local specious parts. Expanded the dealer network to reach town. Came up with easy financing scheme and several occasional discounts to establish volume leadership. kanban.e. 46 . Cashed on branding.      Cost Leadership:  Macro value addition chain was exploited through out the companies operation but also spread within micro value addition chain i. Vast expansion supported by Quality circles.

was adopted to ultimately reduce the cost of 58% to a target of 55%.  Delivery within 24 hours of any variant within the circle. by keeping and improving the productivity. any range or access to definite information directly. Make available any variant. cost cutting exercises. Improve to customer’s perception and loyalty to product with widening the base and strengthening the brand loyalty.    47 . After exploiting value addition micro and macro chain further establishing the cost leadership.  Improves ecstatic and added variants to support the wide range. distribution and works through online. Response Time: Total transparency within the dealer. Macro value addition suppliers offering them hi-tech automation.

year. quarter. what price to charge.g. Demand Forecasting: Forecasting means to know the trend or behaviors after a period of time. and it must also plan for future growth of the firm. etc) is equal to the average value of a time series in a number of previous periods e. One of the techniques of forecasting is:  Moving Averages The simplest smoothing technique is the moving average technique. A firm must decide how much of each product to produce. Economics 1.Example: Bajaj scooter customers change over to Bajaj motorbikes. the forecasted value of a time series for 48 . 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. Here the forecasted value of a time series in a given period (Month. and how much to spend on advertising. with a three period moving average.

Installation of auto control panels for minimum use of  garden lights. Cost cutting: 2. B) At Waluj Plant: 49 . A)At Akurdi Plant: Replacement of 40/60 W incandescent bulbs by 7 W PL  lamps in office building. 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.  Use of thermo sol fuel activities for LDO for better combustion efficiency.the next period is given by the average value of the time series in the previous three method. fountain and road lights.

cooling water pumps etc. at identified locations during identified hours).  Marketing Four P’s of Marketing Mix 1.)  Plant voltage optimization. Reduction of avoidable losses (replacement of capacitors. Product The term "product" is anything that can be offered to a market to satisfy a want or need. Products that can be marketed include 50 . pumps. changed temperature setting of air conditioning system etc. switch-off of lights. Fine turning of equipment (thereopac. fans.

persons. places. is the core benefit. Components of a market offering: Value based prices Attractiveness of Market offering Product features and Quality Services mix and Quality Product Levels In planning its market offering. events. First level. information.Physical goods. and the five constitute a customer value hierarchy. The fundamental service or benefit that the customer is really buys. services. Here in Bajaj the core product is the vehicle. and ideas. Each level adds more costumer value. (Means for transportation) 51 . experiences. organizations. properties. the company needs to think thru five levels of the product.

The essential accessories that would make the product useful. Fourth level.Second level. Augmented product adds cost and soon becomes expected product. which are exclusive to each model. the company has to turn the core benefit into a basic product. Bajaj Auto Finance Ltd (BAFL). the after sales service that the customers expect. This enables the customer to get the right way of taking care of his vehicle. They have personalized service charts. The basic product would include the gears. Third level. 52 . At Bajaj they have special customer care service tips which are accessible even on its website. the rear view mirrors. the company prepares an expected product. a set of attributes and conditions buyers normally expect when they buy the product. the trunk and the petrol tank. a group company of Bajaj Auto Ltd is one of the biggest retail financing companies in the country today. the marketer prepares an augmented product that exceeds customer expectations. 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. 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. Here in case of two wheelers it is the warranty.

Price Pricing is an important part of the marketing strategy. The basic price-deciding factor in any product is the cost.301 40.2. which makes them. For products like Two-wheeler the positioning of the product as well the price of the product is quite important. take every possible step to eat into each others share.485 29. Motorcycles  Chetak – 4 Stroke Spirit CT 100 39.083   53 . 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. So now we have more and more products trying to find space in the market.

602   Pulsar 150 KS Pulsar 150 SS   Pulsar 180 SS  Eliminator 3.386 61. The company has been operating in the two-wheeler industry since decades and enjoys a favorable logistics position. Place Bajaj has a very wide spread dealer network of 219 dealers across the country and abroad which provide excellent customer service.042 57.062 51.312 65. Considering that the industry demands a good availability of service stations Bajaj definitely has a distinct edge over its 54 .840 95. Caliber 115 Wind 125 46.

4. 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. Bajaj has a distinct style of promoting its products. developing the firmpositioning platform. proper training must also be imparted to the employees at the dealerships. There is a general complain from the dealers that by the time they come to know of a product in totality. the company launches a new product. So to ensure that no such complaints arise the dealers must be asked to do a prior homework. With the launch of products with new technologies.competitors due to the presence of a widespread dealer and service station network in the remotest region of India.100 Crore. The advertising Budget of Bajaj Auto is more than Rs. for every product launched there’s a new and fresh advertising strategy. 55 . Promotion Bajaj Auto is an aggressive advertiser.

.. MVO: consternation.making her turn in . the 100cc economy segment has taken off. The logo.One of the successful campaigns from the Bajaj has been the commercial for the launch of Bajaj pulsar... definitely male Market Segmentation rather than Product Differentiation Over the past two years.. as Bajaj introduced low priced motorcycles. Pulsar. One's dupatta skims over the bikes and then gets stuck... "Pulsar". The economy segment’s share of the total motorcycle market has ballooned to 31% from about 20% three years ago.. The 100cc executive segment 56 . three girls walk by a line of motorbikes. Bajaj Pulsar Chatting merrily. She pulls it away Bajaj slowly to reveal. .

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 premium segment 125cc+ is small at 13% of the total market. IT planning and implementation in such a changing environment has become a challenging task. Management Information System Bajaj . 57 . this premium segment is expected to be the future growth driver.continues to dominate the motorcycle market-it forms about 56% of the total motorcycle sales. It can be clearly seen that an attempt has been made by all the motorcycle producing companies to lure the customers to buy their 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. Indian organizations are no exception to this.The IT Effect In the dynamic environment within which all organization has to function IT certainly has started playing a vital role. However.

