1

INTRODUCTION

The term ‘marketing mix’, was introduced by prof. N.H.borden of the Harvard
Business school of America. It describes combination of the four inputs which constitute the
core of a company’s marketing system –the product the distribution system, the price
structure and the promotional activities.

According to Mr. Jerome McCarthy, an American expert, “Marketing mix is the

pack of four sets of variables, namely, product variables, price variables, promotion variables
and place variables.”

The basic task of the marketing manager is the successful management of the
marketing mix, success means that the customer is satisfied and that the organization’s
resources are effectively deployed to that end.

Marketing mix is the set of controllable variables and their levels that the firm uses
to influence its target market. McCarthy popularized a four factor classification of these tools
called the 4ps: product, price, place, and promotion.

Like many concepts, the marketing mix concept seems relatively simple, once it has
been expressed. I know that before they were ever tagged with the nomenclature of
"concept," the ideas involved were widely understood among marketers as a result of the
growing knowledge about marketing and marketing procedures that came during the
preceding half century.

But I have found for myself that once the ideas were reduced to a formal statement
with an accompanying visual presentation, the concept of the mix has proved a helpful devise
in teaching, in business problem solving, and, generally, as an aid to thinking about
marketing.
 2

First of all, it is helpful in giving an answer to the question often raised as to "what is
marketing?" marketing means contribution of four elements i.e., products, price, place and
promotion.

In problem solving the marketing mix chart is a constant reminder of:

 The fact that a problem seemingly lying in one segment of the mix must be
deliberated with constant thought regarding the effect of any change in that
sector on the other areas of marketing operations. The necessity of integration
in marketing thinking is ever present.

 The need of careful study of the market forces as they might bear on problems
in hand. In short, the mix chart provides an ever ready checklist as to areas
into which to guide thinking when considering marketing questions or dealing
with marketing problems.
 3

INDUSTRY_PROFILE:

INTRODUCTION

The Indian automotive industry consists of five segments: commercial vehicles; multi-
utility vehicles & passenger cars; two-wheelers; three-wheelers; and tractors. With
5,822,963 units sold in the domestic market and 453,591 units exported during the first nine
months of FY2005 (9MFY2005), the industry (excluding tractors) marked a growth of 17%
over the corresponding previous. The two-wheeler sales have witnessed a spectacular
growth trend since the mid nineties.

Two-wheelers:MarketaSizea&aGrowth

In terms of volume, 4,613,436 units of two-wheelers were sold in the country in

9MFY2005 with 256,765 units exported. The total two-wheeler sales of the Indian industry
accounted for around 77.5% of the total vehicles sold in the period mentioned.

Figure 1
Segmental Growth of the Indian Two Wheeler Industry
(FY1995-2004)
 4

After facing its worst recession during the early 1990s, the industry bounced back
with a 25% increase in volume sales in FY1995. However, the momentum could not be
sustained and sales growth dipped to 20% in FY1996 and further down to 12% in FY1997.
The economic slowdown in FY1998 took a heavy toll of two-wheeler sales, with the year-on-
year sales (volume) growth rate declining to 3% that year. However, sales picked up
thereafter mainly on the strength of an increase in the disposable income of middle-income
salaried people (following the implementation of the Fifth Pay Commission's
recommendations), higher access to relatively inexpensive financing, and increasing
availability of fuel efficient two-wheeler models. Nevertheless, this phenomenon proved
short-lived and the two-wheeler sales declined marginally in FY2001. This was followed by a
revival in sales growth for the industry in FY2002. Although, the overall two-wheeler sales
increased in FY2002, the scooter and moped segments faced de-growth.

FY2003 also witnessed a healthy growth in overall two-wheeler sales led by higher
growth in motorcycles even as the sales of scooters and mopeds continued to decline. Healthy
growth in two-wheeler sales during FY2004 was led by growth in motorcycles even as the
scooters segment posted healthy growth while the mopeds continued to decline. Figure 1
presents the variations across various product sub-segments of the two-wheeler industry
between FY1995 and FY2004.

DemandaDrivers
The demand for two-wheelers has been influenced by a number of factors over the
past five years. The key demand drivers for the growth of the two-wheeler industry are as
follows:

▪ Inadequate public transportation system, especially in the semi-urban and rural areas;
▪ Increased availability of cheap consumer financing in the past 3-4 years;
▪ Increasing availability of fuel-efficient and low-maintenance models;
▪ Increasing urbanisation, which creates a need for personal transportation;
▪ Changes in the demographic profile;
▪ Difference between two-wheeler and passenger car prices, which makes two-wheelers the
entrylevel vehicle;
▪ Steady increase in per capita income over the past five years; and
▪ Increasing number of models with different features to satisfy diverse consumer needs.

While the demand drivers listed here operate at the broad level, segmental demand is
influenced byasegment-specificafactors.
 5

MARKETaCHARACTERISTICS

Demand

SegmentalaClassificationaandaCharacteristics

The three main product segments in the two-wheeler category are scooters,
motorcycles and mopeds. However, in response to evolving demographics and various other
factors, other sub segments emerged, viz. scooterettes, gearless scooters, and 4-stroke
scooters. While the first two emerged as a response to demographic changes, the introduction
of 4-stroke scooters has followed the imposition of stringent pollution control norms in the
early 2000. Besides, these prominent sub-segments, product groups within these sub-
segments have gained importance in the recent years. Examples include 125cc motorcycles,
100-125 cc gearless scooters, etc. The characteristics of each of the three broad segments are
discussed in Table 1.

