We a group of 7 people from the Indian Institute of Technology, Patna present to you the Microeconomic Case Study on the Hero Cycles branch located in Bihta, Bihar. We worked upon our project as a part of the curriculum where we had to visit the branch interact with the manager and extract useful information from him for our study.

1. Costs of
Various Inputs
of Production
A study on Hero Cycles Limited, Bihta Branch

2. INTRODUCTION
❏ Hero Cycles was established on 1956 in Ludhiana, Punjab
❏ Today it is the largest producer of bicycle, producing 19,000
units per day and exporting them to 70 countries.
❏ Currently, the company has 2,800 dealership and 7,610
employees working under it.
❏ Hero’s has found it a place in the Guinness Book of World
Records for being the single largest producers of bicycles in
the year 1987.

3. SITE MAP
GHAZIABAD
● Market
Expansion
● Production of
aluminium cycles
BIHTA
● Estd. in 2014
● Assembly unit
● NorthEast India
● Economies Of
Scale and Cheap
Labour
LUDHIANA
● Main Branch
● Estd. in 1956
● Focuses on Research &
Development
Branches

4. THE BIHTA BRANCH
❏ The Hero Cycles Bihta was set up on 2014. With
Ludhiana branch and Ghaziabad branch by its side, the hero
cycle Bihta serves as a Assembly Unit.
❏ Bihta Branch makes a huge gross yearly profit even
though Ludhiana Branch has the maximum yearly Sale.

5. Why in Bihar ?
❏ To capture the market in
eastern parts of India Hero
cycles set up a unit in Bihta,
Bihar.
❏ Availability of cheap labour
and land provided by Bihar
government.
❏ Mega Industrial Zone
initiative had facilitated the
development of Hero factory.
❏ Cheap electricity and
transport costs.
❏ Cheapest Freight rates.

6. Economies of Scale

7. Inputs of Production

8. Land
❏ Hero Cycles, Bihta is established on a land of
7 acres.
❏ Initial Capital investment is 115 crores.
❏ Bihar govt. took an initiative for opening
factory in bihta.
❏ The main reason of opening branch in bihta is
cheap land and cheap electricity.

9. Labour
• Wages are on contract basis
• Cheapest Labour amongst all states
Types of Labour Wages(Approx) Percentage of labour
Skilled Labour Rs. 9000 8%
Semi skilled Labour Rs. 7500 12%
Unskilled Labour Rs. 6000 80%

10. Capital
• Total establishment cost Rs.115 Crore
• Total revenue of Rs. 271 Crore
• Om Prakash Munjal started hero cycles with a
capital of Rs 50,000 raised as bank loan

11. Entrepreneur
Pankaj M Munjal
Chairman and Managing Director of Hero Cycles, India

12. MARKET SHARE
● The cycle industry of India is an Oligopoly market with
hero cycles occupying most share.

13. Competitive Advantages
1. The Hero Company concentrates more on Villages as it
draws 60% of its revenue. It raises programs such as “Har
Gaon Har Angan”.
2. The R&D of Hero is highly responsive to the the market
changes.
3. Highest number of service centres across India. It has the
highest number of services center as well as highest sales
per dealer.
4. Speed in development of new product.
5. Availability and ease of access.

14. Advertisement Lead To...

15. Advertisement

16. Effect On Revenue

17. Data acquired from visit
Raw Materials
❏ Citizen bikes provides saddles, cycle plastic and
cycle handle.
❏ Pamtech Company is also an cycle ancillary company
which provides Raw Material to Hero Cycles
Cost of various inputs
❏ Cost of Tube = Rs. 54
❏ Cost of rims = Rs. 118
❏ Cost of bicycle chain = Rs. 126
❏ Yearly sales = Rs. 7.71 lac
❏ Annual Branch Turnover = Rs. 271 cr
❏ Average Revenue = Rs. 3154.91 cr

18. Calculations
Average cost
• Total cost of all bicycles/Quantity produced in a year
= Rs. 154 cr / 7.7 lakh
= Rs. 2000
Average Revenue
• Total revenue/Quantity produced
= Rs. 271 crore / 7.7 lac
= Rs. 3154.91

19. Team Members
Shreyas Taware 1701ME43
Vaibhav Gupta 1701ME51
Justin Barwa 1701ME48
Nandan Shah 1701EE23
Rishab Kumar 1701EE39
Sahil Aggarwal 1701EE56
Sachin Pandey 1701CS61