MINI PROJECT REPORT FOR MARKETING MANAGEMENT

BY

PARTHIBAN R

Reg No:0929123

(DEPARTMENT OF MANAGEMENT STUDIES)

MBA

SECTION B

INTRODUCTION OF HERO HONDA

"Hero", the brand name symbolizing the steely ambition of the Munjals brothers, came into being in the year 1956.

From a modest manufacturer of bicycle components in the early 1940's to the world's largest bicycle manufacturer today, the odyssey was fueled by one vision - to build long-lasting relationships with everyone, including workers, dealers and vendors. This philosophy has paid rich dividends through the years.

Hero, a name synonymous with two wheelers in India is today a multi-unit, multi-product, geographically diversified Group of companies. Through fully integrated operations, the Munjals roll their own steel, make critical components such as free wheels for their bicycles, and have the foresight to simultaneously diversify into myriad ventures, like product designing, IT enabled services, finance and insurance, just to name a few.

Like every success story, Hero's saga contains an element of spirit and enterprise; of achievement through grit and determination, coupled with vision and meticulous planning. Throughout its success trail, the Hero Group and its members have displayed unwavering passion of setting higher standards for themselves and delivering simply the best to their customers.

The Hero Group philosophy is: "To provide excellent transportation to the common man at easily affordable prices and to provide total satisfaction in all its spheres of activity." Thus apart from being customer-centric, the Hero Group also provides its employees with a fine quality of life and its business associates with a total sense of belonging. "Engineering Satisfaction" is the prime motive of the Hero Group and it has become a way of life and a part of the work culture of the Group.

This is what drives the Group to seek newer vistas, adopt faster technology and create quality driven products to the utmost satisfaction of customers, partners, dealers and vendors. Today the Hero Group has a number of accolades and achievements to its credit … yet consumer requirements and newer technologies provide fresh challenges every day, and at Hero the wheels of progress continue to turn...

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 Honda’s 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.

MILESTONES OF HERO HONDA

Hero's success saga contains an element of spirit and enterprise; of achievement through grit and determination, coupled with vision and meticulous planning.

1956 Hero Cycles Limited is established.

1961 Rock man Cycles Industries Limited established, which is today the largest manufacturer of bicycle chains and hubs.

1963 It pioneered bicycle exports from India - a foray into the international market.

1971 Highway Cycles was set up to meet the demands of Hero Cycles. It is today the largest manufacturer of single speed and multi-speed freewheels.

1975 Hero Cycles Limited became the largest manufacturer of bicycles in India.

1978 Majestic Auto Limited was formed and the Hero Majestic Moped was introduced.

1981 Munjal Castings established.

1984 Hero Honda Motors Limited established in joint venture with Honda Motors of Japan, to manufacture motorcycles.

1985 Munjal Showa Limited established to manufacture shock absorbers and struts and is today among the top two shock absorber manufacturing companies in India.

1985 The 100 cc Hero Honda Motorcycle arrived and by 1988 was the No. 1 among all motorcycles in India.

1986 Hero Cycles Limited entered the Guinness Book of Records as the largest bicycle manufacturer in the World.

1987 Hero Motors, a division of Majestic Auto Limited set up in collaboration with Steyr Daimler Puch of Austria.

1987 Gujarat Cycles Limited, now known as Munjal Auto Industries Limited was established to manufacture and export state-of-the-art bicycles and allied products in its fully automated plant at Waghodia.

1987 Sunbeam Auto Limited, earlier a unit of Highway Cycles Limited, established as an ancillary to Hero Honda. It is the largest die casting plant in India.

1988 Introduced "Hero Puch" from Hero Motors Limited. This revolutionary machine immediately set new records of petrol efficiency and usable power in 50 - 65 cc machines.

1990 Hero Cold Rolling Division established and is one of the most modern steel cold rolling plants.

1991 Hero Honda receives National Productivity Council's Award.

1991 Hero Honda receives the Economic Times - Harvard Business School Association Award against 200

contenders.

1992 Munjal Showa Limited receives National Safety Award.

1993 Hero Exports established as the International Trading Division for Group and non-Group products.

1993 Hero Motors becomes Indias largest exporter of two wheelers

1995 Hero Corporate Services Limited as the service segment for the Hero Group Companies, ancillaries, suppliers, dealers and other associates.

