Market Entry Decision for Hero Motors in Chile & Uruguay

7/28/2019 Market Entry Decision for Hero Motors in Chile & Uruguay

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Market Entry Decision For Hero Motors In

Chile & Uruguay

Presentation on -

Global Marketing

Presented to :

Prof. Satish Irde

Presented by:

Nitish Pratap Singh – 67

Priyanka - 73

Shivi - 96

Navita - 61

Ayushman - 25

Kirti kumari - 49

Isha - 42



Company expects to sell 1 million scooters and motorcycles in overseas

markets by 2016-17.

Firm is also identifying overseas locations for assembly plants if (the) volumes

justify it.

The current range of Hero’s engines may not perform well in countries such as

Brazil, Argentina, Mexico and Chile that use ethanol-blended fuel.

Company brief:



Product profile of Hero Motors

(As per Industry Segmentation)



Karizma Extreme,

Hunk,

Impulse

Passion,

Glamour,

Ignitor

Splendor Dawn,

Deluxe

On the basis of Price -

Entry ( 35,000-45000, 125 cc)

Medium (45,000-70,000 150 cc)

Premium(70- 80,000 250 cc)



Snapshots from two Countries

• Chile• GDP growth :- 6%

• Population:-13.82 million

• Language:- Spanish

• Average annual inflation rate:-12%

• Major exports : - motor vehiclesfrom USA

• Ethnic groups:- 95 %white people

• Literacy rate:-98%

• Youth population:- 35-40 %

• Imports India:- 1780 milliondollar

• Foreign direct investment:- 100 %

• Uruguay• GDP growth:-8%

• Population:-3.82 million

• Language:- Spanish

• Average annual inflation rate:-9%• Major exports : - motor vehicles

from USA

• Ethnic groups:- 90 %white people

• Literacy rate:- 96%

• Youth population:- 30- 40%• Imports India:- 750million dollar

• Foreign direct investment:- 100 %



MORE FACTS

• It has the highest investment grading in the region according to

Moody’s, Standard & Poor and Fitch IBCA.

• Chile's corporate tax of 17 percent is one of the lowest in the

world.

• Cost of electricity also one of the lowest in the world.

• It has a single uniform tariff of 6% for imports

• Urban population is 88 %

• Plan to sell at 600$ (6.9% of annual income)

• Consumer spending increased by 5%



Business environment in Uruguay

(PESTLE)



Political Environment

• A left-wing government in power.

• Bilateral tensions such as the controversy between

Uruguay and Argentina• Difficulties within the WTO.

• Exploring new trade alliances e.g. FTA with U.S.



Economic Environment

• According to IMF estimates, Uruguay is likely to achievegrowth in real GDP of 4% in 2013. equivalent to 59.5%of the GDP.

• Uruguay’s economic freedom score is 69.9, making its

economy the 29th freest in the 2012 Index.

• Income category: Upper middle income

• GNI per capita (US$): 11,860

Source -Heritagefoundationindexofeconomicfreedom.com



Social Environment

• 5% of the citizen is upper-class.

• Uruguay has frequently been referred to as South

America's first welfare state.

• Women-50%of the workforce.

• Strong Human rights organization

Source - ECLAC,economicsurveyoflatinamericaandcaribbean,2010-2011



Technological Enviroment

• Latin America’s top technology country.

• Developing new tech companies.

• Providing technology solutions to foster the

development of small and medium-sized companies.

• Introducing technology in education ,health sector.




Legal Environment

• One of the most business friendly legal environments

in the Latin America.

• It ranked near the top in terms of the rule of law, the

perception of corruption, economic freedom, protection of property rights, and global

competitiveness in 2011 .




Business Environment In Chile

(PESTLE)



The political landscape:

It is a progressive and political stable democracy.

The Chilean government conducts a rule-based counter cyclical fiscal policy,accumulating surpluses in sovereign wealth funds during periods of high

economic growth, and allowing deficit spending only during periods of low

growth.

The economic landscape:

Chile has a market-oriented economy characterized by a high level of foreign

trade and a reputation for strong financial institutions and sound policy that have

given it the strongest sovereign bond rating in South America.

Chile considers foreign investment as an essential engine of growth, and an

integral part of its open economic policy

The social landscape :

Chile is a multi-ethnic society, including people of European and Indian

ancestry.



• The technological landscape: Chile leaping forward in terms of technology.

Its technological connectivity is 3rd in the world

• The Legal landscape :

Government is strict on the law and Chile has maintained its position as

the most transparent real estate market within Latin America and hasmade some modest gains since 2008

Agreements and others have given Chile access to over 4.2 billionconsumers in markets around the world.

• The environmental landscape : best business environment in southAmerica

investment friendly free-trade economy.



• Trade and investment regime: Chile's trade and investment regime

continues to be characterized by openness, transparency, predictability andinter-sectoral neutrality.

