atlas honda-internship report 2014 by qazi zohaib aqil

8/10/2019 Atlas Honda-Internship Report 2014 by Qazi Zohaib Aqil

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Atlas Honda

\

\

Internship Report

Company understanding

Study of possible reason of salesdecline

Consumer switching behavior

Brand awareness of CD-Dream and

CG-Dream

Chinese Competition

Marketing Research andRecommendations

Submitted by

Qazi Zohaib Aqil

Shabih Ahmed

Atlas Honda Internship Report by Qazi Zohaib Aqil 2014All rights reserved. Contact author for permission. Email: [email protected]


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Contents

Acknowledgement ......................................................................................................................................... i

Company history ........................................................................................................................................... 1

Products ........................................................................................................................................................ 1

Company Strategy ......................................................................................................................................... 2

Understanding the market & the target market .......................................................................................... 3

From 2S to 5S dealers and Dealerships ......................................................................................................... 4

The Marketing Research ............................................................................................................................... 5

The Marketing Research ............................................................................................................................... 7

Comparison of Honda with Chinese on basic attributes .............................................................................. 7

Histograms and Crosstabs for Analysis ....................................................................................................... 11Recommendations ...................................................................................................................................... 15

Exhibits ........................................................................................................................................................ 18

Exhibit1 ................................................................................................................................................... 18

Exhibit 2 .................................................................................................................................................. 19

Exhibit 3 .................................................................................................................................................. 20

Questionnaire ............................................................................................................................................. 20


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70 cc

CD-70

CD-Dream

100 cc

Pridor

125 cc

CG-125

CG-Dream

Deluxe

RacingCategory

CBR-150

CBR-500

TestMarket

Wave-110

Company history

In 1963 Yousef S. Shirazi found Atlas investments with the capital of PKR 500000. He ran in a contract

with Honda Motor Company Japan, later forming Atlas Honda which by the end of year ending in 2013-

14 had a Assets of PKR 14.3 billion. (Exhibit 1)

Since its inception it has launched legendary models in motor cycles and established a nationwide

integrated network of dealerships which retailed Atlas Honda's motorbikes.

Amongst its motor bikes CD-70 and CG-125, named based on their engine have been called the

"legendary motorcycles" and are still in production. CG-125 engine was launched in 1985 and is its

technology is still popular among consumers and with small changes in vinyl, head light, indicator

designs and muffler, sold mostly in a celebrated red and Black color. CD-70 Model is the most fuel

efficient, with performance of almost 80 Km in one liter of gasoline/petrol (Exhibit 2).

Products

Products classification by engine type (figure 1)

Engine type Description

CD-70 It is a street bike comes in classic red/ black color.

CD-Dream It is a street bike comes in modern design keeping in view of the choice

of modern consumer come in red and black color.

Pridor A 100 cc category for jobs/services oriented working class people.

CG-125 It is the most liked high speed and performance street bike comes with

Figure 1: Products


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Company Strategy

The companys strategy for the time period 1962-1999 can be seen as focusing on

Product and

Place

Oriented and the then business volumes were fluctuating 80000- 100000 units yearly.

In the year 2000, Saqib Shirazi become the CEO of Atlas Honda an enthusiastic Harvard MBA defining

new frontiers for the company abolishing the old fashions which according to him pendulum like

swinging sales volume between 80-100K. To increase the sales volume he proposed cutting the cost per

unit of motorcycle. The following steps were taken to cut the cost

a) Production of imported parts were localized.

b) Costly parts made by vendor were to be reduced in price while equally ensuring good quality by

I. Improving the process technology

II. Vendor to vendor improvements in communication and synergy was developing by Atlas

Honda. In short enhanced the whole supply chain network of vendor to Atlas by

developing a better horizontal integration.

c) Brand image

It then comes to reduce the price of

motorcycle to make it affordable for the

consumers but it left the company with

option to reduce the quality of the product

which is not acceptable by company. Hence

the quality is sustained with no decrease in

quality for this leasing policy was

introduced and which promoted dealers to

make their dealerships a 5S dealership.

Engine type Description

A robust engine in a red and black color. Also known as power machine.

CG-Dream Backed by the engine of CG-125 it comes in modern design and shape

for youth who like motorcycles with speed and modern looks.

