MARKET ANALYSIS OF HERO HONDA

MOTORS LIMITED.

A Project Report submitted in

partial fulfillment of the requirements for

SUBMITTED BY
SUBMITTED TO
 ACKNOWLEDGEMENT

A project cannot be said to be the work of an individual. A

project is a combination of views and ides, suggestions and
contributions of many people. I am extremely thankful to my
project guide who gave me an opportunity to do this project
report as a part of the curriculum.

I wish to express my sincere gratitude to Hero Honda Company

Staff & dealers whose valuable information throughout my
project work.

Also I wish to thank all the respondents who gave me some of

their valuable time to fill up the questionnaires, without which
the project study wouldn’t have been a success.

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 TABLE OF CONTENTS

 OBJECTIVES OF THE PROJECT

 SCOPE OF THE PROJECT

 INTRODUCTION

 AUTO INDUSTRY- A REVIEW

 COMPANY PROFILE

 VISION

 ACHIEVEMENTS

 METHODOLOGY

 MARKETING STRATEGIES

 MARKETING COMMUNICATION

 ADVERTISEMENT

 SALES PROMOTION

 PUBLICITY

 COMPARATIVE MARKETING STRATEGIES

 AUTO MOBILE SALES FIGURE

 ANALYSIS

 RESULTS

 RESOURCE LED STRATEGIC DEVELOPMENT

 CORE COMPETENCIES

 SWOT ANALYSIS

 CONCLUSION

 LIMITATIONS

 RECOMMENDATIONS

 BIBLIOGRAPHY

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  QUESTIONNAIRE

OBJECTIVES

 To study the marketing mix of Hero Honda Company

 To study its life cycle initial stage, growth and maturity.

 To study various promotional strategies and know about the

current strategies keeping in mind the cut throat competition
and arrival of Honda Company in India.

 To focus on comparative study of different products of Hero

Honda company

 Different range of Products; their success and failure.

 To study overall financial performance of Hero Honda

Company.

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 SCOPE OF THE PROJECT

 The project involves, the study of the segmentation,

targeting & positioning of Hero Honda two-wheeler in the
market. And what people think about it.

 Hero Honda. It includes carrying out a survey among

customers & the industry people as well as the retailers. It
also involves the devising of repositioning of the existing
brand by some modifications; advertisement should be so
made that the targeted segment comes to know what the
bike is. How is it better from others. So, that in near future
this bike becomes a grand success. Information regarding the
market share, cost factors, the marketing and promotional
strategies etc was collected from primary data sources.

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 INTRODUCTION

HISTORY

ABOUT THE CHAIRMAN

Brijmohan Lall Munjal – Seeding a Dream

"Don't dream if you can't fulfill your dreams'' Brijmohan Lall Munjal is
often fond of saying. The founder and patriarch of the $ 2.8 billion
Hero Group is your classic first generation entrepreneur. He is a man
who started small, dreamt big and used a combination of grit and
perseverance to create one of the country's largest corporate groups
and the World's No.1 Two Wheeler Company.

Instinctive from a young age, Brijmohan Lall made a rather unusual

start in life. Around the time when the freedom movement in India
was taking shape in the late 1920s, he walked into a newly
opened Gurukul (Indian heritage school) near his home in Kamalia
(now in Pakistan). He was only six years old then.

Thus began an extraordinary tale of courage and perseverance.

Brijmohan began his business story after partition in 1947, when he

6
and his brothers relocated to Ludhiana. The family set up a company
that provided poor people with basic transport (cycles). Three
decades later, as India evolved, he added a second crucial chapter -
which visualized affordable and technologically superior transport to
millions of middle class Indians. The rest is history.

Building Relationships

When Brijmohan and his brothers started out, there was no concept
of organized dealer networks. Companies just produced, and most
dealers functioned like traders. Brijmohan changed the rules of the
business by trusting his gut instincts; introducing business norms
that were ahead of their time, and by investing in strategic
relationships.

Brijmohan built a series of bonds and networks with hundreds of

family members, vendors, dealers and employees. Much like the
Japanese keiretsu system, these networks are now the glue that
holds the Hero Group together.

"Thanks to the relationships that we have nurtured so passionately in

the Hero Family, the younger generations of some of our bicycle
dealers have become dealers of Hero Honda. These relationships
have survived through generations - through bad times and good
times'' the patriarch now reminiscences.

Besides bonding with his vendors and dealers, Brijmohan has been
personally responsible for kindling a spirit of entrepreneurship
amongst his employees, and today, 40 of his former employees are

7
successful entrepreneurs.

Staying Ahead

Though not technically qualified in the conventional sense, few of his

contemporaries have understood the dynamics of technology better
than Brijmohan Lall has. He could always visualize the applicability of
technology before others could. For example, in the 1980s, when all
two-wheeler companies in India opted for two-stroke engine
technology, Brijmohan preferred a four-stoke engine - a technology
that dramatically increased fuel efficiency and reduced maintenance
costs. This technology was one of the biggest reasons for Hero
Honda's stupendous success.

Time and again, Brijmohan managed to steal a march over his

industry peers. For example, when Honda Motors of Japan was
looking for a collaborator in the 1980s, the Hero Group was not high
up the pecking order initially as there were other more eligible and
established suitors.

Yet it didn't take long for the astute Japanese to realize that the Hero
Group and Honda had much more in common than earlier perceived;
there a sharp focus on financial and raw material management, and
employee turnover was low. Honda officials were also amazed to find
that the Munjals were already practicing "Just-in-time-inventory" at
the time (JIT). It turned out that Brijmohan Lall's aspiration to provide
cheap transportation to India's poor by default ensured lean and cost-
effective operations. This in turn increased vendor efficiency and led
to near-zero inventories.

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A Corporate Citizen

A frugal upbringing and a value system modeled on the famous

Gurukul system - which stresses the sanctity of the teacher-pupil
relationship - imbibed in Brijmohan a strong sense of social
commitment and responsibility.

There is a special place in his heart for Ludhiana, the city where he
took roots. Today, Ludhiana is a modern, bustling city, but Brijmohan
has played no mean role in its evolution. Several schools and
educational institutions in Ludhiana owe their existence to the Munjal
family.

The Ludhiana Stock Exchange owes its existence to Brijmohan's

vision as does the Ludhiana Flying Club. He's also set up the not-for-
profit Dayanand Medical College and Hospital-an institute now rated
as one of the best medical colleges in India, in terms of
infrastructure, quality of staff and alumni profile.

In and around Dharuhera, near the first Hero Honda plant, Brijmohan
and his family have left their stamp of philanthropy. The Raman Kant
Munjal Foundation - which Brijmohan set up in memory of his eldest
son, today runs a higher secondary school and a very modern and
well-equipped 100-bed hospital at Dharuhera. The group has also
adopted numerous villages and provides education, vocational
training, drinking water, roads, streetlights and sewerage.

9
AUTO INDUSTRY- A REVIEW

INTRODUCTION

The Rs. 5500 crore Indian two wheeler segment is the second largest
market fin the world after China. India’s two wheeler production is
the third largest in the world after Japan and China. India has a well-
developed two wheeler market with around 25 million households
owning two-wheeler.

The Indian two wheeler industry made a modest beginning in the

early 1950 when Automobile Product of India ( API ) started
manufacturing scooter in India. Until 1958. API and
Enfield( motorcycle) were the only two in production. In 1948, Bajaj
auto began trading in imported Vespa scooter and the three –
wheeler- finally, in 1960’s. it set up shop to manufacturer them in
technical collaboration with piggaio of Italy. The agreement expired
in 1971. In the initial stages, the scooters segment was regulated
regime, foreign company was not allowed to operate in India, and
waiting time for getting Bajaj scooters was as high as 12 years. Java,
and escort. While the Enfield bullet was a four strokes bike, the Java
and Rajdoot were two-strokes bikes. The motorcycles industry was
originally dominated by Enfield with 350 cc bikes. The motorcycles
industry was cc segment. The two wheelers segment was opened up
to foreign competition in the mid 1980’s which saw the entry of the
Japanese manufactures into the country.

CLASSIFICATION OF THE INDUSTRY

The two-wheeler segment can be categorized into the scooter,

mopeds, and motorcycles.

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Motorcycles: this segment has shown the best performance in the
recent years. The market leaders in this section are Bajaj Auto. TVS,
Mahindra, Hero Honda. [The splendor is the most popular segment
among motorcycles.]

Two Wheeler Industry

It wasn’t an easy year for the two wheeler industry. Rising interest
rates and the economic slowdown resulted in delayed consumer
decision making and a rise in loan defaults. Over the course of the
year, banks withdrew financing facilities from satellite towns. The
share of financing, which had increased rapidly to 50-60 per cent of
the total retail sales by early 2007, has now come down to below 30
per cent.
This came as a major setback for the two-wheeler industry.

Ongoing government investments very clearly emphasis inclusive

growth through improved connectivity, job-creation and improving
quality of life. The rural road outlay has been upped by close to 60
per cent, the budget for the Urban Renewal Mission has been hiked
by 87 per cent, and fund allocation to the ongoing National Highways
program has been upped by 23 per cent.
Importantly, India has added fresh impetus to its flagship job creation
program for rural India: the National Rural Employment Guarantee
Scheme. During 2008-09, this scheme, which provides 100
guaranteed days of work a day for the country’s rural poor, provided
employment opportunities to more than 44 million households last
year; a year ago, 33 million households were covered.

During the year, there have been important developments in two-

wheeler industry. The competition has strengthened though there are
hardly any new entrants into the industry. There is an increasing
emphasis on price and this has led to cost cutting efforts all across

11
the industry, thereby, making the customer an ultimate beneficiary.
The trend also saw introduction of new motorcycles with capacity
ranging from 100 to 250cc bikes. We anticipate that many more new
models will be launched during the year and provide customers
plenty of choice at competitive prices.

Businesses cannot consistently grow at 25-30 per cent. Each

business has a tendency to taper and plateau after attaining a
particular size. An annual growth rate of 10-12 per cent over a period
of time is extremely healthy.

The TCS study rankings are conducted at the motorcycle segment-

level to provide comparisons among similar groups of motorcycles.
Motorcycles ranking highest in their respective segments for TCS are:
Hero Honda splendor plus (best standard motorcycle segment); Bajaj
pulser (best executive motorcycle segment); Hero Honda karizma
(best premium motorcycle segment); and Royal Enfield Bullet Electra
(best cruiser motorcycle segment). "The relatively low score for the
executive segment indicates that most manufacturers have fallen
short of meeting the high expectations of these buyers,".

Production, sales growth of the industry

The two-wheeler companies have been operating at high capacities

due to high growth rates between 2009 and 2008. The growth is
expected to lead to increase in the capacities from present 52 lakh
units to 65 lakhs per annum in the year 2009-10, whereas the actual
production estimates by that period at an estimated growth rate of
18% is only 60 lakhs.

Charts showing two-wheeler industry growth rates

Demand

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In India the two-wheeler provide an easy and popular mode of
personal transport for the middle classes. With public transportation
system being inadequate and ineffective the demand for the two-
wheeler is likely to rise. The two-wheeler sales are expected to touch
the 5 million mark by the end of the decade as against the annual
sales of 35,49,271 in 2008-09.

Technology

With liberalization and the increasing competition. The two- wheeler

industry has witnessed technological changes. The four- stroke
engine is being introduced in place of the traditional populations and
fuel inefficient two stroke engine. The smaller capacity engine with
the electronic fuel injection is also being used. Bajaj auto is now
feeling the need to increase its technological competence. Wit the
competition cashing in on the technological competence for their
collaborators. Emphasizes being laid on lighter and fuel- efficient
vehicles. A class of vehicle having fuel efficiency of a moped and
sleekness and style of the motorcycles called scooterette is growing.
The vehicles offer a fuel efficiency of 60-65 km p/h. They enter into
new segment,Bajaj Auto has come out with TVS with Scooty pep and
Hero Honda has come out with a Pleasure and upgraded version of
sleek.

Government policy

The excise duty on two-wheeler , which has previous 10 percent to

30 percent according to the engine capacity, was rationalized is only
two categories size. 15 percent for 75 cc engine capacity and 25
percent for above 75 cc engine capacity the excise duty structure
has been left untouched since the 1993-94 budget.

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Marketing and The Distribution

Like any other emerging country, India experienced the knock-on

effects of the global crisis during the year in review. The effects were
felt through the monetary, financial and real channels. Drying up of
global finance impacted from the middle of the fiscal impacted
domestic capital finance; and corporate earnings came off peaks. In
April 2009, Reserve Bank of India predicted that the Indian
economy's growth for 2008-09 would slow to 6.6 per cent, breaking
an excellent five-year growth sequence. There were two dimensions
to the economic slowdown. In the first half, inflation ran into double
digits as a result of the global crude shock and the global food grain
shortage. To control inflation, the RBI clamped down on money
supply, and reduced liquidity in the economy. By the time inflation
started coming under control, domestic interest rates started
shooting up. Meanwhile, the global crisis erupted, putting further
pressure on liquidity levels.

By October 2008, slowdown was clearly apparent in export-intensive

sectors, both in the manufacturing and service side. By December,
the slowdown turned into de-growth. The cutback in demand from
Europe and the US was so sharp that even a competitive rupee,
which devalued by around 12 per cent during the year, couldn't act
as a buffer. By December 2008, the growth momentum of the first six
months was lost. Planned investment projects were shelved; live
projects faced a shortage of funds as credit flows dried up. As money
became dearer, pay packets became slimmer and risk aversion grew
both from the demand and supply side.Compulsions of coalition
politics at the Centre and the impending Lok Sabha elections didn't
help either, and slowed down reforms and implementation of
projects, particularly in critical sectors like roads, ports and
power.The worst hit was the manufacturing sector. From the second

14
half of the financial year, the index of industrial production
contracted on three occasions, remained close to zero on two
occasions, and was mildly positive only once.

