hero honda modified
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HERO HONDA
FILL IT. SHUT IT. FORGET IT
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COMPANY PROFILE
The joint venture between India's Hero Group and Honda MotorCompany, Japan, has not only created the world's single largest
two wheeler company but also one of the most successful joint
ventures worldwide.
The company introduced new generation motorcycles that set
industry benchmarks for fuel thrift and low emission. A
legendary 'Fill it - Shut it - Forget it' campaign captured the
imagination of commuters across India, and Hero Honda sold
millions of bikes purely on the commitment of increased
mileage. The company introduced new generation motorcycles that set
industry benchmarks for fuel thrift and low emission.
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Hero Honda bikes currently roll out from its three globally
benchmarked manufacturing facilities. Two of these are
based at Dharuhera and Gurgaon in Haryana and the third
state of the art manufacturing facility was inaugurated at
Haridwar, Uttrakhand in April this year. These plants together
are capable of producing out 4.4 million units per year.
Hero Honda's extensive sales and service network now
spans over 3000 customer touch points. These comprise a
mix of dealerships, service and spare points, spare parts
stockiest and authorized representatives of dealers located
across different geographies
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New plant at Haridwar ² the gateway to another success story
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AWARDS TO THE COMPANY
2009 ET Awards for Corporate Excellence
2008
NDTV Profit Business Leadership Award 2008
TopGear Design Awards 2008
NDTV Profit Car India & Bike India Awards
India Times Mindscape and Savile Row ( A ForbesGroup Venture ) Loyalty Awards
Asian Retail Congress Award for Retail Excellence NDTV Profit Car India & Bike India Awards
Overdrive Magazine
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COMPANY OF THE YEAR
T he awards seeks to ²
Recognize a company that has consistently set clear
performance benchmarks for the rest of the industry
and strived to become a world leader
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STRATEGIES DURING RECESSION
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1. PRODUCT PROPOSITIONING
Hero Honda first to go beyond the product end of the story.
Diagnosis was that the customers differentiation in terms of
propositioning the product to customers was weak
It shows in its dominance of cricket, selection of youth and
style icons and associated with shows like MTV roadies
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2. DISTINCT SEGMENTS
Traditionally, the motorcycle market has been seen ascomprising three distinct segments :
1. Entry (100 cc engine capacity, 65 % of the market)
2. Executive (125-135 cc, 20 % of the market)
3. Premium (150 cc, 15 % of the market)
Entry level for the rural market and the other two for the
urban markets.
Hero Honda, conventional segment said, is strong in thesegment of entry segment with 80 % market share and
weak in the other two where its share ranges between 15-
20 %.
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Hero Honda found that these were not watertight categories.
Customers trade freely between a top-end 100 cc motorcycle
and a low end 125 cc motorcycle or between a premium 125 cc
motorcycle and a basic 150 cc motorcycle.
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3. HOLISTIC MOTORCYCLE EXPERIENCE
Hero Honda realized that a customer does look at the engine
capacity, but what he finally seeks is a holistic motorcycle
experience.
So, Hero Honda decided to look at the motorcycle market notfrom engine capacity but from the customers point of view
how the brackets the products available in the market using
his demographic and psychographic profile.
This took the company to unchartered waters of consumer
profiling what is his lifestyle attitude, what he holds dear in
life and so on.
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Hero Hondas in scheme of things are :
1. Entry (35% of the market)
2. Deluxe (50% of the market)
3. Premium (15% of the market)
The company has a lions share of the first two segments anda growing share of the premium segment.
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4. PRODUCT DEVELOPMENT
Hero Hondas different view of looking at the market and its
share has become a cornerstone in its strategy
It now shapes the companys product development, placementand promotion moves.
Hero Honda comes out with new motorcycles, variants and
refreshes keeping the customer profile of each segment in mind.
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5. UPTO DATE CUSTOMER FEEDBACK
According to the VP (Sales and Marketing), Hero Honda
doesnt moves an inch without customer feedback.
On behalf of Hero Honda, TNS talks to thousands of customers
every month to monitor brand health share of mind, brandchoice, share of voice, loyalty indices etc.
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6. INCREASED ADVERTISING ANTE
Hero Honda has upped the advertising ante in the last couple
of years.
Hero Honda has decided to focus more on market shares
rather than profit and also it would offer no discounts on itsmotorcycles.