350 dealers in the first phase and the remaining will be covered in second phase.started with use of computers in accounting.the focus changed to manufacturing. The dealer this phase Bajaj auto used SAP. new product 58 . Phase III . The my SAP Enterprise Portal will cover 100 sales field employees. improving men and machine productivity. Marketing and dealership computerization was brought into effect. Phase II . provides access to unstructured information like news this phase Bajaj auto used the exploding technology in the areas of CAD/CAM.This resulted in a 4-phase implementation: Phase I . Networking and Communications and Office automation in the strategic areas of marketing and engineering. in addition to operating information. Online computers were used during this phased to help in achieving production targets. Phase IV. improving quality and reducing costs which were the major issues at a time when the company was in the sellers market.

new product introduction.  Extensive service and dealer networks. Japan. SWOT Analysis Strength:  Technical expertise. dealer discussion groups.  Worlds lowest cost manufactures in the market.  Higher labour productivity and greater automation. internal market-place. etc. 59 .releases. in collaboration with Kawasaki Heavy Industries.

Opportunities: 60 .  Underutilization of capacity. Weaknesses:  In the late seventies there was skid in production due to intermittent labour problems. Global-scale production.  Not considered living with times.  Lined up a range of 17 two wheelers covering the entire spectrum from motorcycles to scooters.

 Focusing more on motorcycles to capture the urban market. 61 .  Fuel efficiency which is much higher than competitors.  Competition from MNC's.  Bajaj plans to offer CNG models with euro-II compliant.  Government regulations. Threats:  Hero Honda's switch start automatic transmission 100cc scooter. Launching of new products and variants of existing models backed up by appropriate marketing efforts.  Virtual zero maintenance among the products.  Dealers not adjusted with changing realities.

Italy. International Marketing Based on our own brand of globalization. Change in tastes of consumers. 62 . The countries where our products have a large market are USA. Germany. 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. Sweden. Bajaj leads Colombia with 65% of the scooter market. Peru. Colombia. Iran and Egypt. Bangladesh. Sri Lanka.  Increase of secondary or resale market for two-wheelers. in Uruguay with 30% of the motorcycle market and in Bangladesh with 95% of the three-wheeler market. Argentina.

distribution and after sales services through a well-established nation-wide network.Several new models are being developed specifically for global markets and with these we will progressively endeavor to establish our presence in Europe too. we seek a tie up with one of the major industrial establishments. service and spare parts management based on the Bajaj distribution system. In countries where we perceive a good market potential. which would be in a position to invest in the project and which would also entail manufacturing activities apart from marketing. 63 . We offer a full range of services to such business partners:  Training in sales.

we intend to achieve this objective by giving priority to environmental concerns. At Bajaj Auto.  Select machinery and equipment.  Assistance in setting up an assembly plant for assembly of vehicles from complete knocked down (CKD) kits. which include minimizing toxic emissions 64 . training of technical personnel. all in a phased manner as required by the regulations in the recipient country. PRODUCTION AND OPERATION RESEARCH R&D Objectives and Set-up The objective of Bajaj Auto's R&D is to contribute towards making life a better experience for society as a whole. Active supports for setting up manufacturing facilities overseas including transfer of technical know how.

manufacturing engineering. project management and quality assurance. We intend to use R&D not only to develop products better and faster. These platforms comprise of engineers skilled in product engineering. The primary objective of these platforms is to develop newer.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. 65 . better. Our strength in R&D comprises 500 dedicated professionals who work as team members on a platform concept. but to also evolve technologies that are eco-friendly. component development. more efficient and less polluting vehicles for both the Indian and International market. more fuel-efficient and cost effective.

with transfer of the latest technology and R&D assistance. Our designs are also subjected to an exacting and critical assessment from our technology partners. They believe that poor quality is the greatest productivity deterrent of all. like Kawasaki. At Bajaj.Our foreign technology partners. they are committed to high quality standards with a motive for productivity behind it. TOTAL QUALITY MANAGEMENT The core competency of Bajaj Auto lies in the quality provided to the customers. collaborate closely with the platform teams. 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 66 . Kubota and Tokyo R&D.

The Process: 67 . And in the midst of all this. They are an expression of creative and innovative energies. has been possible only because every aspect of the operations is managed to perfection through effective management systems. HRD initiatives and quality assurance and control. products are more than just a process output. Bajaj engineers are trained to develop products that precisely match consumer needs. At Bajaj. year after year.resilience to take on competition from the world's biggest players. Bajaj has never lost sight of the human factor. in which technology plays a passionate role. This commitment starts with the top management and extends to every worker on the shop floor. profitability and market share. The phenomenal growth in volumes. Acutely tuned to lifestyles and social conditions.

Cell members conduct a scrupulous selfinspection of components while Quality Control experts measure and improve manufacturing processes. prototypes over three different stages are subjected to a battery of laboratory and field tests. mistakes are not rectifiedthey are prevented. through the application of statistical tools. Quality Assurance lays down norms for their vendor force. Every engine and transmission assembly. The close interaction ensures that agreed quality levels are unfailingly maintained on the shop floor. During the elaborate development procedure.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. 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. 68 . Besides supervising the pre-production process.

The determined effort to optimize employee output has led to the adoption of the unique V1-V10 system of cellular manufacture. men. Manpower productivity measured in terms of number of vehicle per man-year has grown by 88% in this decade achieve the same level of output. More significantly. the increase in capacity at Bajaj in recent years has been largely due to a surge in productivity rather than a rise in investment. testing facilities and adequate stocks of spare parts. where every dealer conducts an extensive pre-delivery inspection before a vehicle is delivered to a customer.The process of quality control is extended to its dealerships and sales and service outlets. and equipment . Workshops are manned by skilled company-trained mechanics and equipped with appropriate tools. Quality Management: 69 . Results: Results have been creditable. material. This model calls for a continuous minimization of all inputs space.

in December 1994.  Bajaj auto should tighten up the supply chain mechanism and gearing up of the distribution system. 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. to the Moped and Motorcycle Division of the Company at Waluj. It is advised also Bajaj auto to take steps for cutting costs. 70 . in August 1997.ISO 9002 Certificate awarded by the Bureau Veritas Quality International (BVQI). Aurangabad. ISO 14001 Certificate awarded by the Bureau Veritas Quality International (BVQI) to the Company's Plant at Waluj. Aurangabad. especially overheads including salaries.

motorcycles. It should increase focus on its 5 different products. Bajaj auto should undertake a portfolio re-shuffles exercise by which the motorcycles division will be main growth vehicle of the company.  There is a need for greater decentralization at the plant level to ensure that each worker adds value. scooterettes & 3 wheelersfrom productions to dealer’s front.  It should gear up towards improving its productivity levels and they should be able to double the output with the current workforce. It should also work in tandem with 71 .  In a bid to cut costs.  Stung by the declining scooter sales. step.  Bajaj should strengthen its marketing and sales department by creating a separate team for different products in the coming months.scooters. the company should work towards in pushing up indigenization for its 2-wheeler models and reduce waste at the factory level.thru scooters.

vendors to identify for bringing down the cost at the latter's end. 72 .  Bajaj auto has started a component procurement and product development restructuring exercise called 'Scorpio'. This will reduce the company's inventory levels and cut the vendor base by half.