Two –Wheeler Financing

Though two-wheeler are the most preferred from of transport in

India,the fact remains that it is a lower end market product. Most
two-wheeler manufacturer like Bajaj Auto and kinetic engineering
have set up their own finance company since organized financiers do
not think the returns are particularly attractive. The argument given
by some financiers is that the price of a Yamaha or Hero Honda is so
high that people prefer to buy a second hand car instead. This is
particularly true of small town where people desire to own a car and
they have the means the two wheeler is then only a second vehicle
for the family.

MARKET MECHANICS:

Since 1985, when the first Hero Honda it has been and instant hit. A
mileage miser with just about adequate performance further backed
by image of Honda and Hero Cycles brand of aggressive marketing, it
climbed up the sales chart outselling every other motorcycle by ten
of thousands every year.

Over the years, company has received its share of accolades,

including the National Association of India Award against 200
contenders.

SEGMENTATION, TARGETING & POSITIONING

From the current segmentation, targeting & positioning and

consumer surveys we found that our client has targeted the following
segments:

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♦ Congested areas of urban cities.

♦ Males/Females between the age group of 18-36

♦ Middle class people , mostly officials & executives

The client analysis from our questionnaire it was found that our client
has targeted the right segment

HHML is overlooking one feature in bike which is its low maintenance

cost and reliability (i.e. less chances of breakdown) which is absent in
its competitors. Therefore, in order to meet the sales target, two
option are available with the client, one is to redesign the bike and
second is to reposition the bike as “Bike with one time investment”.
Since redesigning of bike may involve a big task and huge
investment therefore we recommended repositioning the bike.

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 COMPANY PROFILE

The Hero Honda story began with a simple vision – the vision of a
mobile and an empowered India, powered by Hero Honda. This vision
was driven by Hero Honda's commitment to customer, quality and
excellence, and while doing so, maintain the highest standards of
ethics and societal responsibilities. Twenty five years and 25 million
two wheelers later, Hero Honda is closer to fulfilling this dream. This
vision is the driving force behind everything that we do at Hero
Honda. We understood that the fastest way to turn that dream into a
reality is by remaining focused on that vision.

There were many unknowns but we kept faith, and today, Hero
Honda has been the largest two wheeler company in the world for
eight consecutive years. Our growth has kept compounding. The
company crossed the ten million unit milestone over a 19-year span.
In the new millennium, Hero Honda has scaled this to 15 million units
in just five years! In fact, during the year in review, Hero Honda sold
more two wheelers than the second, third and fourth placed two-
wheeler company put together. With Hero Honda, the domestic two
wheeler market was able to show positive growth during the year in
review. Without Hero Honda, the domestic market would have
actually shrunk.

Over the course of two and a half decades, and three successive joint
venture agreements later, both partners have fine-tuned and
perfected their roles as joint venture partners. What the two partners
did was something quite basic. They simply stuck to their respective
strengths. As one of the world's technology leaders in the automotive
sector, Honda has been able to consistently provide technical know-
how, design specifications and R&D innovations. This has led to the

17
development of world class, value - for- money motorcycles and
scooters for the Indian market. On its part, the Hero Group has taken
on the singular and onerous responsibility of creating world-class
manufacturing facilities with robust processes, building the supply
chain, setting up an extensive distribution networks and providing
insights into the mind of the Indian customer. Since both partners
continue to focus on their respective strengths, they have been able
to complement each other. In the process, Hero Honda is recognized
today as one of the most successful joint ventures in the world. It is
therefore no surprise that there are more Hero Honda bikes on this
country's roads than the total population of some European countries
put together!

The company's meteoric growth in the two-wheeler market in India

stems from an intrinsic ability to reach out and come closer to its
customers, with every passing year. Hero Honda's bikes are sold and
serviced through a network of over 3500 customer touch points,
comprising a mix of dealers, service centres and stockists located
across rural and urban India. Hero Honda has built two world-class
manufacturing facilities at Dharuhera and Gurgaon in Haryana, and
its third and most sophisticated plant at Haridwar has just completed
a full year of operations. It is difficult to imagine that all this has
happened in the span of just two and a half decades!

The best is yet to come. During the year in review, Hero Honda
powered its way in a market that, for all practical purposes, was
feeling the full effects of the economic slowdown in India. With an
economic recovery now clearly on the cards, Hero Honda is all set to
ride into another summit. As Brijmohan Lall Munjal, the Chairman,
Hero Honda Motors succinctly puts it, "We pioneered India's two
wheeler industry, we've steered it through difficult times; now it is
our responsibility to set the pace again.''

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.

New Models

The company has a large portfolio of brands, with the money-

spinners being mainly Splendor Plus (the world's largest selling bike)
and Passion. However, the company claims it was the launch of the
150cc CBZ and 225cc KARIZMA which established Hero Honda as an
inspirational brand. "The launch of CBZ and KARIZMA got us into a
different league altogether. Although the sales are just about 3,000 a
month, it made us an overall bike company”, Hero Honda would
launch a new model of the KARIZMA by the end of current year, the
Managing Director, Mr. brijmohanlal Munjal, said. Meanwhile, the
company is yet to decide on the location of its proposed Fourth
manufacturing unit. “The feasibility study is on'', he said, adding that
the new plant was likely to come up in the next 18 months. New
launches are likely to help Hero Honda gain a market share in the
coming quarters.

Hero Honda Motors Ltd, has launched a new 100-cc four-stroke bike,
CD deluxe and Dawn is likely to be phased out of the market once
the new model sells ``10,000 plus'' units per month.

Sales Performance

Hero Honda went against the grain and created a growth trajectory
all of its own. Sales of the company grew by over 11 per cent in
volume terms and in value terms; they grew by over 19 per cent.

Effectively, this helped the company end the year with a market
share of around 60 per cent. This robust performance helped the
company increase earnings margin 120 basis points—a remarkable
feat, considering that elsewhere in the world, the automobile industry
went through its worst year in recent history.

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Hero Honda’s performance in its silver jubilee year helped it retain its
position as the world’s largest two wheeler company for the eighth
year in a row. It also helped the company cross the 25 million unit
mark—becoming the first company in India to reach this milestone.

Last year, two new models were launched, namely CBZ XTREME and
HUNK to address super-style and economy segments. Passion pro
has found its position firm amongst Indian models, only next to
Splendor, the largest selling bike in the world in terms of sales
performance. CBZ was re-launched as CBZ XTREME, in April 2007,
with changes and value additions to cater to specific needs of the
customers. Reportedly CBZ XTREME is doing well in its segments
and has sold over 10,000 units in the initial months itself.

Hero Honda has targeted a sale of over 3 million bikes for the year
2009-10. This effort is supplemented by a major launch this year, in
October end; this bike will have some exclusive features and will be
in the 200cc plus range. There are some ambitious programmes of
launching a new range of bikes with technical support from Honda in
the coming years.

With a slew of such measures the capacity available at present

locations can at best support two-million production target at the
existing plants. The company, therefore, is looking at the possibility
of setting up a third plant to meet the future demand and for which
techno-economic study is in progress.

New Initiatives

Customer and customer satisfaction is the purpose of our being an

entity. To increasingly understand him and make him part of our

20
ongoing business. Customer related initiative has been the increase
of warranty period to three years since July 2008. This has
attracted a great deal of customer attention.

During the year the company has added nearly a hundred

dealerships and SSPs. In terms of sheer numbers, the network has
grown by 16% during the year 2008-09. We would endeavor to
increase our reach to every corner of this country.

Plans for the future

In the previous year, the domestic two-wheeler industry entered a

period of de-growth. However, this was arrested in 2008-09, largely
on the back of Hero Honda's performance. After the blip of last year,
the two-wheeler industry went back to a growth phase, largely driven
by Hero Honda and exports. The industry clocked total volumes of 8.5
million during the year in review, a growth of 5 per cent compared to
a fall of 5 per cent in the previous year. The pace of growth was lower
in the domestic market, where the industry clocked sales of 7.43
million, a rise of only 2.60 per cent.

This, however, was a significant improvement over previous year

when the industry had shrunk by 8 per cent.

Motorcycles continue to constitute the largest chunk of the two-

wheeler industry, and during the year in review, accounted for four
fifth of sales. Interestingly, for the second year in succession,
scooters increased their share in the two-wheeler pie from 14 per
cent to 16 per cent. This is clearly a trend reversal from the last 10
years, where the share of scooters in the two-wheeler pie had been
shrinking. Changing lifestyles among women, and the introduction of
feature-rich, high-quality scooters possibly has much to do with the
revival in demand

21
The entry segment – made up of basic 100 cc bikes -Had started
slowing two years ago, and during the year in review, sales in this
segment were down by more than 15 per cent. This could be
attributed to the fact that deluxe segment bikes have become
affordable on account of a 4 per cent excise cut, 1 per cent reduction
in CST and the special package of reduction in excise duty in
December, which most manufacturers passed on to the consumers.
The deluxe segment-made up of value for money and feature-rich
bikes in the 100-125 cc category-grew by 15.2 per cent. The 125-250
cc category-grew at 8.8 per cent. The pace of growth has fallen from
last year's levels. There is no doubt that the higher interest rates
have brought down growth. Nevertheless, this segment was still able
to clock a growth rate in high single digits mainly because of the
excitement caused by a slew of new models that came into this
segment during the year.

The bigger story, of course, is that buyers in small-town India and

rural India, as well as employees of the state and Central
government, were relatively less affected by the slowdown, and this
benefitted the two wheeler industry.

22
 VISION

Hero Honda now the leader in the two wheeler industry. Leaders are
not born, they evolve over time. It all started on the auspicious.
“Baisakhi Day” the 13th of April 1984, when the Hero Honda Motor
Company joined hands. On its journey to take on the No. 1 morale,
Hero Honda created some prominent milestones…..

This leadership has been achieved only because of its philosophy

to excel in all areas. In fact, passion to excel is a credo of the entire
Hero Honda family and is a way of life in Hero Honda. The changing
Scenario of increasing competition and the entry of new brands has
made the credo even more relevant. It serves as a constant reminder
to ensure excellence in providing service to the customer. They are
providing outstanding customer service.

It is in keeping with Hero Honda’s own passionate commitment to

provide ultimate customer satisfaction. Today, they consistently meet
and exceed all requirement on quality, cost and delivery.

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 OBJECTIVES

Hero Honda’s mission is to strive for synergy between technology,

systems and human resources, 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
responsibilities.

This mission is what drives Hero Honda to new heights in excellence

and helps the organization forge a unique and mutually beneficial
relationship with all its stake holders.

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 ACHIEVEMENTS

AWARDS AND ACCOLADES

Year Awards & Recognitions

2009 ET Awards for Corporate Excellence - Hero Honda is the winner of the
“Company of the Year" award for 2008 - 09.
2008 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the
Coveted "NDTV Profit Business Leadership Award 2008"
Top Gear Design Awards 2008 - Hunk Bike of the Year Award
NDTV Profit Car India & Bike India Awards - NDTV “Viewers’ Choice
Award” to Hunk in Bike category
India Times Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty
Awards - “Customer and Brand Loyalty Award” in Automobile (two-wheeler)
sector
Asian Retail Congress Award for Retail Excellence (Strategies and Solutions
of business innovation and transformation) - Best Customer Loyalty Program in
Automobile category
NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year

Overdrive Magazine - Bike Manufacturer of the year

TNS Voice of the Customer Awards:
• No.1 executive motorcycle Splendor NXG
• No.1 standard motorcycle CD Deluxe
• No. premium motorcycle CBZ Xtreme
2007 The NDTV Profit Car India & Bike India Awards 2007 in the following
category:
• Overall "Bike of the Year" - CBZ X-treme
• "Bike of the Year" - CBZ X-treme (up to 150 cc category)
• "Bike Technology of the Year" - Glamour PGM FI
"Auto Tech of the Year" - Glamour PGM FI by Overdrive Magazine.

"Bike of the Year" - CBZ X-treme by Overdrive Magazine.

25
 Ranked CBZ X-treme "Bike of the Year" - by B S Motoring Magazine

“Most Trusted Company” , by TNS Voice of the Customer Awards 2006.

CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the Customer Awards
2006.
2006 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).

One of the 8 Indian companies to enter the Forbes top 200 list of world’s most reputed
companies.

No. 1 in automobile industry by TNS Corporate Social Responsibility Award.

Best in its class awards for each category by TNS Total Customer Satisfaction
Awards 2006:
• Splendor Plus (Executive)
• CD Deluxe (Entry)
• Pleasure (Gearless Scooters)
Splendor & Passion - Top two models in two wheeler category by ET Brand Equity
Survey 2006.

Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two Wheeler
Company).

Top Indian company in the Automobile - Two Wheeler sector by Dun & Bradstreet
- American Express Corporate Awards 2006.

Hero Honda Splendor rated as India's most preferred two-wheeler brand at the Awaaz
Consumer Awards 2006.

Certificate of Export Excellence for outstanding export performance during 2003-04

for two-wheeler & three- wheelers - Complete (Non SSI) by Engineering Export
Promotion Council.

The NDTV Profit Car India & Bike India Awards 2006 in the following
category:
• Bike Maker of the Year
• Bike of the Year - Achiever
• Bike of the Year - Achiever (up to 150 cc category)
• Bike of the Year - Glamour (up to 125 cc category)
• NDTV Viewers' Choice Award to Glamour in the bike category

26
2005
Awaaz Consumer Awards 2005 - India's most preferred two-wheeler brand by CNBC in
the 'Automobiles' category.

Bike Maker of the Year Award by Overdrive Magazine.

ICWAI National Award for Excellence (Second) in Cost Management 2004 in the private
sector category by ICWAI.

10th Motilal Oswal Wealth Creator Award for as the most consistent wealth creator for
the period 1991-2005.
2004
Winner of the Review 200 - Asia's Leading Companies Award (3rd Rank amongst the
top 10 Indian companies).

GVC Level 1 (Highest Rating) by CRISIL for corporate Governance.