Table 1
Two-Wheelers: Comparative Characteristics
Scooter Motorcycle Moped
Price*(Rs. as in January
> 22,000 > 30,000 > 12,000
2005)
2-stroke, 4- Mainly 4-
Stroke 2-stroke
stroke stroke
Engine Capacity (cc) 90-150 100, 125, > 125 50, 60
Ignition Kick/Electronic Kick/Electronic Kick/Electronic
Engine Power (bhp) 6.5-9 7-8 and above 2-3
Weight (kg) 90-100 > 100 60-70
Fuel Efficiency (kms per
50-75 50-80+ 70-80
litre)
Load Carrying High Highest Low
*Ex-showroomaMumbai
Compiled by INGRES
 6

SegmentalaMarketaShare

The Indian two-wheeler industry has undergone a significant change over the past 10
years with the preference changing from scooters and mopeds to motorcycles. The scooters
segment was the largest till FY1998, accounting for around 42% of the two-wheeler sales
(motorcycles and mopeds accounted for 37% and 21 % of the market respectively, that year).
However, the motorcycles segment that had witnessed high growth (since FY1994) became
larger than the scooter segment in terms of market share for the first time in FY1999.
Between FY1996 and 9MFY2005, the motorcycles segment more than doubled its share of
the two-wheeler industry to 79% even as the market shares of scooters and mopeds stood
lower at 16% and 5%, respectively.

Figure2
Trends in Segmental Share in Industry Sales (FY1996-
9MFY2005)

While scooter sales declined sharply by 28% in FY2001, motorcycle sales reported a
healthy growth of 20%, indicating a clear shift in consumer preference. This shift, which
continues, has been prompted by two major factors: change in the country's demographic
profile, and technological advancements.
 7

Over the past 10-15 years the demographic profile of the typical two-wheeler customer
has changed. The customer is likely to be salaried and in the first job. With a younger
audience, the attributes that are sought of a two-wheeler have also changed. Following the
opening up of the economy and the increasing exposure levels of this new target audience,
power and styling are nowaasaimportantaasacomfortaandautility.

The marketing pitch of scooters has typically emphasized reliability, price, comfort and
utility across various applications. Motorcycles, on the other hand, have been traditionally
positioned as vehicles of power and style, which are rugged and more durable. These features
have now been complemented by the availability of new designs and technological
innovations. Moreover, higher mileage offered by the executive and entry-level models has
also attracted interest of two-wheeler customer. Given this market positioning of scooters and
motorcycles, it is not surprising that the new set of customers has preferred motorcycles to
scooters. With better ground clearance, larger wheels and better suspension offered by
motorcycles, they are well positioned to capture the rising demand in rural areas where these
characteristics matter most.

Scooters are perceived to be family vehicles, which offer more functional value such as
broader seat, bigger storage space and easier ride. However, with the second-hand car market
developing, a preference for used cars to new two-wheelers among vehicle buyers cannot be
ruled out. Nevertheless, the past few years have witnessed a shift in preference towards
gearless scooters (that are popular among women) within the scooters segment. Motorcycles,
offer higher fuel efficiency, greater acceleration and more environment-friendliness. Given
the declining difference in prices of scooters and motorcycles in the past few years, the
preference has shifted towards motorcycles. Besides a change in demographic profile,
technology and reduction in the price difference between motorcycles and scooters, another
factor that has weighed in favour of motorcycles is the high re-sale value they offer. Thus, the
customer is willing to pay an up-front premium while purchasing a motorcycle in exchange
for lower maintenance and a relatively higher resaleavalue.
 8

Supply
Manufacturers
As the following graph indicates, the Indian two-wheeler industry is highly
concentrated, with three players-Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj
Auto) and TVS Motor Company Ltd (TVS) - accounting for over 80% of the industry sales
as in 9MFY2005. The other key players in the two-wheeler industry are Kinetic Motor
Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors
India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda
Motorcycle & Scooter India (P) Ltd (HMSI).

Figure 3
Shares of Two-Wheeler Manufacturers in Industry Sales (FY2000-
9MFY2005)

Although the three players have dominated the market for a relative long period of
time, their individual market shares have undergone a major change. Bajaj Auto was the
undisputed market leader till FY2000, accounting for 32% of the two-wheeler industry
volumes in the country that year. Bajaj Auto dominance arose from its complete hold over the
scooter market. However, as the demand started shifting towards motorcycles, the company
witnessed a gradual erosion of its market share. HHML, which had concentrated on the
motorcycle segment, was the main beneficiary, and almost doubled its market share from
20% in FY2000 to 40% in 9MFY2005 to emerge as the market leader. TVS, on the other
hand, witnessed an overall decline in market share from 22% in FY2000 to 18% in
9MFY2005. The share of TVS in industry sales fluctuated on a year on year basis till FY2003
as it changed its product mix but has declined since then.
 9

Technology

Hitherto, technology transfer to the Indian two-wheeler industry took place mainly
through: licensing and technical collaboration (as in the case of Bajaj Auto and LML); and
joint ventures (HHML).

A third form - that is, the 100% owned subsidiary route - found favour in the early
2000s. A case in point is HMSI, a 100% subsidiary of Honda, Japan. Table 2 details the
alliances of some majoratwo-wheeleramanufacturersainaIndia.

Besides the below mentioned technology alliances, Suzuki Motor Corporation has also
followed the strategy of joint ventures (SMC reportedly acquired equity stake in Integra
Overseas Limited for manufacturing and marketing Suzuki motorcycles in India).

Table 2
Technological tie-ups of Select Players
Nature of Alliance Company Product
Bajaj Auto Technological tie-up Kawasaki Heavy Industries Motorcycles
Ltd, Japan
Technological tie-up Tokya R&D Co Ltd, Japan Two-wheelers
Technological tie-up Kubota Corp, Japan Diesel Engines
HHML Joint Venture Honda Motor Co, Japan Motorcycles
KEL Technological tie-up Hyosung Motors & Machinery Motorcycles
Inc
KEL Tie-up-for Italjet, Italy Scooters
manufacturing
and distribution
LML Technological tie-up Daelim Motor Co Ltd Motorcycles
Hero Technological tie-up Aprilia of Italy Scooters
Motors
 10

With the two-wheeler market, especially the motorcycle market, becoming extremely
competitive and the life cycle of products getting shorter, the ability to offer new models to
meet fast changing customer preferences has become imperative. In this context, the ability to
deliver newer products calls for sound technological backing and this has become one of the
critical differentiating factor among companies in the domestic market. Thus, the players
have increased their focus on research and development with some having indigenously
developed new models as well as improved technologies to cater to the domestic market.
Further, with exports being one of the thrust areas for some Indian two-wheeler companies,
the Indian original equipment manufacturers (OEMs) have realised the need to upgrade their
technical capabilities. These relate to three main areas: fuel economy, environmental
compliance, and performance. In India, because of the cost-sensitive nature of the market,
fuel efficiency had been an interest area for manufacturers.

