Hero Honda Strategy Report

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TWO WHEELER INDUSTRY HERO HONDA
in partial fulfillment for the course on
competition & strategy
submitted to
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On
March 24, 2008

Indian Institute Of Management, Bangalore
Table of Contents
1.The Indian Two-Wheeler Industry2
1.1Origins2
1.2. Growth2
1.3Demand drivers2
2.Structural Analysis of the Two-wheeler Industry3
2.1 Industry Segments3
2.2 Industry Trends3
2.2 Five-Forces Analysis of the Two-wheeler industry4
Overall Attractiveness of the Industry6
3.Hero Honda7
3.1 Introduction7
3.2 Product Mix8
3.3 Profitability9
3.4 Competitive Advantage10
3.5SWOT Analysis11
3.5.1 Strengths:11
3.5.2Weaknesses:11
3.5.3Opportunities:12
3.5.4Threats13
4.Challenges and Recommendations15
4.1INDUSTRY SPECIFIC PROBLEMS15
4.1.1Competition Eroding Margin15
4.1.2Slowdown in Growth16
4.1.3Entry of low-priced car17
4.1.4New Emission Norms18
4.2COMPANY SPECIFIC PROBLEMS19
4.2.1 Improving Product Mix19
4.2.2Export22
4.2.3 Ageing Product line23
4.3 Summary of Strategy23
4.4 Budgetary Plan24
4.5 Timeline for Implementation25
5.Contingency Plan26

1. -------------------------------------------------
The Indian Two-Wheeler Industry
1.1 -------------------------------------------------
Origins
In the post-independence decade, motorcycles were shipped from Royal Enfield Company, UK and assembled in India and were used for military purposes, notably for use on the border highways. For most of the 1950’s, Automobile Products of India dominated the two-wheeler scene, along with Enfield. Private players’ entry was deterred to a large extent by the laborious process of obtaining licenses. This led to large government control in investment. -------------------------------------------------

1.2. Growth
During the License Raj, growth was quite subdued, and foreign investments were not encouraged. The industry leaders were Enfield (350cc bikes) and Escorts (175cc bike). In the mid 1980’s, foreign investments were allowed, and Indo-Japanese joint ventures emerged. 2.3 -------------------------------------------------

Demand drivers
The demand drivers for growth of two-wheeler industry are:
* Need for a reliable alternative to the inadequate public transport * Availability of vehicle loans
* Increasing per capita income.
* Explosion in the number of models of two-wheelers for different needs

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2. -------------------------------------------------
Structural Analysis of the Two-wheeler Industry
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2.1 Industry Segments
The two-wheeler industry consists of three segments in different products: scooters, motorcycles, and mopeds.

Figure 2.1 Two wheeler Industry segments
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2.2 Industry Trends
Scooters dominated the two-wheeler market for several decades, with 70-80 % of total two-wheeler sales. However, the trend reversed, in the 90’s, with motorbikes gaining in popularity and capturing a large share of the market. Consumers became increasingly aware of the fact that motorcycles were more fuel efficient and technologically superior.

Figure2.2 : Trend sales in different segment of two wheeler industry

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2.2 Five-Forces Analysis of the Two-wheeler industry

THREAT OF NEW ENTRANTS:

THREAT OF SUBSTITUTES

RIVALRY

BARGAINING POWER OF SUPPLIERS

BARGAINING POWER OF BUYERS

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Overall Attractiveness of the Industry
A complete analysis shows that the industry is moderately attractive, with sales showing a declining trend.

3. -------------------------------------------------
Hero Honda...
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