Adjudged as the Best Value Creator - Large Size Companies 2003-04 by The Outlook
Money.

Corporate Excellence Award 2004 by Indian Institute of Materials Management.

Adjudged as the Organization with Innovative HR Practices by HT Power Jobs for HR

Excellence.

ICSI National Award for Excellence in Corporate Governance 2004 by The Institute of
Company Secretaries of India.
2003
Winner of the Review 200 - Asia 's Leading Companies Award (3rd Rank amongst the
top 10 Indian companies).

Most Respected Company in Automobile Sector by Business World.

Bike Maker of the Year by Overdrive Magazine.

2002
Bike Maker of the Year by Overdrive Magazine.

Winner of the Review 200 - Asia 's Leading Companies Award (4th Rank amongst the
top 10 Indian companies).

Company of the Year of ET Awards for Corporate Excellence.

Ranked 4th in 'Overall Best Managed Company' category, ranked 3rd in 'Best Financial
Management' and 'Best Operational Efficiency' category, ranked 6th in 'Overall Best
Investor Relations' category, by Asiamoney.

Highest Wealth Creating Company of the Year Award by the Money.

GVC Level 1 (Highest Rating) by CRISIL for Corporate Governance.

2001
Bike Maker of the Year by Overdrive Magazine.

Winner of the Review 200 - Asia 's Leading Companies Award (9th Rank amongst the
top 10 Indian Companies).

Winner of Three Leaves Award for showing Corporate Environment Responsibility in

the Automobile Sector by Centre for Science & Environment.

27
1999 National Productivity Award for the Best Productivity Award in the category of
Automobile & Tractor presented by Vice President of India.
1995 The Analyst Award 1995 presented to Hero Honda Motors Ltd. on being ranked 9th
amongst the most investor rewarding companies in India.
1995 National Award for outstanding contribution to the Development of Indian Small Scale
Industry (NSIC Award - Presented by President of India).
1991 Economic Times-Harvard Business School Award for Corporate Performance to Hero
Honda Motors Ltd.

28
 SALES

4000000 3722000

3500000 3336756 3337142

3000751
3000000
2621400
2500000

2000000

1500000

1000000

500000

0
2004-05 2005-06 2006-07 2007-08 2008-09

MARKET SHARE

5% 5%
10%

20% 60%

Hero Honda Bajaj

TVS yamaha
Others

29
 METHODOLOGY

The project involves the study of four- strokes bike segment in two
wheeler industry sector, which involved:

1. Market survey/ Researches

2. Meeting the retailers and the customers

3. Desk Research

RESEARCH APPROACH

I did two types of surveys (Data source):

A. PRIMARY SURVEY

1. P/S T1 was done visiting Hero Honda Motors Ltd. Corporate office,
Basant Lok, Vasant Vihar regarding segmentation, targeting and
positioning of their brands in the two wheeler sector. A lot of desk
research was also done.

2. P/S T2 conducted by visiting Hero Honda Motors Ltd. And retailers

of Hero Honda {Khanna Automobiles & ESS AAY Agencies , auto
needs(INDIA) Pvt.Ltd).Basic objective was to know their product
price, distribution channel, their customers , their process of
segmentation ,targeting and positioning in the problems faced by
the customers and lastly their views about the model.

3. P/S T3 conducted by taking views of the customers using this

model of Hero Honda i.e. Hero Honda splendor. Their view points
About the model, their grievances/ complaints about it. Last but
not the least their views about modification required in it.

30
RESEARCH INSTRUMENT

The research instrument used was a structural questionnaire. It was

formulated after detailed discussion.

SAMPLING PLAN

a) sampling unit: The sampling unit constituted the people in

the middle income going in for bikes.

b) sampling size: the sample size consists of 45 customers, out of

which 5 refused to fill the questionnaire and 5 forms were found
incomplete.

c) sampling procedure : Convenience sampling.

B) SECONDARY SURVEY

1) S/S T1 was conducted gaining information from different

magazines newspaper. And on company from their annual reports
and balance sheets and their website.

2) Promotional strategies used at present like sponsoring programme

and various event which have no direct bearing on the product.
However the main focus is to influence youth- the largest group.
e.g. Hero Honda Sa Re Ga Ma Pa.

31
 REVIEW OF LITERATURE

This chapter presents an exhaustive literature review of quality

dimension in marketing strategies. The discussion in this chapter is
centered on how more the quality dimension in marketing strategies
understood as part of this research. Furthermore, this chapter
explores the topic specific to the industries viz. Two Wheeler
Industry.

The term marketing strategies began to find its way into the
academic marketing literature only in the late 1980’s. The first use of
the term is attributable to Professor Leonard Berry of Texas A& M
University in an American Marketing Association presentation in
1983. The literature on marketing strategies in the early 1990’s for
the most part did not approach the subject from the consumer’s
perspective. There were of course notable exceptions. In 1990, John
Czepiel, Professor of Marketing at the New York University observed
that a marketplace based marketing strategies is “the mutual
recognition of some special status between exchange partners.
(Czepiel, 1990). Susan Fournier refers to what marketing is supposed
to be “the epitome of customer orientation” (Fournier, 1999).

The literature in services marketing, in recognition of such facts,

defines marketing as the attraction, maintenance and enhancement
of marketing strategies (Berry, 1997), or attracting, developing and
retaining marketing strategies (Berry and Parasuraman, 1991).

Traditional measures of service marketing strategies

The primary outcome measures of marketing strategies, satisfaction

and quality, have an extensive literature in both the product and
service fields yet, particularly in the services literature, there are still
some lack of conceptual distinction between the two constructs.

32
Since it is reasonable to assume a high level of correlation between
the two constructs, most studies adopt one or the other measure,
often without any discussion of the justification for the choice.

Satisfaction has proven to be an elusive construct to capture. Much of

the literature on satisfaction focuses on the expectancy-
disconfirmation paradigm as a means of identifying the process by
which customers make satisfaction evaluations. Within this paradigm,
satisfaction occurs when expectations are confirmed or positively
disconfirmed. Measures generally focus on assessing disconfirmation
at the attribute level although recent extensions of the model include
affective dimensions and emotions (Oliver, 1991).

Several alternatives to the expectancy-disconfirmation paradigm

have been proposed. Some suggest that values are better predictors
of satisfaction because values are more enduring than pre-purchase
expectations. Others question the expectancy-disconfirmation model
as being overly dependent on situational induced factors. As an
alternative they proposed the comparison level model, which
suggests that consumers examine each product attribute against a
reference set of attribute levels.

Each of these theories has been supported in empirical studies. Yet

none has been overwhelmingly accepted as an adequate explanation
for consumer post-purchase evaluations. Perhaps this is because
satisfaction with a product or service has traditionally been studied
as a unidimensional construct. However, in many studies,
researchers have found that satisfaction is not a unidimensional
construct (Leigh 1987). In fact for many products and services the
use of an overall, summary satisfaction measure may mask
important diagnostic information about the nature of satisfaction, its
determinants and consequences. Further, the nature of these
dimensions may vary across services.

33
Another explanation for the inadequacies of existing satisfaction
measures may lie in questions raised in the consumer behaviour
literature regarding the emphasis placed on satisfaction research as
the main method of post-purchase evaluations. Woodruff and Gardial
have suggested that while satisfaction describes the customer's
reaction to the value received from a particular offering, customer
value describes the nature of the marketing strategies between user
and product. With few exceptions (Gardial et al., 1992; Woodruff and
Gardial, 1996), studies of post-purchase evaluation do not address
the possible marketing strategies between value and satisfaction /
dissatisfaction. Yet, as discussed in Woodruff and Gardial (1996) the
perception of receiving added value is critical to understanding the
nature of the relationship. Relationships, which are not perceived as
being mutually beneficial, are terminated. The importance of value to
the service experience may explain the use of quality as another
measure of service effectiveness as in econometric terms value
equals quality divided by cost.

Regardless of the paradigm, traditional measures of satisfaction used

in the service sector operationalize the concept on a discrete
transaction basis and generally assess the construct from only one
partner's point of view. Yet it is clear that service relationships are
built upon repeated encounters and are dyadic. If the intention is to
evaluate satisfaction with the relationship, current measures of
satisfaction seem inadequate.

Researchers often distinguish between satisfaction and quality based

on a longitudinal dimension with satisfaction seen as a transaction
specific evaluation while quality represents a long-run overall
evaluation or attitude. However, the distinction between satisfaction
and quality in service delivery has become blurred (Bitner, 1990;
Bolton and Drew, 1991). In fact Zeithaml et al., (1990) define quality
as meeting or exceeding customer expectations, the traditional

34
definition of satisfaction within an expectancy disconfirmation
paradigm.

One of the most prominent measures of service quality is the

SERVQUAL measure based on Parasuraman et al. (1985) gap model.
This model suggests that differences between consumers'
expectations about the performance of a general class of service
providers and their assessment of the actual performance of a
specific firm in that class drives perceptions of quality. The
measurement of quality is functionally identical to satisfaction
measures based on the expectancy-disconfirmation model. The
distinction arises primarily from the nature of the items or attributes
used.

Another approach to SERVQUAL is simple performance measures.

The marketing literature provides considerable evidence that this
approach is superior to the expectations-performance gap model
(Bolton and Drew, 1991; Cronin and Taylor, 1992; Woodruff, et al.,
1983). In a test of their performance-only (SERVPERF) model, Cronin
and Taylor provide evidence that performance explains more of the
variation in service quality than does SERVQUAL (Cronin and Taylor,
1992).

Both SERVQUAL and SERVPERF are global measures of service

quality. The use of a global measure in the evaluation of service
relationships may, however, not be adequate. Particularly in service
relationships relying on social and structural bonding mechanisms
which have increasing levels of customization, a global measure may
not provide the details necessary to fully assess the
strengths/weaknesses of the relationship.

Quality measures, like satisfaction measures have been criticized as

being largely unidimensional (Zeithaml, 1988). Though SERVQUAL is

35
an attempt to correct for this deficiency there are still other
dimensions, which may lead to a purchase experience particularly as
that occurs in a marketing strategies context. Zeithaml (1988)
recognized these failings and proposed a model from an exploratory
study utilizing a means-end hierarchy to investigate the marketing
strategies between price, quality and value. The resulting model
indicates that perceived quality is one of many concepts (i.e.,
perceived sacrifice, high-level abstractions, intrinsic attributes) that
result in perceived value which then leads to purchase.

Obviously satisfaction and quality are important concepts in the

evaluation of service relationships. Both are necessary but not
sufficient to good relationships. However, much controversy
surrounds these constructs and their marketing strategies (Cronin
and Taylor, 1992; Parasuraman et al., 1994; Teas, 1993). Some
literature suggests that satisfaction is an antecedent of service
quality (e.g., Bitner, 1990; Bolton and Drew, 1991) while
Parasuraman et al. (1985) suggest that perceived service quality
leads to satisfaction. Cronin and Taylor (1992) in their test of
SERVPERF found evidence that the latter is in fact the correct causal
order. Thus it appears that to adequately evaluate service
relationships, both concepts must be measured to account for the
ongoing nature of the relationship.

Relationships are a multiplex phenomenon. The nature of the

marketing strategies depends on the kinds of satisfaction desired by
the parties involved; the clients may seek socio-emotional provisions
and/or instrumental provisions, and may allow these concerns to
determine their focus in the relationship. Thus their behavioral
intentions may depend on the provision criterion. The relations also
depend on whether the types of bonds are substantively grounded or
emotionally based. This view reinforces the presence of such
variables as trust, which are primarily socioemotional, and the more

36
instrumental provisions such as legal, planning and technical bonds,
which partly reflect the variable commitment. The conceptualization
of such variables cannot be completely socioemotional or
instrumental, and in the interests of clarity and functionality, the
definitions of the antecedent states of loyalty in the marketing
strategies are based on trust, intimacy, etc.

But it reinforces the basic assumptions in the model. That the

presence of attitudinal variables like trust also play a role and they
determine the overall benefits (provisions) perceived even in a
business relationship. Thus, it is not solely direct commercial value
related considerations but also such attitudinal considerations, which
go beyond the service interaction or episode, which determine
loyalty.

Marketing strategies strength can be seen as the resistance to

disruption of the relationship. The marketing strategies are
developed partly on a basis of evaluations made and partly as a
result of bonding and commitment (Strobacka, Strandvik and
Gronross, 1994). Thus the strength of marketing strategies can be
derived only partly from behavioural variables since they only give an
indication (Hoekstra, 1993) .In most studies when measuring
marketing strategies strength one indicator at a time is used. Since a
behavioural and a mental dimension can be distinguished in a
marketing strategies (Poiesz and Van Raaji, 1993, Storm, 1991), the
individual indicator can be behavioural (descriptive) or mental
(attitudinal) in nature.

From the behavioural point of view indicators like length of the

relationship, recency, frequency, monetary value and regularity are
used most often to get an idea of marketing strategies strength.
Another behavioral indicator could be whether the customer
simultaneously uses also competing companies or only uses

37
company X (Liljander and Strandvik, 1994). From the mental
viewpoint a variable like satisfaction, involvement, perceived
switching costs, long-term expectations, trust and commitment has
been used as an indicator of marketing strategies strength.

Typically, commitment and trust are seen as central to the marketing

strategies paradigm of relational partners, and are posited as key
mediating variables (KMV) (Morgan and Hunt, 1994). Morgan and
Hunt's KMV model rests on the assumptions that these two are key
because they encourage marketers to work at preserving the
marketing strategies investments with partners/clients, resist short
term gains which may be lesser than expected benefits of staying on
in the relationship, and as they view potentially high risk actions as
acceptable since they expect that partners will not act
opportunistically. Further, both the key variables should be present
for the existence of the loyal behaviour patterns indicated here.