In such a scenario the company should be proactive rather than being reactive. Bajaj is about to launch its chopper style Eliminator motorcycle. and this needs to be done for the Waluj plant as well. The cost if controlled shall help it in competing against competitions. 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.COST/PRICE MONITORING Bajaj should concentrate more at reducing the costs and thereby translate this in the price of the vehicle. New players like Kinetic Engineering and Kanpur based LML are coming into the picture and the competition is bound to increase. 73 .

From a modest manufacturer of bicycle components in the early 1940's to the world's largest bicycle manufacturer today. the brand name symbolizing the steely ambition of the Munjal brothers. the odyssey was fueled by one vision .to build long-lasting relationships with everyone.HERO HONDA GROUP Profile of the Company "Hero". 74 . came into being in the year 1956.

Brijmohan Lall Munjal Mr. This philosophy has paid rich dividends through the years. dealers and vendors. N N Vohara Mr. Sudo Mr. S P Virmani Mr.) V P Malik 75 . M P Wadhawan Mr. Akio Kazausa Mr. M. O P Gupta Mr. Pradeep Dinodia Gen. Pawan Munjal Mr. Om Prakash Munjal Mr. (Retd. Satyanand Munjal Mr.including workers. Shinichi Nakayama Mr. S Toshida Mr. Management Chairman Managing Director Joint Managing Director Director Director Director Director Director Director Director Director Director Director Director Mr.

Hero. The third generation is already actively involved in existing as well as the new initiatives within the Group. a name synonymous with two wheelers in India is today a multi-unit. just to name a few. The second and the third generations of the family. IT enabled services. multi-product. make critical components such as free wheels for their bicycles.there is no other Group that has so successfully managed to stay together for over 40 years. Through fully integrated operations. aided by workers who typify the hardy spirit of the Punjab. geographically diversified Group of companies.Consolidated Family Business The Hero Group is a strong family business . the Munjals roll their own steel. finance and insurance. are consolidating the Group’s future with the same zeal. The system is to bring in any new family member. 76 . and have the foresight to simultaneously diversify into myriad ventures. coming of age. within the fold of the existing business or set him up in a new business. like product designing.

coupled with vision and meticulous planning. dealers and vendors. 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. This is what drives the Group to seek newer vistas. adopt faster technology and create quality driven products to the utmost satisfaction of customers. 77 . the Hero Group also provides its employees with a fine quality of life and its business associates with a total sense of belonging. partners. of achievement through grit and determination. 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." Thus apart from being customer-centric.Like every success story. "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. Hero's saga contains an element of spirit and enterprise.

has today become the World's single largest two 78 . yet consumer requirements and newer technologies provide fresh challenges every day and at Hero the wheels of progress continue to turn.Today the Hero Group has a number of accolades and achievements to its credit. the world's largest bicycle manufacturers and the Honda Motor Company of Japan. Glorious History The Legend of Hero Honda What started out as a Joint Venture between Hero Group.

200 units 5. 29. Started with the initial investment of Rs. 70. 77. Driven by the trust of over 5 million customers.195 units 16.537 units 20.friendly companies. 61. an expansive dealer network. 25. 1984.147 units Mission Statement 79 .600 units 7.210 units 10. Add to that technological excellence. and reliable after sales service and you have one of the most customer.555 units 14. This is proved by the company's sales over the years 1985-86 1989-90 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 43. Hero Honda Motors Limited gave India nothing less than a revolution on two wheels. 30.wheeler Company. the Hero Honda product range today commands a market share of 50% making it a veritable giant in the industry.Forget it ' campaign. made even more famous by the 'Fill it .000 units 96.55 crores. it came into existence on January 19.Shut it .

and develop teams that keep the momentum going to take the company to excellence in the new millennium. While doing so we maintain the highest standards of ethics and societal responsibilities. to produce products and services. Constantly innovate products and processes.We at Hero Honda are continuously striving for synergy between technology." Brij Mohan Lall Munjal . 80 . systems. It’s Vision It’s our mission to strive for synergy between technology. systems and human resources. and human resources to provide products and services that meet the quality. performance and price aspirations of the customers.Chairman Hero Group.

Indian Institution of Industrial Engineering. 1992  Honorary Membership .Achievements and Awards 1990:  Pegasus Award from Readers Digest for campaigning 'One Litre Road'.  Hero Honda moved into India's Top 100 Companies . 1991:  Economic Times-Harvard Business School Award for Excellent Governance to Hero Honda Motors Ltd. 1994: 81 .Ranked 87.

 The Analyst Award 1995 presented to Hero Honda Motors Limited on being ranked 9th amongst the most investor rewarding Companies in India. 1995:  National Award for Outstanding contribution to the Development of Indian Small Scale Industry (NSIC Award Presented by President of India). 1997:  Distinguished Entrepreneurship Award conferred upon the Chairman Mr. Business India Group of Publications. Navy & Air Force with its 100cc motorcycles. PHD Chamber of Commerce & industry. 1998: 82 . The Businessman of the Year award is conferred upon the Chairman. 1996:  Hero Honda becomes first company to server Army. Brijmohan Lall Munjal . Brijmohan Lall Munjal by.

