1. Hero Honda

2. SWOT Analysis
 Strengths
 Ability to understand customer’s needs and wants
 Recognized and established brand name
 Effective advertising capability
 Its after sells service
 Technology
 Maintenance cost is low
 Resell value is high
 Company’s name is synonymous with fuel-efficient
bikes and connectivity

3.  Weaknesses
 R&D is not close to the Hero manufacturing
plant
 Hero is vulnerable in the joint venture
because Honda Motor Company has so
much power
 Brand name of Hero itself has no influence
in the automobile industry.

4.  Opportunities
 Global expansion
 Expansion of target market (include women)
 Become India’s leader in the scooter market
 Financial help easily available
 Relatively low rate of interest and the discount of
prices offered by the dealers and manufacturers lead to
the increasing demand for two-wheeler vehicles
 Large market for the high performance segment which
is increasing with the upliftment of the lifestyle of
people

5.  Threats
 Honda Motorcycles and Scooters India can take away
market share and cause joint venture to go sour
 Bajaj Motors is a strong competitor
 The big giant like Harley-Davidson will introduce
soon in Indian market.
 FDI announced in Automobiles is 100%.
 Petrol price increases
 Pollution norms
 Aluminum and steel price increases

6. BCG Matrics
HIGH STARS QUES NMARKS
TIO
C HC W
AS O DOGS
LOW
HIGH LOW
 =Hero Honda = Y aha
am
=Bajaj =Kinetic
=TVS

7. Market Share

8. Explanation of BCG Matrix
 Industry growth is 17%
 The relative market share of Hero Honda is
highest among its rivals (48%) so it will fall
in the star quarter of BCG matrix.
 Company has the only two option
“Innovative or Die”
Source - CAGR

9. Question 1
What were the dominant
characteristic of the market for
mopeds, scooter and motorcycles
in India? What host the
government restriction have
affected country two-wheeler
market?

10. Market Dominant Characteristics
 The Indian two-wheelers Industry can be broadly
classified in scooters, motorcycles and mopeds.
 The era of post independence from the 50's to 70's saw the
emergence of the two-wheeler industry.
 There were a handful of players like Bajaj Auto, Yezdi,
Royal Enfield, though with limited production.
 Manufacturing was licensed, expansion restricted and
locations for setting up plants decided by the government.
 Two wheeler productions were under a lakh during the
70's and iconic brands like Royal Enfield' s bullet and
Bajaj Auto's Chetak won the hearts of Indian consumers.

11.  But the 80's proved to be the transformational decade. A
slew of global alliances were struck. Hero tied up with
Honda, Bajaj with Kawasaki, TVS with Suzuki and
Escorts with Yamaha.
 It was hero Honda that moved the Indian market from
scooters to bikes with the promise of fuel economy, better
technology and a stylish product.
 Post liberalization the focus was on technology, pollution
control, emission norms, increased competition and
segmentation.
 The last 7 years have seen an increase in exports, capacity
expansion, more investments and almost a dozen vehicle
manufacturers.

12. Indian Market Scenario
 Until a decade ago, the auto sector in India had been a
relatively protected industry limiting the entry of foreign
companies with high tariffs against imports.
 Today, as part of a broader move to liberalize its economy,
India has opened up the sector to Foreign Direct
Investments up to 100%.
 since then has also progressively relaxed trade barriers.
 Today, almost all of the major global companies are
present in India producing two-wheelers and passenger
cars in almost all segments.

13. Two-Wheelers: Comparative Characteristics
Scooter Motorcycle Moped
Price*(Rs. as in
> 27,000 > 30,000 > 15,000
January 2007)
Two-Wheelers: Comparative Characteristics
2-stroke,
2-stroke,
Stroke 4-stroke 2-stroke
4-stroke
Engine Capacity 100, 125,
90-150 50, 60,
(cc) 150,>180
Ignition Kick/Electronic Kick/Electronic Kick/Electronic
Engine Power
6.5-9 7-8 and above 2-3
(bhp)
Weight (kg) 90-100 > 100 60-70
Fuel Efficiency
50-75 50-80+ 70-80
(kms per liter)
Load Carrying High Highest Low