Satisfaction plays a major role here, and leads to trust when some
other antecedent conditions are satisfied, like shared values and
goals, dependence based on stable expectation/perception of
performance, and perceived switching costs. The notion of sharing is
central to the conveyance of meaning. People and entities to whom
we feel closest and who mean the most to us are generally those
with whom we have a great deal in common. They share the same
values they demonstrate what Duck (1994) refers to as shared
meaning.

In the same way, it is proposed that commitment follows trust later

on the ladder, and though some commitment elements start forming
at this stage, the fuller commitment only follows when there is the
antecedent of trust itself, which has led to the other more direct,
definitive antecedents, like the various bonds and the positive
attitude to interaction with each other. Commitment, defined as the

38
attitude towards interacting with each other, coupled with the bonds
of various types, is a determinant of marketing strategies strength
(Liljander and Strandvik, 1995). Marketing strategies strength is
closely related to loyalty, or behaviors, which reflect loyalty like
recommendations, repurchase intentions and actual repurchase, etc.
(Storbacka, Strandvik and Gronroos, 1995).

Marketing literature talks about four sources of consumer trust:-

• Generalized trust (derived from social norms)

• System trust (rule of law, regulations, contracts, bureaucracy

professionals)

• Personality based trust (general tendency to trust/distrust

determined by personality traits)

• Process based trust (developed through repeated interactions,

firm/brand specific, interpersonal)

A customer’s first encounter with a service firm is his or her first

‘moment of truth’ and is a potential first step on a road leading away
from reliance on generalized, system and personality based trust
towards a reliance on process based trust. Because system and
generalized trust are held in common by members of society and are
equally available to all firms, they offer less potential for competitive
advantage. By building process based trust, however, service firms
can encourage customer retention and gain competitive advantage
(Barney and Hansen, 1994).

Trust is a multidimensional construct with cognitive, affective and

behavioral dimensions and recent empirical investigations
(Cummings and Bromiley, 1996) have supported this theorizing. In
relationships, individuals trust cognitively based on their knowledge

39
of their partner’s character, they trust affectively based on their
emotion towards their partners and they trust behaviorally by taking
actions that display trust in their partners.

Previous conceptualization s of trust in marketing research has

tended to emphasize the cognitive dimension. The affective
dimension of trust has been largely ignored in the literature.
However, more recently, marketing researchers have examined
social support behaviour in service relationships (Adelman and
Ahuvia, 1995; Adelman, Ahuvia and Goodwin, 1993), which engender
affective trust.

Trust is built up when there are assurances of higher and stable

levels of satisfaction (the exceeding of expectations, every time, in
the service quality approach), and there is lower risk perceived,
security, a feeling of reliability about the supplier, and assistance.
This level of service quality obviously builds trust, and can explain
the threshold of satisfaction which precedes a change in loyalty
behaviour, for some additional benefits are being offered, and the
interactions assume a greater number of dimensions. Trust will lead
to sharing of goals and values, as at this stage, assistance is
expected and also given, in achieving goals that are perceived to be
for the common good of both partners.

Dwyer et al. (1987) marketing strategies development process model

posits that with time, a marketing strategies moves along a
continuum from awareness to commitment and the latter represents
the highest stage of relational bonding. It must be acknowledged that
the possibilities for creating and managing trust and commitment in
relationships may be limited (Gronroos, 1994).

A natural consequence of this may be the stage of opening up, giving

more and accurate feedback by sharing more vital knowledge, which

40
corresponds to intimacy. Marketing strategies literature also enriches
the explanation of why there is sharing, and also why that sharing
seems to provide a jump in the level of loyalty related behaviour.
Intimacy talks of socioemotional benefits, which strengthen the
relationship; and it implies a sharing of vital information, sharing
socially and psychologically. In service quality terms, this would imply
an increase in satisfaction due to more need areas being satisfied, as
needs other than the usual instrumental provisions are being
satisfied. Here the type of marketing strategies positive, cemented
through socioemotional provisions including bonds such as social,
planning, clubs, etc and a positive attitude towards interacting with
each other. This directly impacts marketing strategies strength and
hence loyalty.

The difference between marketing strategies strength and customer

loyalty is the difference between the object. The object of customer
loyalty maybe either the service provider/firm or a particular service
worker. The former is referred to as service loyalty, the latter as
personal loyalty. High levels of customer trust towards the firm’s
employees would be expected to translate into positive attitudes
towards the firm and high levels of customer commitment to the firm
‘s employees would expect customer patronage of the firm.
Therefore when a customer has a strong marketing strategies with
multiple personnel from the firm, researchers suggest a direct path
between marketing strategies strength and true customer loyalty to
the service firm.

Customer satisfaction with a company’s products or services is often

seen as the key to a company’s success and long-term
competitiveness. In the context of marketing strategies marketing,
customer satisfaction is often viewed as a central determinant of
customer retention.

41
However there is a need to look beyond customer satisfaction as
several studies have established that higher levels of customer
satisfaction may not always result in higher levels of customer
loyalty. A few empirical investigations in this area indicate that a
direct marketing strategy between these constructs is weak or even
non-existent. Some studies suggest satisfied customers may not be
sufficient to create loyal customers (Cronin and Taylor, 1992; Fornell,
1992; Oliver, 2000). These studies tend to support Reichheld’s (1993)
argument that customer satisfaction is not a surrogate for customer
loyalty.

In recent times, customer satisfaction has gained new attention

within the context of the paradigm shift from transactional marketing
to marketing strategies marketing (Gronroos, 1994; Sheth and
Parvatiyar, 1994), which refers “to all marketing activities directed
towards establishing, developing and maintaining successful
relational exchanges (Morgan and Hunt 1994). In numerous
publications, satisfaction has been treated as the necessary premise
for the retention of customers and therefore has moved to the
forefront of relational marketing approaches (Rust and Zahorik,
1993). Kotler sums this up when he states: “The key to customer
retention is customer satisfaction” (Kotler, 1994). Consequently,
customer satisfaction has developed extensively as a basic construct
for monitoring and controlling activities in the marketing strategies
marketing concept.

There are obviously aspects of marketing strategies strength other

than customer satisfaction. These include, for instance, the existence
of bonds between the customer and the provider. These bonds
function as switching barriers beside customer satisfaction. Another
dimension relates to the customer's (and the provider's) commitment
to the relationship. Commitment might be based on customers'
intentions and plans for the future.

42
Within the interaction approach and network approach to industrial
marketing six different types of bonds have been suggested (Dwyer
et al., 1987). These are social bonds, technological bonds, knowledge
bonds, planning bonds, and legal/economic bonds. Although these six
bonds can also be found in consumer markets, they are somewhat
limited for this purpose.

In addition to these bonds, Liljander and Strandvik (1995) have

suggested that the consumer may also have geographical, cultural,
ideological and psychological bonds to a service provider. They
propose that ten different types of bond can be identified in the
consumer market: legal, economic, technological, geographical, time,
knowledge, social, cultural, ideological and psychological.

Liljander and Strandvik (1995) argue that the first five bonds-legal,
economic, technological, and geographical and time bonds constitute
effective exit barriers for the consumer. They can be seen as
contextual factors that cannot easily be influenced by the customer
but can be observed and managed by the service firm. They are
more likely to be perceived in a negative sense than the other five
bonds. It is, for example, associated with high costs for the customer
to switch banks if she is tied up with a mortgage in one bank. These
bonds can prevent the customer from switching banks even when the
service given is of low quality.

The other five bonds- knowledge, social, cultural, ideological and

psychological bonds, represent perceptual factors, which are difficult
to measure and manage by the firm. For example the cultural,
ideological and psychological are directly connected to the
customer's values and preferences. A psychological bond, where the
customer is convinced of the superiority of a bank, is probably a very
effective exit barrier. The consequence of bonds is that the customer

43
might accept lower levels of service quality, compared with other
service companies, without breaking the relationship.

Quality dimension of marketing strategies: Studies specific to

Two-wheeler Industry

One of the ways in which companies have tried to establish bonds is

through the loyalty programs. Loyalty programs recently gained
considerable practical and academic attention in the context of
marketing management. The fundamental managerial objective of
these programs is to reward loyal customer behaviour with special
services or rebates and thereby at the same time to promote this
loyal behaviour in order to realize the economic benefit of long term
business strategies (Reichheld 1993, Sharp and Sharp 2008). The
extent to which loyalty program actually achieve this objective has
become increasingly the subject of scientific study (Strauss et al.,
2002, Verhoef, 2007, Yi and Jeon, 2004, Noordhoff et al., 2008).
Usually, such studies have focused on the question of how strong the
supposed connection between participation in a loyalty program and
increased customer satisfaction and loyalty actually is.

Marketing Research on loyalty programs has increased in the last

years. The effect of loyalty programs on loyalty and their critical
success factors were investigated in the context off various industry
settings such as automotive industry (Stauss et al., 2005), financial
services (Bolton et al., 2007), retail stores (Noordhoff et al., 2008).
The results of an empirical study of Stauss et al. (2002) indicate that
the membership in an automotive customer club has a remarkable
impact on the marketing strategies. Bolton et al. (2001) shows that
participants of a loyalty program of a financial services provider
actually tend to realize increased revenues and higher service usage
levels and to overlook negative service experience.

44
Noordhoff et al. (2008) is of the contention that a small number of
alternative loyalty programs in a market and only little familiarity off
customers with these programs positively affect the success of the
program. This is in accordance with the results of the study of
researchers who finds especially high levels of spurious loyalty
among members of frequent flyer programs who are participating in
several different programs.

According to Stauss, Schmidt and Schoeler (2002), “More and more

companies are implementing loyalty programs in order to enhance
their knowledge of their customers, to identify their valuable
customers, to differentiate and give personal attention to these
valuable customers and especially to raise profits by increasing
customer retention and by enabling a more efficient use of marketing
goals”.

They are of the opinion that few firms systematically verify whether
the program they implemented actually achieve these goals. The
consequences could be that the programs do not achieve the
retention effect aimed at or even that the overall marketing
strategies with the firm is weakened.

Zins (2007) in his study of the commercial two wheeler industries

opines that if loyal customer needs to be traced, three conceptual
perspectives are conceivable. First there are behavioural concepts,
which strictly look at the repeat purchase behaviour that may be
somehow biased (Conningham, 1956; Tucker, 1964). It was further
argued that concentrating on the behavioral aspects of loyalty would
consequently overestimate the share of true loyalty as there are
always customers who are forced to repeatedly buy the same brand
or use the same distribution channel (Day, 1969). Second the
attitudinal perspective in contrast allows gaining supplemental
understanding of loyal behaviour. Jacoby and Kyner (1973) advocated

45
a six point definition of brand loyalty which they claimed to be
attitudinally based. This view has to be supplemented by the fact that
both authors supported a multidimensional understanding of the
attitude concept (Lutz, 1991). The third approach applies the
composite perspective combining attitudinal and behavioral
definitions. Strong vs. weak attitudes towards the object paired with
high vs. low repeat behaviour span the classic grid with four types of
loyalty: true, latent, spurious and low loyalty (Day, 1969).

Furthermore one direction of research tries to define commitment as

the particularly cognitively anchored, positive attachment to
behavioral acts, which is conditional for distinguishing between true
and spurious loyalty. (Bloemer and Kasper, 1995; Kiesler, 1971).
However two different types of commitment emerged from the
literature. These two are: affective and calculative commitment.
(Kumar et al., 1994; Mathieu and Zajac, 1990) Affective commitment
is non-instrumental and relies on the enjoyment of a satisfying object
or marketing strategies (Samuelson and Sandvik, 2007). In contrast,
calculative commitment is instrumental (Meyer and Allen, 2008) in
the way that the customer is forced to remain loyal against his/her
desire as long as cost –benefit ratios or switching costs (De Ruyter et
al., 2008) dictate to do so.

According to Zins (2002), two main reasons may induce the customer
to be calculatively committed, lack of alternatives or high personal
sacrifice. He is of the opinion that both issues are highly relevant in
the two-wheeler industries. Flight routes are not only characterized
by connecting city A with city B. Schedule elements such as
frequency, daytime and stop over contribute to customer’s overall
value assessment. Moreover, the generation of personal benefits
through frequent flier programs influences the personal sacrifice
involved.

46
Furthermore, frequent flier programs often base their decisions on
mileage calculations that are competitive and situation driven. They
do not reflect true value. The decision regarding which seat class to
book is based on company restrictions, distance, price and individual
needs. A customer’s behaviour and expectations regarding schedule,
price, time and service is obviously bound to vary significantly
depending on whether he or she travels at his or her expense or on a
third party budget. In the light of these considerations, traditional
segmentation processes soon lead to dead ends and are not
appropriate tools for implementing CRM.

In case of the passenger two wheeler industries, Bouman & Wiele

(1992) in their work have build and tested an instrument on service
quality in the two wheeler industries. Their items were factor
analyzed and fall in three broad categories namely Customer
kindness, tangibles and faith. The factors can be classified as
follows:-

Factor 1: Customer kindness – The front office personnel’s approach

to the customer and his problems regardless of the service delivered.
The customer needs to be helped quickly and in a friendly reliable
way.

Factor 2: ‘Tangibles’ the essence of this actor lies in feasible

concrete characteristics of the service.

Factor 3: ‘ Faith’. The way a two-wheeler business gives the

customer insight into the actual two wheeler industries process.
Information about the process produces faith and reassurance.

Another study on the passenger two wheeler industries was

conducted by Liljander and Roos (2007) in which they tried to explore
and provide meaning to spurious and true relationships. They
conducted a qualitative study in a two wheeler dealership in the

47
European Union where profitability depends on customer
commitment to both after sales services and the two wheeler brand.
The study revealed that behavioral commitment to after sales
services was high but that affective commitment was low to
moderate. Customers were satisfied but did not perceive the
services to be superior to the competitor’s service offerings. They
trusted authorized repair in general and did not feel that after-sales
service would have more than a minor influence on the future two
wheeler purchases.

