DHAK DHAK GO……HERO HONDA SPLENDOR

MADE BY:

CHIRAG MAHESHWARI (24)

BHARAT KALRA (38) ABSTRACT

A Dream Turned into Reality…. We must do something for the community from whose land we generate our wealth.

This famous quote of Hero Honda’s CMD, Mr.Brijmohan Lall Munjal set the ball rolling for the Rural Development of the area around Dharuhera (Haryana) in the year 1990 and 10 years later, the dream, the vision has turned into reality. India is the second largest producer and manufacturer of two-wheelers in the world. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. Indian companies are among the largest two-wheeler manufacturers in the world. Hero Honda and are two of the Indian companies that top the list of world companies manufacturing two-wheelers. The two-wheeler market was opened to foreign companies in the mid 1980s. The openness of Indian market to foreign companies leads to the arrival of new models of two-wheelers into India. This leaded to the strong growth of Indian automobile industry. KEY PLAYERS IN TWO WHEELERS INDUSTRY After facing its worst recession during the early 1990s, the two-wheeler industry bounced back with a 25% increase in volume sales in February 1995. The scooters are considered as family vehicles. There are many two-wheeler manufacturers in India. Major players in the 2-wheeler industry are Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS).

The other key players in the two-wheeler industry are Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Ltd (REL) and Honda & Scooter India (P) Ltd (HMSI).

Motorcycles in India:

Bikes comprise a major segment of Indian two wheeler industry.

Company : Bajaj Auto Ltd Company : HERO HONDA * Hero Honda Achiever * Hero Honda CD Dawn * * Hero Honda CD Deluxe * Bajaj CT 100 * Hero Honda Glamour * * Hero Honda Glamour-Fi * DTSi * Hero Honda Karizma * DTSi * Hero Honda Passion Plus * Bajaj Wave * Hero Honda Pleasure * Bajaj Wind 125 * Hero Honda Super Splendor * Sonic DTSi * Hero Honda Splendor NXG * Hero Honda CBZ Xtreme Company : Kinetic Motor Company : TVS Company : Yamaha Motor Company MOTOR India * Kinetic Aquila * Kinetic Boss * TVS Apache * Yamaha CruxS * Kinetic Challenger * TVS Centra * Yamaha G5 * Kinetic Comet * TVS Fiero * Yamaha Gladiator * Kinetic GF * TVS Star * Yamaha RX15 * Kinetic Stryker * TVS Victor * Yamaha Fazer * Kinetic Velocity

INTRODUCTION

ABOUT THE COMPANY

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 1992 Raman Munjal Vidya Mandir inaugurated - A School in the memory of founder Managing Director, Mr. Raman Kant Munjal 1994 New motorcycle model - "Splendor" introduced

1,000,000th motorcycle produced 1997 New motorcycle model - "Street" introduced

Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated 1998 2,000,000th motorcycle produced 1999 New motorcycle model - "CBZ" introduced

Environment Management System of Dharuhera Plant certified with ISO- 14001 by DNV Holland

Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder Managing Director, Mr. Raman Kant Munja 2000 4,000,000th motorcycle produced

Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland

Splendor declared 'World No. 1' - largest selling single two-wheeler model

"Hero Honda Passport Programme" - CRM Programme launched 2001 New motorcycle model - "Passion" introduced

One million production in one single year

New motorcycle model - "Joy" introduced

5,000,000th motorcycle produced 2002 New motorcycle model - "Dawn" introduced

New motorcycle model - "Ambition" introduced

Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and Zaheer Khan as Brand Ambassadors 2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark

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

New motorcycle model - "CD Dawn" introduced

New motorcycle model - "Splendor +" introduced

New motorcycle model - "Passion Plus" introduced

New motorcycle model - "Karizma" introduced 2004 New motorcycle model - "Ambition 135" introduced

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 New motorcycle model - "CBZ*" introduced

Joint Technical Agreement renewed

Total sales crossed a record of 10 million 2005 Hero Honda is the World No. 1 for the 4th year in a row

New motorcycle model - "Super Splendor" introduced

New motorcycle model - "CD Deluxe" introduced

New motorcycle model - "Glamour" introduced

New motorcycle model - "Achiever" introduced

First Scooter model from Hero Honda - "Pleasure" introduced 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

