Assignment to Study Strategic Plans of Hero Motocorp

INDIVIDUAL REPORT ONSTRATEGIC PLANS OF HERO

MOTOCORP.

BY

Soumya Sundar DashM-13-28

1st Year DoMS, RGIPT

CONTENTS

1. INTRODUCTION.

2. VISION, MISSION & STRATEGY.

3. ANALYSIS OF BUSINESS ENVIRONMENT.

4. SWOT ANALYSIS.

5. FINANCIAL STATEMENTS.

6. SUGGESTED CHANGES IN STRATEGY.

7. CONCLUSION.

8. BIBILOGRAPHY.

INTRODUCTION

Hero MotoCorp Ltd., formerly Hero Honda, is an Indian motorcycle and scooter manufacturer based in New Delhi, India. The company is the largest two wheeler manufacturer in the world. Hero Honda started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan.“Hero” is the brand name used by the Munjal brothers for their flagship company, Hero Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited at Dharuhera, India. Munjal family and Honda group both owned 26% stake in the Company. During the 1980s, the company introduced motorcycles that were popular in India for their fuel economy and low cost. A popular advertising campaign based on the slogan 'Fill it – Shut it – Forget it' that emphasized the motorcycle's fuel efficiency helped the company grow at a double-digit pace since inception. In 2001, the company became the largest two-wheeler manufacturing company in India and globally. The technology in the bikes of Hero MotoCorp (earlier Hero Honda) for almost 26 years (1984–2010) has come from the Japanese counterpart Honda. Hero MotoCorp has three manufacturing facilities based at Dharuhera and Gurgaon in Haryana and at Haridwar in Uttarakhand. These plants together have a production capacity of 6.9 million 2-wheelers per year. Hero MotoCorp has a sales and service network with over 3,000 dealerships and service points across India. It has a customer loyalty program since 2000, called the Hero Honda Passport Program. Hero MotoCorp has five joint ventures or associate companies, Munjal Showa, AG Industries, Sunbeam Auto, Rockman Industries and Satyam Auto Components, that supply a majority of its components.

TIMELINE

1956: Formation of Hero Cycles in Ludhiana(majestic auto limited)

1975: Hero Cycles becomes largest bicycle manufacturer in India.

1983: Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed

1984: Hero Honda Motors Ltd. Incorporated. 1985: First motorcycle "CD 100" rolled out 1987: 100,000th motorcycle produced 1989: New motorcycle model - "Sleek" introduced 1991: New motorcycle model - "CD 100 SS" introduced,

500,000th motorcycle produced 1991: Hero Honda motorcycle CD 100 SS launched. 1994: Hero Honda motorcycle Splendor launched, 1000000th

motorcycle produced. 1997: Hero Honda motorcycle Street launched. 1999: Hero Honda motorcycle CBZ launched. 2001: Hero Honda motorcycle Passion and Hero Honda Joy

launched. 2002: Hero Honda motorcycle Dawn and Hero Honda

motorcycle Ambition launched. Splendor has emerged as the World's largest selling model for the third calendar year in a row (2000, 2001, 2002)

2003: Hero Honda motorcycle CD Dawn, Hero Honda motorcycle Splendor plus, Hero Honda motorcycle Passion Plus and Hero Honda motorcycle Karizma launched. Becomes the first Indian Company to cross the cumulative 7 million sales mark

2004: Hero Honda motorcycle Ambition 135 and Hero Honda motorcycle CBZ launched. Hero Honda became the World No.

1 Company for the third consecutive year. Crossed sales of over 2 million units in a single year, a global record. Splendor - World's largest selling motorcycle crossed the 5 million mark. T

2005: Hero Honda is the World No. 1 for the 4th year in a row. 2006: Hero Honda is the World No. 1 for the 5th year in a row.

15 million production milestone achieved. 2007: Hero Honda is the World No. 1 for the 6th year in a row.