Deluxe Modified engine of CG-125 with 5-speed transmission and front wheel

disk break with modern looks.

CBR-150 Is a racing category bike comes in 150 cc engine.

CBR-500 Is a high end racing category comes with 500 cc of engine.

Wave-110 Is a 110 cc engine motorcycle which is in a test market at present.

Figure 2: Brand image


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d) Aggressive leasing

If we see GDP per capita it is increasing and is recorded at US$ 806 for the year 2013

compared to US$ 772 for 2012 in Pakistan (Exhibit3). Yet the income of $806 annually is

not sufficient to buy Atlas motorcycle on full payment by masses at large. Since the

lowest price of Honda CD-70 is PKR. 69,500 which equal to US$705 (1US$= 98.5). Hence

leasing can make Honda bike available to masses at ease.

As a result of above mentioned changes by the year ending 2002-2003 Atlas Honda broke the pendulum

shift and sold more than 100,000 motorcycles for the first time in history. Along with these changes the

price of Honda CD-70 was reduced to PKR 58,000 than PKR 68,000 and price of Honda CG-125 to PKR

72,000 than PKR 78,000 and a boom is seen in sales.

Understanding the market & the target market

At this point it is useful to look at the consumer market Honda is serving.

Firstly it was believed that the Chinese competition will give a tough time to Honda but it proved itself

beneficial for Atlas Honda for the following reasons

It created a market which does not existed before.

Mostly the bicycles user switched to a Chinese consumer.

The reason to massive switch is easy leasing policy for Chinese motorcycles created space for

Honda user to adopt leasing too.

It did not affect the Honda motorcycle market.

The reason that Chinese motorcycle lacked in good quality, no availability of spare parts, no after sales

services and shortly lived companies such as Hero etc. made in consumers mind a bad brand image for

the Chinese motorcycles. Once consumer base increase for motorcycles and especially for good quality


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Product

Place

Parts

Policy oflease andExhange

Person

Product

Place

2S Business Model 1962-1999 5S Business Model 2000-Present

motorcycle the only choice they were left with was good quality and affordable motorbike a resultant of

which was increase in Hondas sale.

From 2S to 5S dealers and Dealerships

As stated previously Atlass dealer where only limited to 2P of marketing that is product and place. With

the revived business model it turned out to 5P and this time the P s were big including Product, Place,

Parts, Policy of lease and Person (Figure 3). The parts include the spare parts for Atlass motorcycle

which strengthen the after sales services, further added to the companys brand image, and increased

the base of consumer loyalty. Personal leadership was introduced that every person can enhance the

profitability of their businesses by moving from 2P to 5P business model. The leasing policy was the

unique factor as helped a lot to hinder the in consumer market tapped by Chinese competition and

added them to the Atlas Honda family.

The change in business models really impacted and boosted the sales. One good example could be that

during our internship we visited several dealers in Rawalpindi region. Honda Auto who is the 1S dealer

of Honda that is they only sale new Honda motorcycle compared to them is Khawaja Autos on the same

Muree Road Rawalpindi who are 5S dealers adopted the new business model and have a really good

sales as compare to 1S dealer because of the spare parts business they own, the leasing policy they have

and the better leadership.

Figure 3: Business Model


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The Marketing Research

To study the sales decline for the first quarter of 2014 we visited ten dealerships in different areas

including three in Rawalpindi city, Gujar Khan, Color Syedain, Beywal, Dina, Jhelum, Wah & Hassanabdal

and Rawalakot (Azad Kashmir). From the observation and informal interview we have inferred the

following

1. All the dealer are so loyal to Atlas Honda

2. The dealers are deeply enriched in the companys philosophy.

3. Many new dealerships have been created in last 2 to 3 years and many of them are doing well.

4. Dealers in remote areas are reluctant to adopt leasing policy.

5. Demotivation in existing dealers due to establishment of dealers with in close vicinity.

6. Most of them observed the economic down trend and attributed it as a reason of lower sales.

Now we look at various dealers individual

Rawalpindi

In Rawalpindi we visited Honda Autos, Khawaja Autos and Pakistan Autos.

