hero group presentation
TRANSCRIPT
An Overview
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EVOLUTION OF THE HERO GROUP FROM A SMALL COMPANY TO BEING THE WORLD’S LARGEST MANUFACTURER OF BICYCLES AND TWO WHEELERS
EVOLUTION OF THE HERO GROUP FROM A SMALL COMPANY TO BEING THE WORLD’S LARGEST MANUFACTURER OF BICYCLES AND TWO WHEELERS
Bicycle
ServiceTrade Manufacturing
BasicProduct
Parts
Progenic Product
ProductKnowledge
Collaboration
Auto Components
• BPO• IT• Training & Education• Financial
Product ReverseEngineering
Castings Shock AbsorbersSheet MetalCycle, moped and motorcycle comp.
Bicycle Mopeds Motorcycles
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Revenues
510
829
1,810
1997-98 1999-2000 2002-03
CAGR = 29%
Brief profile
• Commenced operations in 1950s and today ranks in the Top 10 business houses of India
• Comprises 18 companies with Hero Honda, Hero Cycles and Munjal Showa being the top 3
• Two of the group companies are the world’s largest manufacturers of two-wheelers (Hero Honda) and bicycles (Hero Cycles)
Net Profits
2539
137
CAGR = 40%
USD million
THE HERO GROUP HAS A TREMENDOUS TRACK RECORD OF SUCCESSTHE HERO GROUP HAS A TREMENDOUS TRACK RECORD OF SUCCESS
“We, at the Hero Group are continuously striving for synergy between technology, systems, and human resources to provide products and services that meet the quality, performance, and price aspirations of the customers. While doing so, we maintain the highest standards of ethics and societal responsibilities, constantly innovate products and processes, and develop teams that keeps the momentum going to take the company to excellence in the new millennium”
MISSION STATEMENT
USD million
1997-98 1999-2000 2002-03
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TODAY, THE HERO GROUP IS INTEGRATED BACKWARDS AND HAS 18 COMPANIES IN ITS FOLD
PRODUCT/ SERVICECOMPANY
Product & Engineering DesignHero Global Design
Payment servicesEasy Bill Limited
Distribution Munjal Sales Corporation
BPO Services, IT, Training & Education Hero Corporate Service Ltd
Financial Services Hero Financial Services Ltd
Sheet Metals and Fabricated Auto Components Satyam Auto Components Ltd
Non Ferrous Castings Munjal Castings
Two-WheelersHero Auto Limited
Financial Services Hero Honda Finlease Ltd
Cycle Components, Auto Components and Machine tools Highway Cycles
Cycle and Auto Components Rockman Cycle Industries
Auto Components Munjal Auto Industries Ltd
International Trading Arm Hero Exports
Mopeds, Scooterette, and Health Care Equipment Majestic Auto
Aluminium Castings Sunbeam Auto Limited
Shock Absorbers Munjal Showa Limited
Cycles, Auto Components, and Cold Rolled Steel Hero Cycles Limited
Motorcycles Hero Honda Motors Limited
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THE GROUP HAS BUILT AN IMPRESSIVE PORTFOLIO OF BUSINESSESTHE GROUP HAS BUILT AN IMPRESSIVE PORTFOLIO OF BUSINESSES
* For a specific segment
Company Segment Market leader Top 3
Hero position in India by sales*
• Hero Honda Motors • Motor Cycles
• Hero Cycles • Cycles
• Munjal Showa • Shock absorbers
• Highway Cycles • Cycle components
• Rockman Cycles • Cycle components
• Munjal Auto Industries Ltd. • Auto components
• SunBeam Auto • Castings
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SNAPSHOT OF HERO GROUP’S ACHIEVEMENTS SNAPSHOT OF HERO GROUP’S ACHIEVEMENTS
World’s largest two-wheeler manufacturer Owns world’s biggest selling motorcycle brand – Hero Honda SplendorWorld’s largest bicycle manufacturerHero Honda amongst top 3 Indian companies by Far Eastern Economic Review, 2002Deep market penetration with 5000 outlets22,000 plus employeesOver 55 million bicycles and 7 million motorcycles on Indian roadsRanked No. 1 amongst Indian automobile companies by Businessworld (Jan. ‘03)“Entrepreneur of the Year” award to the Group Chairman by Ernst &Young
Gross Revenues
Hero Group Financials
5101810
1998 2003
Net Profits
25
137
1998 2003
Networth
99315
1998 2003
CAGR = 29%
CAGR = 40%
CAGR = 26%
Figures in USD million
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THE GROUP HAS WON SIGNIFICANT ACCLAIM AND RECOGNITION WITHIN THE BUSINESS COMMUNITYTHE GROUP HAS WON SIGNIFICANT ACCLAIM AND RECOGNITION WITHIN THE BUSINESS COMMUNITY
“One of top 30 brands in India” “Hero Honda among top 3 Indian companies”
Indian Businessman of the Year award for
Group Chairman
Entrepreneur of the Year award for
Group Chairman from Ernst & Young
Group’s management style acclaimed by • INSEAD, France• London Business School, UK• World Bank
Two of the group companies are the world’s largestmanufacturers Hero Honda – two wheelers and Hero Cycles -Bicycles
Economic Times - Harvard Business School award for Excellent Corporate Performance
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Over Drive Magazine, May 2002Hero Honda Is World Production Numero Uno!