20 million production milestone achieved 2008: Hero Honda Haridwar Plant inauguration 2009: Hero Honda GoodLife Program launched 2011: New licensing arrangement signed between Hero and

Honda (Hero Honda is renamed as Hero). Launch of new refreshed versions of Glamour, Glamour Fi, CBZ Xtreme, Karizma & Crosses the landmark figure of 5 million cumulative sales in a single year

2012: New Models of Hero MotoCorp Maestro the Masculine scooter and Ignitor the young generation bike are launched.

2013: Hero MotoCorp unveiled line-up of 15 updated products including Karizma R, ZMR, Xtreme, Pleasure, Splendor Pro, Splendor iSmart, HF Deluxe ECO, Hero MotoCorp SuperSplendor, Passion Pro and Xpro, Glamour and Glamour FI etc. It also introduced three new technologies- Engine Immobilizer in new Xtreme, Integrated Braking System (IBS) in new Pleasure and i3S (Idle Stop and Start System) in new Splendor iSmart

VISION, MISSION & STRATEGY

VISION

The story of Hero Honda began with a simple vision - the vision of a mobile and an empowered India, powered by its two wheelers. Hero MotoCorp Ltd., company's new identity, reflects its commitment towards providing world class mobility solutions with renewed focus on expanding company's footprint in the global arena.

MISSION

Hero MotoCorp’s mission is to become a global enterprise fulfilling its customers' needs and aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand advocates.

The company will provide an engaging environment for its people to perform to their true potential. It will continue its focus on value creation and enduring relationships with its partners.

STRATEGY

Hero MotoCorp’s mission is to become a global enterprise fulfilling its customers' needs and aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand advocates.

The company will provide an engaging environment for its people to perform to their true potential. It will continue its focus on value creation and enduring relationships with its partners.

BUSINESS ENVIRONMENT

POLITICAL ENVIRONMENT

The political environment consists of various lands acquisition by the company and payment of subsequent taxes to the government. Hero

MotoCorp can now export to Latin America, Africa and West Asia. Hero is free to use any vendor for its components instead of just Honda-approved vendors. Hero MotoCorp hopes to achieve 10 per cent of their revenues from international markets, and they expected to launch sales in Nigeria. the company is coming up with their fourth factory in Neemrana in Rajasthan while their fifth factory is planned to be set up at Halol in Gujarat.

ECONOMICAL ENVIRONMENT

Hero MotoCorp’s sales in 100-125cc segment grew up by 15% and in 125-150 cc it grew up by 9%. 4 % excise cut & 1% reduction in CST has also impacted the sales .At the same time higher interest rate & fuel prices have also impacted the sales .With increase in fuel prices people are opting for performance bikes rather than going for premium bikes .

TECHNOLOGICAL ENVIRONMENT

Hero MotoCorp has entered into Technical collaboration with Steyr Diamler Puch. They have also made a large investment of over Rs 2500 crores to build an integrated R&D center in Rajasthan. They have also entered into technical & financial collaboration with Showa Corporation Japan. In July 2013, HMC acquired 49.2% shareholding in Erik Buell Racing, a motorcycle sport company which produces street and racing motorcycles based in East Troy, Wisconsin, USA. It paid approx. USD 25 million for this stake.

SOCIAL ENVIRONMENT

Hero MotoCorp have been committed to demonstrate excellence in our environmental performance on a continuous basis, as an intrinsic element of their corporate philosophy. Hero aims at introducing Green initiatives in all aspects of the company whether it is Production Development, Manufacturing, and Supply Chain (backward and forward) or even in the operations within the company. The company carries out production and manufacturing through Green Infrastructure which has been especially developed to reduce harmful impact on the environment such as green roof, sewage treatment plant, effluent treatment plant, waste food recycling, paint conservation etc. To complete the process of sustainable development, Hero MotoCorp has also included the company’s supply chain in its green processes. It has put together a “Green Dealer Development Program” at the front end and a “Green Vendor Development Program” for the backend of the supply chain. Hero MotoCorp have also started GoodLife program and passport programme as a part of its CSR activities.They are also sponsoring various sport personalities and are major sponsor of Indian Hockey Team.