Honda Autos

Talking to them we have revealed that Honda Auto is 30 years old in business and is reluctant to adopt

leasing. She is a 1S dealer and attribute the construction of Metro bus project as a reason sales decline

as Metro bus project has reduced the traffic flow on Muree road.

Khawaja AutosKhawaja Autos are also old in business and they also won the scheme for Japan. They are a 5S Model

showroom. They are good in sales and promote leasing and have sold almost 3 CBR-Motorbikes. The

reason they sale good which we have observed is that leadership they have good team which deals in

and coordinates in sales.

Pakistan Autos

New in business, Pakistan Honda is adopting new business practices they also have employed a new

sales team, maintaining computerized data bases. They feel a bit resistance as being new to business

they have to learn the trick of the trade. I see a good sales potential in them. Pakistan Honda makes

lease sales.


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Gujar khan and Beywal

The dealer in Gujar Khan was a 3S dealer his sales volume were average. He said that people here are

more prone toward CG-125 and a decline in sales is due to change in model design, turning silver

silencer to black one.

The Dealer in Beywal was also a newly created dealer and is at 1S level now. He seeks to expend his

business to 3S; the resistance he is facing now is that the land owner is not making him new vicinity so

far where he wants to expand his business to spare parts. If so done he can give company a good

business.

Dina and Jhelum

In Dina we have visited Royal Honda center she is a 5S dealer. Royal Honda is currently busy in enhance

the showroom layout making it a double story building. Royal Honda sale mostly on lease and aims to

makes itself a model showroom, which if made can enhance the motivation and sales of Royal Honda.

In Jhelum we visited Fazal Din & Sons, Bilal Honda Emporium and many other. Jhelum is a stagnant

territory with good sales volume. The audience discourages similar issue like change of silver silencer to

the black on in CG-125. Also one dealer attributed that launch of new vinyl (stickers) of CD-70 has

decreased the sales of CD-Dream and CG-Dream is also not getting so popular in costumers since its

design and shape is not largely welcomed. Also a general perception is that the changes in vinyl of CG-

125 are expected in summer each year so consumer is waiting to buy new vinyl CG-125 to come, myth

or rumor but it is hindering the sales.

Wah, Hassanabdal and Texila

The dealers we visited in Wah and Hassanabdal lacked in respecting the retail price set by the Regional

office. The internal competition to sale more has created a rivalry. According to Wah Honda centers

owner the setup of new dealership in Texila has affected his sales as the new dealership in Texila region

is only at a distance of 15 minutes ride form his showroom and also the dealer in Texila is selling below

companys set retail price that eventually proved to be true. We made a mystery shopper visit and they

had reduced price up PKR 1500 on Pridor selling it for PKR 84500 than PKR 86000 the official reatial

price. Later they were fined for PKR 30000 by the territory in-charge.

Rawalakot

In Rawalakot we visited Welcome Honda Center. Visit their revealed that motorcycle sales in Rawalakot

is seasonal as in winters the sales of Motorcycle declines due to frequent rains and snowfall. The


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celebrity motorcycle model there is CG-125 as it meets the performance required for hilly and rocky

terrain.

The Marketing Research

Along with visit to dealerships that Atlas Honda has created we also conducted a market survey based

on random sample of 49 people using questionnaires (Exhibit 4). The survey helped in looking at variousaspects the consumers have in the mind for both Honda and Chinese motorcycles.

Comparison of Honda with Chinese on basic attributes

To Study the basic attribute we have listed down some basic attributes on which we have asked the

consumer about Honda and Chinese user on following building block attributes

1. Price

2. Durability

3. Design

4. Brand image

5. Performance

6. Maintenance

We have asked users of Honda and Chinese motorcycles the relative importance they give to each of the

above-mentioned attributes and how they see for each Honda and Chinese motor bike individually. The

question 11 and 12 help us to develop the following Multi-Dimensional Scales.

How to read this table and graph

To see how much the above-mentioned attributes are important we have used the following scale

Serial No. Scale Scale Measure Number

1 Not Important 1

2 Below Average Importance 2

3 Average Importance 3

4 Above Average Importance 4

Both Relative importance price Honda user and Relative

importance price Chinese user are the average of the

responses. The interesting point here is that both the

Honda and Chinese user demand the same level ofimportance for each attribute but what actually they are

getting form both the motorcycles are pictures of reality,

Relative importance is highlighted in green ovals.