1 . by XLRI. by Business Baron. Business Leader of the Year conferred upon the Chairman. Mr. Jamshedpur. 83 . Brijmohan Lall Munjal. Sir Jehangir Ghandy Medal for Industrial Peace conferred upon the Chairman. Mr. by Overdrive Magazine. Brijmohan Lall Munjal. 1999:  Best Productivity Award for the best performance in Automobile & Tractor Sector by National Productivity Council presented by Vice President of India. 2000:  Splendor declared World No.largest selling single twowheeler model.  2001:  Bike Maker of the Year.

Mr.Asia's Leading Companies Award (9th Rank amongst top 10 Indian Companies). Winner of the Review 200 . by Business Standard.  Three Leaves Award for Environment to Hero Honda by Centre for Social & Environment Green Rating Project.  Winner of the Review 200 . by the Economic Times. by Ernst & Young. by Overdrive Magazine. 84   . Mr. in the field of Business & Industry. Brijmohan Lall Munjal. Entrepreneur of the Year Award conferred upon the Chairman. 2002:  Bike Maker of the Year. Mr.Asia’s Leading Companies Award (4th Rank amongst top 10 Indian Companies)  Entrepreneur of the Year Award conferred upon on the Chairman. Brijmohan Lall Munjal. Brijmohan Lall Munjal. Giants International Award to the Chairman.  Company of the Year for Corporate Excellence.

85 .Asia's Leading Companies Award (3rd Rank amongst the top 10 Indian Companies).  Most Respected Company in Automobile Sector.  Bike Maker of the Year by Overdrive Magazine. Mr. 2003:  Winner of the Review 200 . Business Leadership Award conferred upon on the Chairman. Brijmohan Lall Munjal. by Business World. by Madras Management Association.

style of management has earned the company plaudits amidst investors.Areas of Management Hero Group > Growth Models 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. vendors and dealers. but focused. as also worldwide recognition. employees. The Group's low key. The growth of the Group through the years has been influenced by a number of factors: 86 .

The fact that most of the machines are either developed or fabricated in-house.Inventory Control The Hero Group through the Hero Cycles Division was the first to introduce the concept of just-in-time inventory. Every assembly line worker operates two machines simultaneously to save time and improve productivity. The Group boasts of superb operational efficiencies. has resulted in low inventory levels. Purchase Policy 87 .

Most vendors supply the components & HHML shares a very nice relationship with the Ancillarisation 88 . resulting in substantial savings in terms of inventory costs. Hero is probably the only company to have mastered the art of the just-in-time inventory principle. This is the Japanese style of production and in India. 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. just before they are required to be installed on the bikes. the just-in-time inventory principle has been working since the beginning of production in the unit and is functional even till date.80% of the components in the manufacturing of a bike today are outsourced to the vendors. vendors. 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 flagship unit of the Group it is claimed that except for a few days during Operation Bluestar. making it a point to extend technical and managerial support to these ancillaries. At Hero Cycles Limited. whose production is dedicated to Hero's requirements and also a large number of other vendors. Mr. ex-employees or close associates of the Munjal family since the Group patriarch.An integral part of the Group strategy of doing business differently was providing support to ancillary units. There are over 300 ancillary units today. which include some of the better-known companies in the automotive segment. "… never wanted to march alone. the plant has never had any stoppage of work. The Munjals have gone much beyond the conventional definition of ancillarisation. The philosophy 89 . Brijmohan Lall." Employee Policy Another Striking feature within the Hero Group is the commitment and dedication of its workers. There is no organized labour union and family members of employees find ready employment within Hero. relatives. These ancillary units are manned by friends.

the Hero Group is known for providing facilities. Hero was giving its employees a uniform allowance. the focus is on financial and raw material management and a low employee turnover.with regard to labour management is "Hero is growing. Financial Planning The Hero Group benefits from the Group Chairman's financial acumen and his grasp on technology. but also for the immediate family members. not just for workers. grow with Hero. Group Company. manufacturing and marketing." When it comes to workers' benefits. Hero Cycles Limited has one of the highest labour productivity rates in the world. as well as House Rent Allowance (HRA) and Leave Travel Allowance (LTA). 90 . Extra benefits took the form of medical check-ups. Long before other companies did so. further ahead of the industry norms. In Hero Honda Motors Limited.

went into commercial production in 1978. Then there were the expansion into the automotive segment with the setting up of Majestic Auto Limited. 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. Then came Hero Motors that introduced Hero Puch. Munjal Auto Components and Munjal Showa Limited amongst other component-manufacturing units. The Munjals also took a foray into other segments like exports. the Group Chairman. Lall has actively looked at diversification. financial services. Munjal and Sunbeam Castings. Mr.Diversification Throughout the years of mammoth growth. Hero Majestic. which includes customer 91 . in collaboration with global technology leader Steyr Daimler Puch of Austria. where the first indigenously designed moped. information technology. Hero Honda Motors was established in 1984 to manufacture 100 cc motorcycles.

Product & Price: 92 . Further expansion is expected in the areas of Insurance and Telecommunication.response services and software development. partners. In Conclusion The Hero Group's phenomenal growth is the result of constant innovations. Marketing P’s A. a close watch on costs and the dynamic leadership of the Group Chairman. of right attitudes and building stronger relationships with investors. vendors and dealers and customers. characterized by an ethos of entrepreneurship.

219 56.217 76.793 53.193 35.778 48.225 65.741 59.170            93 .218 45.616 43.Hero Honda CD 100 CD 100 SS Splendor Splendor (Disc) CBZ (Disc) CBZ (Self) CD Dawn Karizma Ambition (Disc) Ambition (Drum) Ambition 135 (Drum) 42.580 50.

883 47.034 46.407    94 .931 59.256 26.580 49.615 27.196      Hero Motors Smart Sting E Zee SX 23.352 50. Ambition 135 (Drum – Self) Splendor + (Disc) Splendor + (Drum) Passion + (Disc) Passion + (Drum) CBZ Star 53.

95 . Hero Puch. the mini-motorcycle designed by Ferdinand Porsche combined the power (4.15 bhp) and ease of a motorcycle and at 91 km/hr.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.Hero Puch and Hero Winner. The identity of Hero Motors in the market has been established through two of its leading international products . Hero Puch was born which marked a new chapter in the two-wheeler scenario of the country. When Hero Motors entered into a technical collaboration with Steyr Daimler Puch of Austria. the economy of a moped.9 lakhs vehicles sold in 2000-01. A cumulative over 5 million customers are the real foundation of the company's strength.

