HONDA THE POWER OF DREAMS HISTORY Honda Atlas Cars (Pakistan) Limited is a joint venture between Honda Motor Company Limited, Japan and Atlas Group of Companies, Pakistan signed on August 05, 1993. The agreements signed between the two sponsors are for technical collaborations for development parts and systems for manufacture of Honda Cars in Pakistan. Pakistani and Japanese cultures have blended exceptionally well to form a professional team of dedicated specialist. This team has done wonders since it’s inception and has created many records. It was on April 17, 1993 when the foundation laying ceremony was held in a record period of eleven months on March 31, 1994 the construction and plant and machinery installation was completed. Running a race against time the first car was rolled out of the assembly line on May 08, 1994 paving the way for a formal inauguration of the plant. No other persons than the President of Pakistan and the President of Honda Motor Co. graced the auspicious occasion of inauguration on July 13, 1994. The first booking of Civic made in Pakistan started with pomp and grandeur or July 14, 1994 at six dealerships in Karachi, Lahore and Islamabad. The response received from the customers was overwhelming and a morale booster for all concerned at HACPL. With the rapid increase in business new ware house facilities were constructed on June 22, 1995. Another ware 1
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HONDATHE POWER OF DREAMS
HISTORYHonda Atlas Cars (Pakistan) Limited is a joint venture between Honda Motor
Company Limited, Japan and Atlas Group of Companies, Pakistan signed on August 05,
1993. The agreements signed between the two sponsors are for technical collaborations
for development parts and systems for manufacture of Honda Cars in Pakistan. Pakistani
and Japanese cultures have blended exceptionally well to form a professional team of
dedicated specialist. This team has done wonders since it’s inception and has created
many records. It was on April 17, 1993 when the foundation laying ceremony was held in
a record period of eleven months on March 31, 1994 the construction and plant and
machinery installation was completed. Running a race against time the first car was rolled
out of the assembly line on May 08, 1994 paving the way for a formal inauguration of the
plant.
No other persons than the President of Pakistan and the President of Honda Motor
Co. graced the auspicious occasion of inauguration on July 13, 1994. The first booking of
Civic made in Pakistan started with pomp and grandeur or July 14, 1994 at six
dealerships in Karachi, Lahore and Islamabad. The response received from the customers
was overwhelming and a morale booster for all concerned at HACPL.
With the rapid increase in business new ware house facilities were constructed on
June 22, 1995. Another ware house is under construction meet the requirements of the
production line which has more than doubled since its start up.
Keeping the spirits of associates high and alive 5,000 car roll out
ceremony was held in July 1995 and 10,000 cars in August 1996. The deletion program
for indigenization has become a success, which started with 23% in 1994 and has crossed
30% by now. The process of developing vendors to manufacture local parts according to
our standards has been tedious but fruitful. The local parts quality is being checked
thoroughly to maintain the standards and achieve customer’s satisfaction.
Service department conducts two campaigns a year to evaluate the performance
and solve the customer complaints on the spot. This has tremendously enhanced the
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customer’s confidence in Honda Cars, which is evident from the phenomenal sales
volumes.
COMPANY DESCRIPTIONThe company was incorporated on November 4, 1992. The principal activity of the
company is the assembly and progressive manufacture and sales of Honda vehicles and
spare parts.
COMPANY ANALYSISThe company maintained its growth from the previous year. The extensive marketing and
promotion strategies continued. The sales rose to Rs 6.5 billion against Rs 4.5 billion last
year ago. Accordingly cost of goods sold also increased from Rs 4.1 billion to Rs 5.7
billion against it period.
COMPETITORSHonda is currently facing the three biggest competitors in its class. They compete
with Honda because of their successful product in the market before the commencement
of Honda Atlas in Pakistan. These three main competitors are
TOYOTA
NISSAN
SUZUKI
Toyota is considered to be the main competitor of Honda because it is only one
company, which has enough market shares that will directly influence the share of
Honda. This is because of the fact that Toyota has been manufacturing cars much before
Honda in Pakistan and the cars they have been manufacturing since 1993 are much
environmental friendly than any other car manufactured in Pakistan, before. Firstly
Toyota introduced GLi in both transmission categories i.e. manual and automatic. This
category car having 1600 horse power is the direct competitor of Honda Civic not only in
the technique but also in luxury that they provide and the other facilities and add-ons.
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In 1.3 liter car’s Toyota can be considered as the market leader before, as it is
producing three different models in this category i.e. GL, XE and XEG. But now with the
introduction of new Honda City 2000, Toyota is no longer a leader in the market because
of the Luxury and style provided by the Honda City 2000.
