Strategic Management A term paper on Hero Motorcar There is a Hero in each one of 11/11/2013 Submitted by Submitted to Caching Ratio analysis 18 Findings 19 Conclusions References 20 An analysis of the two wheeler industry is done by identifying the position of our company, Hero Motorcar. Having a fortified background, the company has shown tremendous results and opportunities for the growth and development in this industry. The company has also witnessed several strategic movements in terms of human resource, diversification of the product basket, technological advancements, and merger-demurrer to name a few.
Being the pioneer in selling two-wheelers in he country, this company has built strongly on its brand value and customer loyalty. To learn more about the functioning of Hero Motorcar and to give a useful insight of it, the performance of the company is evaluated which avows its position as number one as compared to its competitor (Baja] Auto Ltd). Various tools have been used to compare the company’s performance with the industry competitor. An in-depth analysis reflects the strong position that Hero Motorcar is holding (market share of > 52%).
Hero leads the category in brand stature, which is to be expected since the rand has enjoyed market leadership for several years and hence it should strengthen it in order to be invincible in this industry. The automobiles industry is divided into four segments 1 . Two-wheelers (mopeds, scooters, motorcycles, electric two-wheelers) 2. Passenger vehicles (passenger cars, utility vehicles, multi-purpose vehicles) 3. Commercial vehicles (light and medium-heavy vehicles) 4.
Three wheelers (passenger carriers and good carriers) The industry is one of the key drivers of economic growth of the nation. Since the economic liberalizing of policy of the sector in 1991 and the subsequent opening p of 100 percent FED through automatic route, Indian automobile sector has come a long way. Today, almost every global auto major has set up facilities in the country. The two wheeler industry in India is a flourishing industry with a recorded sales volume of 3. Million units in Q, 2011-12 The worlds standing for the Indian automobile sector, as per the Confederation of Indian industry, are as follows: 0 Largest three wheeler market 0 Second largest two-wheeler market 0 Tenth largest passenger car making 0 Fourth largest tractor manufacturing 0 Fifth largest commercial vehicle market Fifth largest bus and truck segment Motor Cycle Motor cycle remains the most affordable transport preferred by the Indians and the key competitor for this industry is the emerging Data Anna (Price range-RSI. 50000-2, 50,000), designed by the DATA Motors which is keen on establishing itself as a safety alternative to motor cycles as the number of fatal accidents of motorcycle users is relatively high. However, a significant aspect of the market is that it continues to hold a dominant market share of 75% as compared to that of passenger cars (16%). 3 Industry Analysis- using Porter’s Five Forces Model ) Entry Barriers: Entry barriers are high. The market runs on high economies of scale and on high economies of scope 0 The need for technical expertise is high 0 Owning a strong distribution network is important and is very costly. All these make the barrier high enough to be a deterrent for new entrants. 2) Supplier Bargaining Power: Suppliers of auto components are fragmented and are extremely critical for this industry since most of the component work is outsourced. Proper supply chain 3) Buyer’s Bargaining Power: Buyers in automobile market have more choice to choose from and the increasing intention is driving the bargaining power of customers uphill.
With more models to choose from in almost all categories, the market forces have empowered the buyers to a large extent. 4) Industry Rivalry: The industry rivalry is extremely high with any product being matched in a few months by Competitor. This instinct of the industry is primarily driven by technical capabilities acquired over years of gestation under the technical collaboration with international players. 5) Substitutes: There is no perfect substitute to this industry.
Cars, which again are a mode of rainspout, do never directly compete or come in consideration whiles electing a two- wheeler, cycles do never even compete with the low entry level moped for even this choice comes at a comparatively higher economic potential. Summarizing the industry analysis, it can be said that the taleteller market is attractive as it scores well on three out of five categories. 4 HERO MOTORCAR LTD. Background Hero Motorcar Limited is the World’s single largest two- wheeler motor cycle company. The company is engaged in the manufacturing of two wheelers motorcycles and its parts.
The company has three manufacturing facilities namely at Harlan, Hardware and at Attractant. The company is based in New Delhi, India. The company offers a range of bikes namely CD Dawn CD Deluxe 0 Splendor Plus O splendor NAG 0 Passion 0 Hunk 0 Karma Hero Motorcar Limited was incorporated in the year 1984 with the name Hero Honda Motors Ltd. The company was established as a Joint venture company between Honda Motor Company of Japan and Hero 1983; they signed a Joint collaboration agreement and formed the company.