It is not only that the OEMs are increasing their focus on in-house R&D, they also
provide support to the vendors to upgrade the technology and also assist them striking
technological alliances.

TRENDS-IN-THE-TWO-WHEELER-INDUSTRY

Companies-raising-capacity-to-meet-the-growing-demand
All the major two-wheeler manufacturers, viz. Bajaj Auto, HHML, TYS, HMSI and
others, have increased their manufacturing capacities in the recent past. The total capacity of
these players stood at 7.8 million units per annum (FY2003) as against total market sales of
3.8 million units in FY2002. Most of the players have either expanded capacity, or converted
their existing capacities for scooters and mopeds into those for manufacturing motorcycles.
The move has been prompted by the rapid growth reported by the motorcycles segment since
FY1995.

HHML increased the capacity of its plants from 1.8 million units in FY2003 to 2.25
million in FY2004 and has been able to achieve 92% capacity utilization. In light of the
increase in demand for motorcycles, the company plans to set up a new plant. Since its entry
in the Indian market during FY2002, HMSI has aggressively expanded its capacity.
 11

Niche markets also witnessing intense competition

A significant trend witnessed over the past five years is the inclination of consumers
towards products with superior features and styling. Better awareness about international
models has raised expectations of consumers on some key attributes, especially quality,
styling, and performance. High competitive intensity has prompted players to launch vehicles
with improved attributes at a price less than the competitive models

. In an effort to satisfy the distinct needs of consumers, producers are identifying

emerging consumer preferences and developing new models. For instance, in the motorcycles
segment, motorcycles with engine capacity over 150cc, is a segment that has witnessed
significant new product launches and hence, become more competitive. The indigenously
launched Pulsar 150 had met with success on its launch and thereafter, a host of models have
been launched in this segment by various players. While Bajaj Auto launched the Pulsars
(150 and 180 cc) with digital twin spark technology (DTSi) that offers a powerful engine and
fuel efficiency of 125 cc models, model launches by other players include LML's
Graptor/Beamer, HMSI's Unicorn besides the HHML's CBZ (improved version launched in
2003-04) and TVS' Fiero F2. Moreover, in the recent past, the motorcycle segment has
witnessed launch of vehicles with higher engine capacity (higher than 150cc) and power
(higher than 15bhp). These include models such as Bajaj Auto Eliminator and Royal Enfield's
Thunderbird followed by HHML's Karisma. Besides these, KEL has launched premium
segment motorcycles GF 170 and GF Laser besides launching products from the portfolio of
its technology partner (Hyosung's Aquila and Comet 250). The products in this segment cater
for style conscious consumers. Quite a few players are developing models combining features
such as higher engine capacity" optimum mix of power and performance, and superior
styling. However, the extent of shift to these products would depend on the positioning of
such products in terms of price.

In the scooters segment, the market for plastic-bodied variomatic scooters continues
to witness growth in the scenario of overall decline in scooter volumes. Higher volumes and
growth are especially true for certain scooter models, such as Honda Activa, that brought in
new technology (besides variomatic transmission) to further differentiate themselves. Thus,
the need to
 12

differentiate and create a niche has led to companies strengthening their research and
development (R&D) capabilities and reducing the development time for new models.

Increasing focus on exports

For the first nine months of FY2005, two-wheeler exports increased by 37% over the
corresponding previous, led mainly by motorcycles even as exports of other two-wheelers
were healthy. While motorcycle exports increased by 40%, scooter and moped exports
increased by 29% and 27% respectively.

Motorcycle exports by Bajaj Auto, HHML and TVS have reported a to bust growth in
FY2005 and are expected to increase further in the medium term.

Table 3
Two-Wheeler Exports from India (in numbers)
FY2000 FY2001 FY2002 FY2003 FY2004 CAGR 9MFY2005
(FY2000-
04)
Scooters 20,188 25,625 28332 30116 53148 27.4 44832
Motorcycles 35,295 41,339 56,880 126122 187287 51.4 188807
Mopeds 27,754 44,174 18,971 23330 24234 -3.3 22739
Total 83,237 111,138 104183 179568 264669 33.5 256378
Source: SIAM

Although the Indian two-wheeler manufacturers have forayed on their own in their
target export markets, there have been instances of tie-ups with the technology partners. Bajaj
Auto's tie-up with Kawasaki to jointly market Bajaj products in Philippines is a case in point.
Under the tie-up, M/s Kawasaki Motors Philippines Corporation has been appointed as
exclusive distributors to market select Bajaj two-wheelers that include Byk, Caliber 115 and
Wind 125. These vehicles are being sent to Philippines in the completely built unit (CBU)
form. Other strategy of expanding international presence considered by few players is that of
setting up assembly lines in select South East Asian countries either on their own or in
partnership with local players.
 13

Besides, plans of select overseas technology partners to source from their Indian
partners and plans of global majors to develop their Indian manufacturing unit as a sourcing
hub may also lead to increase in two-wheeler exports from India.

Company wise two-wheeler exports since FY2000 are presented in the following Table
4.

Table 4
Company-wise two-wheeler exports (FY2000-9MFY2005)
FY2000 FY2001 FY2002 FY2003 FY2004 CAGR 9MFY2005
(FY2000-
04)
Bajaj
14924 16112 28527 53366 90210 56.8 87225
Auto
HHML 10061 10324 13023 21165 39254 40.5 43441
HMSI 0 0 1293 10916 31414 n.a 27734
TVS 7265 6621 7765 9636 28093 40.2 36666
Yamaha 15197 20446 20321 45546 32906 21.3 27539
Others 35790 57635 32752 39053 42792 4.6 33773
Total 83237 111138 103681 179682 264669 33.5 256378
Source: SIAM

Vehicle Emission Norms

Emission norms for all categories of petrol and diesel vehicles at the manufacturing
stage were introduced for the first time in India in 1990 and were made stricter in 1996.
When the 1996 norms were introduced, it resulted in certain models being withdrawn from
the market. With Stage I India 2000 emission norms coming into place, the cost of
developing suitable technology has remained high.

