Professional Documents
Culture Documents
By Adnan Kitabi Anil Nandyala Avishek Mehra Gaurav Agarwal Ranabir Pal
Agenda
Industry Overview Market Players SWOT Industry Life Cycle and PLC Porters 5 forces
Industry Overview
Overview
Consolidated Industry Market size is 10,000-11,000 crores 80% of market share between
Hero Motocorp- 41% Bajaj Motors- 25% TVS - 14%
Segmental Analysis
Industry Segments
Motorcycles- 78% Mopeds- 17% Scooters- 5%
Segmental Analysis
Motorcycles
Hero Motocorp- 56% Bajaj Motors- 25% TVS- 6%
Scooters
TVS- 19% Hero Motocorp- 16%
Mopeds
TVS- 49% Bajaj Motors- 32%
Segmental Analysis
2010-11 Segment Growth
Motorcycles- 24% Scooters- 42% Mopeds- 23%
Industry Happenings
Hero Honda dissolved their joint venture in 2010 Honda is the clear market leader in the fastest growing scooter segment with over 50% of market share in the segment Honda sells close to 100,000 units per month
Industry Happenings
125cc motorbikes has become a distinct category Intense competition in the premium segment of motorcycles By 2015-16 industry is expected to reach maturity stage (ICRA)
Investment Required
Investment required for a new entrant is unknown as all the players are present for more then 2decades and investment required at that time cannot be compare to what is needed today
Investment Required
Hero invested 400 crores for an additional plant capacity of 750,000 units Hero invested another 1100 crores for another plant for a capacity of 1.2 million Hero invested another 500crores to expand its existing capacity to increase capacity of another 1 million
Capacity Utilization
Hero Motocorp- 98% Bajaj Motors- 75% TVS- 86%
Expansion Plans
Hero Motocorp
750,000 capacity plant in Rajasthan 1.2 million capacity which will increase to 1.8 million in next phase in Gujarat 1 million in expanding existing plants
Bajaj Motors
1.26 million in expanding existing plants
TVS
No such plans
Market Size
The current market size is 15.4 million units as on 2011-12 This is expected to reach 22 million units by 2015-16 (ICRA)
Cost of Material
Hero Motocorp- 68% Bajaj Motors- 71% TVS- 72%
Net Profit
Hero Motocorp- 9% Bajaj Motors- 15% TVS- 3%
CSF
To survive and prosper in an industry a firm must meet 2 criteria 1. What do our customers want? 2. What does a firm need to do to survive competition?
CSF
Prerequisites for success
Analysis of competition What drives competition? What are the main dimensions of competition? How intense is competition? How can we obtain a superior competitive position?
CSF
To keep customer satisfied and loyal Clientele Product Design Market Segmentation Differentiation Servicing Low cost factor
Recent Events
Mahindra recently entered scooter segment Hero and Honda split
Both continue to operate in the market seperately
Future Outlook
By 2013 India will become largest 2 wheeler market in India India will over take China India+ China+ Indonesia=60% of global 2 wheeler market Among these 3, only India post positive growth for FY 2012-13 Replacement demand will be key contributor
Future Outlook
Motorcycles:
The growth rate of entry price segment is expected to be lower then the industry (below 40,000) Competition is likely to intensify in executive segment (price 40,000-50,000) Premium class segment is expected to grow at the fastest rate (above 50,000)
Future Outlook
Scooter:
Expected to increase the market share steadily Expected to double in size by 2014-15 Segment to reach profitability due to expansion
Market Players
HERO MOTOCORP
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two wheelers, based in India.
In 2001, the company achieved the coveted position of being the largest two-wheeler manufacturing company in India.
MANUFACTURING
Hero MotoCorp two wheelers are manufactured across three globally benchmarked manufacturing facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in the hill state of Uttrakhand.
MILESTONES
1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed Shareholders Agreement signed. 1985 - First motorcycle "CD 100" rolled out. 1987 - 100,000th motorcycle produced. 1992 - New motorcycle model - "CD 100 SS" introduced 500,000th motorcycle produced. 1994 - New motorcycle model - "Splendor" introduced. 1,000,000th motorcycle produced.