1996 - Hero Winner, a large-wheeled scooter was introduced by Hero Motors Limited with a choice of 50 cc and 75 cc engines.

1996 Munjal Showa Limited receives British Council's National Safety Award.

1998 - Hero Briggs and Stratton Auto Private Limited was set up to produce 4-stroke two-wheeler engines in various cubic capacities.

1998 Munjal Auto Components established to manufacture gear shafts and gear blanks for motorcycles.

2000 The Hero Group diversifies into IT and IT enabled services through its service segment - Hero Corporate Services Limited.

2000-2001 Hero Honda emerges as the market leader in motorcycles with sales of over a million motorcycles and a strong market share of 47%.

2001 Hero Global Design established to offer engineering services in CAD/CAM/CAE related to New Product Development, Design, Engineering and Manufacturing.

2002 Hero Cycles ties up with National Bicycle Industries, part of Matsushita Group to manufacture high-end bicycles.

2002 Fastener World Established.

2002 Easy Bill Established to offer utility bill collection & retail services.

2003 Tie up with Livebridge Inc., USA.

2004 Tie up with Bombardier - Rotax GmbH for scooter engines.

2004 Tie up with Aprilia Scooters, Italy.

2004 Hero Honda continues as the World's largest manufacturer

of two-wheelers with annual sales volume of 2.07 million motorcycles and a market share of 48%.

2004Retail Insurance business established.

2004HeroITES, a division of HeroCorporate Service Limited hived off as a division of new company Hero Management Service Limited.

2005HeroITES strengthens its relationship with ACS,USA,USD 5.0 billion market cap and Fortune 500 company.

2006 Hero Honda enters the scooter segment, launches 100cc "Pleasure"

2006 Hero Honda crosses a unit sales threshold of 3.0 million motorcycles

2006Hero Group celebrates Golden Jubilee year since inception.It was commemorated by sales of over 15 million motorcycles & over 100 million bicycles.

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, MrBrijmohanLallMunjal 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 two-wheelers 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.

CAREER

Hero has continuously strived for synergy between technology, systems and human resources, to provide products and services that meet the quality, performance and price aspirations of its customers. While doing so, it has maintained the highest standards of ethics and social responsibility, has constantly innovated products and processes and developed teams that keep the momentum in order to take the Group to new heights.

In the forefront of the two-wheeler and auto-components industry in India, the Hero Group is driven by the vision of providing technologically advanced and affordable transport solutions. In doing so its employs and scouts for state-of-the-art technology and systems.

At Hero, new management strategies, techniques and manufacturing processes are constantly adapted. The work culture at the Hero Group revolves around building relationships - be it with workers, vendors or dealers. All those who come to work within the fold of the Hero Group are offered job security and growth opportunities, both personally and professionally.

GROWTH MODELS

The Hero Group has done business differently right from the start and that is what has helped us to achieve break-through in the competitive two-wheeler market. The Group's

low key, but focused, style of management has earned the company plaudits amidst investors, employees, vendors and dealers, as also worldwide recognition.

The growth of the Group through the years has been influenced by a number of factors:

The Hero Group through the Hero Cycles Division was the first to introduce the concept of just-in-time inventory. The Group boasts of superb operational efficiencies. Every assembly line worker operates two machines simultaneously to save time and improve productivity. The fact that most of the machines are either developed or fabricated in-house, has resulted in low inventory levels.

In Hero Cycles Limited, the just-in-time inventory principle has been working since the beginning of production in the unit and is functional even till date. The raw material vendors bring in the goods get paid instantly and by the end of the day the finished product is rolled out of the factory. This is the Japanese style of production and in India, Hero is probably the only company to have mastered the art of the just-in-time inventory principle.

ANCILLARISATION:

An integral part of the Group strategy of doing business differently was providing support to ancillary units. There are over 300 ancillary units today, whose production is dedicated to Hero's requirements and also a large number of other vendors, which include some of the better known companies in the automotive segment. The Munjals have gone much beyond the conventional definition of ancillarisation, making it a point to extend technical and managerial support to these ancillaries. These ancillary units are manned by friends, relatives, ex-employees or close associates of the Munjals family since the Group patriarch, MrBrijmohanLall, "… never wanted to march alone."