The emission norms that are currently in force for two-wheelers and three-wheelers
are more stringent than the Euro II norms. The roadmap suggested for emission norms for
two/three-wheelers by the Expert Committee on Auto Fuel Policy is as follows:
 14

For two-/three-wheelers the emission norms are recommended to be the same in the
entire country:

For new vehicles:

Bharat Stage II norms throughout the country from April 1, 2005

Bharat Stage III norms to be applicable preferably from April 1, 2008 but not later than April
1, 2010

For reducing pollution from in-use vehicles

▪ New pollution under control (PUC) checking system for all categories of vehicles to be put
in place by April 1, 2005

▪ Inspection & maintenance (I&M) system for all categories of vehicles to be put place by
April 1, 2010

▪ Performance checking system of catalytic converters and conversion kits installed in

vehicles to be put in place by April 1, 2007.

Table 5 presents the emission norms for two-wheelers that were in place in the past,
the India 2000 emission norms, and the norms that have been implemented for April 2005
(Stage II) and proposed for 2008 (Stage III).

Table 5
Exhaust Emission Norms
Old
Vehicle Pollutants 1996 2000 2005* 2008/10**
Norms
Tow- CO 12-30 4.5 2.0 1.5 1
wheelers
(gm/Km) HC+Nox 8-12 3.6 2.0 1.5 1

Three- CO 12-30 6.8 4.0 2.25 1.25

wheelers
(petrol) HC+Nox 8-12 5.4 1.5 2 1.25

Three- CO 1 1.1
wheelers
HC+Nox 0.85 1
(Diesel)
PM 0.10 0.05
CO: Carbon Monoxide; HC: Hydrocarbon; Nox: Nitrogen Oxide,
PM: Particulate Matter, * Maximum Sulphur parts per million (ppm)
permissible of 150 and ** Maximum Sulphur ppm permissible of 50
 15

Compiled by INGRES
To be able to meet the exhaust norms, the Auto Fuel Policy has suggested following
technologies:

Table 6
Technologies for meeting the emission norms for Spark Ignited Vehicles
2/3 - wheelers
Level of Emission
2-Stroke Technology 4-Stroke Technology
Norms
Euro I/India 2000 Intake, exhaust, combustion 4-Stroke engine
optimisation Catalytic converter technology

Euro II/Bharat Stage II Secondary air injection Hot tube Secondary

Caatalytic air injection
Converter
Euro III/Bharat Stage III Fuel injection Catalytic Fuel injection
converter Carburetor + catalytic
converter
Euro IV/Bharat Stage IV To be developed Learn burn Fuel injection
+ catalytic converter
Source: National Auto Fuel Policy

The adoption of new technologies for compliance with stricter emission norms may
affect the prices of vehicles. Some two-wheeler manufacturers are testing electronic fuel
injection systems for motorcycles. To begin with, electronic systems are likely to be
introduced in premium segment motorcycles.

Fiscal Policy

The Union Budget for 2001-02 had lowered the excise duty on two-wheelers (with
engine capacity in excess of 75 cc) from 24% to 16%. The manufacturers responded to this
by passing on a relatively large part of the excise cut to customers. The Union Budget
thereafter have left the excise duty on two-wheelers unchanged. But the Union Budget 2004-
05 provides for a weighted deduction of 150% for investments in R&D. This may facilitate
increasing R&D allocations and allow for improvement in the technical as well as product
development skills of the Indian companies.
 16

Indian Auto Policy 2002

The Government of India approved a comprehensive automotive policy in March 2002,

the main proposals of which are as under:

Foreign direct investment : Automatic approval is proposed to be granted to foreign

equity investment up to 100% for manufacture of automobiles and components.

Import tariff : Import tariffs are proposed to be fixed at a level such that they facilitate
the development of manufacturing capabilities as opposed to mere assembly.

Incentives for R&D : The weighted average tax deduction under the Income Tax Act,
1961 for automotive companies is proposed to be increased from current level of 125% (The
weighted average deduction for R&D was increased to 150% in the Union Budget 2004-05).
Further, the policy proposes to include vehicle manufacturers for a rebate on the applicable
excise duty for every 1% of the gross turnover of the company expended during the year on
R&D.

Environmental aspects : Adequate fiscal incentives are proposed to promote the use
of low-emission auto fuel technology (in line with the Auto Fuel Policy). The auto policy
states the Government's intent to align domestic policy with the international practice of
imposing higher road tax on old vehicles so as to discourage their use.
 17

COMPANY PROFILE

Public company
Type
BSE:HEROHONDA M
January 19, 1984 in Gurgaon,
Founded
Haryana, India
Headquarters New Delhi, India
Brijmohan Lal Munjal (chair and
founder)

Key people Toshiaki Nakagawa (joint managing

director)

Pawan Munjal (CEO)

Industry Automotive
Products Motorcycles, Scooters
Revenue U$ 2.8 billion
Website www.Herohonda.com

Company
Logo
 18

Hero Honda Motors Limited, based in Delhi, India, is the world's third largest
manufacturer of motorcycles after Honda and Yamaha. Hero Honda is a joint venture that
began in 1984 between the Hero Group of India and Honda of Japan. It has been the world's
biggest manufacturer of 2-wheeled motorized vehicles since 2001, when it produced 1.3
million motorbikes in a single year.

Hero Honda's Splendor is the world's largest selling motorcycle. Its 2 plants are in
Dharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has also started
production by April, 2008. It will have production facilities such as Lean Manufacturing
concept, more flexible lines & stream line material flow, within & proximity (planning to set
vendors in nearby locations constituting HHML Park) to achieve just-in-time manufacturing.
It specializes in dual use motorcycles that are low powered but very fuel efficient.

