PROJECT REPORT ON

HERO HONDA MOTORS

SUBMITTED BY: NAME: VAIBHAV PAGIA ROLL NO.:58

INTRODCTION
Hero Honda Motors Limited, based in Delhi, India is a joint venture between the Hero Group of India and Honda of Japan. It has been referred to as the world's biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3 million motorbikes in a single year. During the fiscal year 2008-09, the company has sold 3.28 million bikes and the net profit of the company stood at Rs. 1281.7 crore, up 32% from the previous fiscal year any's most popular model is the Hero Honda's Splendor, which is the world's largest-selling motorcycle, selling more than one million units per year.Hero is the brand name used by the Munjal brothers for their flagship company Hero Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda company India. During the 1980s, the company introduced motorcycles that were popular in India for their fuel economy and low cost. A popular advertising campaign based on the slogan 'Fill it - Shut it - Forget it' that emphasised the motorcycle's fuel efficiency helped the company grow at a double-digit pace since inception. Hero Honda has three manufacturing facilities based at Dharuhera and Gurgaon in Haryana and at Haridwar in Uttarakhand. These plants together are capable of churning out 3.9 million bikes per year.[ Hero Honda's has a large sales and service network with over 3,000 dealerships and service points across India. Hero Honda's customer loyalty program, the Hero Honda Passport Program, claims to be one of the largest programs of its kind in the world with over 3 million members.The2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked at 108.

HERO HONDA VISION We, at the Hero Group are continuously striving for synergy between technology, systems and human resources to provide products and services that meet the quality, performance, and price aspirations of the customers. While doing so, we maintain the highest standards of ethics and societal responsibilities, constantly innovate products and processes, and develop teams that keeps the momentum going to take the group to excellence in everything we do."

HERO HONDA MISSION

Hero Hondas mission is to strive for synergy between technology, systems and human resources, to produce products and services that meet the quality, performance and price aspirations of its customers. At the same time maintain the highest standards of ethics and social responsibilities. This mission is what drives Hero Honda to new heights in excellence and helps the organization forge a unique and mutually beneficial relationship with all its stake holders.

HERO HONDA MANDATE

Hero Honda is a world leader because of its excellent manpower, proven management, extensive dealer network, efficient supply chain and world-class products with cutting edge technology from Honda Motor Company, Japan. The teamwork and commitment are

manifested in the highest level of customer satisfaction, and this goes a long way towards reinforcing its leadership status.

ACHIEVEMENTS
Hero Group ranks amongst the Top 10 Indian Business Houses comprising 20 companies, with an estimated turnover of US$ 3.2 billion during the fiscal year 2005-2006. The Group and its management have acquired a number of accolades and achievements over the years: Hero Group Management style has been acclaimed internationally by World Bank and BBC, Kushiro Group is discussed as a case study at London Business School, UK and INSEAD, France. World Bank has acclaimed Hero Cycles as a role model in vendor development based on a world-wide study. The London Business School, UK, has done a case study on the Group as model of entrepreneurship. Boston Consulting Group has ranked Hero Group as one of the top ten Business Houses on Economic value, in India.

The Hero Group is recognized as a long term partner and an ideal employer: Hero Group's partnership with Honda Motors, Japan is over 21 years old Hero Group's Partnership with Showa Manufacturing Corporation, Japan is over 19 years old. Group Chairman, MrBrijmohan Lal lMunjal received the coveted "Ernst & Young Entrepreneur of the Year" award for 2001. Hero Honda Motors was ranked 3rd amongst top Indian companies Review 2000 - Asia's leading companies award (2004) by Far Eastern Economic Review.

 Hero Honda Motors is the World's largest manufacturer of twowheelers with annual sales volume of over 3.0 million motorcycles. Hero Honda Motors has been awarded the highest rating for Corporate Governance (2003) by CRISIL - India's Leading Ratings, Risk & Advisory Company and as the Best Governed Company in private sector(Dec 2004). Hero Honda ranked Number One in the two-wheeler category on Environmental Performance by the Centre for Science and Environment. Hero Cycles Limited is a Guinness Book Record holder since 1986 as the world's largest manufacturer of bicycles, with annual sales volume of 5 million bicycles in FY 2006. Engineering Exports Promotion Council has awarded Hero Cycles with the Best Exporter Award for the last 28 years in succession.