MILESTONES
1998 - 2,000,000th motorcycle produced. 1999 - New motorcycle model - "CBZ" introduced. 2000 - 4,000,000th motorcycle produced. 2003 - Becomes the first Indian Company to cross the cumulative 7 million sales mark. 2005 - Hero Honda is the World No. 1 for the 4th year in a row. 2011 - New licensing arrangement signed between Hero and Honda (Hero Honda is renamed as Hero)
CSR
Raman Munjal Vidya Mandir Raman Munjal Memorial Hospital Raman Munjal sports Complex Vocational Training Complex Adult Literacy Mission Marriages of unprivileged girls Rural Health Care Safe side program
LISTING INFORMATION
The Company is listed in both: National Stock exchange Bombay stock exchange
PRODUCTS
HERO TWO WHEELERS
Passion X Pro IGNITOR MAESTRO IMPULSE HF-DAWN HF-DELUXE PLEASURE SPLENDOR +
PRODUCTS
Splendor NXG Passion PRO Super Splendor Glamour Splendor PRO Achiever Xtreme HUNK Karizma Karizma ZMR
SPORTS PRODUCTS
HERO also make sports products like BAT. Kashmir Willow English Willow
Hero Motocorp
Past strategy:
Focus on economy segment with splendor and passion being the flagship product Minimal presence in the premium segment
Impact
Largest selling 2 wheeler in the world Started losing due to market evolution
Hero Motocorp
Current Strategy
Fully utilize the domination in the economy segment Have bigger presence in the premium segment
Hero Motocorp
It is enjoying 3% advantage in terms of cost of goods sold over Bajaj Still their bottom line is 6% thinner then Bajaj Their operating and non operating cost is 9% dearer then Bajaj This is because of high non cash expenses which is likely to go up with 2 new plants Their utilization of capacity is the most optimum among the three
Hero Motocorp
They have a robust collection mechanism which ensures their collection period is by far the best in the industry Their production speed is the fastest among the 3 players They are also making their supplier happy by having the best payment period Due to the first 2 points their cash conversion cycle is the best despite getting less bargain from suppliers
Hero Motocorp
They are able to roll money 3 times before paying to the supplier They are able to generate 58 paisa out of every rupee invested
BAJAJ GROUP
BAJAJ MOTORS Esvee Precision Component limited
BAJAJ SONS
BAJAJ GROUP
BAJAJ MOTORS
Bajaj Motors Limited was incorporated in 1986 and started its commercial production in 1989. BAJAJ MOTORS was started as a machining unit with backward integration in Forgings of Auto Components They are into manufacturing of auto components mainly precision engine & transmission components for Two Wheelers, Four Wheelers, Tractors and other Heavy goods.
BAJAJ MOTORS
Located on the Delhi-Jaipur Highway on 39-40 milestone, Bajaj Motors Limited is ISO 9001:2000certified & recommended for TS-16949, ISO-14001 certifications from TUV GmBH, Germany. Since its inception in 1986, BAJAJ MOTORS has its specialization in Machining for Auto components specifically Precision Engine Components.
MILESTONES
1989 - Start of Bajaj Motors Ltd 1995 - Establishment of Current Location Bajaj Motors Ltd. 1998 - Introduction of Flexible Manufacturing Concept. 2000 - Establishment of Microtek Forgings as Backward Integration. 2004 - Started Export Activities 2005 - Iintegrated Management System Certification of BML, from TUV, Germany.
MILESTONES
2006 - Establishment of Ferrous Casting, as backward Integration. 2007 - IMS Certification for Microtek Forging Established Aluminium Forging. Plant at Pantnagar. 2010- Plant at Haridwar for HHML . 2011 - New Dedicated Export Line for Machining in IMT Manesar,Gurgaon. 2012 - New Forgong Plant at Bawal Industrial area, Gurgaon.
