Name Aseem Mukhi Anish Bhat Parag Bodele Chamanpreet Kaur Kaushal

Name

PRN

Aseem Mukhi

09020541013

Anish Bhat

09020541014

Parag Bodele

09020541015

Chamanpreet Kaur

09020541016

Kaushal Chhaya

09020541017

Chiranjeeb Dhar

09020541018

Marketing Assignment Review of HMSI Syndicate Three

Syndicate Three – Marketing Assignment: Business Review of HMSI

1

Contents

I. Introduction II. Strategy of rivals Vs HMSI

i. ii. iii. iv. v. vi. vii.

Strategy of HMSI Strategy adopted by TVS & Bajaj for increasing sales and countering growth of HMSI New Strategies adopted by Bajaj New Strategies adopted by TVS Review of strategies adopted by Honda Review of strategies adopted by Bajaj Review of strategies adopted by TVS

Syndicate Three – Marketing Assignment: Business Review of HMSI

2

Introduction In this brief we shall discuss i. ii. iii. iv.

Market growth rate Market size Competition(various companies operating within vertical) Describe scope of work/domains done by companies within that vertical and its importance

The automobile industry has seen an overwhelming growth in liberal India. Almost every big manufacturer has made its presence felt in the country. After the foreign direct investment regulations were removed, many manufacturers saw India as a potential market. Most of the auto manufacturers were in collaboration with the Indian companies after ’91 till ’99, when the rules were changed; some of them still enjoy that. With many foreign manufacturers eyeing India as the market, the giants were no exception and most of them are already having their manufacturing or assembling facilities in India. Honda was into the Indian two-wheeler industry from 1983, when it joined hands with Hero to start Hero Honda and with Kinetic to start Kinetic Honda. Honda broke the ties with Kinetic in ’99 and set up its own 100% subsidiary called Honda Motorcycle and Scooter India (HMSI) Pvt. Ltd. HMSI laid its foundation stone in Manesar, Haryana in the same year and also signed an agreement with Hero that it won’t manufacture motorcycles for the next five years i.e. till 2004 as Hero Honda was not into the scooter segment at that time. This gave Honda a license to manufacture scooters at will and it did that by rolling out its first scooter, Activa in 2001 and followed it with Dio in the same year. Honda now enjoys a large chunk of market share in the scooter segment with Activa, Dio and now Aviator as its products. Honda introduced its first motorcycle, Unicorn in 2004 in the 150cc segment which was followed by Shine in the 125cc segment in 2006 followed by Stunner in the same segment in 2008. All these motorcycles were highly appreciated and instant hits in the growing Indian market which over these years was mainly dominated by Hero Honda and Bajaj Auto Ltd. The main rivals HMSI is countering are BAL, Hero Honda and TVS in the motorcycle segment and TVS, Hero Honda and Mahindra Kinetic in the scooter segment. HMSI is the market leader in the scooter segment and is yet to have a major share in the motorcycle segment even though it is growing at 32.24% on a monthly basis.

Syndicate Three – Marketing Assignment: Business Review of HMSI

3

The bike segment has a market growth rate of 43% with HMSI having a share of 18% The biggest rival in this segment is HMSI’s sister concern Hero Honda with a share of 55%. The scooter segment is having a growth rate of 32.24% and HMSI having a market share of 57.7%. The nearest rival in this segment is TVS motors with a share of 18.7%. References: (http://www.indiaautomotive.net/2009/08/hero-honda-hmsi-sales-up-by-more-than.html) (http://www.herohonda.com/invest_sales_performance.asp); (http://www.financialexpress.com/news/our-100cc-motorcycle-will-hopefully-set-new-standards/442814/); (http://www.financialexpress.com/news/our-100cc-motorcycle-will-hopefully-set-new-standards/442814/) ; (http://www.financialexpress.com/news/honda-to-phase-out-geared-scooters/440044/); (http://www.financialexpress.com/news/honda-to-phase-out-geared-scooters/440044/).

Syndicate Three – Marketing Assignment: Business Review of HMSI

4

Strategy of rivals Vs HMSI In 2007, out of every 100 two-wheelers sold in the country - only 12 were scooters. That number went up to 16 in the past financial year and is projected to zoom to almost 20 this year. There’s more: the scooter market grew in double digits last fiscal, outperforming the two-wheeler market, which grew 2.6 per cent in the same period. The golden days of the early 80s, when scooters had a 64 per cent market share, are still far away. But the revival signals are strong. Scooter manufacturers said the 1.14 million-strong domestic market was expected to cross 2 million units in the next four years. That explains the entry of a host of newer players in the segment, such as Mahindra-Kinetic and Yamaha. Sensing competition, the established players — Honda, TVS Motors, Bajaj Auto, Hero Honda and Suzuki — have hit the drawing board once again, to pull out flashy, highpowered and un-geared scooters. Scooter production stands at roughly 20% of the overall two-wheeler production Year

Two Wheelers Production (Bikes + scooters) 2002-03 5,076,221 2003-04 5,622,741 2004-05 6,529,829 2005-06 7,608,697 2006-07 8,466,666 2007-08 8,026,681 2008-09 8,418,626 (http://www.siamindia.com/scripts/production-trend.aspx)

HMSI has 55 per cent market share, followed by TVS Motors with 19 per cent and Hero Honda with 14.5 per cent and Bajaj managing an 11% market share.