SWOT ANALYSIS STRENGTHS:

1. Ability to understand the customer mentality and requirements.2. Well recognized and established brand name.3. Strong network of distributors, dealers and service station.4. Wide range of products, hence covering the entire customer base.

WEAKNESSES:

1. Post-split from Honda group, it has to venture into its own R & D department.

2. It has to reinvent and innovate its technology to maintain the market share.

3. It has to again make its presence as a brand among the masses as people still refer to it as Hero Honda.

OPPORTUNITIES:

1. Global expansion into other continents.2. Expansion into target markets.3. Attempt to become market leader in scooter market.4. Capitalizing on its distribution channel to regain its market share by

large volume selling.

THREATS:

1. Many competitors in Indian Market like TVS, Bajaj, and Mahindra.2. Post-split, Honda is also giving tough competition.3. More companies are trying to enter into Indian market in the premium

segment.4. Need to change the mindset of people who think it as producer of

motorbikes for daily commuting to also producer of premium bikes like karizma.

FINANCIAL ANALYSIS

Paid up Capital (in Rs.): 39.94 crores Total Turnover (in Rs): 24,166.49 crores Total Profit after Taxes (in Rs): 2,118.16 crores Total Spending on Corporate Social Responsibility (CSR) as

percentage of Profit after Tax (PAT) (%): Our total spending on CSR is Rs. 13,960,887 which is 0.06% of our PAT.

These are data of 2012 as mentioned in the Annual report on the company’s website.

This chart gives the analysis of share price of hero MotoCorp for past five years. The share price has been fluctuating between Rs. 900 and Rs. 2200. It can be seen that even during recession hero MotoCorp’ s share price was consistent .The share price had gone down when the joint venture between Hero and Honda Group was closed.

CASH FLOW STATEMENT OF HERO MOTOCORP

Cash Flow

Mar '13 Mar '12 Mar '11 Mar '10 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

2529.2 2864.71 2404.76 2831.73 1781.46

1890.43 2359.78 2288.11 2686.64 1359.03

-732.94 92.79 -1322.31 -527.63 -861.19

-1056.27 -2458.16 -989.18 -2109.31 -499.93

101.22 -5.59 -23.38 49.7 -2.09

33.73 39.32 62.61 13.45 15.19

134.95 33.73 39.23 63.15 13.1

------------------- in Rs.

Cr. ---------------

----

Net Profit Before Tax

Net Cash From Operating Activities

Net Cash (used in)/from

Investing Activities

Net Cash (used in)/from Financing Activities

Net (decrease)/increase In Cash and Cash Equivalents

Opening Cash & Cash Equivalents

Closing Cash & Cash Equivalents

SUGGESTED CHANGES IN STRATEGY

Hero MotoCorp should go for competitive pricing and target to improve on its sales in other continents so that it can establish it as a global brand.

It should go for aggressive advertisement as most people still consider it as Hero Honda. It can hire global superstars for its advertising.

It should do more research and development work to develop more fuel efficient bikes in this era of high fuel prices.

It should move out of the old management system of Hero Honda to create its unique identity.

From company’s perspective it should look for reducing the employee turnover and it should try to capture the highly efficient manpower to improve its market share.

It should go for more products in upper segment where other competitors have multiple models.

It should do extensive research and development to bring a revolution in technology used in the motorbikes which it did earlier when it was with Honda.

It should target the scooter segment where it has least number of products.

CONCLUSION

As studied , Hero MotoCorp has a long way to go in the motorcycles and scooter segment in the global market. They can leverage upon their previous association with Honda group to improve their brand presence .

They have set out on a long journey , but they didn’t begun well . Now they are on the right path , going along by merging with foreign companies for research and development activities. They have started working on a global mindset by venturing into new markets such as Latin America , Nigeria.

It has started bringing out premium products at low price as was seen in the latest auto expo 2014.

The conclusion is that they started poorly after split but they didn’t took much time to bring their brand among the consumers as well as competitors .

BIBILOGRAPHY

www.moneycontrol.com www.wikipedia.org www.heromotocorp.com www.economictimes.com