BACKGROUND
Two Wheelers industry in INDIA Early 1950s , API started manufacturing scooters in India ( Lambrettas). Later Bajaj Auto Ltd a company become a legend in the global scooter industry. License Raj ( 1940s to 1980s), did not allow foreign companies to enter into the market. This made customers to wait for 12 years to buy a scooter. Only three motorcycle manufacturer were there Royal Enfield, Ideal Jawa & Escorts

 Enfields in the segment of 350cc, Jawa & escorts are into fourstroke. Mid 80s Indian government started permitting foreign companies to enter into the Indian market. Then a number of Indo-Janpanese joint venture witnessed like Hero Honda, TVS Suzuki, Bajaj Kawasaki & Kinetic Honda.

MARKETING STRATEGY A thorough understanding of the fast-changing consumer behavior, new market segments and product opportunities along with sensitivity to changing customer needs, form the core of Hero's marketing strategy and philosophy. At Hero we essentially have a completely customer-driven approach. A nation-wide dealer network comprising of over 3,500 bicycle dealers, 350 dealers for mopeds and 225 franchise holders for motorcycles, ensures convenient access to the Group's products across the country. With a deep sense of belonging to the Hero fraternity, the Group's dealer network has catalyzed growth and acted as a strong bridge between the customers and the Group.

Conventionally, very few Indian bicycle manufacturers were interested in exports. However, the Hero Group's foray into the overseas markets pioneered Indian exports in the bicycle segment as early as 1963. It was a move prompted primarily by the need to be attuned to the global marketplace. While initial exports were restricted to Africa and the Middle East, today more than 50 percent of the Group's bicycle exports meet the demands of

sophisticated markets in Europe and America. This is primarily because of appropriate product development and excellent quality that Hero offers.

SWOT Analysis Strengths Ability to understand customers needs and wants Recognized and established brand name Effective advertising capability Strong distribution network and Service centers Due to the large range of products that are available, almost the entire customer base is covered. 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 The technological changes in the bike sector occurred at a very fast rate. Bajaj Auto Ltd. patented the DTS-i model of the Pulsar. The technology was introduces by Hero Honda into the market with the launch of the Ambition, but it was not patented.

 The company doesn't have a product catering to Rs. 25,000 - Rs. 35,000 segment, and the company might suffer on account of this as the imported motorcycles and foreign players' motorcycles are expected to cater to this particular segment of the market. This can result in fall in the market share of the company. The company imports about 31% of its spare requirements. This makes the company vulnerable to the import policies of the government. It also exposes them to the exchange rate risk.

Opportunities Global expansion into the Caribbean and Central America Expansion of target market (including women) To become Indias leader in the scooter market Hero Honda can capitalize on its superior distribution channel to facilitate the selling of more bikes. Hero group entered into aviation sector and invested 500 Cr in M.P. SEZ. Threats Honda Motorcycles and Scooters India can take away market share and cause joint venture to go sour

 Bajaj Motors, TVS Motors are strong competitors Bajaj Auto has found popularity with both its low-end and premium offerings, which have helped chip away at Hero Honda's dominance

SO Expansion of target market (including women) Recognized and established brand name Ability to understand customers needs and wants

WO R&D is not close to the manufacturing plant

ST Almost the entire customer base is covered.

WT
Honda Motorcycles and Scooters India can take away market share Bajaj Motors, TVS Motors are strong competitors

Confined mostly to Indian Strong market distribution network and Service centers

Competitors

TVS-Suzuki Started in 1982 as Indian Motorcycles Pvt. Ltd in collaboration with Suzuki(Japan) Later named as TVS-Suzuki Limited, which is now one of the leading two-wheeler manufacturers in India. Their Innovations-

Suzuki Max 100R

TVS Scooty TVS Victor TVS Samurai TVS Fiero

Kinetic Honda Ltd.

Came into existence in 1970. Kinetic Engineering Ltd. Was the beneficiary of Hondas. A joint venture with Japanese company brought KHL in the market. The terms of the agreement specified that KHL could not enter the motorcycle business. Bajaj Auto Came into existence in the year 1945,imported scooters and three wheelers from Italy for sale in India. Scooter production started in 1961 and three wheelers followed in 1962 By 2001, Bajaj became the market leader in scooters with annual production in excess of 1.34 million units. Bajaj entered into a technical collaboration agreement with Kawasaki of Japan. Production of Kawasaki 100cc motorcycles started in 1986

Escorts-Yamaha (EYML)

EYML is a joint venture between Escorts Ltd. and Yamaha Motors Co. Ltd. Japan in 1985. By June 2000,the Investment Ratio of YMC was 74%

BCG Matrix on Hero Honda

STAR SPLENDORs-series (plus & super) PASSIONs-series (simple & plus) CBZ Karizma \