The study was designed to investigate customer commitment,

benefit and trust in after-sales service relationships. Two wheeler
-repair and maintenance services were chosen for several reasons.
First it is a credence-based service that is difficult for customers to
evaluate and customer trust is believed to be particularly important.
(Singh and Sirdeshmukh, 2001). Second, customers generally expect
dependable two wheeler-repair services from all repair shops and
other benefits will be needed to win higher customer commitment
(Gwinner et al., 1999).

According to Liljander and Roos, private customers tend to use an

authorized repair shop for their new two-wheeler until it is
approximately five years old. Thereafter most customers opt for
cheaper spare parts than those offered by authorized repair shops.
Furthermore in their study, a loyalty card given out by the parent
company that also featured special offers on two wheelers, service
and spare parts was mentioned as a potential marketing strategies
benefit. However, this card can be obtained by anyone regardless of
marketing strategies length and thus constitutes a weak financial
bond (Berry, 2005).

Summary

48
In the previous chapter, the conceptual framework of this research
study was discussed. Amidst the myriad of dimensions on quality in
the context of customer relationships, the definition which was
acceptable to the researcher was mentioned and the reason for
choosing the proposed model was also elaborated in this chapter.
The formulation of the various hypotheses based on the major
constructs i.e. product quality, service quality, customer satisfaction,
long term expectations, perceived switching cost, shared values,
trust and commitment and its impact on marketing strategies
strength is suggested in the concluding pages of the chapter. Also
besides these nine attitudinal variables, the behavioral variables used
in the study have also been defined and the reasons for their
inclusion have been suggested based on past studies. However, their
role in the present study is more in terms of using them as
classification variables and proposed to be used for the purpose of
grouping.

The next chapter describes the research design and delineates the
research instrument developed for this study. The next chapter also
examines the issue of reliability and validity and provides the
structure for data analysis.

49
 MARKETING: AN INTRODUCTION

Marketing is a social and managerial process by which individuals

and groups obtain what they need and want through creating,
offering and exchanging products and values with each other. In this
way marketing is a business function that identifies customer needs
and wants, determines which target market the organization can
serve best, and designs appropriate products, services, and programs
to serve these markets.

Marketing is much more than isolated business function it is the

philosophy that guides the entire organization. The goal of marketing
is to create customer satisfaction profitably by building-value laden
relationship with important customers as well as fulfill certain
organizational objectives.

People throughout the various kinds of organizations-product or

service, profit or non-profit, domestic or global, small or large, need
to know how to define and segment a market and how to position
themselves strongly by developing need satisfying products and
services for chosen target segment. They must know how to price
their offerings to make them attractive and affordable and how to
choose and manage intermediaries to make their products available
to customers. And they need to know how to advertise and promote
products so customers will know and want them.

The objectives can be achieved through the implementation of

suitable marketing strategy by the organization. It is the marketing
logic that is formulated keeping in mind the needs of the consumers
and also strategies of the competitors. The 4 factors affect it are:

50
Product - The tangible offer to the market, which includes the
product quality, design, features, branding and packaging.

Price – The amount of money that customer pays for the product.
The price of the product should commensurate with its perceived
value. If does not, the buyers will turn to competitors products.

Place – Includes the various activities the company undertakes to

make the product accessible and available to a large number of
target customers.

Promotion – The fourth marketing mix tool, includes all the activities
the company undertakes to communicate and promote its products
to the target market. It consists of advertising, sales promotion,
public relations, and direct and online marketing.

Faced with unrelenting global competition, and ever more powerful

and demanding customers, companies across the world have come
to realize that their old ways of operating – their long standing
methods for developing, making, selling and servicing products – are
no longer adequate. They have also discovered that their existing
tools for improving operations are not making a dent in persistent
problems of high cost, poor quality and inadequate service. In order
to address these problems, these companies are taking measures
more radical than they have ever taken before. They have begun to
re-engineer, they have ripped apart their old ways of doing things
and started with clean sheets of paper.

Hero Honda has effectively evolved remarkable marketing strategies

for its 4P’s. It is because of this that Hero Honda has been able to
come out a niche for itself. But before we discuss the strategies for
the 4Ps separately, it is imperative that we know about the marketing
strategy. This is what keeps the Hero Honda going and have
reinforced its leadership in the motor bike segment.

51
MARKETING COMMUNICATIONS

“Walk the Talk” though Advertising, sales Promotion, Public

Relations, through an emerging Media, including the Web these
things are done through.

♦ Promotional Methods

♦ Promotional Mix

♦ Advertisement

♦ Sales promotion

♦ Public Relations

♦ Event Management

♦ Media Management ]

♦ Budgeting

♦ Measuring Effectiveness

And much more………………..

The internet’s greatest potential has been superbly exploited by the

small business ventures to reach customers directly. The market had
virtually opened quickly to market changes by providing accurate
market intelligence, faster communication and greater planning time.
This helped to reduce the market volatility the dealer to understand
the significance and value of e-commerce and benefits of embracing
the latest in information technology, and initiate concrete steps to
capitalize on it. The marketing is also done through sales
promotions, Advertisement, publicity, etc.

Strong dealer relationship expands the scope of the commercial

paper programme in an organization and Hero Honda is doing that.
They are doing the communication through newspaper, magazines
and television channels, etc.

52
 4Ps of Marketing

PRODUCTS

Hero Honda, which has a technology tie-up with Japan's Honda

Motors, was currently discussing the feasibility of manufacturing
scooters for the Indian market, Mr. Munjal said. However, the
company has a binding clause with Honda's scooter manufacturing
Indian subsidiary, preventing it from making scooters till 2008.

Hero Honda Motors, India's largest motorcycle company, has

launched the premium segment 223cc motorcycle Karizma priced at
Rs 79,000 (ex-showroom, Delhi). Many of the products which the
companies have started have been phased off. Now the existing
products are KARIZMA, CBZ X-TREME, HUNK, SPLENDOR+,
ACHEIVER, PASSION+, SUPER SPLENDOR, GLAMOUR,
PASSION PRO, SPLENDOR NXG, CD DELUXE and PLEASURE.
Among these we are going to analyze only three – (1) CBZ X-TREME,
(2) KARIZMA and (3) Splendor+.

• KARIZMA

• CBZ X-TREME

• SPLENDOR+

The TCS study examines customer evaluations at three distinct

ownership periods: 1 to 6 months, 7 to 18 months, and 25 to 36
months. This helps in understanding the differences in satisfaction
during initial ownership, in-warranty and post-warranty ownership
periods. Satisfaction ratings decline as the length of vehicle
ownership increases. However, Hero Honda Splendor is among the

53
few models to maintain consistency across the three ownership
periods.

SPLENDOR+

The Ex-Showroom Prices

Delhi 38,500
Mumbai 39,000

Engine 4-stroke, OHC, single cylinder, air-cooled

Displacement 97.2cc

-Clutch type Manual

Clutch Primary -

Clutch Secondary Multi-plate wet

Transmission 4-speed constant mesh

Final Drive Roller chain

Ignition Kick starter

Starting Kick starter

Frame Double cradle tubular type

Suspension (Front) Telescopic hydraulic fork

Suspension (Rear) Swing-arm with hydraulic dampers

Dimensions 1950x720x1040mm
(LxWxH)

Wheel Base 1230 mm

Ground Clearance 159 mm

Dry Weight 100.3 kg

Tyres:Front/Rear 2.75"x18"/2.75"x18"

Max.Power 7.2 PS @ 8500 rpm

54
Max.Speed 90 km/h

Fuel Tank Capacity 10.5 ltr (1.4 ltr reserve)

CBZ X-TREME

Specifications

Displacement 150 cc

Power 14.6 PS @ 8000 rpm

Torque 14.2nm @ 6500 rpm

Acceleration 0-60 km/h in 5 seconds

Bore x stroke 63.5 mm x 49.5 mm

Compression ration 8.5:1

Type of brake

Front Disc type (130 mm diameter)

Rear Drum (130 mm diameter)

Type of engine 4-stroke, single cylinder, air-cooled,ATFT

Fuel Tank Capacity 12.5 liters (Full)

2.5 liters (Reserve)

Available in attractive colors

Black-Tahitian Blue-Candy Blazing Red - Sparkling Silver Metallic

Tasmania Green - Sienna Gold Metallic

* Hero Honda CBZ meets the India 2001 Emission Norms.

** Specifications are subject to change without prior notice.

55
Check out these unique features

Transient Power Fuel Control (TPFC) System: For quick acceleration,

providing a sudden surge when required. A feature which is used in
some of the most advanced cars.

Tachometer and Trip meter: Tachometer displays the engine rotation

speed. And first time feature - the Trip meter, measures the distance
traveled in a trip. Dynamic Vibration Dampers: The dampers
incorporated in the handlebar, ensure that your ride is smooth and
easy. Air injection system: Inject fresh air into the exhaust port, to
meet emission norms. Unique Trapezoidal headlight: Gives the CBZ a
distinctly stylish look and helps see clearly in the darkest of night.

Multi lever Lockable seat: Provides storage space. It also doubles as

an antitheft mechanism for the CDI unit, R R Unit and the battery, as
the side covers can be opened only after unlocking the seat.

Zero crank case evaporative emission: A pollution control feature so

advanced that it is for the first time in India. keeping alive the Hero
Honda tradition of special care for the environment. So come, test
ride the Hero Honda CBZ -XTREME. Unplug your imagination.

Motorcycling Unplugged

Equipped with 5 gears and a 150 cc engine that generates 14.6 PS

power. Enough to take it from 0-60 km/h in just 5 seconds. And to
effortlessly touch the top speed of 100 km/h. The CBZ-XTREME also
has the widest rear tyre - with a unique treat pattern that is not
available on any Indian motorcycle; and large, 130 mm drum brakes.
Front disc brakes, it enhances the braking performance.

56
 KARIZMA

Specification

Engine 4-Stroke, Single Cylinder, Air Cooled, OHC

Displacement 223 cc

Medium Power 16.8 BHP at 6000 rpm

Gar Box 5-Speed constant mash

Clutch Multi-plus wat type

Max speed 125 km/h

Acceleration 0 to 60 km/h in 3.8 seconds

Frame Single Cradle Tubular Diamond Type

Suspension (Front) Telescopic Hydraulic Front Fork

Suspension (Rear) Swing arm with 5 step adjustable

Hydraulic shock observer

Brake Type: (Front) 276 mm disc type

(Rear) 130mm drum type

Final Drive Roller Chain

Battery 12V-3 Ah (Kick Start) 12V-7Ah (Self start)

Ignition Digital CDI system (AMI)*

Starting Kick Starter/Self Starter**

Wheel base 1355 mm

Ground clearance 150 mm

Length 2125 mm

Width 755 mm

Height 1160 mm

57
Product Range and New Models:

The Company's product range includes "Splendor+" which is

the largest selling motorcycle brand in the world with over
10 lacs vehicles sold in 2008-09. A cumulative over 40 million
customers are the real foundation of the company's strength. The
total shall soon cross the 7 million mark. Its volumes have been
growing at a strong pace of 40% p.a. over the last five years.

The Company launched a new 100 cc model "Passion pro" in

June 2008. The motorcycle is focused on style and contemporary
design, compared to the Company's earlier motorcycles that were
focused on utility and/or style. "Passion pro" has received an
excellent response from the market and has established itself well,
with sales reaching a level of 29000 units in august 2008, within
just three months of its launch.

58
 PASSION PRO

Specification

Engine 4-Stroke, Single Cylinder, Air Cooled

Bore x Stroke 63.5 mm x 49.5 mm
Displacement 156.8 cc
Compression Ratio 8.5 : 1
Carburetor Side Draft Type (With TPFC)
Engine Oil
1.2 Litres
Capacity
Clutch Multiplate Wet Type
Transmission 5-Speed, Constant Mesh
Final Drive Roller Chain
Ignition Electronic CDI
Starting Kick Starter
Frame Diamond Tubular Type
Fuel Tank Capacity 12.5 Litres (2.5 Litres Reserve)
Suspension (Fr.) Telescopic Hydraulic Fork
Swing Arm with 5-Step Adjustable Hydraulic
Suspension (Rr.)
Damper
Drum Version (130 mm Dia.) Disc Version -
Types of Brakes
Caliper Type
(Fr.) -
(Rr.) – Drum (130mm Dia.)
Dimensions
2090 mm x 755 mm x 1115 mm
(LxWxH)
Wheel Base 1330 mm
Ground Clearance 150 mm
Dry Weight 130 kg
Tyres (Fr./Rr.) (2.75 x 18-42 P) /(100/90 x 18-56P)
Max. Power 12.8 PS @ 8000 rpm
Max. Torque 1.26 kgm @ 6500 rpm
Acceleration 0 - 60 km/h in 5 seconds
Max. Speed 100 km/h

59
Hero Honda Unveils 225-cc Karizma ZMR

Hero Honda Motors Ltd has launched 225-cc motorcycle ‘Karizma

ZMR’ (pronounced karitzma), priced at Rs 91,000 (ex-showroom, New
Delhi). Initially, the premium sports bike will be rolled out in top 375
dealerships (out of its network of 450 dealerships) in 105 towns.
Company managing director Pawan Munjal hoped to sell around
30,000 units of Karizma in 2009-10. ‘‘Between Karizma and CBZ, we
would sell over 55,000 units this fiscal. Margins are certainly better
than what we can get in entry-level bikes.’’

The company was currently working on the next generation of

engines, which would drive a wide range of products in the future,
including a new batch of bikes targeted at the volume segment in
fiscal 2010-11.

The company has plans to rollout a couple of variants during

September-October. Mr. Munjal said that the company was waiting
for the feasibility report which will be out in november 2009 to take a
decision on whether to utilize the existing facilities for further
capacity expansion or to set up a separate Greenfield operation.
‘‘We’ve already stretched capacities up by around 25 per cent. We
certainly need more capacity to grow,’’ Mr. Munjal said.
Hero Honda is looking at double digit growth for volume sales,
turnover, and PAT. Company vice-president (marketing) Anil Dua
said: ‘‘We are expecting double digit growth. A clearer picture will
emerge only after the first quarter.’’