Place Dealer Network At Hero essentially they have a completely customer-driven approach.500 bicycle dealers. 350 dealers for mopeds and 225 franchise holders for motorcycles. ensures convenient access to the Group's products across the country. A nation-wide dealer network comprising of over 3.B. 96 .

Having your motorcycle serviced at an authorized workshop ensures highest standards of service quality and reliability. pneumatic tools & a team of highly trained service technicians. visiting dealers and send back daily postcards with information on the stock position that day. anticipated demand and also competitor action in the region. turnover. There are more than 1000 committed dealers & service outlets spread across the country. fresh purchases. Sales agents from Hero travels to all the corners of the country. The authorized workshop have well laid out standards for motorcycle servicing supported by fully equipped infrastructure in terms of quality precision instruments. Promotion 97 . the Group's dealer network has catalyzed growth and acted as a strong bridge between the customers and the Group. C.Strong dealer company relationship with a deep sense of belonging to the Hero fraternity.

etc. They also have their bikes featured in various TV programs like top drive on star news and others which act as a strong reference. advertising is done at a local level by dealers. which is known for its innovative & Aggressive Marketing. This has increased the brand recall by a significant number.120 crores was the Annual budget for market for the financial year 2002-2003. be it print or mass media like T. attend corporate and brand events and help promote its "We Care" campaign comprising safety riding. Mohammad Kaif. magazines. 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. HHML also promotes sports in the country. Rs. in which HHML also contributes to help dealer promote the dealership in the local area. All the mediums are used extensively. HHML has print ads that the customer gets to see almost every day in newspapers. Superstar Hrithik Roshan is also a Brand Ambassador for Hero Honda Company. environment and friendliness Also. Harbhajan Singh.V & hoardings. Those players are Virender Sehwag. Yuvraj Singh.HHML is an organization. They will endorse the company products. 98 .

2000  NKP Salve Challenger Trophy. 1999  Masters Golf Championship.  Second Indian Television Academy Award.Some of the Events Sponsored During the Years 1993  Hero Cup – Five Nation Cricket Tournament.  7th Cricket World Cup in England.  Masters Golf Championship.  20th Cinema Express Award. 2002  India-England Women's Cricket Series.  Masters Golf Championship. 99 .  Stardust Hero Honda Millennium Honors Award.

 21st Cinema Express Award.  First Indian Television Academy Award. 2004  ICC Champions Trophy in England. 2003  8th Cricket World Cup in South Africa. Brand Ambassadors 100 .  India-England Test Series.

101 .

The Number Game 102 .

This. needless to say. But unfortunately. that was at the cost of popularity in urban areas. The campaign generated high interest and the strategy did work.Hero is one of the few vehicle brands that. Brand preference was stronger amongst rural consumers than urban ones 103 . despite the fluctuations. Hero had a higher ranking than its main competitor in the bicycles market. In the early 1990s. The year 1993. At that time. as demand and brand acceptability picked up in rural areas. Hero had started an aggressive rural-oriented campaign for its motorcycles. has been Hero's highest rank and power score till date. But its popularity (in terms of brand awareness and recall) does seem to be facing a somewhat downward trend. have never managed to go out of the A&M Top Brands Survey. Hero in 1992 had a rank of 40 and a power score of 26. in the main earners and young adults segment. This is probably because of its envious high-sales record in the twowheeler market. in order to break into the rural market. Atlas. saw the brand's ranking fall nine places to 49. Its worst performance was amongst housewives. The creative route taken by the group was by taking parallels from popular Hindi movies to deliver the intended message.

The next year. saw only a minute decrease in ranking with the rank falling one place to 46. the main-earning segment and in the Hindi-speaking regions. the brands ranking has picked amongst housewives. in 1996. The years 1994 and 1995 saw an increase in ranking with the rank increasing to 44 and then to 42. young males and the western and southern regions. 1998. Hero was doing badly in almost every segment and Waking up to this sudden dip in popularity. thus increasing its overall ranking to 45. the brand suffered a huge fall of 14 places to land at rank 56.and amongst lower-income-groups than the higher-income earning segment. And by 1997. But a worrisome trend emerged. Suddenly. Hero has lost scores in around 12 segments out of 14. Hero started with a new advertising campaign. Hero's performance in the urban segment also improved due to the launch of new models. 104 . Its best performance across segments was amongst young adults.

Honda Motor Company of Japan and the Hero Group entered a joint venture to setup Hero Honda Motors Limited in 1984. Its performance in urban areas had dragged it down a few notches. bringing forth a market leader. reasonably priced products. the resulting affinity in working cultures . A Company Par Excellence A rich background of manufacturing high value. 105 .Hero Honda was still the largest selling motorcycle company but other companies such as TVS.brought the world's largest manufacturer of motorcycles in collaboration with the world's largest bicycle manufacturer. an uncompromising pursuit of the goals to attain quality along with customer satisfaction. This led to Hero's rank decreasing to a low of 54 in 1999. Bajaj and Yamaha had started to catch up.

Hero Honda is at present the largest-selling Indian motorcycle and the most fuel-efficient in its category .The Market Leader Today Hero Honda has managed to achieve indigenization of over 95 percent.5 million motorcycles in the coming years.2 million motorcycles. Hero Honda is the market leader in motorcycles. with sales of over Two million motorcycles in last year and a strong market share of 50%. Customer-centric 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 106 . Hero Honda became the first company in the country to introduce four-stroke motorcycles and set the standards for fuel efficiency. pollution control and quality. It has an excellent distribution and service network spread throughout the country. a Honda record worldwide. It has a production capacity of 1. which shall be enhanced to 1.the outcome of Hero Group's foresight and another classic example of how the group strives to provide the customer with excellence and satisfaction.

The Company focuses on providing "Value for Money" through its pricing strategies and after sales services. all placed Hero Honda in a league distinct from the conventional. their relationship over 116 years old now. 107 . safety driving courses and others. mobile workshops. tactical promotion comprising of fuel conservation campaigns.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. an efficient dealer network. Hero Honda has emerged as the most successful joint venture Company of Honda in the world. finance and loan services. Excellent Collaborator Relationship Hero Honda is now the leading two-wheeler Company in India in terms of net sales. Excellent marketing. 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.