Boston Consulting Group has ranked Hero Group as one of the top ten Business Houses on Economic Value Added (EVA), in India
The Hero Group is recognized as a long term partner and an ideal employer:
Hero Group's partnership with Honda Motors, Japan is nearly 20 years old
Hero Cycles Limited has not lost a single man-day of production since 1956
HERO GROUP’S TRACK RECORD HAS ALSO BEEN ACCLAIMED BY HERO GROUP’S TRACK RECORD HAS ALSO BEEN ACCLAIMED BY
Hero Honda Is World LeaderNet Profit CAGR of 50% in last five years
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HERO HONDA MOTORS IS ONE OF INDIA’S MOST SUCCESSFUL COMPANIES HERO HONDA MOTORS IS ONE OF INDIA’S MOST SUCCESSFUL COMPANIES
Revenues
244
1,093
97-98 02-03
CAGR: 35%
Net Profits
16
122
97-98 02-03
CAGR: 50%
Market share
97-98 02-03
Hero Honda
Others
100% = (mn units)
1.4 3.66
“The HHML scrip has found favor with investors as it has given consistently high returns”
– Economic Times
37 45
63 55
USD million
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HERO HONDA WAS RANKED AT NUMBER 3 AMONGST THE TOP TEN INDIAN COMPANIES BY FAR EASTERN ECONOMIC REVIEW – 2002 REPORTHERO HONDA WAS RANKED AT NUMBER 3 AMONGST THE TOP TEN INDIAN COMPANIES BY FAR EASTERN ECONOMIC REVIEW – 2002 REPORT
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FACTORS WHICH MADE HONDA, JAPAN PARTNER WITH HERO GROUP*FACTORS WHICH MADE HONDA, JAPAN PARTNER WITH HERO GROUP*
Honda selected the Hero Group for a variety of reasons, which included:
Its engineering capabilityRelevance and salience of HERO brandDistribution networkCommitment to QualityKnow-how and experience in handling large volume production and distributionTight focus on financial and raw material processesLow employee turnoverCordial Industrial Relations
* Source:London Business School Case study, 2000
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HERO CYCLES IS THE LARGEST PLAYER IN THE BICYCLE SEGMENTHERO CYCLES IS THE LARGEST PLAYER IN THE BICYCLE SEGMENT
Sales: FY 2002-03*
Source: Prowess
56
94
132
(Cycles Business)
• Sales of Hero Cycles is about 1.4 times its biggest competitor even though Hero was not the first to set up cycles business in India
• Hero Cycles has now maintained its market leadership position over the last 2 decades
USD million
HERO Cycles Limited is a Guinness Book Record holder since 1986 as the world’s largest manufacturer of bicycles.Engineering Exports Promotion Council has awarded HERO Cycles with the Best Exporter Award for the last 28 years in succession.
