1Hero Motocorp Ltd., formerly Hero Honda, is an Indian motorcycle and scooter manufacturer based in New Delhi, India. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. The company is the largest two-wheeler manufacturer in India. Hero motocorp has ranked 41 in ET 500 ranking 2012.
The first plant was established at Dharuhera, Haryana, on the outskirts of New Delhi. In the years to follow, large industrial areas created for additional manufacturing facilities for Hero MotoCorp Ltd., along with their Ancillaries in Gurgaon, New Delhi and Sidcul, Haridwar.
In quick succession came the setup of several other supply-chain projects in Forgings, Casting, Plastic Injection Molding and other manufacturing technologies.
Over the next two decades, the Hero Group through Hero Corporate Service Limited setup several companies to supply to Hero MotoCorp, partly or wholly owned by the Hero Group. With its keen sense on relationship management, the Hero Group has been successful in creating an unique model of backward integration that has been recognized the world over.
In 1995, Hero Corporate Service Limited was setup as a separate entity to provide specialized services to the group companies and ancillaries. The corporate services group has played a unique role in shaping the future of the Hero Group. Its primary role has been to provide services ranging from strategic advisory to complete Greenfield Project setup for the Dr. Brij Mohan Lall Munjal owned Hero Group.
In having created a warehouse of knowledge over the past few decades, Hero Corporate Service Limited has also been successful in its entrepreneurial ventures of business building in the Information Technology Enabled Services Sector, Manufacturing, Real Estate Project Management, Insurance Services, Engineering, Trade and other Service areas.
Hero Motor has finalised an export strategy focusing on markets such as Latin America, Africa and South-East Asia, taking its first step towards emerging as a global player after the recent split with its 26-year old Japanese partner Honda.
The BM Munjal-controlled company is making changes in its existing products to suit the needs of these fast-growing overseas markets, apart from identifying homegrown talent to drive export growth.
Products: The major contributor of total sales is Hero MotoCorp, which accounts for around 40% market share as always. New launches from Hero MotoCorp like Passion X Pro, Ignitor are doing well as per company reports. The company is increasing scooter-manufacturing capacity to 60,000 units per month from the current 54,000 units, thanks to its latest scooter Maestro. Overall Hero MotoCorp sold 5,04,271 units in February and total 10,59,068 units in the first two months of this year.
Two-wheeler: Motorcycles, Scooters
Hero Merchandise: Cricket bat
Competitors: These are competitors of Hero motocorp. Atul Auto Ltd, Bajaj Auto Ltd, Kinetic Engineering Ltd, Kinetic Motor Company Ltd, LML, Maharashtra Scooters Ltd, Majestic Auto Ltd, Scooters India Ltd, TVS Motor Company Ltd, Royal Enfield and Honda motorcycle & scooter ltd.
According to SIAM (Society of Indian Automobile Manufacturers), Automobile industry produced 20,366,432 vehicles of which the share of two wheelers, passenger vehicles, three wheelers and commercial vehicles stood 76 percent, 15 percent, 4 percent and 4 percent respectively.
Passenger Vehicles
15%
Commercial Vehicles
4%
Three Wheelers
4%
Two Wheelers
76%
Aggressive Marketing by the Automobile Companies has been a major factor for the high growth in the sales of vehicles, mainly two wheelers. Easily available loans by the auto financing firms, public and private sector banks and easy installment options usually enables the consumer (mainly middle income group) to go for two wheelers.
The Indian Two Wheeler industry recorded sales volume of 3.4 Million units in Q3 2011-12, thus registering a growth of 11 percent YoY. When the economy is somewhat tamed by high inflation and increasing fuel prices, two wheeler industry has registered a growth of 15 percent YoY, in 2011-12. The growth has been mainly due to favorable demographic profile, moderate two wheeler penetration level and growing urbanization.
Indian two wheelers industry continues to be dominated by Hero MotoCorp with a market share at over 55 percent in the domestic two wheelers segment. The other two big players are Bajaj Auto and TVS. The top three account for over 89.5 percent of the industry volumes.
