Industry Happenings• Hero Honda dissolved their joint venture in2010• Honda is the clear market leader in the fastestgrowing scooter segment with over 50% ofmarket share in the segment• Honda sells close to 100,000 units per month
Industry Happenings• 125cc motorbikes has become a distinctcategory• Intense competition in the premium segmentof motorcycles• By 2015-16 industry is expected to reachmaturity stage (ICRA)
Investment Required• Investment required for a new entrant isunknown as all the players are present formore then 2decades and investment requiredat that time cannot be compare to what isneeded today
Investment Required• Hero invested 400 crores for an additionalplant capacity of 750,000 units• Hero invested another 1100 crores for anotherplant for a capacity of 1.2 million• Hero invested another 500crores to expand itsexisting capacity to increase capacity ofanother 1 million
Expansion Plans• Hero Motocorp– 750,000 capacity plant in Rajasthan– 1.2 million capacity which will increase to 1.8million in next phase in Gujarat– 1 million in expanding existing plants• Bajaj Motors– 1.26 million in expanding existing plants• TVS– No such plans
Market Size• The current market size is 15.4 million units ason 2011-12• This is expected to reach 22 million units by2015-16 (ICRA)
CSFTo survive and prosper in an industry a firmmust meet 2 criteria1. What do our customers want?2. What does a firm need to do to survivecompetition?
CSFWhat do customers want?How does the firm survives thecompetition?Analysis of Demand•Who are our customers?•What do they want?Analysis of competition•What drives competition?•What are the main dimensions ofcompetition?•How intense is competition?•How can we obtain a superiorcompetitive position?Prerequisites for success
CSF• To keep customer satisfied and loyal• Clientele• Product Design• Market Segmentation• Differentiation• Servicing• Low cost factor
Recent Events• Mahindra recently entered scooter segment• Hero and Honda split– Both continue to operate in the market seperately
Future Outlook• By 2013 India will become largest 2 wheelermarket in India• India will over take China• India+ China+ Indonesia=60% of global 2wheeler market• Among these 3, only India post positivegrowth for FY 2012-13• Replacement demand will be key contributor
Future Outlook• Motorcycles:– The growth rate of entry price segment isexpected to be lower then the industry (below40,000)– Competition is likely to intensify in executivesegment (price 40,000-50,000)– Premium class segment is expected to grow at thefastest rate (above 50,000)
Future Outlook• Scooter:– Expected to increase the market share steadily– Expected to double in size by 2014-15– Segment to reach profitability due to expansion
HERO MOTOCORP• Hero MotoCorp Ltd. (Formerly Hero Honda MotorsLtd.) is the worlds largest manufacturer of two -wheelers, based in India.• In 2001, the company achieved the coveted positionof being the largest two-wheeler manufacturingcompany in India.
MANUFACTURING• Hero MotoCorp two wheelers are manufacturedacross three globally benchmarked manufacturingfacilities. Two of these are based at Gurgaon andDharuhera which are located in the state of Haryanain northern India. The third and the latestmanufacturing plant is based at Haridwar, in the hillstate of Uttrakhand.
MILESTONES• 1983 – Joint Collaboration Agreement with HondaMotor Co. Ltd. Japan signedShareholders Agreement signed.• 1985 - First motorcycle "CD 100" rolled out.• 1987 - 100,000th motorcycle produced.• 1992 - New motorcycle model - "CD 100 SS"introduced 500,000th motorcycle produced.• 1994 - New motorcycle model - "Splendor"introduced. 1,000,000th motorcycle produced.
MILESTONES• 1998 - 2,000,000th motorcycle produced.• 1999 - New motorcycle model - "CBZ" introduced.• 2000 - 4,000,000th motorcycle produced.• 2003 - Becomes the first Indian Company to cross thecumulative 7 million sales mark.• 2005 - Hero Honda is the World No. 1 for the 4thyear in a row.• 2011 - New licensing arrangement signed betweenHero and Honda (Hero Honda is renamed as Hero)
CSR• Raman Munjal Vidya Mandir• Raman Munjal Memorial Hospital• Raman Munjal sports Complex• Vocational Training Complex• Adult Literacy Mission• Marriages of unprivileged girls• Rural Health Care• Safe side program
LISTING INFORMATIONThe Company is listed in both:-• National Stock exchange• Bombay stock exchange
PRODUCTSHERO TWO WHEELERS• Passion X Pro• IGNITOR• MAESTRO• IMPULSE• HF-DAWN• HF-DELUXE• PLEASURE• SPLENDOR +
Advantages Of Corporate sales atHERO• Single window processing for delivery at multiplelocations• No running around for documentation• Attractive finance options• Hero MotoCorp Passport - Unique CRM Program• Bulk Incentive Schemes
SPORTS PRODUCTSHERO also make sports products like BAT.• Kashmir Willow• English Willow
Hero Motocorp• Past strategy:– Focus on economy segment with splendor andpassion being the flagship product– Minimal presence in the premium segment• Impact– Largest selling 2 wheeler in the world– Started losing due to market evolution
Hero Motocorp• Current Strategy– Fully utilize the domination in the economysegment– Have bigger presence in the premium segment
Hero Motocorp• It is enjoying 3% advantage in terms of cost ofgoods sold over Bajaj• Still their bottom line is 6% thinner then Bajaj• Their operating and non operating cost is 9%dearer then Bajaj• This is because of high non cash expenseswhich is likely to go up with 2 new plants• Their utilization of capacity is the mostoptimum among the three
Hero Motocorp• They have a robust collection mechanism whichensures their collection period is by far the bestin the industry• Their production speed is the fastest among the 3players• They are also making their supplier happy byhaving the best payment period• Due to the first 2 points their cash conversioncycle is the best despite getting less bargain fromsuppliers
Hero Motocorp• They are able to roll money 3 times beforepaying to the supplier• They are able to generate 58 paisa out ofevery rupee invested
BAJAJ MOTORS• Bajaj Motors Limited was incorporated in 1986 andstarted it’s commercial productionin 1989.• BAJAJ MOTORS was started as a machining unit withbackward integration inForgings of Auto Components• They are into manufacturing of auto componentsmainly precision engine & transmission componentsfor Two Wheelers, Four Wheelers, Tractors and otherHeavy goods.