ERP Implementation The Company has successfully implemented SAP R/3 (ERP Program . It speaks of the commitment of the management and the implementation team towards making it processes accountable and efficient. The modules were implemented and stabilized in a record 10 months period."Project Synergy") thereby enabling proper planning and company wide efficiency. 108 .

Exports HERO CYCLES 109 .

However. the Hero Group's foray into the overseas markets in 1963 pioneered Indian exports in the bicycle segment. This is primarily because of appropriate product development and excellent quality that Hero offers. today more than 50 percent of the exports from Hero Cycles Limited meet the demands of sophisticated markets in Europe and America. It was a move prompted essentially by the need to remain attuned to the global market place. While initial exports were restricted to Africa and the Middle East. 110 .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.

like Gujarat Cycles Limited (now Munjal Auto Industries Limited). Its products are supplied to the International Markets of developed countries like U. Hero Puch is perhaps the first Indian two-wheeler to be homologated abroad (in Spain) and has assembly plants in Mauritius and Egypt. The success of the Hero Majestic moped did not remain confined to Indian shores. Munjal Auto Industries Limited has state-of-the-art equipments imported from Europe and Taiwan. Turkey and Holland. Argentina. The Group's exports have gone beyond cycles and their components.K.The Group has been continuously upgrading technology and has set up special units . Finding enthusiastic buyers across the world. France. Today Hero Puch mini-motorcycles can also be seen in Paraguay. The unit is designed to match international standards and is an Export Oriented Unit (EOU). 111 . Mexico. it became the largest exported moped from India. to meet international quality standards. Germany. etc.

Munjal Showa Limited is one of the largest suppliers of shock absorbers to major auto giants in Japan. 112 . The Government of India recognizes Hero Exports as a Trading House. amongst other developed markets. In 1993 Hero Exports was established as the International Trading Division for Group and non-Group products.Group Company. 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. United States and the United Kingdom.

total industry volumes in Financial Year 2002 were 4.9 m units in FY02). There is a continuation of shift in demand towards motorcycles from geared scooters. 113 .FUTURE OUTLOOK OF TWO-WHEELER SECTOR The dynamics of the Indian two-wheeler industry has changed significantly over the last six years. motorcycles have got a lion’s share in a matter of just six years (66% of total two-wheeler sector volumes or 2. As is evident from the graph below.3 m units. In absolute terms.

7% 6.1% 12.3% 10.6% 14.1% 66.8% 8.9% 24.8% 8.4% 32.5% 10.4% Ungeared Geared scooters 8.1% 3.5% Scooters 42.1% 8.9% 8.9% 8.2% 114 .5% 14.7% 54.7% 9.3% 6.3% 9.1% 16.1% 30.9% 9.7% 25.2% 74.5% 15.2% Stepthrus 9.0% 12.3% 2.6% 40.0% 34.All Year Two1995 1996 1997 1998 1999 2000 2001 2002 2003 wheelers 2208231 2660005 2965474 3042347 3403471 3776719 3745516 4318531 5053562 Motorcycles 23.0% 10.8% 27.8% 16.6% 38.9% 16.1% 10.3% 6.4% 35.7% Mopeds 15.6% 9.8% 7.6% 42.

36. the consistent fall in interest rates has also benefited the industry immensely. in 1996. Secondly. In an analyst meet of TVS Motors in mid 115 . 30. ‘Kawasaki Bajaj’ and TVS Max-100 R with an average entry-level model starting with prices above Rs. This had also aided the shift in demand. But with the advent of competition. This comes in two forms.The factors that have prompted the change are: Affordability. Eventually. the price difference between a ‘boxy’ geared scooter and a ‘sleek-cum-trendier’ motorcycle had narrowed.000 per unit. this had declined with entry level of Bajaj’s ‘Boxer’ available at less than Rs. the top selling models were Hero Honda’s ‘CD 100’ and ‘Splendor’. 000 per unit.  Firstly.

NCAER expects the mix to change considerably with the consuming class expected to touch 91 million households in financial year 2007 (46%). For quantification purpose. Just to put things in perspective. 116 . as much as 40% of its motorcycle sales are financed. It will be safe to assume higher numbers for the industry as well. in absolute terms. have also led the change in consumer preference. This has also been a driving factor for the industry in the last few years. two-wheelers bought through vehicle financing stands at around 1. the NCAER estimate suggests that the consuming class as a percentage of total households in India in financial year 1995 was 29 million (17%).2002.7 million units.  Rising double income families and urbanization. the company said that.

we remain positive on the sector. 117 . highlights this significance. But over the longerterm horizon of 3-5 years. Growth in volumes will take place due to the following factors:  Increasing contribution from the services sector.The graph below. which shows the correlation between GDP and the two-wheeler sector.

 Increasing percentage of young population.  Declining interest rates.  Wider availability of finance. Urbanization.  Double income families. Apart from motorcycle segment. Honda’s launch of ‘Dio’ and Kinetic’s ‘Nova’. ungeared scooter manufacturers will also see a sustained rise in volumes.  Decreasing product life cycles. are both launches in the ungeared scooter segment. which could unlock significant value from the rural markets.  Continuing poor public transport system.  Improving road connectivity. 118 . Bajaj Auto and TVS expect the decline in geared scooter and moped sales to stabilize in the near future.

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. It generates a return of over 50% on its capital employed in the business. Hero Honda is operating on a negative working capital since Financial Year 1996. Honda Motor Co. 26:26 joint venture between the Hero group and Japanese major. The volumes of HHML have been growing at 40% p. over the last five years. Hero Honda Hero Honda Motors Limited (HHML) is a.a.Which company will benefit in the future? As far as the motorcycle segment is concerned. The company has earned the distinction of being the world’s largest individual motorcycle-making company. 119 . Hero Honda. The remaining stake is in the hands of financial institutions and the public.