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THE HERO CYCLES GROWTH HAS BEEN THROUGH A TIGHT FOCUS ON FOUR KEY FACTORS: THE HERO CYCLES GROWTH HAS BEEN THROUGH A TIGHT FOCUS ON FOUR KEY FACTORS:
Action Action OutcomeOutcomeVisionVision Maintaining Maintaining GrowthGrowth
Aspiration of providing “cheapest” transportation to the poorest of India’s poor
Introduce “Value for Money” product
Sturdier product to meet rural demand
Ancillarisationand backward integration
Continuously improve productivity
Product well accepted
Production expanded from 25 cycles a day (1956) to 19,500 cycles a day (2003)
Competition shrank across India from 100 manufacturers to 4 major players
Expand markets
Rural Focus
Product Innovation
Technical Alliances
Integrated Backwards to remain cost-competitive and thus expand market share
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HERO’S STRATEGY THAT MADE HERO CYCLES AND HERO HONDA GLOBAL LEADERS, REVOLVED AROUND 5 THEMESHERO’S STRATEGY THAT MADE HERO CYCLES AND HERO HONDA GLOBAL LEADERS, REVOLVED AROUND 5 THEMES
Hero Group NOT only as a “low cost provider” but also as “VALUE FOR MONEY” provider
Build strong alliances and relationships with all stakeholders in the chain
Benchmark against best global practices
Product Innovation keeping in mind the sensitivities of the target market
Strong culture of performance
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CONSEQUENTLY THE VALUE PROPOSITION BY HERO TO MARKETS WAS BASED ONCONSEQUENTLY THE VALUE PROPOSITION BY HERO TO MARKETS WAS BASED ON
Thorough understanding of fast-changing consumer behaviour, new market segments and product opportunities through customer interaction & feedback
Investments in Technology upgradation
Using Foreign collaboration to assist in new design and production processes
Focus on “Quality”
Productivity and Profitability
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TODAY HERO GROUP EXPORTS PRODUCTS & SERVICES ACROSS CONTINENTSTODAY HERO GROUP EXPORTS PRODUCTS & SERVICES ACROSS CONTINENTS
Exports bicycles, cycle components, motorcycles, mopeds and castings to more than 70 countries
The “IT initiative” of the Group exports services to US, UK & Australia
The Group encourages Vendors to be part of the Global supply chain
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TO PROVIDE QUALITY PRODUCTS AND SERVICES, THE GROUP HAS JOINT VENTURES AND BUSINESS ALLIANCES WITH MANY WORLD CLASS COMPANIES
TO PROVIDE QUALITY PRODUCTS AND SERVICES, THE GROUP HAS JOINT VENTURES AND BUSINESS ALLIANCES WITH MANY WORLD CLASS COMPANIES
Honda Motors , Japan
Universal Cycles Plc, UK StyerDaimlerPuch, Austria
FienTools, Switzerland
Showa Mfg. Co., Japan
Siemens Info. Systems , India
“Hero Honda motors is the most successful Honda joint venture worldwide”
– K. Suzuki, Senior Managing Director,
Honda Motor, Japan
National Bicycle, JapanAprilia, Italy
SAP, IndiaNavision (Microsoft),India
EralMetall, Germany
LiveBridge,USA
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HERO GROUP HAS ALWAYS BELIEVED IN GROWTH THROUGH PARTNERSHIPS AND SHARING THE FRUITS OF GROWTHHERO GROUP HAS ALWAYS BELIEVED IN GROWTH THROUGH PARTNERSHIPS AND SHARING THE FRUITS OF GROWTH
International Partnerships
Hero Honda Motors is the most successful Honda joint venture worldwide, functioning for nearly two decades
The relationship with Showa Mfg. Co., Japan is over 17 years oldand Munjal Showa is the largest manufacturer of shock absorbers in India
Partnership with Other Stakeholders
A large number of the 5,000 dealers have had a successful partnership with the Group for over four decades
The Group has helped develop a large number of vendors who have grown along with the companies and therefore have a strong commitment in the success of the business
The Group enjoys a very healthy respect amongst institutions including Banks, Central and State Governments
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HERO GROUP’S SUCCESS HAS ALSO BEEN THROUGH ITS SIGNIFICANT INVESTMENT IN HUMAN CAPITALHERO GROUP’S SUCCESS HAS ALSO BEEN THROUGH ITS SIGNIFICANT INVESTMENT IN HUMAN CAPITAL
People Productivity
• Enhancing people performance and productivity by
- Training
- Retraining
- Incentivisation
Multiskilling
• To aid in employability
• Ensures horizontal mobility across trades
Group’s Values
• Human capital is the key “asset”
• Continuously invest in this asset