The numbers mentioned in front of Honda and Chinese are

Honda Chineseprice

HONDA3.391304

CHINESE3.673913

Relativeimportance priceHonda user 3.369565

Relativeimportance priceChinese user

3.627907


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3.391304348

3.673913043

3.369565217

3.627906977

3.35

3.4

3.45

3.5

3.55

3.6

3.65

3.7

0 1 2 3

Ideal importance point and Price

comparison

HONDA

CHINESE

Relative importance

Honda

Relative importance

Chinese

the actual points where these motorcycles stand in consumers mindsets in the red ovals and are also the

averages of the consumer preferences.

In the graph below relative importance points and price comparison points both actual point of Honda

and Chinese are above ideal points. In the current case it represents that both have a good pricing

strategy and in this case the Chinese have a relatively good pricing compared to Honda.

Easy scale to read

Serial No. Distance from the relative importance point Remarks

1 Above Good/Favorable

2 Below Bad/Not Favorable

Now we look at Durability factor

Honda Chinese

Durability

HONDA 4.434783

CHINESE 2.717391

Relative

importanceHonda 3.717391

RelativeimportanceChinese 3.704545

4.434782609

2.717391304

3.71791 3.704545455

0

1

2

3

4

5

0 1 2 3

Ideal importance point and

Durabilty comparison

HONDA

CHINESE

Relative importance

Honda

Relative importance

Chinese


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In this graph it is quite clear that Honda score far more in durability than Chinese motorcycle as actual

point is way above the ideal point which is a good indicator for Honda.

Now we compare the Design factor

Honda Chinese

Design

HONDA 3.891304

CHINESE 3.434783

RelativeimportanceHonda 3.521739

Relativeimportance

Chinese 3.545455

In design consumers have a very high likelihood for Hondas design as compared to Chinese

counterparts.

Honda Chinese

Brand Image

HONDA 4.521739

CHINESE 2.804348



Consumers have a high value for Hondas brand image and are not satisfied from Chinese counterpart.

3.891304348

3.434782609

3.52173913 3.545454545

3.4

3.5

3.6

3.7

3.8

3.9

4

0 1 2 3

Ideal importance point andDesign comparison

HONDA

CHINESE

Relative importan

Honda

Relative importan

Chinese

4.52173913

2.804347826

3.760865 3.75

0

0.5

1

1.5

2

2.5

3

3.5

4

4.55

0 1 2 3

Ideal importance point and brand

image comparison

HONDA

CHINESE

Relative importan

Honda

Relative importan

Chinese


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Honda Chinese

Performance

HONDA 4.086957

CHINESE 3.152174



Consumers have a strong opinion that Honda has a better performance than Chinese counterparts.

Honda Chinese

Maintenance

HONDA 3.847826

CHINESE 3



Both the user of Honda agreed to this point Honda has lower maintenance cost as compared to Chinese

motorcycles.

4.086956522

3.152173913

3.695652174 3.636363636

0

0.5

1

1.5

2

2.5

3

3.54

4.5

0 0.5 1 1.5 2 2.5


performance comparison

HONDA

CHINESE

Relative importa

Honda

Relative importa

Chinese

3.847826087

3

3.456521739 3.522727273

0

0.5

1

1.5

2

2.5

3

3.54

4.5

0 0.5 1 1.5 2 2.5


maintenance comparison

HONDA

CHINESE

Relative importa

Honda

Relative importa

Chinese


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Histograms and Crosstabs for Analysis

On the basis of data collected, we processed it on SPSS and following useful insights are obtained which

will assist us in our recommendations.

Histogram and Crosstab For Honda


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Both the chart and cross tab represent the maintenance cost and the time of usage of Honda motor-

cycle by the Honda user. It is quiet true that overwhelmingly the response is the Honda motorcycles

maintenance cost is very low but the 7 cases of High maintenance cost 1 case of very high is also

alarming.

Histogram and Crosstab For Chinese


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This result shows that the users of Chinese motorcycle have low maintenance cost too. Among the

random sample only one case of Chinese motorbike user have claimed that it is a very high maintenance

bike.

