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BUSINESS: HERO HONDA
Fierce Fight
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"Like Bajaj, Hero
Honda too could become a victim of its own success."
Rajiv Bajaj, President, Bajaj Auto
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"Hero Honda was
in the market with the right product at the right time."
Sulajja Motwani, Joint MD, Kinetic
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With
all its might and merit, HHML's future is unlikely to be as smooth as in
the recent past. Competition is intensifying in the two-wheeler market.
A spate of models has been launched in the past one year, taking the number
of models in the Rs 42,000-47,000 range to 17. The market for auto-geared
scooters is set to revive in the coming months. That will arrest, if not
stall, the rise in the marketshare of motorcycles.
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.
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THE KEY DRIVERS
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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.
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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.
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| TEAM MAKER: As vice-president,
human resources, Narendranath Akhouri is to sharpen HHML's strength
as a people's company. |
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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.
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MILESTONES TO THE TOP
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December 1983: Hero and Honda Motor Company of Japan sign
shareholder agreement.
May 1985: India's first four-stroke 100-cc motorcycle CD-100
launched with the campaign "Fill It, Shut It, Forget It".
April 1989: Sleek bike launched.
November 1991: CD100SS launched; 5,00,000th motorcycle
produced.
January 1994: Splendor launched; after initial hiccups
becomes company's bestseller.
January 1997: Honda's bestselling bike worldwide, Cub,
launched as Street, fails in Indian market.
April 1999: CBZ, Hero Honda's first motorcycle with an
engine of more than 100 cc, launched.
2000: Splendor becomes the largest-selling motorcycle model
in the world.
January 2001: Passion launched.
March 2001: Hero Honda becomes a zero-debt company.
2000-1: Hero Honda sells more than a million motorcycles
in a year; becomes Honda's largest two-wheeler facility worldwide.
April-June 2001: Hero Honda becomes India's largest two-wheeler
company.
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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.
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