Economic Analysis of Hero Honda

Essay Info: 15155 words.

Managerial   Economics Case Study

EMP OCT 2008

Term 1

Case Report on Hero Honda

Team Members

Pavitar Singh – 41

Uttam Kotdiya – 59

Bimal Luthra – 16

Kamlakar – 33

Gaurav Yadav – 27

Janmejay Gupta – 32

Introduction to Hero Honda 3

Hero Honda Mission 4

Hero Honda Mandate 5

Factors influencing growth 5

[ Just-in-Time ] 5

[ Ancillarisation ] 5

[ Dealer Network ] 6

[ Financial Planning ] 6

[ Quality ] 6

[ Diversification ] 6

Models 7

Competitor Analysis 8

Market Overview 11

Two Wheeler Market in India 11

CURRENT SCENARIO 13

Domestic Trends 13

EXPORT TRENDS 13

MOTORCYCLE SALES 16

Cost theory 18

Various type of cost 18

Cost analysis of Hero Honda Motors Ltd 19

Cost Analysis 20

Trend for Sales, cost and profit 21

Initiatives for cost reduction by Hero Honda 22

Economic Analysis 24

Economic Reasons Behind this De-Growth: 24

Higher Interest Rates 25

Availability of Finance 25

Hero Honda Champion in De-Growth 26

Long Term Strategy 27

Rural Economy 27

Hero Honda’s stress on Rural Economy 27

Is this really Paying 27

Effective Working Capital Management 28

Financial Analysis 30

Sales 31

Sales Volume 33

Growth in Sales Volume 34

Net Total Income 35

Profit Before Tax 37

EVA with Investment 40

EVA Without Investment 42

SWOT Analysis 43

Strengths 43

Weaknesses 44

Opportunities 45

Threats 45

References 46

Introduction to Hero Honda

|                                                                                         |

|Hero Honda Motorcycle Ltd.                                                               |

|[pic]                                                                                     |

|Type                   |Public company BSE:HEROHONDA M                                     |

|Founded               |January 19, 1984 in Gurgaon, Haryana, India                       |

|Headquarters           |[pic]Haryana, India                                               |

|Key people             |[pic]Om Prakash Munjal, Founder                                   |

|                       |[pic]Mr. Brijmohan Lall Munjal, Chairman                           |

|                       |[pic]Mr. Toshiaki Nakagawa, Joint Managing Director               |

|                       |[pic]Mr. Pawan Munjal, Managing Director                           |

|Industry               |Automotive                                                         |

|Products               |Motorcycles, Scooters                                             |

|Revenue               |[pic]U$ 2.8 billion                                               |

|Website               |http://www.herohonda.com/site/home/home.asp                       |

[pic]

The joint venture between India’s Hero Group and Honda Motor Company, Japan has not only created the world’s single largest two wheeler company but also one of the most successful joint ventures worldwide.

During the 80s, Hero Honda became the first company in India to prove that it was possible to drive a vehicle without polluting the roads. The company introduced new generation motorcycles that set industry benchmarks for fuel thrift and low emission. A legendary ‘Fill it – Shut it – Forget it’ campaign captured the imagination of commuters across India, and Hero Honda sold millions of bikes purely on the commitment of increased mileage.

Over 20 million Hero Honda two wheelers tread Indian roads today. These are almost as many as the number of people in Finland, Ireland and Sweden put together!

Hero Honda has consistently grown at double digits since inception; and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda’s top -selling motorcycle ‘   Splendor. This festive season, the company sold half a million two wheelers in a single month*€”a feat unparalleled in global automotive history.

Hero Honda bikes currently roll out from its three globally benchmarked manufacturing facilities. Two of these are based at Dharuhera and Gurgaon in Haryana and the third state of the art manufacturing facility was inaugurated at Haridwar, Uttrakhand in April this year. These plants together are capable of producing out 4.4 million units per year.

Hero Honda’s extensive sales and service network now spans over 3000 customer touch points. These comprise a mix of dealerships, service and spare points, spare parts stockiest and authorized representatives of dealers located across different geographies.

Hero Honda values its relationship with customers. Its unique CRM initiative – Hero Honda Passport Program, one of the largest programs of this kind in the world, has over 3 million members on its roster. The program has not only helped Hero Honda understand its customers and deliver value at different price points, but has also created a loyal community of brand ambassadors.

Having reached an unassailable pole position in the Indian two wheeler market, Hero Honda is constantly working towards consolidating its position in the market place. The company believes that changing demographic profile of India, increasing urbanization