Brand Awareness of new models

The given below comparison shows the consumer responses for the newly launched bike of Honda

family the CD-Dream and the CG-Dream.

From the table above it is clear that 62.5% of respondents of the survey are yet unaware of the quality

of the CD-Dream among them 35.4% are Honda users. This means that they are unaware of the launch

of CD-Dream itself. A mass promotion is required for these two machines as they lack in awareness so

far.


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The awareness level about CG-Dream in among Honda users is even worse about 37.5% users of Honda

are not aware that anything/product as Honda CG-Dream exist in market. Also, overall level of

unawareness is 62.5% equal to that of CD-Dream.

The need of a new bike

We have also run a factor analysis to study the consumer mindset. Based on building blocks of

1. Price

2. Durability

3. Design

4. Brand image

5. Performance

6. Maintenance

The need of factor analysis is that it helps in identifying new market or products required in market. The

rotation we set to obtain this was varimax. This varimax rotation was required as it amplifies the

variances among characteristics, which in our cases are the above-mentioned six building blocks hence,

helping in making excellent factors.

It proved out to be very beneficial and is supportive of the Hondas new launch of CD-Dream and CG-

Dream. The component 1 and component 2 are the existing market of motorbike where component 1 is

Honda and Component 2 is Chinese motorbike. We ran a factor analysis in which we tried to find out

that consumer is demanding a new motorbike that should have

1. Price equal to Honda motorcycle. Price [Honda], which is .800, is its representation and Price

[Chinese] -.575 is its strong opposition.

2. Also consumer wants a Design to be like Chinese bikes that are stylish too.

Both these needs are accomplished by new

models of Honda street bikes (CD-Dream

and CG-Dream) providing quality product

with new designs.


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Future buying preferences

An analysis is also conducted to see next bike the consumer will buy and its mode of payment.

Following are results concluded:

This cross tabulation between current pocket size and consumer preference for mode of payment shows

that CG-125 is the most preferred bike of the market. Also consumer mindset is still so rigid for buying

motorcycle on full payment. To enhance sales existing consumer must be switched to leasing mode of

payment that it is not so far happening. One way to do it is to design scheme so relevant to Chinese

counterparts that is the basic down payment must be very too.

Recommendations

Recommendations obtained from research

1) Looking at the results of research it was found consumers favor Hondas price but Chinese bikes

price is favored more. Knowing the fact that Hondas pricing is covering all the costs for the

qualities it provides and this fact is also very clear in consumers mind. But what Honda can do is

to promote aggressive leasing to tackle this issue.

2) Also the maintenance costs of Honda bikes are relatively high compared to its Chinese

counterparts. Despite of quality it provides Honda is not performing well in long term usage. For

this Honda is doing extensive trainings of mechanics. Also the existing dealers who are aspiring

must be added more S to their dealerships.

3) Also Brand awareness for CD-Dream and CG-Dream is very low as pointed out previously in the

section of Quality Comparison Honda must arrange some promotional strategy for these to

motorcycle. Consumer are resistant because of its resale and also hindrance is seen accepting


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new shape and design. Some promotional rally can be arranged to promote these new shape.

Also it market will develop in long run since youth is more prone toward new designs.

Recommendation form field survey.1) For CG-125 acceptance for black silencer than silver chrome is not welcomed by audience at

large. CG-125 users are mostly owned by hobbyist so making such changes in design must be

made in accordance with audience at large.

2) Audience demand discounts in retail price. This is what Atlas Hondas dealers understand too

but they are not allowed by the Regional office to give discounts. Hence some leverage must be

given to dealers on full payment sale.

3) The dealers who are resistant to sale by leasing must be enforced to sale by leasing. For this

matter each of the territory in charge must help the dealer to understand the leasing

methodology and procedures. If after that the dealer is reluctant to lease, open a new only

leasing dealership, not letting the existing resistant dealer to operate as a lease setup later for

next 5 year to learn a lesson.

