BUSINESS: HERO HONDA

Fierce Fight

	"Like Bajaj, Hero Honda too could become a victim of its own success." Rajiv Bajaj, President, Bajaj Auto
	"Hero Honda was in the market with the right product at the right time." Sulajja Motwani, Joint MD, Kinetic

Stung by HHML's coup, Bajaj is fighting back fiercely. Using the war chest of its reserves, it has reduced the prices of key models. Its entry level four-stroke motorcycle, Boxer City, is priced Rs 4,000 less than HHML's CD-100 and Rs 7,000 less than Splendor. To stem the shrinking of the scooter market, Bajaj has also cut prices of the Chetak and Super. Though HHML thinks Bajaj is undercutting the market, Bajaj claims its products are not underpriced. Rather, it says that HHML products are overpriced.

THE KEY DRIVERS
CUSTOMERS' ADVOCATE: As senior vice-president, marketing, Atul Sobti oversaw HHML shift to a customer-driven company. His motto: deliver customer value proactively and genuinely.
FUND MANAGER: Under Ravi Sud, vice-president, finance, HHML became a zero-debt company with a cash surplus of over Rs 300 crore last year. HHML's options: a high dividend, share buyback or capacity expansion.
TEAM MAKER: As vice-president, human resources, Narendranath Akhouri is to sharpen HHML's strength as a people's company.

There are also fears that HHML may fall into the same trap as Bajaj-relying too much on its past success and not changing quickly. Warns Rajiv Bajaj, president, Bajaj Auto: "Like Bajaj in the past, HHML is in danger of becoming a victim of its own success." His contention: the Splendor could do to HHML what the Chetak did to Bajaj. It lulled the company into complacency.

Right now, HHML shows little sign of that. In fact, the company is trying to get closer to its customers. Beginning April 2001, it extended the warranty period for all Hero Honda products from six months to two years. "It will force us to raise our service standards even further," quips Atul Sobti, senior vice-president, marketing. In April, HHML also launched a passport scheme for its customers which already has 1.5 lakh members. The benefits of the Rs 95 passport range from accident insurance, reward points on purchase and service to participation in exclusive events.

More importantly, the company seems aware of how fast the market is changing. Its bikes are no longer the only ones with four-stroke engines and the best fuel economy. "There is a feeling that everything has everything. And the only way to stay ahead of the competition is to deliver customer value proactively and genuinely," comments Sobti. By April 2002, the company is likely to show a growth of "five times in five years". That is, on all basic parameters of performance, such as sales and profits, HHML would have grown five times in five years.

But there is one doubt about HHML's future that can't be dispelled even with the best of its performance. It's the question mark over the future of Honda-Munjal relations. Most dealers, vendors and shareholders of the company are curious to know what happens in 2004 when Honda's 10-year technology agreement with Hero Honda comes up for review. Honda has already set up a 100 per cent subsidiary to manufacture scooters in India. Right now both sides deny any possibility of a break-up. Asks Yanaginda: "Who would want to hurt a company as big and as profitable as HHML?" Adds Pawan Munjal: "Honda recognises HHML's success as a joint effort and the company will do better in future if the partners stay together." To demonstrate Honda's commitment, the launch of four new models is under discussion. Analysts also believe that whatever may happen between Honda and the Munjals, HHML as a company has no near term threat.

The only way Honda and the Munjals can fight the speculation about their future partnership is by repeating their past performance. Living up to its own standards is HHML's biggest challenge today.