Political, Economic, Social and Technology are the factors that affect the external Environment of an industry.
The Political Analysis comprised of Political Influence, Tax Policies, Trade Regulations and regulation of Government policies
Basic custom duty on motorcycle with engine capacity of 800 cc or more being increased from 60% to 75%
Investment allowance of 15% for investments above 100 cr as tax incentive
Expenditure plan to be 30% higher
Tax deductions on spare parts of environment free vehicles
The cost of imported motorcycles will increase. With the government intervention in the form of budget being presented by Finance Minister, it is clear that for two wheeler industry the level of localization is certainly going to rise.
The economic aspects comprised of economic growth, interest rate, exchange rate and the rate of inflation.
The two primary factors that drive the economic scenario are
Abundant and low cost labor
Easy availability of raw material steel, aluminum, natural rubber locally
The Dip in the interest rate by RBI will boost sales and growth in a much positive way
Moreover, India is having an upper hand, due to abundance of local labors and Raw materials.
Social Aspects of two wheeler industry are popularity, mobility, subculture and safety
Motorcycles primary means of motorized transport
Many Two wheeler firm raise money for charities by organizing free rides
Two wheelers are mostly cost efficient and reduces urban congestion
Wearing helmet as mandatory while riding two wheelers to make them safe from accidents is an act of safety
Technical Aspects in Two Wheeler industry includes construction, fuel economy, electric motorcycles, dynamics and accessories.
Two wheelers construction is a fusion of engineering, manufacturing and assembly of components and systems which results in high performance and low costs
Use of technologies usually tends to make two wheelers a fuel efficient mode of transport, as most of the motorcycles are designed to achieve 80 km mileage per litre with low maintenance costs.
Invention of electric motorcycles
Sufficient bike accessories enables the rider to change the wear and tear parts easily
Community/Social Responsibility
Raman Munjal Vidya Mandir
CBSE affiliated co-educational school for the poor children
Imparting education through advance learning methods
Raman Munjal Memorial Hospital
Rural population in and around Daruhera
Latest diagnostic and surgical technology.
Vocational Training Centre
26 batches comprising of 625 women have been tarined
Imparting training in tailoring, embroidery and knitting. Women are self employed now.
Adult Literacy Mission
Village heads and other prominent villagers
To encourage and motivate adult literacy
Marriages of Underprivileged girls
Girls from the backward castes
Providing financial and other supports to the families
Rural Health Care
Providing health care services to the local people
To ensure good health these camps are held on a regular basis
Safe Ride Program
Every Individuals who rides two wheeler
To ensure safety safe ride programs are conducted
Customers
Low Costs Bikes
Reduce prices to the Rs. 20000 – 30000 range
To target the lower income group customers who does not have any mode of transport
Enhanced R&D facilities
Downsizing engines below 100 cc
88% of its 4.53 million two wheeler sales came from up to 125 cc segment
Sturdy and rugged customers
Customers who uses motorcycles as a carrier and loading pattern.
To create an innovative product, targeting this segment of consumers
Financial
Revenues
Hero MotoCorp’s Rs. 5983.6 Crore revenue
Revenue grew by 16.9% YoY and 3.4% QoQ
11.3% YoY and 2.9% QoQ growth in terms of sales volume. To enhance exports the fourth manufacturing plant gets established
Operating Profit Margins(OPM)
OPM at 15% in Q3 2011-12
Creating a new corporate brand, introduction of new models, building of R&D capability and exploring overseas markets
Net Profits
Profit after Tax in Q3 2011-12 stood at 613 crore which is ultimately 42.9% YoY and 1.6% QoQ growth
Overall the company’s revenue and profit after tax touched a record high in Q3 2011-12
Operations/Processes
Cost
Tracking inventory costs effectively and efficiently
Cost leadership is the company’s focus area. Targeting double digit growth in industry turnover.
Quality
Aligning HR processes with the supply chain
Improving robustness of people processes. Achieving operational excellence. Proving better quality products to customers.