BAJAJ MOTORS• Located on the Delhi-Jaipur Highway on 39-40milestone, Bajaj Motors Limited is ISO9001:2000certified & recommended for TS-16949, ISO-14001 certifications from TUVGmBH, Germany. Since its inception in 1986, BAJAJMOTORS has its specialization in Machining for Autocomponents specifically Precision EngineComponents.
MILESTONES• 1989 - Start of Bajaj Motors Ltd• 1995 - Establishment of Current Location BajajMotors Ltd.• 1998 - Introduction of Flexible ManufacturingConcept.• 2000 - Establishment of Microtek Forgings asBackward Integration.• 2004 - Started Export Activities• 2005 - Iintegrated Management System Certificationof BML, from TUV, Germany.
MILESTONES• 2006 - Establishment of Ferrous Casting, as backwardIntegration.• 2007 - IMS Certification for Microtek ForgingEstablished Aluminium Forging. Plant at Pantnagar.• 2010- Plant at Haridwar for HHML .• 2011 - New Dedicated Export Line for Machining inIMT Manesar,Gurgaon.• 2012 - New Forgong Plant at Bawal Industrialarea, Gurgaon.
FacilitiesThe facilities can be divided in 3 categories:-• Machining• Forging• Casting
Bajaj Motors• Past strategy:– Full reliance on scooter segment• Impact:– Was numero uno when scooter was a dominantsegment– Lost out after the entry of motorcycles in themarket
Bajaj Motors• Current Strategy– Target the youth with sporty bikes
Bajaj Motors• Need to reduce the cost of goods sold which isnow as high as 71%• Strategy of backward integration can bedeployed• Need to re enter the fastest growing scootersegment• Need to capture more market share if theywant to make more optimum use of theircapacity
Bajaj Motors• Their collection period is 4 times more lagthen Hero but still better then TVS• The production speed is just above 30%slower then Hero• They are getting the best terms with theirsuppliers• Like Hero they are also enjoying negative cashconversion cycle but a week worse then Herodue to the first 2 points
Bajaj Motors• They are able to roll the money around 1.5times before paying it to the suppliers• They are generating 50 paisa out of everyrupee invested worst among the 3
TVSTVS Motor Company is the third largest two-wheelermanufacturer in India and one among the top ten inthe world, with annual turnover of more than USD 1billion in 2008-2009, and is the flagship company of theUSD 4 billion TVS Group.
Milestones• 1980 – Company launched the first two seater.• 1984 – Company launched 100cc bike and tookfirst mover advantage.• 1994 – Company launched scooty for women.• 1996-97 – They introduced green concept byintroducing 110 cc Shogun• 2000 – Introduced 150 cc, 4 stroke motorcycle• 2002 – They won total quality managementaward
Continued• 2005-06 – It launched its first Indonesian Plant.• 2007 – It introduced 7 new products.• 2009-10 – It introduced Jive- auto-clutch bike.
International PerformanceTVS Motor Company has been awarded Star Performer- Silver Shield in two/three wheelers category, by EEPCIndia, for excellent export performance for year 2007-08.
ContinuedMopeds• TVS XL Super• TVS XL Heavy Duty.