It has been leading the world since 3 consecutive years. Hero Honda's brand equity. HHML’s success comes from an unprecedented success of its Splendor model. Hero Honda's Splendor is already the world's largest selling twowheeler. Passion is already selling more than 15. it's only a matter of time before the Splendors of the world start fading away. but they look pale in comparison with Splendor.Hero Honda has a 50% share of the motorcycles segment. Hero Honda’s legacy of a solid after sales service and brand equity will continue to drive volume growth. It is strongly believed. Hero Honda sold over one million motorcycles last year. its distribution network. This also raises concerns on the future growth of the company. efficient operations. Sure CBZ and Street have clocked decent volumes. quality products coupled with continuous product introductions shall spruce up the sales. that the lack of suitable product 120 . which now contributes over 65% of sales.000 vehicles a month. It has achieved sales of more than 2 millions in the last FY. With LML and now BAL coming into their own with newer models.

HHML being a pure motorcycle company has been working at an operating spread of around 13%. Such diversifications would only mean less dedication to the core business of HHML by the new generation of Munjals. 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. 121 . while operating margins for BAL stands at less than 7% (excluding other income). which is already beginning to show results. And adding fuel to the entire future of HHML is a growing interest amongst some family members to foray into ITenabled services and the likes. 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. BAL with its Caliber has threatened the seemingly unstoppable growth of Splendor. The past is history.offerings from BAL.

part of the TVS Group. is one of India's leading two-wheeler manufacturers. With a turnover of over Rs.So. one can only wait to see how the dice eventually rolls out. TVS Motor Co TVS Motor Company Limited. we have some unanswered questions with regards to ownership of HHML in the future. Will it be Munjal. the Company manufactures a wide range of 122 .1800 crores. Honda or a JV or…well.

‘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. scooters. mopeds and scooterettes. It has a strong sales and service network of 430 Authorized Dealerships. TVS’s heavy reliance on few models like ‘Victor’. TVS is growing from strength to strength. 1018 Authorized Service Centers and over 864 Certified Service Points. The Fiero F2 and Scooty Pep both had been designed to set new standards in style and performance as also Little wonder. 123 . it boasts of more than 5 million happy customers.

781 units in June 2003. which has also been extremely well received. In January 2003 the company also introduced the premium version of the Freedom in select markets. which was launched in Uttar Pradesh in July 2002 and progressively in other parts of India in September-October 2002. representing a six-fold increase.LML LML is one of the leading scooter manufacturers in the country. Motorcycle sales.278 units in the previous year. stood at 55. This phenomenal growth in motorcycles comes entirely from the Freedom. 124 . Two-wheeler manufacturer LML in June 2003 recorded a six-fold growth on a year-on-year basis in its motorcycle sales. for the first three months of the financial year 2003-04.000 units within a year of its launch. 80.398 units in June 2002 to 16. whose total population on road had crossed 1. This impressive growth signals the company’s turnaround.259 units compared to 7. The growth in motorcycle sales comes from Freedom model. The company's motorcycle sales grew from 2.

a divergent trend in share price and the sharp swing in the price-earnings multiple. price discounts offered by producers. The showrooms will have tea and coffee vending machines and a cybercafé. Developments such as the entry of more number of players into the motorcycle market.000 to 2. 125 . The impact of these developments is reflected in a change in market share.LML has decided to brand its new generation primary dealerships as ‘LML Global’. monsoon failure and growing competitive pressure have changed the underlying basics of the industry. These will showcase all LML scooter and motorcycle models in a roomy environment ranging from 1. CONCLUSION Changing Landscape of the two-wheeler industry The two-wheeler industry is passing through a very interesting phase.ft.000 sq.

a gradual move up in the value change and a tight leash on costs by industry leaders to effectively counter sporadic price-led competition. 126 . the global major. It is believed that there will be continuity of market growth. Attractive growth rates in the motorcycle segment. Suzuki. which recently severed its ties with TVS Motor Company. the battle for market share is set to intensify further. Apart from international companies. As a result.The year ended March 2002 may not have been particularly good for the stock market. Hero Honda and TVS Motor is explained by the robust demand for motorcycles. but not so for two-wheeler stocks. whose presence hitherto was confined to the scooter market. has now decided to set-up manufacturing facilities in the country. The market's affinity for two-wheeler stocks . effective sales and marketing skills will likely determine future success.Bajaj Auto. have now entered the motorcycle segment. there is growing competitive pressure from existing domestic producers as well. has intensified competitive activity in the past two years. With product configurations across players converging. LML and Kinetic.

Bajaj Auto and TVS Motors have nearly equal scores in all the competitive positions. It has placed most of its bikes in the early stages in the Utility segment appealing to the masses. which has also attracted other players in the market and driven growth in the sector.Motorcycles embody the best features of a two-wheeler such as fuel efficiency. ruggedness and greater product differentiation. Its product positioning has also been very good. 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. Our population profile (skewed towards the youth) and a rising service class tilts the balance in favor of motorcycles. Currently all the major players in the industry.Hero Honda. 127 . Due to its superior and reliable products and excellent services reached the number 1 position. with the rest of the players lagging behind in the run.

has been the second mover in the segment. Bajaj’s 128 . 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 money. Kawasaki. This is expected to increase to 12% in FY 2005. 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. Other players in the market are following suite to both Hero Honda and Bajaj Auto. Bajaj Auto has been the faster of the two since it has come to terms with the motorcycle market potential. Exports now constitute about 4% of total two-wheeler sales. increased product lines and above all has now taken a substantial market in the Premium segment. thus lag behind. 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.Bajaj on the other hand. It has provided the consumers cheaper and more fuel efficient bikes. They could not analyze the market potential by themselves.

has decided to outsource its sub-200cc motorcycle requirements from Bajaj. It has to understand the Indian market and the Indian customer in order to have a good product mix in India. 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 129 . Bajaj and TVS Motors. In regards to TVS Motors. It cannot rely on a single product Victor to see it through this intense competition. Only Yamaha Motors has the financial muscle and product range to compete with the three giants Hero Honda. This can be the singular reason for concern for the other players in the market. Its ability to launch new reliable and quality products has decreased due to an end in its technical collaboration with Suzuki. it has to launch products in all the three segments to build in from here.technical partner. It has the technical know-how and good products in international arena. 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.