EMPLOYEEPOLICY:

Another Striking feature within the Hero Group is the commitment and dedication of its workers. There is no organized labour union and family members of employees find ready employment within Hero. The philosophy with regard to labour management is "Hero is growing, grow with Hero." When it comes to workers' benefits, the Hero Group is known for providing facilities, further ahead of the industry norms. Long before other companies did so, Hero was giving its employees a uniform allowance, as well as House Rent Alowance (HRA) and Leave Travel Allowance (LTA). Extra benefits took the form of medical check-ups, not just for workers, but also for the immediate family members.

DEALER NETWORK:

The relationship of the Munjals with their dealers is unique in its closeness. The dealers are considered a part of the Hero family. A nation-wide dealer network comprising of over 5,000 outlets, the Munjals have a formidable distribution system in place. Sales agents from Hero travels to all the corners of the country, visiting dealers and send back daily postcards with information on the stock position that day, turnover, fresh purchases, anticipated demand and also competitor action in the region. The manufacturing units have a separate department to handle dealer complaints and problems and the first response is always given in 24 hours.

FINANCIAL PLANNING:

The Hero Group benefits from the Group Chairman's financial acumen and his grasp on technology, manufacturing and marketing. Group Company, Hero Cycles Limited has one of the highest labour productivity rates in the world. In Hero Honda Motors Limited, the focus is on financial and raw material management and a low employee turnover.

CONSOLIDATED FAMILY BUSINESS:

The Hero Group is a strong family run business - there is no other Group that has so successfully managed to stay together for nearly 50 years. The system is to bring in any new family member, coming of age, within the fold of the existing business or set him up in a new business. The third generation is already actively involved in existing as well as the new initiatives within the Group. The Group's future is being consolidated with the same zeal by the second and the third generations of the family, aided by workers who typify the hardy spirit of the Punjab.

DIVERSIFICATION:

Throughout the years of mammoth growth, the Group Chairman, MrLall has actively looked at diversification. A significant level of backward integration in its manufacturing activities has been substantial in the Group's growth and led to the establishment of the Hero Cycles Cold Rolling Division, Munjal and Sunbeam Castings, Munjal Auto Components and Munjal Showa Limited amongst other component-manufacturing units.

Then there were the expansion into the automotive segment with the setting up of Majestic Auto Limited, where the first indigenously designed moped, Hero Majestic, went into commercial production in 1978. Then came Hero Motors which introduced Hero Puch, in collaboration with global technology leader Steyr Daimler Puch of Austria. Hero Honda Motors was established in 1984 to manufacture 1000 cc motorcycles.

The Munjals also took a foray into other segments like exports, financial services, information technology, which includes customer response services and software development. Further expansion is expected in the areas of Insurance and Telecommunication.

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.

Let’s compare scooters from all major manufacturers from once king of scooter market Bajaj to Japanese Suzuki’s and Hondas.

The Group has undertaken a steady up gradation of technologies and there has been diversifications and setting up of newer establishments to meet stringent international standards.

At the core of it all is a customer-centric scheme of policies and production ... and the bottom line is to "Add Value while Engineering Satisfaction."

Market segmentation, product differentiation and product positioning vs other competitors

Scooter market is automotive market in India with 57 lakh units sold this quarter. This segment mainly concentrates on ladies and urban market where people like stress-free riding.

Scooters in India are not powerhouses as is in European Markets, where engine capacity exceeds 1000cc. few of the early scooters like Kinetic Honda which slowly eroded Bajaj’s market share had self start as killer feature.

These days even 100cc bikes have self starters and its no more marketable features. Manufacturers these days are looking to sell their products with features like front fueling, cell phone charger, under seat storage, etc.