The Joint venture between Indian’s Hero Group and Honda Motor Company, Japan, has not only created the world’s single largest two heeler company but also one of the most successful Joint ventures worldwide. In the year 1985, the company commenced their commercial production at Diarrhea plant in Harlan and introduced their first motorcycle, CD 100 in the market. In the year 1997, the company inaugurated their second manufacturing facility at Surgeon in Harlan. In the year 2004, they introduced new models, Ambition 135 and CB in the market.
During the year, they renewed the Joint company plundered into scooter segment and launched ICC sugarless Scooter, Pleasure in the market. During the year 2007-08, the company commissioned their hired plant at Harridan in Outranked with an initial installed capacity of 500,000 units. 5 This plant had lean manufacturing and practices that ensured efficiency. During the year 2008-09 & 2009-10, the company increased the installed capacity of Motorized 2 wheelers up to ICC engine by 1800000 no’s. To 5400000 no’s.
The company launched the new upgraded versions of CB Extreme and Karma in 2010-11. Also, they breached the landmark 5 million figure cumulative sales in a single year. During the year, the Indian Promoter Group of the company, which comprised of Hero Investments Pot Ltd (HIP), Buddha Chain Investment Pot Ltd BICEP) and Hero Cycles Limited (Hero Cycles) realigned the shareholding in the company, following a family agreement. As a result, Hero Cycles transferred its shareholding in the company to HIP on May 28, 2010.
As a result of these transactions, the Indian Promoter Group of the company now comprises of HIP and BICEP owned and controlled entirely by the Ninjas Family headed by Barbarian All Ninjas. Also, during the year, the Indian Promoter Group and Honda Motor Co Ltd, Japan (Honda) entered into a Share Transfer Agreement (the Agreement) on January 22, 2011. As per the terms of the Agreement, Honda had agreed to transfer its entire heralding of 26% in the Company to the Indian Promoter Group, bringing an end to the Joint venture between the two promoter groups of the company.
The acquisition was completed on March 22, 2011 and the shares held by Honda were transferred to the Indian Joint venture partner. In addition to the Agreement, the Indian Promoter Group and Honda also entered into a License Agreement on January 1, 2011. As per this agreement, Honda has given to the company, the right and license to manufacture, assemble, sell and distribute certain products and their service parts under their Intellectual Property Rights.
In July 2011, the company changed their name from Hero Honda Motors Ltd to Hero Motorcar Ltd. In February 2012, the company entered into a strategic partnership with Erik Bubble Racing (VERB) Of USA for contemporary technology and design inputs to enable the company to launch high end bikes for the domestic and international markets. 6 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 Motorcar Ltd. Company’s new identity, reflects its commitment towards providing world class mobility solutions tit renewed focus on expanding company’s footprint in the global arena. Hero Motocross’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 relationship with its partners. Strategy Hero Motocross’s key strategies are to build a robust product portfolio across disgorges, explore growth opportunities globally, continuously improve its operational efficiency, aggressively expand its reach to customers, continue to invest in brand building activities and ensure customer and shareholder delight. Brand The new Hero is rising and is poised to shine on the global arena. Company’s new identity “Hero Motorcar Ltd. Is truly reflective of its vision to strengthen focus on mobility and technology and creating global footprint. Building and promoting new brand identity will be central to all its initiatives, utilizing every opportunity and leveraging its strong presence across sports, entertainment, and ground-level activation. Manufacturing Hero Motorcar two wheelers are manufactured across 3 globally benchmark manufacturing facilities. Two of these are based at Surgeon and Diarrhea which are located in the state of Harlan in northern India.
The third and the latest manufacturing plant is based at Harridan, in the hill state of Attractant. 7 Distribution The Company’s growth in the two wheeler market in India is the result of an intrinsic ability to increase reach in new geographies and growth markets. Hero Motocross’s extensive sales and service network now spans over to 6000 customer touch points. These comprise a mix of authorized dealerships, service & spare parts outlets, and dealer-appointed outlets across the country.