Fill it ,Shut it and Forget it is the slogan that one remembers of

Hero Honda in the early days of its bike campaigning. Now, is it
moving towards shut it and forget it?? Let’s see.

60
For years, Hero Honda has dominated the 2 wheelers market with its
CD100, splendor and Passion (relatively new).Now, things are a bit
different as there is a lot of cut throat competition as the market is
dancing to the tunes of the customer.CBZ-XTREME is a bike which is
good at looks but the same cannot be said about its performance.
With the launches of FZ16, GS150r and pulsar150(revised) there was
a new segment which was open where there was an emphasis on
power and fuel economy also .And now, everybody is vying to take
the honors for leadership in this segment.

1)Price:

Somehow, this still is a major factor in India when people buy bikes.
They cost around Rs. 38,000 to Rs 58,200 with the disc brakes in
most cities and around Rs62,000 for the electric start option.
2)Looks and Features:

We as humans, first form an impression about things by the way they

look to our eyes and it goes without saying that bikes should be
appealing to the eyes.
Tank shape and contours: The tank is one of the components that
make a bike look like Mr. Handsome or Mr. Ugly.

AMI:Advanced Microprocessor Ignition system which facilitates a

good mileage, pickup with better control on ignition timing.
Colors: The Hero Honda bikes come with 9 colors with at least 4 of
them good for nothing.

3) Suspension ,Stability and Reliability:

Suspension: Should be definitely among the best in the class and

should not be the prime suspect for your back problems. Hero Honda
gives you adjustable shocks which can be tuned for your liking.

61
Stability: hero Honda bikes are very stable as compared to any
other bike manufacturer.

Reliability: bikes are extremely reliable and very low maintenance is

needed.

4) Fuel economy and Electricals:

Fuel Economy: This definitely will play on the buying minds if the
bike has to succeed.

Electricals: The lighting should be the best.

5)Fit and finish: The quality feel is on the higher side and it
definitely gives a lot of satisfaction when one owns one.

6)Specifications:
Engine, Displacement, Max power, Gear box, Frame, Cradle, Weight,
Top speed, Fuel economy, Braking, Electric start (Optional)

7) Riding impressions:

The pickup is on the faster side of decent and definitely bound to be

of some help in the city traffic for short and quick overtaking. The
engine should sound soft. The seating position should be
comfortable.
8) Publicity: This is the critical aspect of any marketing strategy
which has a great impact in the minds of the youth who yearn to
have a bike.

9) Verdict: This is the final decision which the customer makes after
getting exposed to all the steps said above.

PRICING

62
Pricing is a important component of marketing mix of the firm.
Determining the prices of different products of a firm is very difficult
task of the marketing manager. Price denotes money value of a
product. If represent the amount of money for which a product can
be exchange. In other words, prices represents the money which the
buyer pays to the seller for a product price represent the exchange
value of goods and services in terms of money. Price is all around.

Price factor has very well been touched by the manufacturers. The
pricing strategy of the company is very set. they price their product
according to the cost of production and also by keeping an eye on
the price of the competitors of that segment and demand of the
product in the market.

A pricing strategy that ensured an average manufacturer margin that

game dealer an adequate return and created a reputation with
consumers like “a company selling a good quality product at a
reasonable price. Industry focus them selves the low cost producer
with good quality and aimed to maintain the price advantage in every
market of two wheelers.

Hero Honda group ensures an easily affordable pricing through

excellent transportation to common man. I fixes customer centric
pricing that provide customer total satisfaction.

Hero Honda’s pricing objectives are: List price, Discount , Financing

schemes, Credit terms , Maximize profits

Hero Honda group ensures an easily affordable pricing through

excellent transportation to common man. It fixes customer centric
pricing that provides the customer with total satisfaction.

DISTRIBUTION

63
HERO HONDA HAS direct contact with the dealers. There are no
middlemen involved. The dealers directly sell to the customers. The
channel is of 1st level which has only the dealers as the link between
the customers and the company.

64
Distribution Channel

Manufacturer Dealer Customer

Sub-dealer

How Promptly The Work Done?

The dealers keep in contact with the manufacturer or the head office
or the regional office. As the order fax reach the manufacturer, as in
Delhi it takes only one-nights time of transit from the manufacturer to
the dealer. The dealers in far off places like in Assam, South India and
others, it takes a maximum of 7 days to reach the placed order due
to the transit.

Basically, the delay of delivery of the order is basically due to the

transit time. The transit time in near places is not more than one
night.

How The Transit Done?

The manufacturer's have their own transportation facilities. The

manufacturers have trucks which can load 18-25 units of bikes at a
time, individually. When the units are dispatched from the factory, or
manufacturing it, it is in its standard form and accessories like seat
cover, handle cover, back-looking glass and others are not part of the
standard unit of the two wheeler of Hero Honda.

The transportation trucks straightway reach the warehouses of the

dealers. In case the warehouse of the dealer is not there then the
trucks straight away come to the dealers showroom where they
usually have some place for storing the stock as in the case of
Daryaganj dealer. The Daryaganj dealer’s stock is stored in the place

65
just behind the showroom. For this particular dealer the
transportation cost to bring the units from the warehouse to the
showroom is saved and thus the distribution cost is saved. But there
are dealers like in Green Park, this dealer does not have their ware
house nearby to the showroom which means that this dealer has to
keep their own transportation system to bring the units from the
warehouse to the showroom which is not cost effective.

The sub-dealers usually hire the trucks to get the units delivered to
their outlets. Sometimes the dealer’s truck is used by the sub-dealers
to carry the units to their outlets on goof faith. If the sub-dealer is the
part of the same dealer then the transportation charge are less and if
they hire it then the cost is high for the sub-dealers.

What Does Customer Want?

The customers of Hero Honda, according to the Asst. Manager (Sales)

are very particular about the colors that Hero Honda offers in its wide
variety of scooters. He said that the customers are very much aware
of their purchase. Gone are the days when the sales people could
influence the buyer to buy a particular product. Almost 90-93% of the
customer, whoever comes to the showroom. Usually comes after
he/she had made a decision. So, the work of the sales person is less.
The rest 7-10% have some doubts with regard to the purchase of
Hero Honda. It is here, where the sales persons have to do some
work in convincing the customers about the scooter. The sales person
in this regard convey the customers about the mileage, strokes and
also the parameters that the customers enquire.

When Do They Sell More?

Hero Honda scooters peak season selling state from the month of
April, just after the budget and after the month of November the sells
become slack. This is mainly due to the people think that the budget

66
can reduce the prices and moreover the budget usually brings in a
difference at Rs. 1000 - 1500. This is an important factor for
increasing in sells. Usually in the month of November the
manufacturer comes with re-modeling and also new launches. People
wait till the month of April to see whether the prices are slashed or
not.

How Is The Price Determined According To The Change?

Manufacturer, on the basis of the cost of production determines the

price and the factors like tax and others. Usually the sales tax on the
two wheelers is 8% but in Hero Honda it 4%. This is because Delhi
Government has found out that the pollution from Hero Honda is very
less due to the catalytic converter which every model of Hero Honda
have. The government has identified that by using the catalytic
converter Hero Honda is helping the environment which is a social
cause. Hero Honda Bikes not only have market in India, but also in
abroad. To maintain the differences in market of the different
companies it takes the help of the local manufacturers or the dealers
outside for the distribution of their scooters smoothly.

How's The Relationship Between The Manufacturer And

Dealers?

Improvement of sells is the first and foremost concern of the trading

people. He said that they are given the dealership to sell the products
of Hero Honda and the relationship is better when the sells are more.
On an average, sells around 5 to 6 scooters per day. The company
representatives keeps in contact with the dealers over telephone and
keeps an pressuring the sales managers of the dealers to improve
the sells. The Dealer have 2 sales staff in the showroom and 7 more
sales staff who moves around their sells territory on the call of the
customers. The representatives of the company visit the dealers

67
weekly or fortnightly. As per Mr. Ayub, the representatives of the
company keeps on pressuring the dealers to increase the sales as in
the case of the aforesaid dealer. Earlier they use to sell around 5-6
scooters a day and now they are asked to sell around 8-10 scooters
on an average per day. The company keeps a very good relationship
with the dealers. As the launch of the new models the company calls
on all the dealers for meeting. In these meetings the company
executives discusses the strategies that the company will follow
during the forthcoming months. The company accordingly asks the
dealers to change their strategies. Things like the target of sales sells
for the forthcoming year, what should be the attitude towards the
market, the company's forecast and many such issues are discussed
in these meetings. The company also meets with the dealers during
the time of new launch. Here the company invites the dealers and
also the sub dealers to train them about the new product that is
going to be launched. The company gives the dealers and sub-
dealers mechanics a training of around 15 to 20days.

The most important fact about the dealers of Hero Honda is that they
organize training programmes for the local mechanics who doesn't
have any affiliation from any brand two-wheelers. These mechanics
who are running their business in very small scale are invited to the
training camps of the dealers at the launch of new models. The
dealers improve the relationship at personal level with these local
garage by giving them gifts.

Sales forecast

So depending on the market demand, the dealers place the order.

The dealers make a sales forecast taking into consideration the
market demands the past years sales in the same month, and also
whether the present season is a peak slack season. Once, the sales

68
forecast is made, then the dealers place the orders depending on the
forecast.

69
 ADVERTISEMENT

Advertisement, local events sponsorship and promotions and inviting

a prominent personality for the inaugural or first like delivery function
would contribute effectively in generating a wider local interest and
attention.

Hero Honda’s latest DKD commercial its two brand starring its
Ambassador and India’s heart throbs, Hritik Roshan and priyanka
chopra, truly reflects the multi fact roles that today’s new generation
plays. The commercial reflecting the charisma and vibrancy of these
two stars, takes Desh Ki Dhadkan to dazzling new heights. It is
young, colorful and vibrant and represent the icons of contemporary
times. And it will go a long way in strengthening the leadership status
of the product by the mile.

The new commercial is powerful film repeat with an impressive

storyline. The effort to pack the story, drama and impact in just 60
seconds was phenomenal challenge itself. The idea was born itself.
The idea was born out of the very essence of “Hero and Stars”.
Keeping in mind would cause on the drama and impact it would
cause on the audience. It is a commercial packed with action where
today’s heart throbs, Hritik roshan and Priyanka Chopra, are seen
tackling new roles. The story being in a field adjoining a hill with
Hritik and priyanka on Hero Honda bikes and Pleasure respectively.

Both Sameer and Aditya win lifetime opportunity act with Hritik and
Priyanka, the two star heartthrobs of millions in India and all four will
be seen in action in the new commercial DKD.

These are some of the Slogan for every product (Bike) and these are
following:-

CD-100 : Fill it, shut it, Forget it.

70
CD100SS : Tough and Rugged.

Splendor : Designed to Excel.

Street Smart : License to enjoy.

Passion : When style matters, Bike born in studio

not in factory.

CBZ : Motorcycling Unplugged.

CBZ-Xtreme : live xtreme

HUNK : because muscle mattres.

KARIZMA : Jet sets go.

Hero Honda : Leading the way.

Celebrity Endorsement: Hero Honda has roped in film actor Hrithik

Roshan, Priyanka chopra, Mohammed Kaif, Harbhajan Singh, Zaheer
Khan, Yuvraj Singh and Virender Sehwag as its brand ambassadors.
Announcing the formation of the Hero Honda `Team Ambition', Mr.
Pawan Munjal, said, "Indian Cricket and Hero Honda have both made
the nation proud and helped the world recognize India's potential.
The `Team Ambition' has many similarities in personality with Hero
Honda, such as `splendor of performance', `passion to excel' and
`ambition to win".

In their role as brand ambassadors, the `Team Ambition' would soon

star in Hero Honda's new commercials. As part of the association,
Hero Honda will also find prominence on the bats to be used by
Yuvraj Singh and Zaheer Khan in the forthcoming cricket events.

71
Sourav Ganguly, who has been associated with Hero Honda since
2000, said, "Through Team Ambition, we are looking forward to
communicate more directly with over 6 million Hero Honda
customers in India and the millions more added every year."

Says Mr. Anil Dua, Senior Vice-President, Marketing and Sales, Hero
Honda, "Hero Honda has been promoting cricket for over a decade
now. Starting with the memorable Hero Cup in 1993, we have
adequately benefited through the promotion of this national fervor.

Cricket is one sport which binds our entire nation and is, perhaps, the
largest platform in the world, enabling companies to communicate
with millions of consumers in the shortest possible time."

The `Team Ambition' would also provide coaching and guidance to

the budding talent in the country and support cricket projects
undertaken by Hero Honda in India and abroad, a company release
said.

Hero Honda will keep up its promotional activities with emphasis on

cricket and entertainment. The company claims that its Desh Ki
Dhadkan campaign featuring brand ambassadors priyanka chopra
and Hrithik Roshan has received a very good response and helped
build the company's image. Last year, the company spent around Rs
90 crore on advertising and marketing.

72
 SALES PROMOTION

A fundamental concern of any customer during the purchase Of a

double product is the quality and provision of efficient service. After
all queries on product quality, performance, features and benefits
have been satisfied, the customer invariably focuses on the service
factor for the product as the end objectives is to ensure trouble free
operation. In this respect servicing acquires paramount importance
and Hero Honda’s focus and emphasis on these key result area have
been instrumental in establishing its superiority and technological
edge in the market. The host of training programmes and relationship
enchantment activity additionally backs the spates of servicing camp,
organized throughout the country. The active support of servicing
and co-operation rendered by the dealer in the form of logistics and
infrastructure further aid in making such programmes highly
meaningful and valuable. They are doing free check up camps
reinforce customer trust. Service advisor’s collecting information
from a customer about his satisfaction level after the servicing of
their bike. For the promotion of products the Hero Honda dealer rally.
Hero Honda is organizing so many events in sports, cultural
programmes, film -festivals etc for the promotion of the product eg.
Hero Honda NKP salue Challenger Cricket Cup brings new talent to
the force, MALTA Junior Tennis Tournament, Hero Honda social’s
Commitment rehabilitating children affected by violence, operational,

Relief, donation for drought relief, Rota Trade Mela 2007, Road Show,
Training programmers to enhance quality of service, free back up
camps reinforce customer’s trust, ride safe programmes held for
Delhi Traffic Police, Mobile Revolution in servicing etc.