SPECIFICATION:

ModelHero Honda Pleasure

Honda Activa

Honda Aviator

Suzuki Access

Kinetic Flyte

Bajaj Kristal

TVS Scooty Pep+

TVS Scooty Streak

Engine Capacity (cc)

102 102 102 124 124.6 95 87.8 90

Max Power (bhp @ rpm)

7 @ 70007 @ 7000

7 @ 70008.58 @ 7000

87.2 @ 7500

5 @ 6500

5 @ 6500

Max Torque (Nm @ rpm)

7.85 @ 5000

7.85 @ 5500

7.85 @ 5500

9.80 @ 5000

9.007.66 @ 5500

5.80 @ 4000

5.80 @ 4000

Max Torque (Nm @ rpm)

7.85 @ 5000

7.85 @ 5500

7.85 @ 5500

9.80 @ 5000

9.007.66 @ 5500

5.80 @ 4000

5.80 @ 4000

Ignition SelfSelf & Kick

Self & Kick

Self & Kick

Self & Kick

Self & Kick

Self & Kick

Self & Kick

Front Suspension

Bottom link spring loaded hydraulic damper

Bottom link spring loaded hydraulic damper

Telescopic

Telescopic

Telescopic with oil damping

Leading link co axial

NA NA

Rear Suspension

Swing arm with spring loaded hydraulic damper

Unit spring with spring loaded hydraulic damper

Unit spring with spring loaded hydraulic damper

Swing-Arm

Unit Swing-Arm

Trailing Arm single shock absorber with SNS

NA NA

Length (mm) 1750 1765 1802 1780 1790 NA NA NA

Width (mm) 705 715 707 650 670 NA NA NA

Height (mm) 1100 1130 1162 1125 1100 NA NA NA

Wheelbase (mm)

1240 1235 1256 1250 1260 NA 1230 1230

Ground Clearance (mm)

125 145 145 160 135 NA 135 135

Kerb Weight (kg)

104 NA 102.3 109 105 NA 95 95

Front Tyre3.5×10, 4PR/51J

3.5×10, 4PR

90/90-12 54J

90/100-103.5×10, 4PR

3.0×10, 4PR

3.0×10, 4PR

3.0×10, 4PR

Rear Tyre3.5×10, 4PR/51J

3.5×10, 4PR

3.5×10, 4PR

90/100-103.5×10, 4PR

3.0×10, 4PR

3.0×10, 4PR

3.0×10, 4PR

Front Brake (Dia mm)

Internal Expanding Shoe (130)

Drum (130)

Drum (130) or Disc (190)

Drum (130)

Drum (130)

Mech. Expanding Shoe (110)

Drum (110)

Drum (110)

Rear Brake (Dia mm)

Internal Expanding Shoe (130)

Drum (130)

Drum (130)

Drum (130)

Drum (130)

Mech. Expanding Shoe (110)

Drum (110)

Drum (110)

Fuel Tank Capacity (lt)

5 6 6 6.4 5 NA 5 5

Headlamp 35W 35W 35W 35W 35W 35W 35W 35W

Battery12V – 5Ah

12V – 5Ah

12V – 5Ah

12V – 5Ah

12V – 9Ah

12V – 5Ah

12V – 5Ah

12V – 5Ah

It’s clear from specifications TVS Scooty is the lightest and least powerful and Suzuki Access is the most powerful, all others fall in between this spectrum.

Now let’s look into features which are ground breaking and deal breaking.

FEATURES:

Model

Hero Honda Pleasure

Honda Activa

Honda Aviator

Suzuki Access

Kinetic Flyte

Bajaj Kristal

TVS Scooty Pep+

TVS Scooty Streak

Multireflector Headlamp Yes Yes Yes Yes Yes Yes NA NAPuncture Resistant (Tuff up) tube

Yes Yes Yes No No No No No

Storage Capacity 15 lt 15 lt 20 lt 20 lt 22 lt 22 lt 12 lt 12 lt

Front Fueling system No No No No Yes Yes No

No (but seat need not be opened)

Central Control/Lock No No No No Yes Yes No No

Mobile Charging No No No No Yes No No Yes

Disc Brake option No No Yes No No No No No

Front Telescopic suspension

No No Yes Yes Yes No No No

Distribution Strategy used to serve the Customer and Promotional Mix:

Focus on rural markets: Unlike peers, Hero Honda is actively focused on building its presence in rural markets. In December 2007, it launched a pan-India program called ‘HaarGaon, HaarAangan’ (every village, every house). As the program achieves critical mass, it will help the company to build a sustainable competitive advantage. Although it is difficult to segregate between urban and rural demand as the rural buyer also buys from urban dealers, the rural market contributes about 45% of Hero Honda’s domestic sales (based on company estimates).