HMSI TVS Bajaj

Market share % 55 19 11

Sales Growth / Decline % * 32.24% 14% -12%

Projected Growth% 18% 7 NA

* based on year on year comparison with sales in July 2008 * Comparison of scooter sales.

Syndicate Three – Marketing Assignment: Business Review of HMSI

5

Strategy of HMSI ✔ Honda to exit geared scooter segment in India, the Japanese two-wheeler major Honda will exit the geared scooter market in India and phase out its 150 cc model — Eterno — as the company plans to focus on the gearless segment. ✔ The company would focus on gearless scooters in the future and with the launch of the new Activa, HMSI is looking at a total of 18% growth in its two-wheeler sales in the next fiscal, 2009-10. ✔ The Company has entered the bikes market since 2004. This has led to a certain degree of cannibalism between Hero Honda & HMSI. However, Honda motor company stands to gain out of either company’s success. ✔ HMSI has a one-month waiting period for its new Activa (110 cc); six months before, it was just 10 days. Encouraged, it is ramping up its monthly production to 60,000 from 40,000 earlier. ✔ Honda remains committed to its promise to deliver superior technology and performance, even though HMSI products are priced relatively higher than other companies in the market. (http://www.livemint.com/2009/03/27143017/Honda-to-exit-geared-scooter-s.html) (http://world1.rediff.com/business/report/2009/jun/20/for-scooters-its-yesterday-once-more-almost.htm)

Strategy adopted by TVS & Bajaj for increasing sales and countering growth of HMSI Most companies currently produce scooters in the 100-125cc range that are targeted at customers who want higher mileage and are ready to compromise on power. Generally, an entry-level bike (100cc) is more powerful and economical than a gearless scooter. To counter this, companies are working on scooter models that generate higher power without undermining the fuel economy. The result will be a product that matches the performance of motorcycles while being more comfortable, agile and easy on the pocket. They also aim at developing E- scooters ➢ Chennai-based TVS Motors, makers of Scooty, are developing a premium un-geared scooter that will be more powerful and superior on design and styling. The company is learnt to have developed a new platform, much more powerful than the 90cc Scooty. ➢ The country’s second largest bike maker, Bajaj Auto, is also developing a completely new, ungeared, scooter. To be launched in 2011, it is aimed at taking on the products of HMSI. This product will be high on power output, like the company’s current bike range, but will not sacrifice on fuel economy. (http://www.business-standard.com/india/news/for-scooters-it%5Cs-yesterday-once-more-almost/361608/)

Syndicate Three – Marketing Assignment: Business Review of HMSI

6

New Strategies adopted by Bajaj Major emphasis to be on new product launches. Have a new scooter market under development – will be launched early 2010. Plan to launch a three-wheeled motorcycle, to cater to a niche segment. Bajaj expects stronger growth in the first quarter of FY'10 powered by the continuing success of the XCD 135 DTS-Si as also the launch of product upgrades off the Pulsar platform As a result of the recent stake hike by Bajaj Auto, KTM now has Rajiv Bajaj on its board and the cooperation agreement between the two companies covers product development, technology, vendor sourcing and distribution.

Bajaj

Existing Products Bajaj Kristal DTSi Pulsar Discover 135 DTSi Platina 100, 125 DTSSi

New Launch's in 2009 XCD 135 DTSi XCD Sprint Discover 100 DTS-Si Kawasaki Ninja 250R

(http://www.livemint.com/2009/01/11224551/Bajaj-Auto-plans-new-models-to.html) (http://www.autoexpo.in/news08/news_aug4.asp)

New Strategies adopted by TVS Chennai-based TVS Motors, makers of Scooty, are developing a premium un-geared scooter that will be more powerful and superior on design and styling. The company is learnt to have developed a new platform, much more powerful than the 90cc Scooty. Targeting young women who need mobility and whose daily travel is limited to around 15-25 km per day, with the E-scooter series - Scooty Teenz Electric. TVS is also considering increasing its market share in the premium bike segment by launching new APACHE 180. Of late, there has been a constant rise in the demand of the premium segment and TVS don’t want to lag in grabbing the opportunity.