The powerful benefits of test rides, special promotions and

communication drives to draw in the initial customers, preparation of

73
accurate customer information forms to create a customers
database, offer of finance facility and active steps to impart specific
transiting at the dealer’s sales and services levels would be essential
steps to achieving the brand and the company objectives. Mr. Uppal
also touched upon the servicing policy for passion and cautioned the
invitees to remain alert for substitution in Hero Honda brands among
its customers. The sales increase would have do be targeted from
new customers and not its existing ones. The key attitude that would
constantly contribute towards sales would be total and passionate
commitment.

74
 PUBLICITY

For the purpose of publicity Hero Honda is always organizing different

events, etc. and they are always inviting celebrities from film, sports,
media, politics, etc. There are some of event and parties are as
follows:-

The Hero Honda stardust millennium Honours and BFJA awards for
Bengali films.

In a gesture that honors and salutes some of the finest talent in south
Indian Cinema. Hero Honda also security sponsored the 20th Cinema
Express Awards.

The sponsorship of the women’s World Cup in 1997 came next, then
the ICC Cricket World Cup 2004.

Hero Honda, the largest two wheeler leader in Indian sponsored the
21st Cinema express Awards. Marketing Convention 2006. They are
priyanka Chopra, Miss World, Lara Dutta Miss Universe, Diya Mirza
Miss Asia Pacific, Sourav Ganguly Indian Cricket Captain, Daler
Mehndi, Mr. Harsha Bhogle the famous cricket commentator etc.

Dandiya programme at Kota and Banswara. In this Ms Sunita Rao, the

popular singer entertains at the festivals at the Dandiya Programme.

Thrill and the excitement at the Hero Honda Master Golf tournament.
In this tournament Kapil Dev, virendra sehwag, Pronoy Roy, Milkha
Singh and so many celebrities were present.

Galaxy of stars add to the glitter Surat rang 2008. Pinaz Masani, the
famous gazhal singer, Kavita Krishnamurthy the famous play back
Singer, Shibani Kashyap the pop singer are the main highlight of this
programme.

75
Hero Honda sponsor’s 26th Cinema Express Awards and the main
celebrities of this programme are evergreen Hero Devanand, Film
Makers Hero Honda sponsor Army ordnance Corp Motor Cycle
Expedition.

Joy of buying

At Hero Honda, we believe in providing the best of service, as

reflected in our corporate ‘We Care’ philosophy.

An extension of this is the passport programme, popularly known as

‘suhana safar’. This unique programme aims to build long-term
relationship with customers.

The Passport Programme membership benefits customers in a

number of ways:

♦ For new customers, a change to win a Hero Honda Splendor or

Rs.50,000 in cash; and a one –year accident incident insurance
cover worth Rs. 1 lakh

♦ Special rewards and discount on accumulation points

♦ Invites to exclusive local events

♦ Attractive discount on spare parts

♦ And much more to come

REVIVING UP TO ENTICE BUYERS

With manufacturer offering attractive finance schemes, now

is a good time to buy, says dr.pritam Singh.

TWO- WHEELER sales have been increasing thanks to the continue

thanks to the continuing upward swing in motorcycle sales. To make

76
sure that this happiness continues and that they grab the largest
share of the pie, manufacturer have been offering the customers
finance schemes.

Hop across to the Hero Honda dealership. The industry leader is

offering finance option from ICICI, Centurion Bank and Tata Finance
All normally offer a 9.9-percent rate of interest on two-wheeler
finance, though there are other schemes too. Keeping in mind the
ongoing festive season, Hero Honda is offering a Special 8.4-pecent
rates of interest on two-wheeler finance Another schemes is the low
EMI schemes where one has to pay just 777 every month(for 48
month).but Hero Honda offers this for on 65-70 percent of the total
amount against the usual 90-percent.

Bajaj has tie-up with Centurion Bank, apart from its own two-wheeler
finance. The prevailing rates are 11.9 percent against a finance of 85-
90 percent of the total value.

Kinetic also has its own finance arm besides its dealer its dealers can
get your vehicle financed through Tata Finance. The rates are 9.9
percent but there are many varying rates of interest available. There
is a heavily advertised schemes of 2.99 percent rate available on a
limited period.

TVS offers the same 9.9 percent rate of interest. yamaha has a tie-up
with the Association apart from the other option. Finance is easily
available for up to 85-90 percent of the total value and the rates are
9.9 percent.

The interest rates vary according to the period of loan and the
amount.

77
 COMPARATIVE MARKETING STRATEGIES

Hero Honda has 35% of Honda’s sales in the world and Honda Motor
of Japan is proud to be associated with Hero Honda. As a staunch
supporter, with technology and brand support from the global power
house, Honda Motors, Japan, would immensely boost the business
prospects in the country despite the onslaught of serve competition
in the market place. ‘ it is our avowed aim that Honda Motors’,
scooters and Hero Honda’s motorcycles would together corner 65%
of the market share of two wheeler in the country’.

Primary among these were the National Customer Survey by IMRB

with a record 25,000 interviews, making it the largest two-wheeler
survey. This way followed up by the National Customer satisfaction
survey in September 2008. In keeping with “Top Gear”, the company
also reestablished customer finance tie-ups with Tata Finance. In the
present Scenario, this is available in 170 towns and to 232 dealers a
leading to a current volume of around 15000 per month. This
represents as much as 40% of the total customers financing .

The dealers finance tie-ups with Citibank and Centurion Bank. The
current sanctions to as many as 189 dealers were worth Rs.110Crore,
he revealed. There had also been no opportunistic ad hoc price
increases. The company also took positive steps to facilitate the
dealer “Authorized representative service extension policy. The
corporate commitment to “we are” and the company’s emphasis on
environment protection also resulted in opening the first effluent
treatment plant at a dealership. New service training centers were
also established at Delhi and Chennai.

While quarterly product reviews were conducted with the factories, a

unique programme of joint visits with quality department land
Japanese staff was also introduced. On the spare parts front, multiple

78
increases in spare policy was also overhauled and new, innovative
actions were taken leading to a volume of over 6,000 bikes in the
current year itself.

The company also associated itself actively with sponsorship of

armed forced rallies, notable among them being the Kargil Rally and
the AOC Rally. While this built up its relationship with premier
customers, the initiatives taken on other priority fronts were equally
effective. Showroom standardization was effectively detailed. World
event sponsorships also helped the company to achieve global
exposure for its brand.

The company’s entry into the tournament events sponsorships was

equally successful. Its sponsorship of Hindi Cinema
awards(Millennium Honors held in Mumbai in January 2008, was
followed up by sponsorship of Bengali cinema (BFJA Awards –
Calcutta, August 2008) and then South Indian Cinema (Cinema
Express Awards- Chennai, November 2008).]

A laudable achievements was also the signing of the two top Leaders,
veritable ‘Desh ki Dhadkan’ in the field of sports (Cricket), and
entertainment (Hindi films), three years. Priyanka chopra and Hritik
Roshan the two stalwarts in their fields are also designed as brand
ambassadors for Hero Honda for a period of three years.

The national Launch of the Hero Honda passport programme

specifically targeted at enhancing customers relationships, the
implementation of the Hero worldwide safety riding campaign at
dealer Level, and support extended to dealer during the customers
satisfactions survey.

79
To streamile operations and sales administration, the company also
introduced the service excellence awards for SSP’s decentralized the
settlement of free service coupons reimbursement, reorganized the
Dharuhera Service Center as the National Training Center, with latest
technology to provide specialized advanced courses. Dealer level
implementation of the integrated dealership software package was
also another significant activity undertake.

The major success were the volume and revenue increase of by over
two and a half times, and a market share increase in motor cycles,
from 52% to from 60% and in 2 wheeler, a doubling from 36% to
40%. For the current year ending 2009, the company would achieve a
volume of over 2 million bikes under project “OM” and revenue in
excess of Rs.3000 crore. The spare parts business itself was striving
for revenues of Rs. 245 Crores. Service reporting at all authorized
outlets would exceed the ten million mark.

The market perception inevitably revolved around the admirable

achievement of Hero Honda as the No:-1 two wheeler company in
India. It revealed that the total customer base of the company on a
world wide basis had crossed the 4 million mark. The road envisaged
in the light of these facts was just an ambitious with the emphasis

80
being to sustain a growth rate of 15% per annum as well as be alert
and responsive to new development particularly the resurgent and
aggressive competition with new players and bikes as in addition to
the China / WTO impact world trade organization.

Hero Honda’s own marketing initiatives as well as the emerging

potential of second hand motorcycle business. Key aspects in
accessories business, social commitment and socially relevant
programmers, and communications drives were also pointed out.

Specific brand building and customers relationship exercise like the

passport programme, satisfaction survey, safety riding, campaign,
service extension assistance the various multi-levels training and
development programmes, seminars and workshops, CBZ club,
product quality reviews and field quality visits were all essential and

indispensable ingredients to achieves the required results. And for

this the most vital input was inevitably the passion from one and all.

DEALER

The advantage of efficiency to keep prices reasonable and increase

customers Loyalty Is a vital components in the company’s priorities.
With 405 dealers, 178 SSPs and 15 stockiest, the company’s strength
in terms of dealership and service points for the various brands in an
achievement that was laudable by all counts.

The dealers to take the company to newer heights, and fulfill the
declared version of the company that expectation were essential in
any relationship building process and for this constants evaluation
and review of the essential internal components was impressive on
the part of dealers.

Emphasizing on the urgent need to begin the marketing initiatives on

a war footing with immediate action. This was one mantra that was

81
imperative in today’s market environments. And the second mantra,
is to stress the customers. It was thus vital to continue to strengthen
the existing customers bonds and relationship and enhance the
brand loyalty factor. Importance of small gestures like services due
letter cannot be overemphasized. The effort at all times must to be
provide the customers with total satisfactions on servicing.

With 90 dealers had already attended the training programmes, the

remaining would also be able to derive the benefits to training
through a phased training programme throughout the year. The
training would also be cross board, covering dealers, dealer
associates, service technicians, and senior managers.

The chairmen also had praise for all the dealers Acknowledging their
hard work and continuous efforts he said, “ you are the real front end
of the company with the customers and you all deserve compliments.
Some of you enjoy a relationship of over 15 years with the company
and same dealers have joined recently.

Hero Honda dealers have continued to demonstrate their spirited

enthusiasm in aggressively promoting the Hero Honda product range.

Though innovative initiatives the efforts at utilizing local events,

function and programmes to maximize the impact of the companies
commitment have been highly beneficial in all fronts while local and
regional interest in hero Honda brands in generated to high Level, the
awareness and the subsequent appreciation for the company’s
commitment to customer’s satisfaction through outstanding
standards, state of the art technology and the brand quality that is
awesome in features as it in benefits is widely and skillfully
generated. The strategic display of products also further enhance the
approval accorded by the enthusiastic on lookers and visitors at local
shows.

82
 AUTO MOBILE SALES FIGURE

Bajaj Auto Ltd.

Hero Honda Motor

Royal Enfield Motors

TVS Motor Co.

Yamaha Motors India

0 1000000 2000000 3000000 4000000

2007-08 2008-09

83
Company Name April- Sep. 2007-08 April-Sep 2008-09
Yamaha Motors India 286624 645245
TVS Motor Co. 365654 624564
Royal Enfield Motors 20235 25235
Hero Honda Motor 15,22,000 16,37,142
Bajaj Auto Ltd. 5000440 6025648

Sales and figure for the first six months of fiscal 2008-2009 ,shows a
mixed trend. In order words, some segment are witness growth and
some decline.

In the two –wheeler segment, motorcycles continue to show robust

growth. During the period under review sales of motorcycles rose
43.03 percent to 37,33,142 numbers. All the major players recorded
growth. Market leader Hero Honda sales increased 30.05 percent to
819.167 numbers. Interestingly, third seeded TVS saw its sales grow
98.93 per cent to the period under review, production of the century
increased 44.91 percent to 1,876,015 numbers.

84
 GROWTH OF THE INDUSTRY

35
30.4
26.6
30
25.21
25
20 23.02
16
15
10
5
0
2004-05 2005-06 2006-07 2007-08 2008-09

STEADY CLIMB (all figures in Rs. Crore)

3500 3,170
3000
2,270
2500
2000
1,553
1500
1,156
783
1000 641
500 192.1 250
26.5 50.4 76.7 121.4
0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Profit After Tax Total Income

85
 COMPARISON OF HERO HONDA’S THREE
PRODUCTS

CBZ-X-TREME

 While CBZ was introduced the market for 150c segment war not
quite well developed. It was a niche market with a number of

unsatisfied and unrecognized customer who

aspired for more power, life style and speed. So it can be
concluded that the product the strategy was diversification. The
customers were to be taught about their unrealized needs. For
that the company had to use informative as well as aspirational
advertisement

 To make the customers understand that the bike was for the
upper class market, it was priced a premium also.

KARIZMA

 In the case of karizma, the market for 200+

segment was Non existing. The company introduced the bike as a
new product. For the company it was the first bike in the highly

86
 demanded 200+cc segment. Here the company has adopted the
product development strategy.

 The company has priced this product with respect to future

competetion.

SPLENDOR+

 Splendor+ came to the scenario as a

more efficient bike catering to the needs of the 100cc segment,
which at that time was served by many others.

 The analysis reveals that the company has adopted Market

penetration as its strategy. For that, advertising mainly focusing
on its superior quality, were then released. Fuel efficiency coupled
with zero maintenance was projected as a key differentiator.