New 'Splendor NXG' launched

New 'CD Deluxe' launched

New 'Passion Plus' launched

New motorcycle model 'Hunk' launched 20 million production milestone achieved 2008 Hero Honda Haridwar Plant inauguration

New 'Pleasure' launched

Splendor NXG lauched with power start feature

New motorcycle model 'Passion Pro' launched

New 'CBZ Xtreme' launched

25 million production milestone achieved

CD Deluxe launched with power start feature

New 'Glamour' launched

New 'Glamour Fi' launched 2009 Hero Honda Good Life Program launched

Hunk' (Limited Edition) launched

Splendor completed 11 million production landmark

New motorcycle model 'Karizma - ZMR' launched

Silver jubilee celebrations INDIAN RURAL MARKET AT A GLIMPSE

Large and Scattered market The rural market of India consists of over 63 crores consumers from 5,70,000 villages Major income from agriculture 60 % of the rural income is from agriculture Low standard of living Low literacy, low per capita income, social backwardness, low savings, etc. Traditional Outlook The rural consumer values old customs and tradition. They do not prefer changes. Diverse socio-economic backwardness Diverse socio-economic backwardness is different in different parts of the country. Infrastructure Facilities Physical distribution becomes costly due to inadequate Infrastructure facilities like roads, warehouses, communication system, financial facilities

The rural bazaar is booming beyond everyone’s expectation. an estimated induction of Rs 140 billion in the rural sector through the government’s rural development schemes in the Seventh Plan and about Rs 300 billion in the Eighth Plan is also believed to have significantly contributed to the rapid growth in demand. The high incomes combined with low cost of living in the villages have meant more money to spend. And with the market providing those options, tastes are also changing. PROBLEMS WITH RURAL MARKET

Underdeveloped People and The number of people below poverty Underdeveloped Markets line has not decreased in any appreciable manner. Vast majorities of the rural people are tradition bound, fatalistic and believe in old customs, traditions, habits, taboos and practices. Lack of Proper Physical 50% of the villages in the country do not Communication Facilities have all weather roads. Media for Rural Communication Radio, television and cinemas are potential medium for communication. Rural areas account for hardly 2000 to 3500 mobile theatres which are far less then no. of villages. Many Languages and Dialects Number of recognized languages is only 16, the dialects are estimated to be around 850. The messages have to be delivered in the local languages and dialects. Dispersed Market Scattered and impossible to ensure the availability of a brand all over the country. 7 Indian states account for 76% of the country’s rural retail outlets, the total number of which is placed at around 3.7 million. Low Per Capita Income 33-35% of GDP is generated in the rural areas and is shared by 74% of the population. Low Levels of Literacy Leads to problem of communication for promotion purposes. Prevalence of spurious brands and a multitude of ‘local variants’, which are seasonal demand cheaper, therefore, more desirable to villagers Different way of thinking Fairly simple thinking and usually has 2 or 3 brands to choose. STORY BEHIND THE WALL

GROWTH OF TWO WHEELER INDUSTRY IN RURAL MARKET Two wheeler industry in India has shown a good jump. In the last 4-5 years, two wheeler industry has shown average growth of 8.5%, having an overall segregation among: motorbikes (8%), scooters (12%) and mopeds (10%); all thanks to a steady revival in economic activity, low excise duties, low interest rates and relatively higher disposable incomes that enabled the demand pull.

Major players: Hero Honda, Bajaj, TVS Motors, Honda Motorcycles & Scooters, Yamaha, Mahindra & Mahindra (new player) have captured the market significantly in urban sectors and are foraying to go deep into the interiors of the country.

With cars like Tata Nano being introduced for Rs 1.5 lakhs for Indian roads along with various other schemes introduced by car companies to lure customers, 2 wheelers future lies in semi-urban and rural regions.

IMMENSE POTENTIAL IN RURAL INDIA According to research, with an estimated market for 2 wheelers in FY 11 as Rs 535 billion in India and 92 million potential buyers, the rural market accounts for 40% of the size which cannot be ignored.