14. Demand Forecast for Motorcycles and Scooters for 2011-12
2-Wheeler Regions
Segme
nt East &
North-
South West North- All India
Central
East
2835 4327 2624 883 10669
Motorcycle
(12.9) (16.8) (12.5) (11.1) (14.0)
203 219 602 99 1124
Scooter
(2.6) (3.5) (2.8) (2.0) (2.08)
Source – www.ibef.com

15.  Table suggests two important dimensions for the two-
wheeler industry.
 The region-wise numbers of motorcycle and scooter
suggest the future market for these segments.
 At the all India level, the demand for motorcycles will be
almost 10 times of that of the scooters.
 The same in the western region will be almost 20 times
 It is also evident from the table that motorcycle will find
its major market in the western region of the country,
which will account for more than 40 per cent of its total
demand.
 The south and the north-central region will follow this.
The demand for scooters will be the maximum in the
northern region, which will account for more than 50 per
cent of the demand for scooters in 2011-12.

16. Demand Drivers
 Inadequate public transportation system, especially in the
semi-urban and rural areas
 Increased availability of cheap consumer financing in the
past 3-4 years
 Increasing availability of fuel-efficient and low-
maintenance models
 Increasing urbanization, which creates a need for personal
transportation
 Changes in the demographic profile
 Difference between two-wheeler and passenger car prices,
which makes two-wheelers the entry level vehicle
 Steady increase in per capita income over the past five
years; and
 Increasing number of models with different features to
satisfy diverse consumer needs.

17. GOVERNMENT RESTRICTIONS
 Before 1990s, Government did not allow foreign direct investment.
 For local players there was licensing process.
 Controlled Imports.
 Steep excise duties &
 sales tax
 Vehicle Emission Norms
 Euro Norms
– Setting up of clean technology mechanisms in polluting industries.
– Setting up of Common Effluent Treatment Plants (CETPs) in
industrial estates.
– New pollution under control (PUC) checking system for all categories of
vehicles to be put in place by April 1, 2005

18. THE PARAMETERS DETERMINING
EMISSION FROM VEHICLES
 Vehicular Technology
 Fuel Quality
 Inspection & Maintenance of In-Use Vehicles
 Road and Traffic Management

19. Question 2
How has Honda chosen to enter in the
Indian market for scooters,
motorcycles and electric generators?
What are the standard features of
Honda's international strategy?

20. Honda In India
 Glocalization strategy
 In the environment of liberalization, Honda had come
looking for partners
 Building plants in local areas to meet local demand
 Wanted to make strong footholds in Moped, motorcycles
and electric generators
 Made a short list of indian prospects (companies)
 Negotiation with Bajaj Auto (which was in joint venture
with Piaggio of Italy) failed.
 Went in talks with Kinetic Engineering Ltd (First
manufacturers of moped, Maharastra), 44% of the indian
moped market and 15% of the total two-wheeler market.

21.  Negotiation resulted in a 50/50 percent joint
venture forms Kinetic Honda Motors Ltd.
 Objective of launching a line of scooters in
india
 This was all about how Honda entered in India's
Two-wheeler market.
 On basis of prevailing electricity penetration in
urban, semi urban and rural areas Honda went
on talks with another partner for Shri Ram
Generators Pvt Ltd.

22. Honda’s International
Strategy
 Honda's Global Vision
– Soichiro's vision was international in
character. His desire was to lead the
world in technology, and make a
significant contribution to the creation of
a better society. As a result, most of the
products that Honda developed started
out by making a difference.

23.  Honda raised its stake from 26% to 51% in Kinetic Honda.
 In 1983 Honda exists from the joint venture by selling its
stack back to Firodias
 In 1984, Allied with the Hero Group (Munjal Group) to
enter in motorcycle business in india and formed Hero
Honda Motors Limited.
 Honda agreed to provide technology know how to HHM
and assist in setting up manufacturing facilities
 Focused on the quality of the modals on the aspect of
durability, fuel efficiency and pollution control
 Honda decided to consolidate its R&D activities
worldwide in three countries, but not in india.
 Well managed distribution network.

24. Question 3
What were the key structural events of the
business relationship between Hero and
Honda? Has the relationship produced the
successful results?