Company profile

“Hero” is the brand name used by the Munjal brothers in the year 1956 with the
flagship company Hero Cycles. The joint venture between India's Hero Group and Honda
Motor Company, they are related to Jagdish Lal Munjal

During the 80s, Hero Honda became the first company in India to prove that it was
possible to drive a vehicle without polluting the roads. The company introduced new
generation motorcycles that set industry benchmarks for fuel thrift and low emission. A
legendary 'Fill it - Shut it - Forget it' campaign captured the imagination of commuters across
India, and Hero Honda sold millions of bikes purely on the commitment of increased mileage

Hero Honda has consistently grown at double digits since inception; and today, every
second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India
buys Hero Honda's top -selling motorcycle - Splendor.
 19

Hero Honda bikes currently roll out from two globally benchmarked manufacturing
facilities based at Dharuhera and Gurgaon in Haryana. These plants together are capable of
churning out 3.9 million bikes per year. A third state of the art manufacturing facility at
Hardwar in Uttranchal will soon be commissioned to cope with sustained customer demand.

Hero Honda's extensive sales and service network now spans over 3000 customer
touch points. These comprise a mix of dealerships, service and spare points, spare parts
stockists and authorized representatives of dealers located across different geographies.

Hero Honda values its relationship with customers. Its unique CRM initiative - Hero
Honda Passport Program, one of the largest programs of this kind in the world, has over 3
million members on its roster. The program has not only helped Hero Honda understand its
customers and deliver value at different price points, but has also created a loyal community
of brand ambassadors.

History

Hero Honda is worlds third largest two wheeler maker. India has the largest number
of two wheelers in the world with 41.6 million vehicles. India has a mix of 30 percent
automobiles and 70 percent two wheelers in the country. India was the second largest two
wheeler manufacturer in the world starting in the 1950’s with the birth of Automobile
Products of India (API) that manufactured scooters. API manufactured the Lambrettas but,
another company, Bajaj Auto Ltd. surpassed API and remained through the turn of the
century from its association with Piaggio of Italy (manufacturer of Vespa scooters).

The license raj that existed between the 1940s to 1980s in India did not allow foreign
companies to enter the market and imports were tightly controlled. This regulatory maze,
before the economic liberalization, made business easier for local players to have a seller’s
market. Customers in India were forced to wait 12 years to buy a scooter from Bajaj.
 20

The CEO of Bajaj commented that he did not need a marketing department, only a
dispatch department. By the year 1990, Bajaj had a waiting list that was twenty-six times its
annual output for scooters.

The motorcycle segment had the same long wait times with three manufacturers:
Royal Enfield, Ideal Jawa, and Escorts. Royal Enfield made a 350cc Bullet with the only
four-stroke engine at that time and took the higher end of the market but there was little
competition for their customers. Ideal Jawa and Escorts took the middle and lower end of the
market respectively.

In the mid-1980s, the Indian government regulations changed and permitted foreign
companies to enter the Indian market through minority joint ventures. The two-wheeler
market changed with four Indo-Japanese joint ventures: Hero Honda, TVS Suzuki, Bajaj
Kawasaki and Kinetic Motor Company (Kinetic Honda). The entry of these foreign
companies changed the Indian market dynamics from the supply side to the demand side.
With a larger selection of two-wheelers on the Indian market, consumers started to gain
influence over the products they bought and raised higher customer expectations. The
industry produced more models, styling options, prices, and different fuel efficiencies. The
foreign companies new technologies helped make the products more reliable and with better
quality. Indian companies had to change to keep up with their global counterparts.

The 2006 Forbes 200 Most Respected companies list has Hero Honda Motors ranked
at 108. [1]

Growth

Hero Honda experienced great growth throughout its early days. The Munjal family
started a modest business of bicycle components. By 2002 Hero Group had sold 86 million
bicycles producing 16000 bicycles a day. Today Hero Honda has an assembly line of nine
different models of motorcycles available. It holds the record for most popular bike in the
world by sales for Its Splendor model. Hero Honda Motors Limited was established in joint
venture with Honda Motors of Japan in 1984, to manufacture motorcycles. It is currently the
largest producer of Two Wheelers in the world. It sold 3 million bikes in the year 2005-2006.
Recently it has also entered in scooter manufacturing, with its model PLEASURE mainly
aimed at girls. HUNK is the latest offering from the HHML stable.
 21

Just-in-Time Manufacturing

The Hero Group through the Hero Cycles Division was the first to introduce the
concept of just-in-time manufacturing. The Group boasts of superb operational efficiencies.
Every assembly line worker operates two machines simultaneously to save time and improve
productivity. The fact that most of the machines are either developed or fabricated in-house,
has resulted in low inventory levels.

In Hero Cycles Limited, the just-in-time inventory principle has been working since
the beginning of production in the unit. This is the Japanese style of production. In India,
Hero is probably the only company to have mastered the art of the just-in-time inventory
principle.

Ancillarisation

An integral part of the Group strategy of doing business differently was providing
support to ancillary units. There are over 300 ancillary units today, whose production is
dedicated to Hero's requirements and also a large number of other vendors, which include
some of the better known companies in the automotive segment.

Labor relations

In Hero Group there is no organized labor union and family members of employees
find ready employment within Hero. The philosophy with regard to labor management is
"Hero is growing, grow with Hero." Hero workers receive a uniform allowance, as well as
House Rent Allowance (HRA) and Leave Travel Allowance (LTA). Extra benefits include
medical check-ups not just for workers, but also for the immediate family members. For the
majority of the production workers, who are hired through contractors, these benefits are out
of reach. This and other problems lead to a strike and factory occupation by 4,000 temp
workers in the Gurgaon plant in spring 2006.

Diversification

Throughout the years of enormous growth , the Group Chairman, Mr. Lall has
actively looked at diversification. A considerable level of vertical integration in its
manufacturing activities has been ample in the Group's growth and led to the establishment of
 22

the Hero Cycles Cold Rolling Division, Munjal and Sunbeam Castings, Munjal Auto
Components and Munjal Showa Limited amongst other component-manufacturing units.