Reduced debts by government, farm loan waivers, (MSP-Minimum Support Price), low interest rates, more financial institutions offering credit, government agri- credit programmes, schemes of NREGA(National Rural Employment Guarantee Act) Mahatma Gandhi Rural Employment Scheme-all these factors have added impetus to the purchasing power and disposable income of the local consumers in these regions. DIFFERENCE BETWEEN RURAL AND URBAN CONSUMER

While buying a product Rural customer:  looks for maximum needs being satisfied in a product. Also the customer should have 4 A’s—Awareness, Affordability, Availability and Acceptance. These customers are in particular distinguished as buyers of ‘Value for Money’.

 Rural customers need a sturdy transport product which could be used for multi-purposes- carry luggage, cross the undeveloped roads, go to mundi, milk carriage etc. Unlike urban, the customer here is not educated so there is indispensable need to educate them verbally. Further, there is great impact of reference sale or ‘Word of mouth’ publicity to increase sale.

The other exclusive marketing activities being carried out to make the product more popular are participation in local melas, rural games, rural financing and local mechanics to avoid bad publicity of the product.

WIDE SPREAD DISTRIBUTION NETWORK OF HERHONDA MOTORS

Hero Honda which has a consolidating position in the urban sector is not far behind to take up rural vertical all the more seriously. The company’s contribution is a massive 58% of the total country's two wheeler sale, 42% of their total sales business is from rural segment. These impressive sale figures are a result of many rural initiatives with the vision “Har Gaon Har Angan ” , (Every Village Every Household), undertaken by Hero Honda.

No. of Villages Covered: Under the rural initiative, over 100,000 villages have already been covered. All non-metro dealerships conduct Opinion Leader Contact Programs (OLCP), Loan Melas and Exchange Camps on a regular basis in up-country and rural markets.

 Service Har Jagah (SHJ) : Hero Honda dealerships across the country are conducting Service Har Jagah (SHJ) camps in village locations, on the same specified day of every month, thereby enabling customers to get their bikes serviced in their own villages, rather than travelling several miles to nearby towns and cities for the same.

HERO HONDA IN RURAL MARKET

REASON TO CHOOSE RURAL MARKET

 To strengthen retail financing to support the initiative that could lead to setting up of its own finance arm.

 Looking at new growth areas to maintain sales momentum in a shrinking market.

 Plans to cover 100,000 of the600,000 villages in the country by the end of this financial year under a campaign aimed Har Gaon, Har Aangan (every village, every household).

 Created a special ‘rural vertical' to push growth started. Under this, collecting a lot of data at rural touch point. Many of dealers are now meeting Sarpanches, Headmasters, Aanganwadi workers and other opinion makers to understand the rural consumer better.

RURAL MARKETING

During the year, Hero Honda's ambitious rural connect program Har Gaon, Har Aangan program rolled out across most states of the country.

It was also a year in which Hero Honda cascaded its unique rural connect program Service Har Jagah. After successfully testing this grassroots rural connect program in some states, Hero Honda went national in October 2009. At the moment, there is a network of more than 2,000 rural sales channel partners working on the rural vertical through the Har Gaon Har Aangan and Its extensions such as Service Har Jagah program.

There is a plan to substantially boost this number in the coming years by spreading to villages that have a population of even less than 5,000,

Apart from meeting opinion leaders, the rural sales executives are also tasked with organizing free checkup bike camps, loan melas, test ride camps, conducting Ride Safe Programs to educate customers on "Safety" and "Maintenance" and conducting other awareness camps on various value added features such as Genuine Spare Parts, Good Life Program, Hero Honda Advantage and other services offered by the Company.

The idea is not just to increase awareness about the two wheeler industry but also to increase buy-in for Hero Honda products.

To improve its rural presence, Hero Honda is relying heavily on information technology and during the year, the Company made specific efforts to capture details of sales in the rural market. It gave the marketing team a much better idea of the customer mix and demand forecast and simultaneously, enhanced coordination between the channel partners and HeroHonda.