Sustainability
Setting new industry benchmarks in the area of energy conservation and sustainability
Vapor absorption machines and heat recovery units were installed. Breakthrough technology for gear rolling, fine blanking, advanced cam grinding was introduced to increase productivity and sales
The Ansoff Matrix, designed by Igor Ansoff, classifies and explains different growth strategies for a company. This matrix is used by companies, which have a growth target or a strategy of specialization.
This tool, crossing products and markets of a company, facilitates decision-making.
The Ansoff matrix offers four strategies to achieve the objectives:
Penetration of the market
Extension of the market
New products
Diversification.
Hero Motors presently operates in the Indian and Srilanka markets. It is now legally allowed to operate in several international markets after the end of JV with Honda.
The product portfolio of hero motors primarily includes 2 wheeler bikes. It produces about 20 models including all variants. A very tiny part of its portfolio of sports gear i.e., primarily cricket merchandise. Its product portfolio includes
Sleek
Street
Achiever
Ambition 133, Ambition 135
CBZ, CBZ Star, CBZ Xtreme
CD 100, CD 100 SS, Hero Honda Joy, CD Dawn, CD Deluxe, CD Deluxe (Self Start)
Glamour, Glamour F.I
Hunk
Karizma, Karizma R, Karizma ZMR FI
Passion, Passion Plus, Passion Pro
Pleasure
Splendor, Splendor+, Splendor+ (Limited Edition), Super Splendor, Splendor NXG, Splendor PRO
Hero Impulse launched in 2011 after the separation of hero and Honda. Its India’s first off-road and on road Bike.
Existing products New Products
Better pricing
Finance options
Better marketing & deals
Rural customers
Skate bikes, scooty bikes
Bikes for women
E-friendly bikes
Racing bikes
Geographical: Sri lanka (SE Asia)
Africa
Latin America
Segmentation: Teens & kids for bicycles,
Niche bikers for accessories
Concentric- 4 wheelers
Horizontal – Accessories – Biking gear
Expansion in existing sports gear
Existing
Markets
New
Markets
For existing products and markets, Hero can penetrate into market with
Value delivering pricing & Finance options
After-sales services
Increased visibility & marketing
Value deals
Focus on rural segment by driving through make shift showroom etc. to gain visibility
These strategies will help hero penetrate more into the market.
To increase the top line and market shares etc., new products in existing products can be introduced. Product lines in the following categories are few examples:
Extensive product line in bikes for women
Bicycles, skate bikes, scooty bikes for kids
Environmental friendly bikes with customer friendly technology can be pioneered
With racing gaining popularity as a sport in India, hero can develop racing bikes in its product portfolio
To increase the customer base with existing products, new markets should be developed. The aim here is, again, to increase the top line.
Geographical expansion into markets like Latin America, Africa etc. as customer needs in these markets are in synergy with hero’s offerings.
Customer segmentation into niche customers for high value products, teens and children for bicycles, sports merchandise etc.
These approaches will increase the market for hero’s products.
With new markets and new products, diversification is the way to approach.
Diversification is of 4 types: horizontal, vertical, concentric, conglomerate.
Horizontal Diversification: The Company is developing a new product or activity capable of satisfying the same clientele, even if the new products are technologically independent of the existing products.
Vertical Diversification: The Company starts to make the work of its suppliers and/or customers.
Concentric Diversification: The Company develops new products/activities with a complementary technology to existing products/activities. These products may attract a new group of customers and there will be a transfer of key skills.
Diversification by conglomerate: The company has different products/activities for various markets. The firm now settles on a market where it has neither previous experience nor industry but it could attract new groups of customers.
Hero can grow in new markets with new products by diversifying in the following way:
Concentric: diversify into 4 wheeler segment
Horizontal: Biking accessories will see growth with rise in niche bikers. Hero can leverage on this by diversifying into biking accessories. An extensive Sports merchandise product line will also lead to horizontal diversification.
Vertical and conglomerate diversification would not be profitable for hero’s growth.
These are several growth options for Hero motors that are assessed using ansoff Matrix.
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