Then there were the expansion into the automotive segment with the setting up of
Majestic Auto Limited, where the first indigenously designed moped, Hero Majestic, went
into commercial production in 1978. Then came Hero Motors which introduced Hero Puch,
in collaboration with global technology leader Steyr Daimler Puch of Austria. Hero Honda
Motors was established in 1984 to manufacture 100 cc motorcycles.

The Hero Group also took a venture into other segments like exports, financial
services, information technology, which includes customer response services and software
development. Further expansion is expected in the areas of Insurance and
Telecommunication.

The Hero Group's phenomenal growth is the result of constant innovations, a close
watch on costs and the dynamic leadership of the Group Chairman, characterized by a culture
of entrepreneurship, of right attitudes and building stronger relationships with investors,
partners, vendors and dealers and customers.

Criticism

There is a frequent complaint that the biking enthusiasts in India make in many Auto-
related forums which is related to Hero Honda not making serious efforts to upgrade its
models as frequently as its competitors like Yamaha,Bajaj and TVS. Many bike enthusiasts in
India feel that Hero Honda only upgrades the "stickers" along with the names of its
bikes.'Sticker' upgrading can be easily noticed by observing the technical specifications of the
models Splendor, Splendor Plus, Passion, Passion Plus, Karizma, Karizma R. Another
frequent complaint made by Bike enthusiasts is that Hero Honda has too many bike models
with exactly same or similar engines despite of the company claiming that it caters to 'all
segments'. While Bajaj rolls out new models with many improvements, there have been very
less new or feature-upgraded models from Hero Honda.The latest bike from Hero Honda is
Hunk which again has an engine more or less similar to CBZ-Xtreme and now Yamaha has
launched two new bikes YFZ-R15 and FZ16 to compete with Hero Honda and Bajaj.
 23

PRODUCT PROFILE:

Hero Honda Bikes are on various models and designs they dealing with various
brands also separation on gender wise for male customers and female customers. The
following are some of the brands of Hero Honda bikes,

Splendor plus

Super Splendor

CBZ Extreme

Karizma

CD Dawn

Passion plus

Achiever

Pleasure

Activa

Kinetic Nova

Hero Honda Motorcycles, which provide smooth and enjoyable ride with maximum fuel
efficiency. we offer Hero Honda Splendor, Hero Honda Super Splendor, Hero Honda CBZ
Motorcycles and other popular models to choose from.
 24

Hero Honda Glamour F1

It gives us a sense of pride to forward this gleaming machine to our
clientele that is Hero Honda first fuel injection technology-driven
motorcycle.

Technical Specifications
Engine Quantum Core
Displacement 124.7 cc
6.72 KW (9 BHP) @ 7000
Maximum Power
rpm
Maximum Speed 95 kmph
Gears 4 Gears
Frame Tubular Double Cradle
Tyre Size (Front) 2.75 x 18 - 42 P / 4 PR
Tyre Size (Rear) 3.00 x 18 - 52 P / 6 PR
35/35 W Halogen Bulb
Headlight
(Multi-Reflector)
Starting Kick / Self
Brakes (Front) Drum / Disc
Brakes (Rear) Drum
No. of Variants 4
 25

Hero Honda CBZ Xtreme

The 4 Stroke, Single Cylinder, Air Cooled speed machine from Hero Honda is a cool
one. We have all the five colors in Black, Silver, Blue, Green & Red available with
us.

Technical Specification

Type Air Cooled, 4 Stroke Single Cylinder OHC

Displacement 149.2 c.c

Cylinder
Single cylinder , Vertical Engine
Arrangement

Maximum Power 10.6 KW ( 14.4 Ps ) @ 8500 rpm

Maximum Torque 12.80 N-m @ 6500 rpm

Bore x Stroke 57.3 x 57.8 mm

Compression Ratio 9.1 :1

Carburettor C.V Type

Starting Self Start / Kick Start

Idle speed 1400 rpm + 100

Ignition AMI - Advanced Microprocessor Ignition System

Clutch Multiplate wet

Gear box 5 Speed constant mesh

Type Tubular , Diamond Type

Front Disc Dia 240 mm Disc - Non Asbestoes type

Drum Internal expanding shoe type ( 130 mm ) -

Rear
Non Asbestoes type

Rim Size Front 18 x 1.85 , Alloy Wheels

Rear 8 x 2.15 , Alloy Wheels

Tyre Size Front 12.75 x 18 - 42 P

Rear 100/90 x 18 - 56P ( With Tuff-up Tube)

Battery 12 V - 7 Ah ( Self )

Head Lamp 35W / 35W - Halogen Bulb ( Multi-Reflector Type )

Tail Lamp 12V / 0.5W ( LED LAMPS)

Stop Lamp 12V / 5 W ( LED LAMPS)

Fuel tank capacity 12.3 Ltrs ( Min )

Reserve .5 Ltrs ( Usable reserve )

Length 2080 mm

Width 765 mm

Height 1145 mm

Wheelbase 1325 mm

Ground clearance 145 mm

Minimum turning
2.10 mtrs
radius

Kerb weight 141 Kg ( Kick ) / 143 Kg ( Self ).

 26

Hero Honda Splendor

We deal in one of the most successful bikes in Indian motorcycling
history - Hero Honda Splendor. The bike is available in a number of
shades and models

Technical Specification
4 Stroke, Single Cylinder, Air
Engine
Cooled
Cubic Capacity 97.2cc
Max. Power 7.5 BHP @ 8000rpm
Gear Box 4 Speed
Ignition CDI
Front Brakes 130mm Drum
Rear Brakes 110mm Drum
Front Tyre 2.75 X 18
Rear Tyre 3.00 X 18
Wheelbase 1235mm
Ground
159mm
Clearance
Dry Weight 116 Kg
Tank Capacity 12.8 Litres
Colours Black, Silver, Blue & Red
 27

Hero Honda CD Dawn

The shock absorbing rear suspension, providing a smooth ride and
coping up efficiently with sudden jerks due to the uneven road and
bumps has made Hero Honda CD Dawn a popular bike.