The Company has placed brand displays in various DCM Hariyali Kisaan Bazaar Centres, spanning across many states namely Uttar Pradesh, Uttaranchal, Madhya Pradesh, Haryana and Punjab. These premises were also used for conducting free check up camps and education camps on Safety Riding skills, such camps were also held in association with Monsanto, Godrej Aadhar, IFFCO and various other fertilizer and seed companies in many parts of the country. PLAN HAR GAON HAR AANGAN

STRATEGY: Hero Honda has established mobile service centres to take care of rural customers. THE LESSON: Reinforce product quality through service indicators. Hero Honda was quick to realize that there was a huge opportunity waiting to be tapped. A rural vertical was set up sometime in 2007. Five hundred sales representatives were taken on board for the mission Har Gaon, Har Aangan (every village, every courtyard.)

These representatives have been given work tasks and not sale targets - they need to meet potential customers and opinion leaders in villages. So far, Hero Honda has mounted three two-month long "waves" through these men. Each wave has resulted in additional sale of 15,000-16,000 motorcycles.

Farmers, Hero Honda knows, have money in their pockets twice a year when they harvest their crop - once around May and June and then around October and November. These "waves" are mounted just before the harvest so that Hero Honda is on their radar screen when they have cash in hand.

It also realised that one reason customers in these markets choose Hero Honda over others is the easy availability of spares and authorised mechanics. As a result, in the resale market, it commands a premium over rivals. This makes Hero Honda preferred brand.

Company decided to ramp up rapidly its touch points with customers -showrooms, service centres and so on. From 2,000 in 2006, the number has risen to 3,500 now. The plan is to add at least 500 every year. Most of these will be service points.

Customers can travel over long distances to buy a motorcycle but not for service. A customer can take his motorcycle for servicing four or five times a year. Many of these touch points can start as a service centre and over time become a sale centre. PROMOTION POLICY:

➢ Company gives advertisement in different media vehicles time to time. Like in TV. Magazines, newspaper, etc.

➢ Hero Honda also organizes free service camps every year. ➢ Hero Honda also takes art in trade fair. ➢ Hero Honda with the help of ICICI Bank provides loan to the customers & also provide easy monthly installment scheme to customers.

➢ Hero Honda gives huge commission to their dealers.

Folk Theater:

Folk theaters are mainly short and rhythmic in form. The simple tunes help in informing and educating the people in informal and interesting manner. It has been used as an effective medium for social protest against injustice, exploitation and oppression.

Demonstration: "Direct Contact" is a face to face relationship with people individually and with groups such as the Panchayats and other village groups. Such contact helps in arousing the villager's interest in their own problem and motivating them towards self-development. Haats & Melas: The countries oldest tradition holds the key to solving these problems. The mobile supermarkets of rural India.

Facts & Figures:- Over 47,000 haats and 25,000 melas are held annually. The average daily sale at a Haat is about Rs.2.25 Lacs.

Annual sales at melas amount to Rs.3,500 crore.

Over half the shoppers at haats have shopping lists.

More than 10,000 melas draw visitors from all over India.

Nearly half the outlets at melas are for manufactured goods.

Haats is a better opportunity for promotion after brand building has been done at Mela.

Wall Paintings:

Wall Paintings are an effective and economical medium for advertising in rural areas. They are silent unlike traditional theatre .A speech or film comes to an end, but wall painting stays as long as the weather allows it to. Retailer normally welcomes paintings of their shops, walls, name boards. Since it makes the shop look cleaner and better. Their shops look alluring and stand out among other outlets. Besides rural households shopkeepers and panchayats do not except any payment, for their wall to be painted with product messages. To get one's wall painted with the product messages is seemed as a status symbol. The greatest advantage of the medium is the power of the picture completed with its local touch. The images used have a strong emotional association with the surrounding, a feat impossible for even a moving visual medium like television which must use general image to cater to greatest number of viewers.