Service• Extended Warranty• Xpress Service• Online Service booking
TVS• Past strategy– Focus on rural/semi urban population• Impact– Did poorly in urban areas– Started losing due to• Population Migration• Increase in purchasing power
TVS• Current strategy– Maintain dominance in rural/ semi urbanpopulation– Focus on economy segment in urban population– Presence in premium segment
TVS• Need to expand its capacity so as to not tolose market share• Can take advantage of its financialleveragability which is as low as 0.61• Need to reduce its cost of goods sold as it ismost expensive for them• They need to get their expansion plan in place
TVS• The robustness of their collection mechanism issimilar to that of Bajaj• The production process is where they are losingbig time with the other which is more thendouble then that of Bajaj and more then triplethen that of Hero• Their payment terms with suppliers are similar tothe other 2• Especially due to the production speed it is theonly company with a positive cash conversioncycle
TVS• Their money is locked in the system for 3 days• They are generating as high as 60 paisa out ofevery rupee invested which is the best in theindustry
SWOT for HERO• Strengths– Largest manufacturer of two wheelers in India– Many service stations– Easy availability of replacement part/spare parts– Products for all the segments
SWOT for HERO• Weakness– After the demerger of Honda from HeroHonda, Hero will not be getting the technicalexpertise of Honda in motor engineering– Capacity utilisation is almost 100%– The word Hero Honda and Honda becamesynonymous for normal people– Hero and Honda have almost similar type ofmodels
SWOT for HERO• Opportunity– Increase in the sale of sports bike segment– Credit financing by different banks is increasing forthe 2 wheeler purchaser– Increase in disposable income
SWOT for HERO• Threat– Increase in fuel price– Inflation– Economic slowdown
SWOT for Bajaj• Strengths– In the last few years they are the innovators intechnology (specially for the brand Pulsar)– Providing technology which can make fuelefficiency bike– Leader in 150+ cc segments
SWOT for Bajaj• Weakness– Not full capacity utilisation– Not strong in all the categories– Do not have any presence in the moto-scootersegment– Worst asset turnover ration in the industry
SWOT for Bajaj• Opportunity– Increase in the sale of sports bike segment– Credit financing by different banks is increasing forthe 2 wheeler purchaser– Increase in disposable income– Can re-enter the fastest growing segment
SWOT for Bajaj• Threat– Increase in fuel price– Inflation– Economic slowdown
SWOT for TVS• Strengths– Strong in the moped segment– Gaining popularity in the 100 cc segment– Capacity utilisation is 100%
SWOT for TVS• Weakness– Very less product portfolio in the motorcyclesegment– Least financial leveragability in relation to industrystandard– No expansion plans
SWOT for TVS• Opportunity– Increase in the sale of sports bike segment– Credit financing by different banks is increasing– Increase in disposable income
SWOT for TVS• Threat– Increase in fuel price– Inflation– Economic slowdown– Migration of people from moped to motorcycle
PLC of Scooters• Scooters enjoyed a pretty long stay in themarket• Decline started after the coming up of motorcycles scooters had reached the start ofdecline stage• With scooty, honda activa,aviator the scootermarket re-emerged and PLC got a new curve
Threat of New EntrantsVery Low because• Entry barriers are very high• Product falls under the category of high level ofinvolvement• The biggest challenge is setting up sales servicecenter, which is very hard for a new entrant• Well established players are already existing• Industry is consolidated• Economies of scale
Threat of Buyer’s Bargaining PowerVery High because• So many options are available to buyers• Substitutes are available• Supply-demand mismatch in the industry• Supply is greater than the demand
Threat of Suppliers Bargaining PowerIn automobile industry sellers can havebargaining power in the following areas• Metal• Tires• Batteries• Auto components
Threat of Suppliers Bargaining Power• Metal : Prices are determined in internationalmarkets, chances of Bargaining power is less• Tires: They are 40 listed tire manufactures inIndia, Industry is fragmented. Bargaining powerof suppliers is low• Batteries: Industry is fragmented. Bargainingpower of suppliers is low• Component Manufacturers: Industry isfragmented. Bargaining power of suppliers is low
Intensity of CompetitionIntensity of competition is high• Aggressive competent players are alreadypresent• 7 players are present in commuter segment• Manufacturing capacity already exceedingdemand
Threat of Substitutes• Local trains• Cars• Electrical Vehicles• Public transport
Threat of SubstitutesThe substitutes in one form or other have thefollowing attributes• Relative price of substitutes is cheaper• Relative quality of substitutes is higher• Switching costs is lower
Threat of SubstitutesWhy people are switching to Local trains?• Safety• Affordability• Time saving• Cost• Pollution
Threat of SubstitutesWhy people are switching to Cars?• Safety• Comfort• Status Symbol
Threat of SubstitutesWhy people are switching to Public Transport?• Safety• Affordability• Time saving• Cost• Pollution
Threat of SubstitutesWhy people are switching to Electrical Vehicles?• Environmental Friendly• Maintenance cost
Threat of SubstitutesReasons for Electrical Vehicles not doing well ?• Electrical vehicles at present not competitivewith respect to present petrol runningvehicles• No established player is offering Electricalvehicles
What 2 wheeler companies can do ?Fill the gaps in their product portfolio– Electrical vehicles for environment friendly– Launch a new product which takes care of safetyand comfort