Nissan is not a direct competitor of Honda because this company produces 1.4
liter and 2.0 liter fuel & Diesel cars respectively. But because of the big giants like
Toyota and Honda in the market this company cannot compete in the market and loses its
share. But now few months back they launched their new models in the market at low
prices as compared to Honda and Toyota.
Suzuki introduced its 1.6-liter car a few years back with the name of Baleno. They
introduced two models GLi and GXi in the market having fuel injection system in the
category of 1.3 liter in competition with Honda City. But Honda has no fear of them
because of the fact that, Honda is already the market leader in 1.6-liter class & 1.3 liter
class. According to the recent survey the graph of Baleno 1.6 & 1.3 is continuously
declining because of their competitors like Toyota and Honda.
The overall evaluation of company’s strengths, weaknesses, opportunities, and
threats is called SWOT analysis. The first two factors i.e. strengths and weaknesses relate
to company’s internal operations, whereas the other two factors Opportunities and threats
relate to company’s external environment.
STRENGTHS:
These are the company’s strong points, which help the company in achieving a
respectable place in the market.
Honda is a multinational company, which adds to its strengths.
It is a market leader in petrol car industry.
It is an environment friendly car.
Has efficient fuel consumption.
There is no power distance in the company.
It is a sort of status symbol in Pakistan.
Weaknesses:
These are the internal factors, which go against a company’s favor in achieving its
target.
Honda doesn’t produce diesel cars.
It only manufactures for upper middle class only, whereas it should also
produce for cars for middle class.
Compared to its competitors Honda has a less resale value.
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OPPORTUNITIES:
These are the areas of buyer willingness in which a company can perform
profitably.
In the near future it can also manufacture diesel-consuming cars, as petrol
prices are fairly high as compared to diesel.
Honda can make its cars available for middle class as well.
THREATS:
These are the challenges posed by unfavorable trends or developments that would
lead, in absence of defensive marketing action, to deteriorate in sales or profits.
As fuel prices are increasing on regular basis so Honda needs to see this
Change and think for producing a car suitable for changing times.
Honda is facing a fierce competition from its competitors and it has to keep a constant check on activities of its competitors like Toyota, Nissan etc.
461,367 406,754 438,803 434,349 Capital work in progress 1,579 4,588 37,092 14,101
462,946 411,341 475,895 448,450
Deferred Taxation 2,716 1,541 1,541 -
Long term Deposits 1,498 1,498 1,618 1,745
Current Assets
Stores and Spares 14,373 13,518 14,124 15,837 Stock-in-trade 537,668 685,147 809,255 938,768 Trade debts 355 6,442 - - Loans, advances, deposits, prepayments and other receivables 233,713 180,969 166,254 209,446
Cash and Bank balances 276,410 489,565 568,164 838,280 1,062,519 1,375,642 1,557,797 2,002,331
Total Assets 1,529,679 1,790,021 2,036,851 2,452,526
Vertical Analysis of Balance Sheet1999 2000 2001 2002
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Share Capital &ReservesIssued Capital 27.46%23.46%20.62%17.13%Reserves 40.01%40.17%41.24%44.12%Unappropriate Profit 0.03% 0.04% 0.01% 0.04%Total equity 67.50%63.68%61.87%61.28%
Deferred Liabilities 0.29% 0.30% 0.36% 0.40%
Current Liabilities
Short term running finance and other credit facilities-secured 3.75% 0.00% 0.00% 0.00%Creditors, accrued and other liabilities 20.96%29.53%32.11%28.59%Provision for taxation 2.01% 1.80% 1.53% 2.02%Proposed Dividend 5.49% 4.69% 4.12% 7.71%
30.16%22.72%21.54%17.71%Capital work in progress 0.10% 0.26% 1.82% 0.57%
30.26%22.98%23.36%18.29%
Deferred Taxation 0.18% 0.09% 0.08% 0.00%
Long term Deposits 0.10% 0.08% 0.08% 0.07%
Current AssetsStores and Spares 0.94% 0.76% 0.69% 0.65%Stock-in-trade 35.15%38.28%39.73%38.28%Trade debts 0.02% 0.36% 0.00% 0.00%Loans, advances, deposits, prepayments and other receivables 15.28%10.11% 8.16% 8.54%Cash and Bank balances 18.07%27.35%27.89%34.18%Total current Assets 69.46% 76.85%76.48%81.64%
Total Assets 100% 100% 100% 100%
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BALANCE SHEET
VERTICAL ANALYSIS
Asset Side:The fixed assets are 30.26% of total assets. They are higher in year 1999-2000 but
after that percentage of fixed asset in total asset has decreased in year 2000-2001. But
after that the percentage remains almost same. The percentage of long term deposits is
10% in year 1999-2000. It remains almost same for years 2000-20001 and 2001-2002.