TVS

Existing Products Apache 160 RTR, RTR Fi Star, Star City Scooty Pep, Pep+ Teenz

New Launch's in 2009 Apache RTR 180 Unisex >=100cc scooter

(http://www.livemint.com/2009/07/28213546/TVS-plans-highcapacity-gearle.html)

Syndicate Three – Marketing Assignment: Business Review of HMSI

7

Review of strategies adopted by Honda The first bike launched by Honda, Unicorn was launched in the existing 150cc segment which was mainly dominated by Pulsar series and later TVS Apache also chipped in within the competition. Same was the case with Shine, its second bike in the 125cc segment. After this, Honda slightly moved away from convention by adopting a new strategy of segmentation by creating a segment within two existing segments. In 2008, Honda launched a 125cc Stunner CBF intended for not the conventional 125cc segment but just between 125cc and 150cc segment. Honda did not compromise on the feature rich and technologically sound product and not on the price either. The price of this bike was 50-60 thousand, thus overcoming the price void between the 150cc and 125cc bikes. The competitors sell their 125cc bikes at 40-50 thousand while the price of 150cc segment starts somewhere around 60 thousand. This pricing strategy of Honda has paid well and now they are planning to penetrate the gap between the existing 100cc and 125cc segments by launching a new feature laden and technologically sound 100cc bike. Again Honda has clearly announced that the price of this bike won’t be in the conventional 100cc range but slightly more than that. Review of Strategy adopted by Bajaj Looking on the recent information on Bajaj; we may believe that they haven’t been able to tackle the market successfully. In-spite of losing market share for the last quarter, Bajaj looks determined to get back to the leadership position it was once accustomed to. It is looking to consolidate in the 100cc segment as well as launch new model which appeal to the younger generation. Bajaj has many firsts to its name, not catering to consumer needs is one – a mistake it has made and hopefully learnt from. It now aims to revive it scooter business and also its tie-up with KTM will make sure it stays updated technologically. HMSI has been able to counter Bajaj’s growth by adopting innovative policies, unheard of yet in the Indian Two-wheeler market.

Review of Strategy adopted by TVS TVS has not been able to make significant inroads into the market due to two main reasons – Its new product launches have been delayed and it has not been successful spoiling Honda’s party! TVS now aims to launch new bikes and is also looking at capitalizing on the E-scooter market. It hope to lure customers by offering lower priced models, as well as the promise that these products are low on maintenance. HMSI has been consistent in shipping out scooter and bikes which have all these attributes and more. What remains to be seen is how successful TVS is in the next few quarters in taking Honda head on!

Syndicate Three – Marketing Assignment: Business Review of HMSI

8

SBU

Market Growth Rate

Market Share

Market Share Of Nearest Rival

Relative Market Share

Quadrant

Bikes

43

18

55

0.33

Question Mark

Scooters

32.24

57.7

18.7

3.08

Star

(http://www.financialexpress.com/news/our-100cc-motorcycle-will-hopefully-set-new-standards/442814/) (http://www.herohonda.com/invest_sales_performance.asp) (http://www.financialexpress.com/news/our-100cc-motorcycle-will-hopefully-set-new-standards/442814/) http://www.financialexpress.com/news/honda-to-phase-out-geared-scooters/440044/

RELATIVE MARKET SHARE

Syndicate Three – Marketing Assignment: Business Review of HMSI

9

STAR

Question Mark (Bikes)

(Scooters)

10

CASH COW

DOG

0 M A R K E T G R O W T H 1

Syndicate Three – Marketing Assignment: Business Review of HMSI

10

0

1

Syndicate Three – Marketing Assignment: Business Review of HMSI

11

0

On what basis do you think company has formed SBUs The Indian automobile market is primarily driven by consumers demanding fuel efficient and low maintenance vehicles. Also the market demand is driven by the middle class, hence HMSI sub-divided its two-wheeler manufacturing into two strategies units namely: Bikes and Scooters. Is the portfolio healthy? The market has seen an extra-ordinary growth and HMSI has been quick to capitalise and is now threatening the local players into reviewing their strategies. HMSI currently is the market leader in scooter segment and grabbing up share in the motorcycle segment. Suggest strategies to be pursued for each SBU Scooter is already a market leader hence it has to carry on with that and its catching up on bikes as well but the thing is it is still a psyche of lower middle class that it is a high end automobile provider which is marring its market to TVS and Bajaj in bikes and to mopeds in scooters sectors hence in case it wishes to capture on that it can introduce a little less range scooters in the gearless category to target young, female and old riders and in case of bikes the marketing strategy needs to be changed to portray it as value for money and "not so expensive" .

Syndicate Three – Marketing Assignment: Business Review of HMSI

12