Hero Honda, derives 60 per cent of its sales from the rural segment.” In order to promote its brand in the rural market, Hero Honda has recently launched a marketing initiative in towns with a population of less than 50,000 in Uttar Pradesh. The initiative would involve a mobile showroom and workshop, through which people will be able to gather knowledge about the vehicles and also buy them. The concentration will be mainly on promoting the company's two major brands: Splendor and Joy. With these initiatives, Hero Honda is targeting sales of 1.3 million two-wheelers this fiscal. The festival season has also showed an improvement in sales for Hero Honda despite the current downtrend. A factor driving sales could be the company's offering of a two-year warranty (for which it claims to spend approximately Rs 10- 15 crore annually) and its hugely successful consumer loyalty programme. Hero Honda, makes practically nothing at its plant. The only operation done at its Dharuhera works other than the assembly of motorcycles is engine assembly. Hero Honda has an enormous advantage as in it has a product for each of the market segments. The CD 100 is the basic no-frills model with fuel efficiency and reliability as USP; the CD 100 SS is the upgraded durable model positioned in the rural market; Sleek the glamorous bike for the urban youth and the Splendor is the premium product with better features and targeted at the urban market. Analysts believe that the biggest advantage Hero Honda enjoys is its brand image as a fuel-efficient bike. The company expects to leverage on the strong brand image when its earliest customers start looking for replacements. A recent research report says that on the back of large volumes, Hero Honda has developed strong vendors like Munjal Showa, Hi-Tech Gears, International Instruments and others from whom it sources more than 80 per cent of its components. This has also helped the company to lower its import content. Hero Honda, makes practically nothing at its plant. The only operation done at its Dharuhera works other than the assembly of motorcycles is engine assembly. FUTURE PLANS OF HERO HONDA FOR RURAL INDIA

Hero Honda Motors is accelerating efforts to tap rural markets as it gears up to sell a whopping five million units in 2010-11. Already, four out of 10 Hero Honda bikes sell in rural markets and in the next three years, one out of every two (50%) will be selling in the hinterland.

No wonder then that the country’s largest two-wheeler maker has decided to begin a door-to-door service facility for rural customers.

Called ‘Service Har Jagah’, this network will be based on specially customised bikes which are fitted with necessary equipment to provide service on wheels in the interiors. Hero Honda managing director Pawan Munjal said 600 fresh rural support executives are being recruited for this purpose and this programme will support the company’s successful ‘Har Gaon Har Aangan’ drive where village elders, sarpanchs, headmasters and aanganwadi workers were contacted to enhance bike sales.

More than 7,500 villages will be covered every month under the rural service initiative on a regular basis and will attend to over 70,000 customers. So far, 1,100 customised bikes for servicing remote areas have been introduced. Munjal said that though the two-wheeler market has shown good volume growth even during the recent months of global slowdown, penetration levels leave a lot of scope for further growth. “Even today rural penetration for motorcycles is just 7% and in the urban areas between 21% and 25%. This gives us immense opportunity for growth.” The number of touch points (dealerships plus sales and service outlets) are already up by 50% to 3,000 and another 500 would be added by March. A majority among the new touch points would be coming up in the hinterland, tier- II and tier-III towns and suburbs of larger towns, indicating a subtle yet extensive shift in the company’s strategy towards addressing newer two-wheeler consumer.

Munjal said that some years back, Hero Honda had customised some CD 100 bikes to suit rural road conditions but now that the road infrastructure is improving there is no longer any need to deliver any specialised products for the rural markets. To a question on capacity expansion, Munjal said that Hero Honda’s three manufacturing facilities (two in Haryana and one in Uttaranchal) are being used almost fully now so there was the need for setting up another manufacturing plant.

“Our teams have begun assessment forsetting up the fourth greenfield facility…at present, we look at optimum capacity addition of 2,000 units per day…we did show interest in setting up a facility in Rajasthan even before the Uttaranchal plant was set up, but possession of land posed a challenge. We still don’t have the land,” Munjal said.

Plans ‘Nano’ bike Hero Honda Motors has already begun tapping suppliers for developing a low-cost motorcycle. Managing director Pawan Munjal says that the joint venture partners have begun research on this project which, if implemented, would generate large volumes and come at a “breakthrough” price.

“It must be a win-win for all stakeholders, the company, suppliers and buyers. We will take a call on this project in the next 10-12 months.”

Dispatch

To streamline its supply chain, especially at the front end. Hero Honda introduced a finished goods dispatch automation (FNGD) system. This system has enabled real-time inventory management with the use of barcodes to identify and track motorcycles and scooters. This level of minute tracking is expected to facilitate cost effective and scientific dispatch and encourage lean production.

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