Favorable demographics – lower penetration, higher income: The rural market isUnderpenetrated and offers huge opportunity for 2-wheeler players. As per NSSO 2005Data, household penetration of 2-wheelers in rural areas is 8% as against 23% in urbanAreas. This coupled with increasing income (driven by increase in farm income, farm loanWaiver, etc) and improving infrastructure augurs well for 2-wheeler demand in rural areas.Further, growth in relevant population (16-45 years) is estimated to be higher in rural areasat about 7% as against 5% in urban areas over FY05-10.

100cc bike apt for rural market: Lower cost of ownership and lower operating costAre the keys for success in rural markets? Hence, the economy segment bike (100cc) withA lower price point is most suitable for rural markets. We believe Hero Honda, with its80% market share in up to 125cc motorcycles is well placed to benefit from this.

Strong distribution network in rural market: Given the vast spread of rural market,Having a strong distribution network is imperative for deeper penetration into the hinterland.As a part of its rural strategy ‘HaarGaon, HaarAangan’, it is initially covering 18,000 ofThe targeted 23,360 villages with a population of over 5,000 and has appointed 500 speciallytrained rural sales executives at the dealership level. The company has already approachedMore than 1,00,000 opinion leaders in these villages through rural executives.

Improvement in product mix and market share: While Hero Honda continues toDominate the up to 125cc segment with 80% market share, it has gained market shareEven in the above 125cc segment by 400bp to 11.7% in the last two years. It has been ableTo gain market share in above 125cc segment driven by launch of new products over theLast two years. As a result, contribution of the economy segment has reduced from 97% inFY07 to 94% in FY09. Further, in the above 125cc segment, it now has more productsthan the incumbent market leaders.

THE SECRET BEHIND HERO HONDA'S SUCCESS

On the first of every month, two-wheeler companies disclose their sale figures for the previous month. May 1 was no different.   Hero Honda, the country's largest and most valuable two-wheeler company, said it logged sales of 370,575 two-wheelers in April, up 29.5 per cent from April 2008. Its closest rival, Bajaj Auto, said sales fell 24 per cent to 169,119 during the month. The gap between the two rivals had expanded to over 200,000. Not so long ago, Bajaj Auto was giving sleepless nights to Hero Honda. In September 2006, it had come close to displacing Hero Honda from the top slot. Hero Honda's rule as the leader of the Indian motorcycle market, second only to China in size, it looked would soon be history. The partnership with Honda of Japan (it provides technology and owns 26 per cent of Hero Honda) meant exports couldn't make up for loss of domestic market share. (Hero Honda's exports are restricted to markets

where Honda doesn't have a presence - Nepal, Bangladesh, Colombia and so on). There was palpable tension in the company. Left with no choice, it took a decision that changed its face forever. "We said we will focus on market share rather than profits," recollects Hero Honda Managing Director and CEO PawanMunjal.

I WILL USE THE STRATEGY TO INTRODUCE THE NEW PRODUCT IF I AM A MANAGER OF THE HERO HONDA COMPANY.

1. A product that nobody can get elsewhere.2. Closer or more convenient access to a desired product3. Better service.4. Better price.5. Better value.

o Differentiation strategy may be related to a product or service or to any marketing activity. But here the emphasis is on product Differentiation.

o Product differentiation: It involves “developing and promoting an awareness of difference between the advertiser’s product and other products”.

o Differentiated strategies include targeting, positioning and Segmentation.

o Positioning is all about a customers’ perception about the brand as being different from other brands of specific dimensions including Product attributes.

o This specialty can be associated with design, brand image, technology, Features, dealers, network, or customer service.

REFERENCES:

Wikipedia-

1. "Board of Directors". Hero Honda. http://www.herohonda.com/co_board_directors.htm. Retrieved 2009-10-15.

2. ab Share Manthan : http://www.sharemanthan.in/index.php/indian-companies/49-auto/2150-hero-honda

3. "Every Village, Every Home", Forbes 183 (12): 80, June 2008, ISSN 0015-69144. Forbes, none. "World's most reputed companies (pg.3, rank101 to 150)".

http://www.forbes.com/business/2006/11/20/leadership-companies-reputation-lead-managing-cx_hc_1120rep_list_3.html. Retrieved 2007-07-08.