25. Key Structural Events
 In 1984………………..
 The Company entered into a technical-cum-financial
collaboration agreement with Honda Motor Co. Ltd., Japan
(HML)
 As per this collaboration agreement, HML was to furnish
complete technical information and know-how and trade secrets
and other relevant data
 Hero Honda CD-100 is the first four stroke motorcycle to be
introduced in India in 100cc range. Its most attractive features
are fuel efficiency and its light weight. CD-100 will be equipped
with electronic ignition system, illuminated speedometer, 4
speed gear box, neutral and flasher indicators, etc
 Both partner held 26% of the equity with another 26% sold to
public and the rest held by financial institutions.

26.  In 1985 The Company embarked on its 2nd phase of expansion
of increasing its installed capacity from 1,20,000 to 1,50,000
vehicles per annum by the addition of several critical aluminum
and steel components.
 In 1989 The Company introduced a new model "Sleek" during
July
 In 1990 The Company was planning to launch a new model
motor cycle-CD 100 SS suitable to semi-rural conditions. In the
domestic market the Company was reported to have a market
share of 46%.
 In 1994 The Company extended its JV till 1994.
 Hero Honda Splender was launched in 1995 for urban areas.

27.  In 1997 Hero Honda Motors has launched its newest
motorcycle, the Street, a 100 cc bike designed for use in
congested urban traffic conditions
 Hero Motors of the Rs.1,600 crore Hero group, as part of its
globalization plan, has set up a plant in Brazil for manufacturing
hero winner scooters.
 In 1999 Hero Honda Motors Ltd (HHML) and 20th Century
Finance Corporation Ltd have signed a Memorandum of
Understanding (MoU) for financing of Hero Honda motorcycles
 In 2001 - Hero Honda Motors Ltd. has launched a new 100cc
motorcycle named `Passion‘
 Launches its new 223-cc, 16.8 BHP Karizma at Rs 79,000
 Introduces Passion Plus, new version of Passion motorcycle
 2005 Two-wheeler major Hero Honda on October 5 announced
launch of its first scooter 'Pleasure'
 In 2006 Hero Honda launches CBZ variant X-treme

28. Hero Honda
 Results
– Between 1995-2001 economic spread (deference between WACC
and ROIC) expand frosm 16.5% to 65.4% was among the highest
in country
– 1997-2000 hero Honda's quarterly sales grew 303.28% and its net
profit jump from 16.28Cr to 98.3Cr
– While the industry grew at an average 21.74%/annum between
1997-2001 and hero Honda average growth rate of 35.46%/year
– Hero Honda maintained its grip in the motorcycle segment with a
lead of more than one million motorcycles over its competitor
– Current market share of 48 per cent in motor cycle segment and
industry growth as 36.54%
– Company accounted for 40 per cent of the Indian two-wheeler
market.

29. Question 4
Have Hero and its chief rivals encountered
various challenges as a result of their
relationship with foreign partners? Explain

30. Definitely it is revealed that any challenges
those were encountered by the players in
automobile industry that was due to their
foreign collaborators

31. Tvs- Suzuki
 Tvs Incorporated in 1982 as Indian motorcycles Pvt. Ltd to
produce motorcycles in collaboration with Suzuki
 The perfect blend between the best design engineers and the
latest technology
 But in august 2001, Tvs bought out 25.97% stake of Suzuki
for 90 million, increasing its stake to 58.43%.
 The parting also meant that Suzuki would not be allowed to
enter India for a 30 month period
 Tvs group wanted to promote the Tvs brand, grow their
revenues, and develop product indigenously
 They also wanted to export Tvs-made vehicles to rest of the
world, a proposition Suzuki motors opposed.

32.  With decline of two-stroke motorcycle in India, and with the
recent launch of the all-Indian Tvs victor, it was clear that
Indian partners can do without Japanese collaborator.
 TVS' in-house product development was not good

33. Escorts -Yamaha
 In 1995, Escorts and Yamaha Motors formed a 50:50 joint
venture (EYML).
 It all started in 1999 when Escorts sold one-third of its shares
in the construction equipment company Escorts JCB to JCB of
the United Kingdom for Rs 490 billion. This brought its stake
down from 60% to 40%. Next came the turn of Hughes
Escorts Communication, a 51:49 joint venture between
Hughes Communications of the United States and Escorts. In
December 1999, Escorts offloaded 23% of its stake to Hughes
for Rs 750 million. This brought its shareholding in the
company to 26%.