But in year 2001-2002 it has decreased to 0%.
The current assets are 69.4% in year 1999-2000 and they are gradually increasing
over the year. In year 2001-2002 they are 81%. This is because of gradual increase in
cash and inventory.
Liabilities Side:
The current liabilities are 32.21% of total liabilities and equity. And they are
gradually increasing over the year. The creditors, accrued and other liabilities are 20% of
total liabilities and equity side and they are also gradually increasing over the year. The
deferred liabilities are 0.29% of total liabilities and equity side. And they are also
gradually increasing over time.
Equity Side:
The total equity is equal to 67.50% in year 1999-2000. The %age of equity to
total liabilities and equity is decreasing over time. The %age of issued capital is 27.46%
in year 1999-2000 and is decreasing gradually over the time.
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Trend Analysis of Balance Sheet 1999 2000 2001 2002
Share Capital &ReservesIssued Capital 100 100 100 100 Reserves 100 117 137 177 Unappropriate Profit 100 155 53 177
100 110 122 146
Deferred Liabilities 100 123 166 224
Current Liabilities
Short term running finance and other credit facilities-secured 100 - - - Creditors, accrued and other liabilities 100 165 204 219 Provision for taxation 100 104 101 161 Proposed Dividend 100 100 100 225
100 88 95 94 Capital work in progress 100 290 2,348 893
100 89 103 97
Deferred Taxation 100 57 57 -
Long term Deposits 100 100 108 117
Current Assets
Stores and Spares 100 94 98 110 Stock-in-trade 100 127 151 175 Trade debts 100 1,817 - - Loans, advances, deposits, prepayments and other receivables 100 77 71 90
Cash and Bank balances 100 177 206 303 100 129 147 188
Total Assets 100 117 133 160
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Trend Analysis
Balance Sheet
Equity:Trend shows that our reserves increased with the same ratio while our
inappropriate profit firstly increased by 155% in (2000) then decreased to 53%in (2001)
then a tremendous increase in inappropriate profit that is of 177% in 2002, While there is
consistent increase in stockholder’s equity.
Liabilities:Current liabilities have increased consistently over the years due to increase in
Creditors, accrued and other liabilities while dividend also increased in 2002 by 225%. Total
liabilities increase with same ratio. This shows that company working in the same
manner.
Assets:Operating fixed assets tangible, expenditure decreased 92.3% in 2000 and little
increase (93%) in 2001. Decrease in 2000 is higher because company sold fixed assets in
2000. Long-term deposits remains same during 2000 while slightly increased to 108% in
2001 and 117% in 2002. To build good relations with dealers and transporters company
took their deposits because sale was higher in 2000. Current assets in 2000 increased to
129%, in 2001 increase to 147% and in 2002 increase to 188%. C.A is higher in 2000
because trade debts were high in 2000 and also cash and bank balances while Loans,
advances, deposits, prepayments and other receivables decreased. Total assets increased by
117% in 2000, 133% in 2001 and 160% in 2002.
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Horizontal Analysis of Balance Sheet 1999-2000 2000-2001 2001-2002
Share Capital &ReservesIssued Capital - - - Reserves 17 17 29 Unappropriate Profit 55 (66) 233
10 11 19
Deferred Liabilities 23 36 35
Current Liabilities
Short term running finance and other credit facilities-secured (100) - - Creditors, accrued and other liabilities 65 24 7 Provision for taxation 4 (3) 59 Proposed Dividend - - 125
In 1999-2000 the cost of good sold was 86% of total sales. There continuous increase In COGS up to year 2001. But after that in year 2002 it has decreased. However the increase in cost of good sold was less as compare to sales because of favourable exchange rate prevailed in market. The operating profit in year 2002 has increased because of decline in cost of good sold.
Admn. Expenses:
The admn. Expenses have 4.36 %age of total sales in year 1999. The percentage of admn. Expenses to total sales have decreased.
Financial Charges:
The financial charges are .14% of total sales in year 1999. But they are decreasing over time and it is because of decrease of short term running finances.
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Trend Analysis of Profit And Loss Account1999 2000 2001 2002