Technical Specification
4 Stroke, Single Cylinder, Air
Engine
Cooled
Cubic Capacity 97.2cc
Max. Power 7.4 BHP @ 8000rpm
Gear Box 4 Speed
Ignition CDI
Front Brakes 130mm Drum
Rear Brakes 110mm Drum
Front Tyre 2.75 X 18
Rear Tyre 3.00 X 18
Wheelbase 1230mm
Ground
160mm
Clearance
Dry Weight 114 Kg
Tank Capacity 10.5 Litres
 28

Hero Honda Super Splendor

Hero Honda Splendor-new generation bike with quantum core engine is
a healthy 9BHP unit in 125 cc engine.

Technical Specification
4-Stroke OHC, Single Cylinder,
Engine
Air Cooled
Bore X Stroke 52.4 X 57.8 mm
Displacement 124.7 cc
Compression Ratio 9.1: 1
Max Power 6.72 Kw (9 BHP) @ 7000 rpm
Torque 10.35 Nm @ 4000 rpm
Max Speed 90 Kmph
Clutch Multiplate Wet
Final Drive Roller Chain
Digital - CDI Ignition (AMI)
Ignition Advanced Micro Processor
Ignition system
Starting Self Start
Frame Tubular Double Cradle
Front : Telescopic Hydraulic
Suspension Fork Rear : Swing Arm with
Hydraulic Shock Absorbers
Dimensions
1995 X 735 X 1095 mm
(LXWXH)
Wheel Base 1265 mm
Ground Clearance 150 mm
Kerb Weight 121 Kg
Front : 2.75 X 18 - 4 PR / 42P
Tyres
Rear : 2.75 X 18 - 6 PR / 48P
Front Drum Type : Internal
Expanding Type - 130 mm Dia
Brakes
Rear Drum Type : Internal
Expanding Type - 130 mm Dia
Fuel Tank
12 Ltrs. (Min)
Capacity
12V - 35W Multi Reflector
Head Light
Halogen Bulb - AC Type
 29

Hero Honda Passion

This 4 stroke air cooled bike with a keihin-fiecarburettor is a bike for
mellowed people.

Technical Specification
4 Stroke, Single Cylinder, Air
Engine
Cooled
Displacement 97.2 cc
Maximum Power 7.5 ps at 8000 rpm
Ignition Electronic CDI
Frame Tubular Double Cradle
Head Light Halogen Bulb 35 W / 35 W
Final Drive Roller Chain
Battery 12 V - 2.5 Ah
Starting Kick Starter
 30

Hero Honda Pleasure

Enjoy the pleasure of a joy ride. The new roll-out from Hero Honda
targets the youngsters. The range of flashy colours(eight in all) are
selected to target the brigade of youngsters with unique trendy features.

Technical Specifications
Engine Air-cooled, 4-stroke single cylinder OHC
Bore x Stroke 50.0 x 52.0 mm
Displacement 102 cc
Compression Ratio 9.0 : 1
Maximum Power 5.22 kW (7bhp) @ 7000 RPM
Maximum Torque 7.85 Nm @ 5000 RPM
Maximum Speed 77 kmph
Clutch Dry, Automatic Centrifugal Clutch
Ignition CDI
Starting Self-start
Bottom Link with Spring-loaded
Front Suspension
Hydraulic Damper
Rear Suspension 150 kg
Swing Arm with Spring-loaded Hydraulic
Ignition
Damper
Length x Width x Height 1750 mm x 705 mm x 1100 mm
Wheel Base 1240 mm
Ground Clearance 125 mm
Kerb Weight 104 kg
Tyre Size* Front 3.50 x 10 - 4PR / 51 J
Rear 3.50 x 10 - 4PR / 51 J
Internal Expanding Shoe Type (130 mm)
Front Brake
Non-asbestos Type
Internal Expanding Shoe Type (130 mm)
Rear Brake
Non-asbestos Type
Fuel Tank Capacity 5 Ltrs (Min)
35W / 35W Halogen Bulb (Multi-reflector
Head Lamp
Type)
Battery 12 V-5 Ah
 31

Kinetic Nova
Get yourself charged up with the kinetics of Kinetic Nova from one of
our convenient outlets. The increase in the bull horse power from 7.5
bhp to a peak of 8.65 bhp is achieved in a large rev band of 5000 rpm to
7000 rpm.

Technical Specification
Dimensions
Overall Length : 1819 mm
Overall Width : 740 mm
Overall Height : 1076 mm
Wheel Base : 1250 mm s
Ground Clearance
Dry Weight : 103 kg
Engine : 4 Stroke Air Cooled
Cubic Capacity : 134.9cc
Max. Power : 8.5 bhp @ 6500 RPM
Max. Torque : 10 Nm @ 4500 RPM
Starting : Electric / Kick
Chassis & Susp
Chassis Type : Tubular Underbone
Tyre Front : 3.50" x 10" - 4 PR
Tyre Rear : 3.50" x 10" - 4 PR
Wheel Rims : New
Susp. Front : Leading Link Hydraulic Damper
Susp. Rear : Unit Swing Arm / Hydraulic Damper
Transmission : Variomatic
Brakes
Front Brakes : 130 mm dia
Rear Brakes : 110 mm dia
Electricals
MAGNETO :
Battery : 12 V / 9.0 AH
Head Light : 12 V 35 / 35 W ( MFR )
Tail Light : 5W
Brake Light : 21 W
Turn Signal Light : 10 W
Horns : Single
 32

Honda Eterno
We provide the first geared scooter being manufactured by Honda to
enhance the riding experience of the scooter enthusiasts. This full size
geared traditional scooter is in response to changing customer
expectations.