34.  mid 2000, Escorts divested 24% equity to Yamaha Motors
and as a result, Yamaha Motors became a majority
stakeholder in the venture (74:26)
 In May 2001, Escorts sold its remaining 26% equity, thus,
exiting from the joint venture.

35. Kinetic-Honda
 KEL and Honda set up a 50-50 joint venture called kinetic-
Honda Ltd.
 The terms of agreement specified that KHL could not enter the
motorcycle business
 Throughout the 1980s, Kinetic remained India's largest moped
manufacturer with a 44% market share and a 15% share of the
overall two-wheeler market. A decade later, the company's
moped market share halved to 22% and the overall market
share figure reached an abysmal 5%.

36. Question 5
What obstacles stands in the way of Hero’s
operation one billion? What issue must
Hero management address to achieve its
2002 strategic and financial objectives?

37. Obstacles stand in the operation one
billion

38. • bajaj is the market leader
• tough competition from the company from competitors
like
TVS SUZUKI
ESCORT YAMAHA
BAJAJ PIAGGIO
KINETIC HONDA
• they were totally dependent on the Honda motors for
the technology .
•New product development was not materials as far as
the market demand dedicated .

39. • Threat from local players like
monto motors of rajasthan
They were providing bikes and mopeds at very lowest cost .
• fundamental principal of product of superior value at
reasonable price .
but
Prices of steel , yen (japan) , ruber , are significantly high as
compare to previous years .

40. HERO MANAGEMENT ADDRESS
…..

41. • The market is far from maturity .
so penetration is possible ..
So concentrate on rural market more as
compare to urban market , because urban
market is already aware regarding brand of
hero .
• Motorcycles growth as compare to other
means of transportation was much higher .
• Good brand name is availble in the market
• cost of bikes is much lower to car
40,000 < 3,00,000

42. India rural market (70% of total population )
Rural people are very much cost conscious .
They did not require that much features .
They should develop their own
technical institute .

43. In advertisment ….
Shows the feature of bike as compare to brand
endorsement ..
Because people prefer safety as first and it is the
basic criteria through which one can attract to the
customers ..
They can remove the dominance of bajaj from the
market because bajaj is the market leader .

44. Question 6
What recommendations would you make to
Mr. Brijmohan lal to maintain hero’s
dealing position in the market?
Should company consider developing new
relationship with international partner?
Does it make more sense to create stronger
alliance with domestic partner or to go
outside india?

45. RECOMMENDATIONS
 Concentrate on R & D establishment.
 Concentrate on entry and premium segment to
increase the market share.
 Concentrate on pricing strategy
 As far as entry segment is concerned, bikes should be
reasonably priced with above average fuel economy to
attract common man
 Ally with domestic financial firm to provide finance
and vehicle insurance.

46.  In current condition Hero must have to
consider its partner till 2014.
 But rather than depend upon honda, hero
should focus on R&D development on its
own
 There are no domestic partner with which
Hero can go for JV to develop R&D

47. Comparison between Hero Honda and
Bajaj Auto in motorcycle segment
Product Price Place Promotion
Hero Honda CD 100, Hero Honda 44000-50000 for Exclusive outlets Both used
Splender, CD Dawn, .150cc segment of Hero-Honda extensive
Passion, Plus in and Honda for distribution
below 150cc segment mopeds system to reach
And 60000-
, and CBZ, Karizma Urban as well as
80000 for high
in the Upper Rural areas
end segment
Segment, durability “Desh ki
and fuel efficiency Dhadkan”
were focused.
Bajaj Boxer AT, CT in the 35000-40000 for Mainly dealt with It also done the
below 150cc segment below 150cc franchising same what ,
and Pulser and segment and method with “Hamara Bajaj”
Discover DTS-I, fuel 50000-60000 for local distributors
efficiency was main above 150cc
focus segment

49. Thank you