f'"

;'~ 4: /lero Honda Motors Ltd: Aiming to Capture the ;g"i!tuwl1fK Market in India Wi,

~i~..oduction
JfItD Honda M?tors

. ".ult

Ltd came into existe,nce

on 19 January

1984 as

of a Jomt venture be~ween India s Hero Group and Japan's

.~

Motor~omp~ny.Dunng the 1980s, He~oHonda became the

to drive a vehicle

.f}IWt(;Ompany.m India to prove that It was possible

,

. 1JJOIOTcyclesthat

"flbout pollutmg the roa~s. The company Introduced new generation

set the I~d~st~ benchmark for f~eI thrift and low

_8ion. TI~elegenda~ Fill It-Shut It-Forget It slogan captured Cbeimagination of millions across India. Hero Honda sold millions .of'bikes on its commitment of increased mileage.'

that th"re are currently twice the number of motorcycle owners in the Rs 200,000-500,000 income segment, compared to the Rs 90,000200,000 income segment. Those earning between Rs 200,000 and Rs 500,000 per year are projected to nearly treble by 2009-201O. Hero Honda expects this income group to be a key constituency for its price and deluxe category motorcycles, which accounts for the bulk of its product portfolio.2 Hero Honda believes that the changing demographic profile of India, increasing urbanization, and the empowennent of rural India will add millions of new families to the economic mainstream. This would provide the growth ballast that would sustain Hero Honda in the years to come. As Brijmohan Munjal, chainnan of Hero Honda Motors, succinctly points out, "We pioneered India's motorcycle industry, and it is our responsibility now to take the industry to the next
level. We will do all it takes to reach there.
n I

Productsoffered by Hero Honda Motors Ltd

']beoompany produces motorcycles and scooters. Some of its brands

Table 4.01 gives the total income of the company from the year 1990 to 2006.
TABLE 4.01 Total income of Hero Honda Motors Limited (1990-2006)

.,e Achiever, Karizma, CBZ, Splendor, Super Splendor, Splendor ~!1us, Glamour, Passion, Passion Plus, CD Deluxe, CD 100 SS, Sleek, JIIJId CD DaWn. The company also manufactures spare parts for these tWowheelers. It also provides mobile after-sales service to its existing customers.2 . In urban India, lower taxes and good salary increments across sectorS have resulted in an increase in the disposable income in the bands of consumers. A sizeable chunk of GDP now comes from the terVice sector, which contributes 54% to the country's total GDP. More significantly, the fastest growing segment in the service sector, information technology and IT-enabled services, is being driven byyouth.2 Before thel980s, motorcycles were considered to be the ideal transport medium for rural India. However, in the changing environment, motorcycles are preferred by urban youth because of the attractions of style and speed. The motorcycle market overtook the scooter market in 1998-1999 and this trend seems to be continuing. The changing nature of jobs especially in selling, marketing, etc. low EMIs offered by financial institutions, increasing disposable incomes, and rising fuel prices are some of the factors that have contributed to the increase in the size of the motorcycle market. India could have more than a dozen metropolitan cities by the next decade, and this will throw up its own challenges and opportunities. Hero Honda has'already begun seeding the rural market, especially ill north and west India, through loan tie-ups with two leading banks, the Punjab State Cooperative Bank and the State Bank of India. Similarly, through a tie-up with the state bank of India, Hero Honda field officers are working directly with the bank branch officers reaching rural credit holders (Kisan credit cards) in specific regions and approaching fanners personally.2

Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total income (in million rupees) 1523.3 2187.0 2757.3 3134.7 3667.1 5087.6 6187.1 7840.3 11,642.2 15,655.3 22,698.0 32,060.0 45,132.7 51,520.3 67,864.8 86,656.2 101,879.5

AnOptimistic Future
According to the 2005 National Council of Applied Economic Research (NCAER) study on India's consuming classes, currently &round20 million Indian families \'IIfOund 100 million consumers) havean annual income of more Rs 200.000 making them ripe candidates for consumer durable purchases. The NCAER data also shows

Source: Prowess (Y. 2.6.), Centre for Moniloring Indian Economy Pvt. Ltd, Mumbai, accessed September 2008. reproduced \\ith permission,

Figure 4.01 is the MS Excel output (Descriptive Statistics) and Figure 4.02 is the Minitab output (Graphical Summary) of the total income of Hero Honda Motors Ltd. From the output, prepare a detailed statistical report on the success story of the company.

Chapter 4

I Measures

of Dispersion

159

~>f?~'t';fj{;i,

>-.:

FIGURE 4.01 MS Excel output Descriptive Statistics) of the Total income of Hero Honda Motors Ltd from 1990 to 2006

A B 1 Descriotive Statistics 2 2749961176 3 Mean 7768.966788 4 Standard Error 116422 5 Median #N/A 6 Mode 32032.27067 7 StandardDeviation 1026066364 8 SampleVariance 9 Kurtosis 0.542188703 1276985473 10 .Skewness 100356.2 11 Range 12 Minimum 1523.3 13 Maximum 101879.5 14 Sum 467493.4 15 Count 17 101879.5 16 Largest(1) 1523.3 17 Smallest(1) 16469.47375 18 Confidence LevelC9b.O%)

--- ----

.~nd='n-O...lmg

Nunrulli.y Tes.

.Squ.rcd

1.37 O.OO 275UU 32032 1026066364 1.271>99 0.54219 P 1523 3401 11642 48327 101880
In'<rvcl for M""n

.~,

p. V.lu< < \1 e.an S.o.,,, \'ari......,

Sl<Wl1CfS

KurtOSIS I' Minimum

~
0 20000 40000 60000 80000 10000

I.. Quanik M<diam 3n! Quartik Maximum

95.~ Cnnfidrnc<

-{
FIGURE 4.02 Mlnitab output lQl _Jptllcal summary) of the tl'tal Income of Hero Honda Ml'tl'l S Ltd from 1990 to 2006

1::
9:". ("",Iiden,," In'eI,'.ls

110.'
3~UI

439M
for M<dian 44819

95'.. C<>nfiJrno..., In'<rwl

M<on

9~", C'nnfidonoc In'oryc~ f", S.lk\

23857

48751

M<dion

.,
IOIOUO 2UOUO 3000U 41WKIU

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