hero honda (1) com
TRANSCRIPT
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HERO
HONDAA PIONEER IN 2
WHEELER SEGMENT
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Universal customer expectation
These three are the universal customer expectation which most of
the consumer have.
These expectation has been f ulfilled by Hero Honda which has
made it num ber one in two wheeler segment.
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Porter¶s model
Threat fromsubstitutes:
Low priced 4-
wheelers
Intensified competition
Huge num ber of
undifferentiated
products making
advertising important
Rural market potential
Threat from new entrants:
R educed entr y barriers
(FDI)
Import duty on foreign
bikes
Buyers power:
High
Price sensitivity
reduced
Supplier power:
Low (fragmented and
exclusive)
Further reduced by
threat of back ward
integration by buyers
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Major players
Hero Honda, 39.8
Bajaj Auto, 24.4
VMotors, 17.7
Honda Motors, 8.5
Yamaha, 3.8 Others, 5.8
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956 -Set u p HERO CYCLES to manufacture cycles.
1961 ± Setu p ROCKMAN CYCLES for for chains and hubs, today it is the
worlds largest manufacturer of chains and hubs.
1963 ± HERO CYCLES starts exports of cycles
1975 ± HERO CYCLES becomes the largest manufacturer of cycles in
India
1978 ± MAJESTIC AUTO set u p to manufacture mopeds.
1984 ± HERO HONDA set u p.
1985 ± MU NJAL SHOWA set u p for manufacture of shock a bsor bers.
1987 ± SU NBEAM CASTINGS set u p.
1988± HERO MOTORS set u p.
1998 ± HERO HONDA sales cross 500,000 units per year.
2000 ± HERO HONDA sales cross ,000,000 units per year.
2004 -HERO GROUP revenues cross US $ 2 billion HERO HONDA sales
cross 2,500,000 units per year
Timeline
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FORMATION OF HERO HONDA:
MAJOR REASONSEngineering capa bility
Distri bution network
Cordial Industrial
R elations
Tight focus on
financial and raw
material processes
Low employee turnover
R elevance of HERO brand
Commitment to
Quality
K now-how and
experience in handling
large volumes
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To strive for synergy between technology, systems and human resour ces, to
produce products and services that meet the quality, performance and price
aspirations of its customers. At the same time maintain the highest standards of
ethics and social responsi bilities.
MISSION
The vision of a mo bile and an empowered India, powered by Hero Honda.
Driven by Hero Honda¶s commitment to customer, quality and excellence, and
while doing so, maintaining the highest standards of ethics and societal
responsi bilities.
VISION
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SWOTAbility to understand
customer¶s needs and wants
Esta blished brand
name
Effective advertising
capa bilityAfter sale service
Technology
Maintenance cost.
R esell value is high
Company¶s name is
synonymous with f uel-efficient bikes and
connectivity
R&D is not close to
the Hero manufacturing
plant.
Hero is vulnera ble in
the joint venture because
so much power.
Brand name of Hero itself has no influence in
the automo bile industr y.
STRENGTHS
WEAKNESSES
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Glo bal expansion.
Expansion of
target market
(include women).
R elatively low
rate of interest and the discount of
prices.
Large market for
the high
performance segment which is
increasing.
Honda
Motor cycles and
Scooters India can
take away market
share.
Bajaj Motors is a strong competitor.
FDI announced in
Automo biles is
00%.
Petrol price increases.
Pollution norms.
Aluminum and
steel price
increase.
SWOTOPPORTUNITIES
THREATS
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Product development
1985-89 1991-94 199 -2000 2001-03
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2008- bikes with power start
2007- new HUNK launch
2005-first scooter modelPLEASURE
2004-new modelAMBITION,CBZ
New plant at haridwar
Upgraded version of Splendor, passion, CD deluxe
New model of glamour, achiever
TOTAL SALES OF 10 MILLIONS
Product development continued««.
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Bicycle business: integrated back wards to a large extent (various factories bought and set u p).
The main priority has been sour cing high-quality components for the
Munjal¶s business since then.
Always depends on foreign technologies.
For motor cycles, HH has 15 key vendors. ± economies of scale
± lower cost per unit for vendor.