Riding comfort. RECOMMENDATIONS Opportunities and Threats for the Industry  Motorcycles race ahead There are no signs of a reversal in the growing consumer preference for motorcycles to scooters. 130 . better control and superior mileage have attracted consumers to motorcycles. All the three segments will move in an upward direction in terms of engine capacity.price and engine capacity.

LML launched Energy and Adreno models. the soft interest rate regime over the last two years has resulted in a steady drop in lending rates. while Kinetic Engineering came up with Challenger. TVS Motor found the demand for its two-stroke bikes picking up after it cut prices. This has lured the Kinetic group and LML. while other two-stroke producers such as Yamaha and TVS Motor have also turned to four-stroke models. With petrol prices ruling firm. two-stroke motorcycles have lost ground heavily in recent years. the cost of retail loan has fallen steadily which. As a result. it is not all that surprising to find the growing consumer preference for four-stroke bikes that offer superior mileage.Also. 131 . in turn. has prompted consumers to go in for motorcycles. After some sharp drop in volumes. though they are a costlier than scooters. As a result. Bajaj Auto has practically stopped producing twostroke bikes. the consumer preference has tended to be skewed in favour of four-stroke models. In the motorcycle market.

Existing majors — Hero Honda and Bajaj — have taken efforts to enhance their presence in the fast growing four-stroke segment. With a series of successful launches such as Boxer. Caliber and Caliber Croma. Bajaj has turned out to be a star performer in terms of improvement in turnover and increase in market capitalization. 132 .

Kinetic Motor launched its Marvel model. 133 . while Bajaj came up with Saffire. Scooty continues to be the market leader. no major improvement in product features. Honda Motor of Japan has launched the Activa model produced by its local subsidiary. Moreover. while Bajaj (through Spirit) and Kinetic (through Style) have a presence in this product category. In the scooter market. the lack of choice and practically. In the sub-100cc category. The ease of usage and relatively lower product weight make ungeared scooters a popular choice. Scooters on a downhill ride Scooters continue to lose favour at the market place. design and styling have driven consumers away. Bajaj continues to dominate the geared scooter market with LML a distant No 2. this product segment has seen more product launches compared to the geared models. especially among women. the ungeared models could turn out to be the dark horse. In the geared scooter segment.

Mopeds also appear to be losing their earlier image of an ideal entry-level vehicle. The drop in the price of motorcycle (second-hand bikes. the depressed scenarios in the farm sector and the pressure on crop realizations have affected demand from the key rural market segment. 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. in particular) has affected moped demand.  Mopeds losing out After growing at a steady pace during the mid-1990s. If the companies manage to come up with more such products. This apart. 134 . scooters could stage a comeback in the two-wheeler market.

has decided to launch four-stroke mopeds. the related expenses such as advertisement and other promotional 135 . 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. TVS Motor. With more models coming up. it is evident that model launches are critical for survival and growth. which might revive demand.

The earnings growth would be driven more by volumes. while TVS has signed a contract with Sachin Tendulkar. Industry majors have already upped their ad-spends over the recent years. Hero Honda has launched an advertisement featuring Sourav Ganguly and Hrithik Roshan. Hero Honda and TVS Motor have gone a step ahead by roping in celebrities as brand ambassadors. which could bring pressure on profit margins.outgo are sure to go up. the companies would raise the load of promotional activities. 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. 136 . This apart. 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.

This. Competition on the rise The growing popularity of motorcycles has resulted in more players vying for a place in this market. three others are fighting for a place in the segment. it would be all the more imperative for companies to launch models at fairly frequent intervals. With more products vying for consumer attention. 137 . Besides the top three companies. This has already been evident in Bajaj's and TVS' recent performance. the product life-cycle could get shortened. has led to an improvement in their financial performance. both have managed to enhance their market share in the motorcycle market. in turn. As a result. This would be the single-most important factor for success. This has resulted in the market place becoming crowded with numerous models. Backed by successful model launches.

Other offerings such as CBZ and Street enjoyed muted success. There would be a limited market potential for higher priced products. But we would be interested in such products as it helps in developing our technical capabilities though we may not always make money. Below this price segment is where there would be huge volumes. The Rs 50. Porters 5 Forces of Competition 138 . which has enjoyed reasonable success at the market place. it came up with Passion.After a considerable time.000 mark is probably a serious psychological barrier.

Substitutes & the Industry. animate the positioning of the company in its industry. clarify the areas where strategic change may yield greatest payoff. They highlight the critical strengths and weaknesses of the company. highlight the places where industry trends promise to hold the greatest significance as either opportunities or threats. Rivalry among existing firms – High  139 .The state of competition in an industry depends on five basic forces: Customers. Potential Entrants. The collective strength of these forces determines the ultimate profit potential of an industry. Suppliers. Knowledge of the underlying sources of competitive pressure provides the groundwork for a strategic agenda of action.

Thus the demand for cars affects the demand for twowheelers. The industry is constantly witnessing price-cuts. With the increase in disposable income & increase in bank finance people prefer to have cars rather than two wheelers. There are also some small players who are gaining market share such as LML & Kinetic. freebies & product launches. Hero Honda & T V S Motor Co.  Barriers to entry –High 140 . Threat of Substitute Product – High  The two-wheeler industry faces direct competition from the automobile sector. the demand for two-wheelers will rise.The two-wheeler industry is categorized by intense competition mainly between the three majors – Bajaj Auto. If the demand for cars falls.

The marketers have segmented the market into three categories namely entry level. Thus it is very difficult for newcomers to enter this sector. The investment required to compete with these giants would be significant.90% of the product is outsourced thus the suppliers have a direct impact on the companies cost & profitability. Around 60% . It has been observed that companies which have ignored the customers have suffered – Bajaj Auto.The barriers to entry & exit are high. executive & premium category. Bargaining power of suppliers – Poor  The two-wheeler industry. Thus the bargaining power is poor. There are a variety of products available to customers to choose from. rely on only a few selected vendors. Bargaining power of buyers –High  The bargaining power of the buyers is high. but instead had a dispatch department. which once operated without a marketing department. The industry attractiveness is low not due to profit margin but due to intense & well established competitors. The customer is treated “as a king”. However the rules of the game have 141 .

. All activities Production & Marketing should be done keeping the consumer in mind. 142 . The customer should be the focus of all activities. With this I end my memorable odyssey……….changed.

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