HINDUSTAN ENGINEERING AND AUTOMOTIVE PRODUCTS LTS

Presented by: Alok Jain (13) Ankit Jain (18) Vishwamitra Vats

Background
Established in early 90s JV with a leading European company to manufacture Engineering and Automotive components for growing Indian market. Company absorbed considerable technology from JV partner and commenced exporting its product in various African market, Middle East Market and SE Asian markets under its own brand. This created a direct competition with the partner.

Background

(Cont)

The JV agreement was withdrawn by mid 90s. Agreed that either of the partners can market their product in India. Considering high competition, HEAP considered exporting its product to developed markets in Europe, Japan & USA. Lack of expertise in designing & certain manufacturing technologies restricted the entry of HEAP in developed countries.

Background

(Cont)

Major competitors were also not willing to share their design and technologies to avoid potential competition. Guru Prasad the Head of International Operations suggested to establish own representative offices to have a direct customer contact and to build Local distribution network. Also recommended that the company should have a replacement market rather having OE segment.

Background

(Cont)

HEAP had to price the same products differently in different market. HEAP had a fear from his copycat products which will erode HEAPs market share by distributing low quality products at cheap price. As a result of the above many distributors threatened to quit their dealership.

Background

(Cont)

Mr. Krishna Rao the Head of R& D team suggested to have a collaborative relationship with the Italian bureaus as a medium term measure to increase the market share in the foreign countries. Where as for long term he suggested to build in-house expertise which will in turn increase the profitability and market share of HEAP.

Automotive Industry
India enjoys natural advantage on cost as it is amongst the lowest cost producers of steel in the world. It contributes about 4 per cent in India's Gross Domestic Product (GDP) and 5 per cent in India's industrial production. This sector has generated about 4.5 lakh of direct employment and about one crore of indirect employment.

The automotive industry in India

9th largest automobile industry . 2nd largest two-wheeler market, 11th largest Passenger Cars producers. 4th largest in Heavy Trucks. 2nd largest tractor manufacturer. annual production of over 2.3 million units. The monthly sales of passenger cars in India exceed 100,000 units.

Government support:
The Industrial Policy of 1991 de-licensed the Automobile Industry in India, but passenger car was de-licensed in 1993. This took the Indian automobile production from 5.3 Million Units in 2001-02 to 14.8 Million Units in 2010-11. 100% Foreign Direct Investment (FDI) is permissible

Government support

(Cont)

This liberalization has helped this sector to restructure itself, absorb newer technologies, and keep pace with the global developments realizing its full potential. To protect India from becoming a dumping ground for old and used vehicles produced abroad, the custom duty on the import of second hand vehicles including passenger cars has been raised to 105%.

The Key Players

Others, 5.8% Yamaha, 3.8% TVS Motors, 17.7% Hero Honda, 39.8% Bajaj Auto, 24.4%
Hyundai, 19.17

Honda Motors, 8.5%

Others, 5.73 Honda, 5.33 Tata Motors, 17.19 Maruti, 50.37

Two wheeler

Passenger vehicle

Passenger vehicle Two Wheeler

TATA Motors, Maruti Udyog, Honda Motors, Toyata, Skoda, Mahindra & Mahindra, Daimler Chrysler, Hindustan Motors Hero Honda, Bajaj Auto, Honda Motors, TVS Motors, Yamaha , Kinetic Motors

QUESTIONS

1. What short-Term and Long Term Strategies should HEAP follow in order to achieve a position where at least 30% of revenues could be from exports

Answer
Short Term Strategies: Increase the market share of the company in the foreign market by aggressive marketing To develop the in-house R & D & Technology design. Develop a strong marketing team & target should be to have a large customer base (standardization). Differentiate the product from the competitor Motivate the dealers to sell the product.

Answer

(Cont)

Long Term Strategies: Increasing the profitability by increasing the margin Having a strong brand name Having strong relationships with the customers. To establish a brand name in quality and after sales service.

2. Whether it should agree to sell its product under the distributers brand & what impact this could have in the long run?

Answer
Decision should be taken looking all the positive and negative strategies with the distributors.