Chile remains strongly committed to the multilateral trading system, where

it participates actively.

Chile claims to have more bilateral or regional trade agreements than any

other country. It has 57 such agreements (not all of them full free trade

agreements), including with the European Union, Mercosur, China, India,

South Korea, and Mexico.



Demographics of Uruguay



Age structure

• Population: 3,316,328

• 0-14 years: 22.2%

15-64 years: 64.1%65 years and over: 13.7%

• Population growth rate: 0.24%• Urban population: 92%

Source- uruguayproperties.com, indexmundi.com



Income distribution

• GDP (purchasing power parity): $51.56 billion

• Economy:

Uruguay's economy is characterized by an export-

oriented agricultural sector, a well-educated

work force, and high levels of social spending.

GDP per capita (PPP) (US$)= 15,300




Lifestyle

• Uruguayans are passionate about sports.

• Fashion is also a significant part of Uruguayan life.

• It’s is a country that allows you to have a highstandard of living with the equivalent of an average

European or US salary or pension.




Occupation

• Uruguay is largely dependent on agriculture and

services for its economy. Agriculture accounts to

over two-thirds of the total exports in the country.

• The main industries in Uruguay include food processing, electrical machinery, transportation

equipment, petroleum products, textiles, chemicals

and beverages.



Demographic Profile of Chile



Age Structure

• 0 to 14 years: 22.3% (male 1,928,210/female1,840,839)

• 15-64 years: 68.1% (male 5,751,091/female5,744,014)

• 65 years and over: 9.6% (male 680,450/female

944,156

Source – CIA worldfactbook & Ginni index



Income Distribution

• Ranked as upper middle income by World Bank.

• South America’s most stable and prosperousnations.

• 30

th

most competitive country in the world andfirst in Latin America.




Lifestyle

• Racial mix of American Indians and Europeans.

• 50% below 25 years of age.

• 72% below 40 years of age.

• Active at outdoor sports and innovative.




Occupation

• Mainly services sector like:

Education

Doctors

Teachers

Engineers



Market Facts

Motorcycles market - Consists of , 1. On- and off-road motorcycles

2. Scooters

3. Mopeds (50 c.c.)

The automobile sector expanded rapidly in 2010 in response to strong

domestic demand.

Sales - 15% p.a. (2012 - 2014)

Number of new vehicles sold - 6.5 million in 2012.

Source – Latin America motorcycle industry, Motorcycle Markets and forecasts, Conferderation of production and

trade.



Both countries don’t have automobile manufacturing facilities .

100% import of vehicles.

Nearest Automobile hubs are Brazil & Argentina in South America and

Mexico.

The main exporter are : Korea (34%), Japan (21%) & China (15%).

But Chinese lack trust.

83.5% (2009) of the population of Latin America live in large cities.

% of vehicles financed through Banks – 80% Chile, 63% Uruguay

Dakar Rally takes place in Chile

Source – Latin America motorcycle industry, Motorcycle Markets and forecasts, Conferderation of production

and trade.



Motorcycles in these countries used to be seen as luxury products.

Fancy models used for recreational and competition.

The most popular models are motorcycles around 125-cc capacity.(For messenger service )

Motorcycles in Latin America are mainly used in the distribution

services industry.

Motorcycles for working purposes are used intensely.

Mileage could be as high as 8,000 kilometers per month.

Average life could be as short as 5 years and thus Per capita change inVehicle owned is 50 per 1000 that is highest in the world.

Source – Latin America motorcycle industry, Motorcycle Markets and forecasts, Conferderation of

production and trade.



The use of motorcycles for work related trips are low.

(Motorcycles Non-Existent For Personal Transportation)

Respect for the motorcyclist is non existent.

Motorcycles are easily subject to robbery.

In rural areas,

Use is limited because there are few representatives and repair places.

Also personal transportation is usually associated with cargo movement.

Motorcycles prices are still high when compared to average per capitaincome.

Source – Latin America motorcycle industry, Motorcycle Markets and forecasts, Conferderation of production

and trade.



Competition :

1. Two-wheeler

a. Number of players (local and international) –

Dominated by Japanese manufacturers

Some of them have partial manufacturing facilities in the

region.

Honda, Yamaha, and Suzuki are the best known brands.

b. Popular segments in two-wheeler market – High end &

Designer bikes.

2. Four-wheeler – People prefer them over Bikes

3. Public transport- Very cheap though not world class.

Source – Latin America motorcycle industry, Motorcycle Markets and forecasts, Conferderation of production and

trade.



Target group -

Rich and high class - Racing & Recreational Bikes

Organizations - Having Delivery and messaging services

Government Organizations – Police , Defense



Market Entry Decision:

A significant market is there.

Entry through Distributors and exporting from manufacturing facilities in

India.

Later on we can think of setting up manufacturing facility over there to

cover other countries.

Market Entry Decision for Hero Motors in Chile & Uruguay

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