QUESTION MARKS Hunk CBZ extreme Pleasure

CASH FLOWS CD deluxe CD 100ss CD Dawn

DOGS Achiever Honda joy Glamour Ambition LOW

HIGH

Porters Five Forces of Competitive Position

New Market Entrants, eg:
entry ease/barriers geographical factors incumbents resistance new entrant strategy routes to market

Supplier Power, eg:

brand reputation geographical coverage product/service level quality relationships with customers bidding processes/capabilities

Competitive Rivalry, eg:

number and size of firms industry size and trends fixed v variable cost bases product/service ranges differentiation, strategy

Buyer Power, eg:

buyer choice buyers size/number change cost/frequency product/service importance volumes, JIT scheduling

Product and Technology Development, eg:

alternatives price/quality market distribution changes fashion and trends legislative effects

Improving supply of

CORE COMPETENCIES Core competencies provide a different approach to strategic development. Instead of maintaining a portfolio of Strategic Business Units the large organizations need to maintain a set of competencies within the firm which allow it top successfully pursue its strategies. Hero Hondas spectacular performance its sales and profits have trebled to Rupees 4465 crore and Rupees 462 crore, respectively, in the last three years - have fetched it unending kudos from corporate India. It will definitely continue to be a major player in the motorcycle industry and may even hold on to the top slot for a long, long time to come. Hero Honda is financially robust it churns out Rupees 650 crores in cash flows every year and is sitting on free reserves of another Rupees 685 crores.

GENERIC STRATEGY: Three basic or generic strategies open to any business are: 1. Cost Leadership: This will provide above average profits and managing all aspects of the value chain to reduce costs at every point creates it. A cost leader will sell a standard no-frills product or service, and is likely to be a large firm reaping the advantages of economies of scale.

2. Differentiation: A strategy of differentiation involves meeting customers needs by outperforming the competition by offering better value added through a unique offer to the customer. While most of the companies gamble with products, HHML on the other hand prefers a tried-and-tested approach. They have managed top get consumers to buy there premium, technologically superior products. Their strategy was to consolidate its leadership and maximize profitability by focussing its resources on a few good products. 3. Focus: A focus strategy may be effective where neither an overall cost leadership nor a differentiation strategy is possible for a firm.

Key factors of Hero Hondas success

Founded in 1984 as a joint venture between Indian-owned Hero Cycles and Japan's Honda Motor (Charts), Delhi-based Hero Honda has grown its sales 730 percent in the past eight years, to $1.9 billion in 2006, and the company now commands a market share of nearly 50 percent. Hero Honda doesn't sell the cheapest machines on the market; instead, the company's bikes command a premium because buyers believe they offer better value for each hard-earned rupee. Prosperity has brought new wealth to millions of Indian households, so consumers now want more than just an affordable price. They're also

eager to buy products with superior style and performance - an important lesson for anyone hoping to do business in India or the emerging middle-class economies of China, Russia, and Brazil. Here are three techniques that Hero Honda uses to sex up sales of India's workhorse form of transportation. 1.) Put quality first Inside Hero Honda's spotless Indian plants, white-suited workers produce 13,000 motorcycles a day. Half of a Hero Honda factory worker's wage is based on performance factors such as productivity and quality, and top employees enjoy the most generous compensation in the industry. The extra effort translates into a better-made product, and customers notice the difference. "Hero Honda doesn't just deliver good quality, it delivers consistently good quality," says Pradeep Saxena of Delhi-based market research firm TNS Automotive India. "The company's engines are always considered smooth. 2.) Keep the Improvements Coming Hero's Indian management uses Honda's vast parts bin to exploit the best technology its Japanese partner has to offer. Just a year and a half ago, $900 100cc Passion Plus bikes were among Hero Honda's topselling models. Now, for a price about 2 percent higher, the new 125cc Super Splendor offers a self-starter and better acceleration, and there are signs that it's eating into the Passion's sales. Hero also added fuel injection to the 125cc motors installed in the company's $1,100 Glamour models this year; fuel injection is common in cars, of course, but this is the first time the technology has been offered on such a small motor.

3.) Deliver on the Image Delhi's Himgiri Hero Honda, one of India's top dealerships, caters to consumers who are eager to see how far their new wealth can take them. "The performance is excellent, and I know it's going to be totally reliable," explains Delhi insurance salesman Umesh Mathur as he signs the papers to purchase a new bike. "It's everything I could want in a motorcycle." Hero has also opened dealerships aimed specifically at female professionals. The new "Just4her" showrooms are painted in pastels and furnished with upholstered couches.

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