Facilities
The facilities can be divided in 3 categories: Machining Forging Casting
Products
Bajaj Platina (all variant) Bajaj Discover
Bajaj XCD
Bajaj Pulsar (all variant) Bajaj Avenger
Bajaj Motors
Past strategy:
Full reliance on scooter segment
Impact:
Was numero uno when scooter was a dominant segment Lost out after the entry of motorcycles in the market
Bajaj Motors
Current Strategy
Target the youth with sporty bikes
Bajaj Motors
Need to reduce the cost of goods sold which is now as high as 71% Strategy of backward integration can be deployed Need to re enter the fastest growing scooter segment Need to capture more market share if they want to make more optimum use of their capacity
Bajaj Motors
Their collection period is 4 times more lag then Hero but still better then TVS The production speed is just above 30% slower then Hero They are getting the best terms with their suppliers Like Hero they are also enjoying negative cash conversion cycle but a week worse then Hero due to the first 2 points
Bajaj Motors
They are able to roll the money around 1.5 times before paying it to the suppliers They are generating 50 paisa out of every rupee invested worst among the 3
TVS
TVS Motor Company is the third largest two-wheeler manufacturer in India and one among the top ten in the world, with annual turnover of more than USD 1 billion in 2008-2009, and is the flagship company of the USD 4 billion TVS Group.
Milestones
1980 Company launched the first two seater. 1984 Company launched 100cc bike and took first mover advantage. 1994 Company launched scooty for women. 1996-97 They introduced green concept by introducing 110 cc Shogun 2000 Introduced 150 cc, 4 stroke motorcycle 2002 They won total quality management award
Continued
2005-06 It launched its first Indonesian Plant. 2007 It introduced 7 new products. 2009-10 It introduced Jive- auto-clutch bike.
International Performance
TVS Motor Company has been awarded 'Star Performer - Silver Shield' in two/three wheelers category, by EEPC India, for excellent export performance for year 200708.
Products
Motorcycles
Apache RTR 180 Flame DS 125 Flame TVS Jive Star City Sports
Continued
Variomatic Scooters
TVS Wego Scooty Streak Scooty Pep+ Scooty Teenz
Continued
Mopeds
TVS XL Super TVS XL Heavy Duty.
Service
Extended Warranty Xpress Service Online Service booking
TVS
Past strategy
Focus on rural/semi urban population
Impact
Did poorly in urban areas Started losing due to
Population Migration Increase in purchasing power
TVS
Current strategy
Maintain dominance in rural/ semi urban population Focus on economy segment in urban population Presence in premium segment
TVS
Need to expand its capacity so as to not to lose market share Can take advantage of its financial leveragability which is as low as 0.61 Need to reduce its cost of goods sold as it is most expensive for them They need to get their expansion plan in place
TVS
The robustness of their collection mechanism is similar to that of Bajaj The production process is where they are losing big time with the other which is more then double then that of Bajaj and more then triple then that of Hero Their payment terms with suppliers are similar to the other 2 Especially due to the production speed it is the only company with a positive cash conversion cycle
TVS
Their money is locked in the system for 3 days They are generating as high as 60 paisa out of every rupee invested which is the best in the industry
SWOT Analysis
PLC of MotorCycles
PLC of MotorCycles
Motor cycles had a very strong introduction and growth stage. The Indian motorcycle segment has entered the maturity stage
PLC of Scooters
PLC of Scooters
Scooters enjoyed a pretty long stay in the market Decline started after the coming up of motor cycles scooters had reached the start of decline stage With scooty, honda activa,aviator the scooter market re-emerged and PLC got a new curve
PLC of Mopeds
PLC of Mopeds
Started off strong Had a strong growth phase Is now in the end of the maturity
Porters 5 Forces
Porters 5 Forces
Intensity of Competition
Intensity of competition is high Aggressive competent players are already present 7 players are present in commuter segment Manufacturing capacity already exceeding demand
Threat of Substitutes
Local trains Cars Electrical Vehicles Public transport
Threat of Substitutes
The substitutes in one form or other have the following attributes Relative price of substitutes is cheaper Relative quality of substitutes is higher Switching costs is lower
Threat of Substitutes
Why people are switching to Local trains? Safety Affordability Time saving Cost Pollution
Threat of Substitutes
Why people are switching to Cars? Safety Comfort Status Symbol
Threat of Substitutes
Why people are switching to Public Transport? Safety Affordability Time saving Cost Pollution
Threat of Substitutes
Why people are switching to Electrical Vehicles? Environmental Friendly Maintenance cost
Threat of Substitutes
Reasons for Electrical Vehicles not doing well ? Electrical vehicles at present not competitive with respect to present petrol running vehicles No established player is offering Electrical vehicles
Thank You