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RECOGNISING SOCIAL RESPONSIBILITY, THE GROUP CONTRIBUTES ACTIVELY TOWARDS WELFARE OF THE SOCIETY THROUGH ITS NUMEROUS SOCIAL INITIATIVES
RECOGNISING SOCIAL RESPONSIBILITY, THE GROUP CONTRIBUTES ACTIVELY TOWARDS WELFARE OF THE SOCIETY THROUGH ITS NUMEROUS SOCIAL INITIATIVES
The Group has set up and is involved with:
• Schools
• Colleges
• Hospitals
• Vocational Training Centres
• Promotion of Sports and Sports persons
• Various community development activities and in improving rural and urban infrastructure
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THE GROUP HAS DIVERSIFIED INTO THE SERVICES BUSINESS FOR GLOBAL CUSTOMERS AND ASPIRES TO BE A SIGNIFICANT PLAYER OVER TIME
THE GROUP HAS DIVERSIFIED INTO THE SERVICES BUSINESS FOR GLOBAL CUSTOMERS AND ASPIRES TO BE A SIGNIFICANT PLAYER OVER TIME
• Hero’s distinctive edge in all its businesses has been – World-class
project management
– Superior service orientation
• After attaining market leadership in motorcycles, Hero decided to enter into customer interaction services and software services because it can best leverage its distinctive skills/capabilities in these sectors
Hero Global Design
BPO/ Call centre services
Division ActivityCompany
Hero CorporateService
Training and Education
IT Services
Product Design & Engineering
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RATIONALE FOR DIVERSIFICATION INTO SERVICES BUSINESS FOR GLOBAL CUSTOMERSRATIONALE FOR DIVERSIFICATION INTO SERVICES BUSINESS FOR GLOBAL CUSTOMERS
Hero Group’s Ability to Compete• The Group has a proven track record of managing long term relationships with its domestic as well as global partners
• The Group has demonstrated capabilities to manage a large pool of people (22,000 employees) which is a pre-requisite for success in this business
• The Group has consistently exceeded customer expectations by understanding their needs both expressed and implied
• The Group’ s value proposition is based on providing value for money by managing cost (without compromising on quality) and efficient use of resources
• The Group has attained leadership position through its service orientation
Given the India advantage and the Hero Group’s attributes, BPO Services business is a compelling case for diversification with a fairly high likelihood of success
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HERO GROUP FINANCIALS – Over the years
HERO GROUP FINANCIALS – Over the years
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HERO GROUP: GROWTH IN REVENUESHERO GROUP: GROWTH IN REVENUES
1810
1455
1110
829
618510
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
US$
Mn.
CAGR = 29% over the last
5 years
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HERO GROUP: GROWTH IN NET PROFITSHERO GROUP: GROWTH IN NET PROFITS
2539
5570
120137
0
20
40
60
80
100
120
140
160
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03
US$
Mn.
CAGR = 40% over the last
5 years
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HERO GROUP: MOVEMENT OF RETURN ON EQUITYHERO GROUP: MOVEMENT OF RETURN ON EQUITY
34.2%
32.3%
29.3%
33.50%
45.80%
45.90%
0%5%
10%15%20%25%30%35%40%45%50%
1997-98 1998-99 1999-00 2000-01 2001-2002 2002-03Year
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SUMMARISING SUMMARISING
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HERO GROUP HAS BUILT LEADERSHIP POSITIONS PRIMARILY DUE TO ITS BELIEF IN THE FOLLOWING PRINCIPLESHERO GROUP HAS BUILT LEADERSHIP POSITIONS PRIMARILY DUE TO ITS BELIEF IN THE FOLLOWING PRINCIPLES
Understanding stakeholder (incl. international partners and customers) expectations and delivering value for money
Managing relationships
Creating a Performance culture
“Partnership Approach” with ancillaries
Efficient Current Asset Management
Accepting and using ever changing technology as a facilitator
Strong quality and process orientation
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RESULTS OF GROUP INITIATIVESRESULTS OF GROUP INITIATIVES
The Group’s philosophy of empowering and training human capital, use of appropriate technologies, constantly being close to the customer and maintaining a healthy work environment with the highest standards of ethics and corporate governance has resulted in the Group companies excelling in their chosen field through a service attitude year after year, leading to impressive financials and healthy returns to all stakeholders
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THANK YOUTHANK YOU