4) Visiting a dealer in remote area of Beywal he had a problem with the delivery of supplied motor

cycle. The bike he ordered was contained in mid of loaded delivery truck. All other motorbikes

of some other dealer, who was to be served next had to be unloading to unload this Beywal

dealerships motorbike.When his bike has been unload the trucker refused to upload all the

bikes just unloaded of the other dealership and said to this dealer to deliver all these bikes

himself now, creating a conflict. The point Im trying to make here is that since Atlas Honda has

outsourced the delivery system, its conduct and practices must be revised and must be

monitored by Atlas Honda by collecting a feedback form every dealer when his delivery is made.

Territory in charges can be assigned this responsibility.

5) Also if a bike delivered to some dealership is containing some damage or if a costumer claims

warranty I have found dealers in remote area less proactive and lacking to understand necessary

steps to respond warranty claim for customer and for themselves if some part is receivedbroken. The spare parts department can help them in educating how to claim warranty from

warranty dealers or can help them in creating local synergy.

6) Atlas Honda must announce the tentative date for the launch of now design in market. During

our survey we have found that consumer are resistant to buy CG-125 power machine as they

are waiting for new vinyl or sticker to be launched.


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Exhibits

Exhibit1

Source: Company Annual Report 2013-1014


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Exhibit 2

Exhibit 3


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Exhibit 4

Questionnaire

Questionnaire- MotorbikeThis questionnaire is collection of data for market research project on motorcycles business in Pakistan.

All the information collected will be kept secured and can possibly be published or reproduced foracademic purpose sole at Karachi School for Business and Leadership, Karachi.

Q1) which motorcycle are you using currently, specify with name

a. Honda(_________________)

b. Chinese(_________________)

Q2) when purchased it was a

a. New motorbike

b. Used/Second hand motorbike

Q3) when did you purchase you motorcycle?

a. Three months or less

b. 6 months or less

c. 1 year ago

d. 2 years ago

e. More than 2 years

SatisfactionQ3) Maintenance cost of my bike is

Very low Low High Very high

Purchase Likeability and IntentionsQ) You prefer Chinese motorcycle over Honda motorcycle. (if yes please specify)

a) Yes

a. 70 cc (_________________)

b. 100 cc(_________________)

c. 125 cc(_________________)

b) No

Q4) keeping in view your current pocket size which one would you buy?

a. Honda CD-70

b. Honda CG-125

c. Honda Pridor

d. Honda CD-Dream

e. Honda CG-Dream

f. Honda Deluxe


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Q5) if I have to buy a motorcycle I will prefer buying by

Leasing

Full payment

Second hand/ used

Q6) Do you think Chinese motorbikes are in a strong competition with Honda Motorcycles?

a. Yes

b. No

Q7) I normally use motorcycle for

a. Racing

b. Ride to my work

c. Recreational cruise

d. Family transporte. Others

Q8) I think Honda motorcycle

Is a low

quality bike

Quality is equal to

other bikes(Chinese)

Quality is better

than other bikes

Has the highest

quality

Don't

know

CD-70

CG-125

Pridor

CD-Dream

CG-Dream

Deluxe

Q9) when purchasing new HONDAmotor bike, rate the following,

I will get pre-purchase information about motorbike from

a. Visiting website of the motorbike company

Not at all May be not Neutral May be yes Almost always


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b. Consulting a friend who is currently using that motorbike


c. Consult a Mechanic


d. Follow my gut feeling


Q10) when purchasing new Chinesemotor bike, rate the following,

I will get pre-purchase information about motorbike from

b. Visiting website of the motorbike company


c. Consulting a friend who is currently using that motorbike


e. Consult a Mechanic


f. Follow my gut feeling



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Attributes and Features

Q11) Rank the following for a motorcycle

Attributes Not Important Below Average

Importance

Average

Importance

Above Average

Importance

Price

Durability

Variety

Design

Brand Image

Performance(0-60 km/h in less

time)

Maintenance

Q12) Rate the following for a motorcycle

Price

Honda Very bad Bad Neutral Good Very good

Chinese Very bad Bad Neutral Good Very good

Durability



Variety



Design



Brand Image



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Performance 0-60 km/h



Maintenance



Q13) Rank the following, for purchase of a new motor bike

Scale

Less important.very important

1 2 3 4 5

Price

Resale Price

Availability Spare

parts

After Sales service

Leasing Policy

Thank you

atlas honda-internship report 2014 by qazi zohaib aqil

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