Also, the company did some aggressive planning and last year
launched a 3 min advertisement on television to mark its silver
jubilee.
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7. TARGET CUSTOMERS PREFERENCE
Research showed that Hero Hondas target customers (in the agebracket of 18-35 years) relate to four subjects : Cricket, Music,
Movies and Adventure.
Thus, it roped in film stars Hrithik Roshan and Priyanka Chopra,
joined the Indian Premier League sponsorship bandwagon and got
associated with TV shows like sa re ga ma pa
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8. VARIANTS EVERY YEAR
The lifecycle of motorcycles has dropped down sharply in thelast few years.
Hence, none of the 13 motorcycles of Hero Honda in the market
is not more than2
years old.
The company has decided to launch 8 or 9 new products,
variants or refreshes every year.
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9. RURAL RESCUE
Around mid2
007, consumer finance companies started to pullthe plug on automobile finance as bad loans had risen with
alarming rapidity.
As a result, 2007-08 was bad for industry. But, Hero Honda
found that its sales were flat and not declining.
This was because of strong sales in rural market.
500 sales representatives were taken on a mission Har gaon,
Har angan.
Each wave has resulted in additional sales of 15,000 16,000
motorcycles.
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10. INCREASED NUMBER OF TOUCH
POINTS
Hero Honda has decided to rapidly ramp up its touch points
with customers show rooms , service centres and so on.
The number has rose from 2000 in 2006 to 3500 now.
The plan is to add at least 500 every year.
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RESULTS AND FINANCIAL ANALYSIS
1) SALES
Despite a slow down in the two-wheeler industry, sales of
the company grew by 11.53 per cent.
The company ended the year with a market share of about
57%
Hero Honda sold 37,22,000 units in 2008-09 compared to
33,37, 142 units in 2007-08
In value terms, total sales ( net of excise duty) increased by
19.2 percent to Rs. 12319 crores from Rs. 10332 crores in
2007-08.
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2) PROFITABILITY
The companys earning before interest depreciation and
taxes (EBIDTA) margins increased from 13.33 per cent in
2007-08 to 14.16 per cent in 2008-09 and the operating
profit (PBT before other income) increased by 28.4 per cent
from Rs 1221.79 crores in 2007-2008 to Rs1568.86 crores in2008-09.
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3) CASH FLOWS
Growth in sales turnover and better efficiencies in working
capital management improved the cash flow from
operations from Rs. 1211.78 crore to Rs 1359 crore.
4) CAPITAL EXPENDITURES
During the year, the company incurred a capital expenditure
of Rs. 318.05 crore. The funds went into the expansion of
operations
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5) RAW MATERIALS
Softening metal prices particularly aluminum and nickel in
second half of the year combined with better sales
realization to bring down the share of material costs
considerably.
Raw material costs came down from 71.6 per cent to 71.0per cent
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CONSIDER THE STATS.
Last August, Hero Hondas market share was around 54%. The credit squeeze had taken the breadth out of bike market
Yet in the next 12 months, Hero Honda increased its market
share to 59%.
It clocked one of its best numbers in the first quarter of thisfiscal selling one million units for the first time in a quarter.
Hero Hondas attractively priced 100cc motorcycles changed
that game as the market moved slowly and surely towards
bikes.
When the slowdown hit, the entire market suffered a severe
setback, yet Hero Honda actually increased its market share,
totaling up one million units in the just ended
quarter.
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FUTURE PLANS NEW LAUNCHES
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CHALLENGES AHEAD
There might be a difficulty as Hero Honda has launched its 100
cc motorcycle.
Tata Nano, can take some customers away from two wheelers.
The company has tasked its engineers to come out with a low-
cost motorcycle, one that combines the price of a moped and
the performance of a motorcycle through value engineering and
tax planning.
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TO CONCLUDE
Our performance in the month of June, as indeed in the first quarter, is very satisfying, coming as it does on the back of a
high base last year. Our strategy has been driven by innovation
in every sphere of our activity building a robust product
portfolio across categories, exploring new markets, aggressively
expanding the network and continuing to invest in brand
building activities. Going forward, we will continue to stay true
to our strategy, and carry on setting new benchmarks.
Mr. Anil Dua,Sr. Vice-President
(Marketing & Sales)