Engine
Type 4-stroke, Single cylinder, air cooled, OHC
Displacement 147.7 cc
Max. Power 6.0 KW (8.2 bhp) @ 6000 rpm
Max. Torque 10.63 Nm @ 4000 rpm
Transmission 4 Speed Constant Mesh
Ignition Kick
Electricals
Battery 12V
Headlamps 35/ 35 W
Chassis
Clutch Wet Multiplate
Frame High Rigidity Under Bone
Dimensions (lxbxh) 1810 x 716 x 1132 mm
Wheel base 1247 mm
Seat height 161 mm
Ground clearance 145 smm
Suspension
Bottom Link, Spring Loaded Hydraulic
Front
Damper
Unit swing with spring loaded hydraulic
Rear
damper
Tyre size
Front 3.50 - 10, 4 PR
Rear 3.50 - 10, 4 PR
Brakes
Front DRUM, 130 mm DIA
Rear DRUM, 130 mm DIA
Fuel Tank
4.5 litres
Capacity
 33

Honda Activa
The first scooter model of Honda for the Indian market,Activa let's
anybody in the family get their hands on it. The gears are removed from
the scooter to enhance the pleasure of riding.

Technical Specification
Engine
Type 4-stroke, Single cylinder, air cooled, OHC
Displacement 102 cc
Max. Power 7 Bhp @ 7000 rpm
Max. Torque 0-8 Kg-m @ 5500 rpm
Transmission V-matic
Ignition Self / Kick
Electricals
Battery 12V, 5Ah
Headlamps 35W
Chassis
Frame High rigidity Under Bone type
Dimensions (lxbxh) 1765 x 715 x 1130 mm
Wheel base 1235 mm
Seat height 760 mm
Ground clearance 145 smm
Suspension
Bottom Link with spring loaded hydraulic
Front
damper
Unit swing with spring loaded hydraulic
Rear
damper
Tyre size
Front 3.50 - 10, 4 PR
Rear 3.50 - 10, 4 PR
Brakes
Front Drum, 130 mm dia
Rear Drum, 130 mm dia
Fuel Tank
6 litres
Capacity
 34

Honda Dio
The first scooter model of Honda for the Indian market,Activa let's
anybody in the family get their hands on it. The gears are removed from
the scooter to enhance the pleasure of riding.

Engine
Type 4-stroke, Single cylinder, air cooled, OHC
Displacement 102 cc
Max. Power 7 Bhp @ 7000 rpm
Max. Torque 0-8 Kg-m @ 5500 rpm
Transmission V-matic
Ignition Self / Kick
Electricals
Battery 12V, 5Ah
Headlamps 35W
Chassis
Frame High rigidity Under Bone type
Dimensions (lxbxh) 1760 x 710 x 1110 mm
Wheel base 1235 mm
Seat height 760 mm
Ground clearance 145 smm
Suspension
Bottom Link with spring loaded hydraulic
Front
damper
Unit swing with spring loaded hydraulic
Rear
damper
Tyre size
Front 3.50 - 10, 4 PR
Rear 3.50 - 10, 4 PR
Brakes
Front Drum, 130 mm dia
Rear Drum, 130 mm dia
Fuel Tank
6 litres
Capacity
 Kinetic 4 S
We offer Kinetic 4S, which has the illustrious legacy of comfort, reliability,
convenience, adventure and endurance. With a power of 5.3 Kw @ 7500 rpm it runs a
top speed of 82 km/hr, which is more than enough for any kind of riding in high 35
traffic area.

Technical Specification

Engine

Type 4 Stroke, Air cooled, Single Cylinder

Displacement in CC 113.5

Max. Power @ rpm 5.3 Kw @ 7500 (7.2 HP)

Max. Torque Nm @ rpm 7.7 @ 5000

Bore x Stroke mm Ø50 x 57.8

Compression Ratio 10.1 : 1

Ignition CDI Ignition

Clutch Dry, centrifugal

Valve Train IV-1, EV-1, SOHC

Carburettor Spaco FSY-18, Micarb VME18

Choke Manual

Fuel efficiency (USTC) kmpl 55

Max speed kmph 73

Brakes

Front Drum (f 110 mm)

Rear Drum (f 110 mm)

Suspension

Front Telescopic

Rear Telescopic

Dimensions

L x W x H (mm) 1750 x 665 x 1075

Wheel Base - mm 1250

Kerb Weight - Kg 104

Fuel Tank Capacity - Lit. 7

Tyre Sizes

Front 3.50x10-4PR-51J

Rear 3.50x10-4PR-51J

Electricals

Head Lamp 12V, 35 / 35 W

Front Position Lamp 12V, 4W

Battery 12 V , 9 Ah

Indicators 12V, 21W X 4

Tail Lamp/Brake Lamp 12V, 5/21W

Fuel Indicator YES

Special Features

1) Dual mode ignition timing

X speedo-graphics
2) Better Y R1 R2 (R1-R2) =D D2
Age
Income
13 Tangible
Opinion On
OnFree No. of
components
83After
Nearness Noofof4 Fuel
Color
1Brands & No.
Percentage 3No.No.
ofofof 9
*Size Respondents
Respondents Consumption
design Respondents
Respondents
Respondents
AgeUsage
level No of ofTwo No of
of
Sales
Showroom
Below
Below
79 Service
20
10000 18
*Features 13
34 respondents
1 %HS Very
2Splendor
good + 38 -14283 1
Strongly Agree
*Colors 16
44 11 Pep of range
29
TVS Scooty wheeler respondentsrespondents
Gender
10000-20000
20-30 No of
41 *Durability 2179
82 Percentage S Good
CBZ 63 6134 designed to1set new standards
Agree 34 2
66 A 23 3 Below
44
state-of-the-art four Below
stroke 75cc -1
20scooterette,
1 year
18 28
20000-30000
30-40
Somewhat
*Package 41
40
respondents 73
26% in convenience
48
17 SWBetter
Glamour
this is 20 –
1 30
– 5 31
a two-wheeler 27
years 21
for
82 the young generation.
43 We provide
17 Environmenta12 3 4
them in five metallic two-tone colour-1 combinations. 1
Male
Disagree
Above *Taste
30000
40
l 114 10
17 2176
13 14DS
09 BadActiva30 –5 40
– 1018years
2040
12Promotion64
Female
Strongly disagree
*Others 36
Analysis 0624
01 04
01 Above
Above40 10 10years
Objectives1512
Total
Total 150 150 150
100 Technical
100Total
Total
Total
Specification
Total 150
Total 150
150
150 150