± efficient planning and forecasting.
± Higher bargaining power over su ppliers.
± long-term relationship with Hero Honda
Integration
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Financial Performance
Sales
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Sales ( Nos) 761623 1029510 1425303 1677537 2070147 2621400 3000751 3336756 3337142 3722000 4600130
Growth in sales (%) 43.6 35.2 38.4 17.7 23.4 26.6 14.5 11.2 0.01 11.53 23.59
Sales ( Nos)
0
500000
1000000
15000002000000
2500000
3000000
3500000
4000000
4500000
5000000
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
Sales ( Nos)
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Profita bility
± Improvements in the margins yoy
Better control over material cost, marketing cost and sharp focus on operational efficiencies
PAT & Profitabilty Ratios
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Total Income(in crores) 2269 3191 4539 5195 5997 7563 8870 10090 10517 12565 16099
growth in total income(%) 50.7 40.7 42.3 14.4 15.5 26.1 17.4 13.7 4.2 19.5 28.1
PBT(crores) 285 377 694 885 1072 1217 1412 1246 1410 1781 2832
PAT(crores) 192 247 463 581 728 810 971 858 968 1282 2232
PAT/Income from operations(%) 8.5 7.7 10.2 11.2 12.1 10.7 11.1 8.6 9.3 10.4 14.1
Return on Cap employed(%) 66.1 64.9 94.5 98.9 92.8 80.9 72.3 51.6 49 50.9 76.4
EPS(Rs) 9.6 12.4 23.2 29.1 36.5 40.6 48.6 43 48.5 64.2 111.8
Return on Equity(%) 52.2 46.9 72.1 75.6 72.9 61.6 55.5 38.3 35.5 37.8 61.4
EPS
0
20
40
60
80
100
120
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
EPS
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Cash Flows
± Growth in sales turnover, better efficiencies in the
working capital management improved cash flows
from operations.
Net Cash from operations
0
500
1000
1500
2000
2500
3000
99-00 00-01 2001-02 2002-03 2003-04 2005-06 2006-07 2007-08 2008-09 2009-10
Net Cash from operations
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Working Capital Management
± Efficient use of the various components of working capital cycle.
± Effective control the receiva ble and inventories ena bling it to
continue to operate on negative working capital
Working Cap and liquidity ratios
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Inventory Period 16.1 14.4 11.3 10.5 10.4 11.9 11 10.6
Operating Cycle 23.2 19.2 14 14.9 17.9 21.2 16.8 13.3
Cash Cycle -16.3 -28.3 -33 -23.9 -12.2 -10.6 -13.1 -17
Current Ratio 0.7 0.51 0.53 0.74 0.84 0.68 0.51 0.45
Dividend Policy
- Company has followed a policy of paying high dividends, keeping in
mind cash generating capacities, the expected capital needs of the
business and strategic considerations.
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Div Payout(%) 26.7 75.5 69.8 61.9 56.3 46.88 46.29 45.86 36.45 31.3
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De bt Str ucture
± Ver y minimal amount of de bt- de bt free company
Capital Structure
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
total debt(in crores) 51 66 116 134 175 202 186 165 132 78
Share Cap(in crores) 39.94 39.94 39.94 39.94 39.94 39.94 39.94 39.94 39.94 39.94
Reser ves & Surplus (in crores) 408 696 802 995 1314 1453 1969 2430 2946 3761
Long Term Debt/ Equity 0 0 0 0 0 0 0 0 0 0
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The Road Ahead
T PE R i lik l b l li i i i
H H
BAL d TV xp c d p l iv l i i i
d m k i FY E du g c m b ck i
gm d ig xp c d g
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Value proposition of hero Honda
Thorough understanding of :- New market segments
Market dynamics post slowdown
product opportunities through customer
interaction & feed back Su perior service orientation
Investments in Technology u p gradation
Using Foreign colla boration to assist in new design
and production processes Focus on ³Quality´
Productivity and Profita bility
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Growth matrix
1 2
34
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BASIC DRIVERS
³VALUE FOR MONEY´ provider
Strong alliancesand relationshipswith allstakeholders
Benchmark against bestglobal practices
ProductInnovation
Strong cultureof performance
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THANKS