87
 ANALYSIS

AGE GROUP

36 Above 18-20
10% 9%

21-25
31-35 33%
37%

26-30
11%

INCOME GROUP (PER ANNUM IN THOUSAND)

175 above 75-100

150-175
4% 17%
11%
125-150
11%

100-125
57%

88
Three Motorcycle Companies that comes in your mind.

60 58

50

40

30
20
20
10 10
10 2

0
TVS Hero honda Bajaj yamaha Others

Things that you looked while purchasing a bike?

80 75
71 69
68
70

60

50

40 33 32
30

20

10

0
Looks
Fuel efficiency

Low price
maintenance

Least physical
(less chances

breakdown)
Reliability

effects
Low

cost

of

89
How did you get to know about Hero Honda that you are
having at present?

80 75
72 71
70

60
51
50

40
31
30 26

20

10

0
Looks Fuel Low Reliability Least High price
economy m aintance physical
cost effort bike

Which other bikes would you prefer to buy?

45

40

35

30
25

20
15
10

5
0
Yamaha Others TVS Bajaj

90
I preferred Hero Honda Splendor+ than other bike?

80
71
66
70

60

50

40 33

30
14
20

10

0
Maintenance Looks Physical efforts Fuel economy
cost

MARKET SHARES (%)

MODEL 2008 2009

Premium/lifestyle category 45.25 29.16

(Rs 60000 and above)

Commuter/Smart Category 64.80 56.16

(Rs 48000-60000)

Economy category (Rs 21.71 32.95

35000-48000)

In the typical Boston Consulting Group (BCG) matrix, a company

could move from 'star' to 'cash cow' pretty quickly say a year or two
and therefore one needs to ride these two years completely and then
get into another stock which is going to turn into a star, at the stage
of emergence.

91
 RESULTS

After a study of various Hero Honda customers, we found the

following:

♦ Geographical Distribution:

About 98% of the customers surveyed belong to congested areas

of Delhi.

♦ Age group of customers:

About 90% of the customers were within in the age group of 20-35

♦ Income group of customers:

Most of the customers surveyed belong to middle income group.

♦ Occupation of the customers:

84% of the customers surveyed were official/ salesmen and 11%

were students & first jobbers.

♦ Percentage share of HHML in two wheeler segment:

HHML holds 60% share.

♦ Customers preferences while purchasing a bike:

Fuel efficiency, looks, Low maintenance cost, Reliability

♦ Competitors of Hero Honda:

According to the survey reports the main rivals of Hero Honda are
Yamaha, Bajaj Auto, and TVS.

♦ Preference of Hero Honda over competitors:

About 89% of the customers believe that Hero Honda is better

than the competitors because of low maintenance cost and fuel
efficiency.

92
 RESOURCE LED STRATEGIC DEVELOPMENT

The range of “resource based” views on developing alternative paths

of business development can be examined using:

• The Growth/Share Matrix

• Core Competencies

• Generic Strategy

The Growth/Share Matrix for Hero Honda Motors Limited:

This matrix has often been used to examine the relative growth
prospects of a firm’s line of products. In the matrix, activities are
classified according to their growth rate and there competitive
position or market share.
BUSINESS

STAR
GROWTH

S QUESTI
HIGH

ON
MARK
RATE

CASH
COWS DO
LOW

GS

HIGH LOW

RELATIVE COMPETITIVE POSITION

(MARKET SHARE)

93
Hero Honda Motors Limited is a Star which has high market share and
a high growth rate.

They developed fuel efficient motorcycles at a time when everyone

was producing 2-stroke motorcycles. This made them gain market
share at a rapid pace and helped them to become the market leaders
in the motorcycle segment. Having set its focus on customer
satisfaction, the company is determined to provide products and
services that meet the quality, performance and price aspirations of
their customers. HHML wants to provide its customers with value for
their money.

Hero Honda's motorcycles account for over 60% of the entire

motorcycles market. The various brands of Hero Honda are Splendor,
CBZ, Passion, karizma, and Acheiver. Splendor enjoys nearly 30% of
the total motorcycles market.

94
 CORE COMPETENCIES

Core competencies provide a different approach to strategic

development. Instead of maintaining a “portfolio” of Strategic
Business Units the large organizations need to maintain a set of
competencies within the firm which allow it top successfully pursue
its strategies.

Hero Honda’s spectacular performance – its sales and profits have

trebled to Rupees 4465 crore and Rupees 462 crore, respectively, in
the last three years - have fetched it unending kudos from corporate
India.

It will definitely continue to be a major player in the motorcycle

industry and may even hold on to the top slot for a long, long time to
come. Hero Honda is financially robust – it churns out Rupees 650
crores in cash flows every year and is sitting on free reserves of
another Rupees 685 crores.

GENERIC STRATEGY:

Three basic or generic strategies open to any business are:

1. Cost Leadership: This will provide above average profits and

managing all aspects of the value chain to reduce costs at every
point creates it. A cost leader will sell a standard ‘no-frills’ product
or service, and is likely to be a large firm reaping the advantages
of economies of scale.

2. Differentiation: A strategy of differentiation involves meeting

customer’s needs by outperforming the competition by offering
better ‘value added’ through a unique offer to the customer.

While most of the companies gamble with products, HHML on the

other hand prefers a tried-and-tested approach. They have

95
 managed top get consumers to buy there premium,
technologically – superior products.

Their strategy was to consolidate its leadership and maximize

profitability by focussing its resources on a few good products.

3. Focus: A focus strategy may be effective where neither an overall

cost leadership nor a differentiation strategy is possible for a firm.

MARKET LED STRATEGIC CHOICE/OPTION

STRATEGY:

1. They must address the need for power in a new premium category
and not in commuter bikes.

2. Consumers are basically looking for fuel efficiency, durability,

style, power and price. Its products the Splendor & Passion offer
fuel efficiency and durability. Karizma Cbz offers style. Power and
price bikes. Now they must look for new products.

3. Not having proper in-house Product Engineering skills have caused

Hero Honda dearly. They must hence improve in-house Product
Engineering skills.

4. Lack of product creation skills also means that the speed at which
Hero Honda launches new products is likely to be less than that of
its rivals. Thus to launch new products at a speed in line with their
competitors is one strategy that Hero Honda must look in to cash
on.

5. The company uses both imported and indigenous raw materials

and components to manufacture the motorcycles. As a result, the
increase or decrease in the import tariffs has an impact on the
company's bottomline. The proportion of imported and indigenous
raw materials, components and spares used in FY03 is as follows:

96
 Imported Indigenous
(as % of total) (as % of total)

Raw Material &

17.90 82.1
Components

Spares 31.21 68.78

Hence the company must try to use more of localized/indigenous

components.

Alternate Recommendations:

The two wheeler industry in India is experiencing a shift from

Scooters to Motorcycles. In the motorcycles segment, the customers
are shifting from 2-Stroke to 4-Stroke motorcycles citing fuel
efficiency as a major reason. Hero Honda must catch on this
opportunity.

This has made the ride smoother for Hero Honda. But this coupled
with the low cost of production has attracted MNC’s to enter India in
a big way. This has been signaled by the arrival of Honda Motors,
Japan, through its fully owned subsidiary. This has made the
motorcycle companies to reduce their prices. Hero Honda has
reduced the price of its leading brands by an average of Rs. 2300.
This price cut is expected to have a positive impact on the demand
for two-wheelers. The company is expected to face stiff competition
from foreign players in 2010.

Hero Honda must hence try to reduce the cost of production and this
can be achieved through reduction along the value chain.

97
 SWOT ANALYSIS

Strengths:

• Technological support from Honda Motors, Japan.

• The company has a deeply penetrated dealer network.

• The company provides good after sales service through its well-
established dealer network.

• The company enjoys a huge market share and well established

brands like Splendor+, Passion+, CBZ-xtreme etc.

Weaknesses:

• Hero Honda depends on Honda for new products and this is a big
weakness.

• The company doesn't have a product catering to Rs. 25,000 - Rs.

35,000 segment, and the company might suffer on account of this
as the imported motorcycles and foreign players' motorcycles are
expected to cater to this particular segment of the market. This
can result in fall in the market share of the company.

• The company imports about 31% of its spare requirements. This

makes the company vulnerable to the import policies of the
government. It also exposes them to the exchange rate risk.

Opportunities:

• The motorcycle segment is growing at the rate of 33%, which

provides a great opportunity for the company to cash on.

• Also it is experiencing a shift in the customer preference for 4-

stroke mobikes (automatic scooters). This again provides an

98
 excellent opportunity to Hero Honda to leverage its market share
and market leadership for sustained profitability.

Threats:

• The technical collaboration with Honda is valid only for a period

and this is a serious threat as they have been dependant on
Honda for technology. Also Honda has set up its 100% subsidiary
in India which has start producing motorcycles from 2008. This
has further increased the competition.

• The company has plans to foray into the scooter segment, which
can also be a major threat for the future prospects of the
company. The reason being that the consumers are shifting from
scooters to motorcycles and at this hour moving from motorcycles
to scooters doesn't sound logical.

Motorcycles form the major chunk of the sales revenue of Hero

Honda. A small proportion of the revenue comes from the sales of
spares.

99
 CONCLUSION

From the customers survey and desk research we conclude that:

"We are confident that we will continue getting technology from

Honda." Honda, for its part, has also made similar statements.
However, industry analysts do have doubts. Says an industry analyst,
"Honda's track record in India does lead to some apprehensions. An
analysis of Honda's past tie-ups in India would prove so. For instance,
Honda exited the joint venture with Kinetic by selling its stake to the
promoters and launched a replica of Kinetic Honda's ungeared
scooter; its 60:40 ventures with SIEL for cars progressively became a
99:1 partnership and its venture with the Shriram group for gensets
ended when it bought out Shriram's stake. This does throw up some
questions with regards to the path ahead for Hero Honda." These
examples prove that Honda has always wanted to have its own
entity, says another analyst.

Most of the customers of Hero Honda belong to congested areas.

They mostly belong to middle class and are mostly officials/
executives. Thus, we conclude client has targeted the right segment.

From the findings we conclude that a customers while purchasing a

bike, customers takes into consideration mainly fuel efficiency, good
looks, low maintenance cost and reliability.

The main competitors of Hero Honda are Bajaj Auto, Yamaha and
TVS.

The consumer preference basically depends upon wider network and

better services.

Customers are influenced more to buy a product by advertisements

rather than dealer friend’s or family recommendations.

100
 LIMITATIONS

1. Due to lack of time I was not able to cover many customers.

2. As I reside in Delhi, so customers of Delhi were taken into account.

3. Answers given by the customers may be biased one.

4. Research work was confined to South Delhi.

5. Some time Co-operation from respondents was missing.

101
 RECOMMENDATIONS

After the complete analysis of entire assignment we put forward a set

of recommendations which are a follows:

 Since the client has targeted the right segments, but the reason
for the low sales of Hero Honda

 Cbz is high price. Moreover the client has positioned the bike as
“city ride made easy” fuel –efficient bike as a result of which if
comes in direct competition with.

 TVS Victor and Bajaj Boxber. But HHML is overlooking one feature
in bike. Which is its low maintenance, and reliability (i.e. less
chances of breakdown) which are absent in its competitors.
Therefore in order to meet the sales target, two options are
available with the client, one is to redesign the bike and second is
to reposition the bike as “bike with one time investment” since
redesigning of bike may involve a big task and huge investment
therefore we recommended repositioning the bike.

 In order to increase the market share, customers promotional

activities should be encouraged through advertisements to attract
the male & female segment.

 Hero Honda, if it starts functioning independently, has to innovate

and develop their own technology to support their growth
aspirations.

 The dissatisfied customers should be dealt with appropriately

should be satisfied so that they do not break the relationship with
company.

102
 BIBLIOGRAPHY

 NEWS AND VIEWS FROM MARKETING DIVISION OF HERO HONDA.

 AME BUSINESS MAGAZINE.

 AUTO MAGAZINE.

 BUSINESS INDIA

 FINANCIAL EXPRESS

 BUSINESS LINE

 OVER DRIVE MAGAZINE.

 WWW. INDIAINFOLINE.COM

 WWW. HEROHONDA.COM

 WWW.ECONOMICTIMES.COM

103
 QUESTIONNAIRE
CONSUMER SURVEY

Name: ______________________

Address: _____________________
Q1. Please mention your age group
18-20  21-25
 26-30  31-35
 36- Above
Q2.) Please mention your income group (per annum in thousand)
 75-100 100-125
 125-150 150-175
 175 & above
Q3) Gender
 Male Female
Q4) Martial Status
Married Unmarried
Q5) please mention your occupation 0
Officials Clerical or Salesmen
Student First Jobbers Retired
Q6) Name three motorcycle companies that come to your mind
 Hero Honda Motor Ltd.
 Bajaj Auto Ltd.
 Yamaha Motors Ltd.
 Royal Enfield
 TVS Ltd.
Q7) what are the things that you look while purchasing a bike?
Fuel efficiency
Looks
Low maintenance cost

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 Reliability(less chances of breakdown)
Least physical efforts
Low price
Q8) how did you get to know about Hero Honda that you having at
present?
 Advertisement
 Family information
 Friend’s recommendation
 Dealer’s recommendation
Q9) which other bike would you have preferred to buy?
 Yamaha motors others
Tvs motors Bajaj motors
Q10) Prefer Hero Honda splendor than other bike because of:
 Fuel economy
 Less physical efforts
 Better looks
 Low maintenance cost
Q11) Would prefer TVS apache to Hero Honda CBZ because of:
 Fuel economy
 Price
 Brand image
 Low maintenance cost
Q12) what is the image of HERO HONDA in your mind?
Economical
Durable
Smooth Bike
Safe Bike
Rough and Tough

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HERO HONDA MOTORS LTD.

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107
Cash Flow Statement of hero Honda motors ltd.

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