STRATEGIC ISSUES FOR BUSINESS

Transcription

1 CHAPTER - 7 STRATEGIC ISSUES FOR BUSINESS EXCELLENCE CASE STUDY OF HERO HONDA MOTORS LTD.

2 Chapter 7 Hero Honda Motors Limited Case Study Hero Group Hero, the brand name symbolizing the steely ambition of the Munjal brothers, came into being in the year From a modest manufacturer of bicycle components in the early 1940 s to the world s largest bicycle manufacturer today, the odyssey was fueled by one vision - to build long-lasting relationships with everyone, including workers, dealers and vendors. This philosophy has paid rich dividends through the years. Hero, a name synonymous with two wheelers in India is today a multi-unit, multiproduct, geographically diversified Group of companies. Through fully integrated operations, the Munjals roll their own steel, make critical components such as free wheels for their bicycles, and have the foresight to simultaneously diversify into myriad ventures, like product designing, IT enabled services, finance and insurance, just to name a few. Like every success story, Hero s saga contains an element of spirit and enterprise; of achievement through grit and determination, coupled with vision and meticulous planning. Throughout its success trail, the Hero Group and its members have displayed unwavering passion of setting higher standards for themselves and delivering simply the best to their customers. The Hero Group philosophy is: To provide excellent transportation to the common man at easily affordable prices and to provide total satisfaction in all its spheres of activity. Thus apart from being customer-centric, the Hero Group also provides its employees with a fine quality of life and its business associates with a total sense of belonging. Engineering Satisfaction is the prime motive of the Hero Group and it has become a way of life and a part of the work culture of the Group. This is what drives the Group to 4* 172

3 seek newer vistas, adopt faster technology and create quality driven products to the utmost satisfaction of customers, partners, dealers and vendors. Today the Hero Group has a number of accolades and achievements to its credit... yet consumer requirements and newer technologies provide fresh challenges every day, and at Hero the wheels of progress continue to turn.. The Legend of Hero Honda What started out as a Joint Venture between Hero Group, the world s largest bicycle manufacturers and the Honda Motor Company of Japan, has today become the World s single largest two wheeler Company. Coming into existence on January 19, 1984, Hero Honda Motors Limited gave India nothing less than a revolution on two-wheels, made even more famous by the Fill it - Shut it - Forget it campaign. Driven by the trust of over 5 million customers, the Hero Honda product range today commands a market share of 48% making it a veritable giant in the industry. Add to that technological excellence, an expansive dealer network, and reliable after sales service, and you have one of the most customer- friendly companies. This is proved by the company s sales over the years : ,000 units ,200 units ,30,600 units ,61,210 units ,29,555 units ,25,195 units ,77,537 units Customer satisfaction, a high quality product, the strength of Honda technology and the Hero group s dynamism have helped HHML scale new frontiers and exceed limits. In the words of Mr. Brijmohan Lall Munjal, the Chairman and Managing Director, We will continue to make every effort required for the development of the motorcycle 173

4 industry, through new product development, technological innovation, investment in equipment and facilities and through and through efficient management. Hero Group Achievements Hero Group ranks amongst the Top 10 Indian Business Houses comprising 18 companies, with an estimated turnover of US$1.8 billion during the fiscal year The Group and its management have acquired a number of accolades and achievements over the years: Hero Group Management style has been acclaimed internationally by World Bank and BBC, UK. Hero Group is discussed as a case study at London Business School, UK and INSEAD, France. World Bank has acclaimed Hero Cycles as a role model in vendor development based on a world-wide study. The London Business School, UK, has done a case study on the Group as model of entrepreneurship. Boston Consulting Group has ranked Hero Group as one of the top ten Business Houses on Economic value, in India. HSBC-Merril Lynch has estimated Hero Group would be among the top value creators in The Hero Group is recognized as a long term partner and an ideal employer: Hero Group s partnership with Honda Motors, Japan is over 20 years old Hero Group s Partnership with Showa Manufacturing Corporation, Japan is over 18 years old. Group Chairman, Mr. Brijmohan Lall Munjal received the coveted Ernst & Young Entrepreneur of the Year award for Hero Honda Motors was ranked 3rd amongst top Indian companies Review Asia s leading companies award (2003) by Far Eastern Economic Review. Hero Honda Motors is the World s largest manufacturer of two-wheelers with annual sales volume of over 2 million motorcycles. Hero Honda Motors has been awarded the highest rating for Corporate Governance (2003) by CRISIL - India s Leading Ratings, Risk & Advisory Company. 174

5 Hero Honda ranked Number One in the two-wheeler category on Environmental Performance by the Centre for Science and Environment. Hero Cycles Limited is a Guinness Book Record holder since 1986 as the world s largest manufacturer of bicycles, with annual sales volume of 5.2 million bicycles in FY Engineering Exports Promotion Council has awarded Hero Cycles with the Best Exporter Award for the last 28 years in succession. Initiatives An Environmentally and Socially, Aware Company At Hero Honda, our goal is not only to sell you a bike, but also to help you every step of the way in making your world a better place to live in. Besides its will to provide a high-quality service to all of its customers, Hero Honda takes a stand as a socially responsible enterprise respectful of its environment and respectful of the important issues. Hero Honda has been strongly committed not only to environmental conservation programmes but also expresses the increasingly inseparable balance between the economic concerns and the environmental and social issues faced by a business: businesses must not grow at the expense of mankind and man s future but rather must serve mankind. We must do something for the community from whose land we generate our wealth. A famous quote of Mr. Brijmohan Lall Munjal, our CMD. Awards & Accolades Awards & Recognitions to Hero Honda Motors Limited 2003 Bike Maker of the Year by Overdrive Magazine Most Respected Company in Automobile Sector by Business World Winner of the Review Asia s Leading Companies Award (3rd Rank amongst the top 10 Indian companies) 2002 Bike Maker of the Year by Overdrive Magazine Winner of the Review Asia s Leading Companies Award (4th Rank amongst the top 10 Indian companies) 4* 175

6 2Q01 Entrepreneur of Year Award by Business Standard Company of the Year of ET Awards for Corporate Excellence Giants International Award to the Chairman in the field of Business & Industry Business Leadership Award by Madras Management Association Entrepreneur of the Year Award by Ernst & Young Winner of 3 Leave Award for showing Corporate Environment Responsibility in the Automobile Sector by Centre for Science & Environment Winner of the Review Asia s Leading Companies Award (9th Rank amongst the top 10 Indian Companies) Bike Maker of the Year by Overdrive Magazine 2000 Sir Jehangir Ghandy Medal for Industrial Peace - by XLRI, Jamshedpur 1999 National Productivity Award for the Best Productivity Award in the category of Automobile & Tractor presented by Vice President of India 1998 Business Leader of the Year by Business Baron 1997 Distinguished Entrepreneurship Award by PHD Chambers of Commerce & Industry 1995 The Analyst Award 1995 presented to Hero Honda Motors Ltd. on being ranked 9th amongst the most investor rewarding companies in India National Award for outstanding contribution to the development of Indian Small Scale Industry (NSIC Award - Presented by President of India) 1994 Businessman of the Year by Business India 1992 Honorary Membership - Indian Institution of Industrial Engineering 1991 Economic Times-Harvard Business School Award for Corporate Performance to Hero Honda Motors Ltd. Financials at a Glance (Rupees in Crores) Particulars Sales (no.) Growth in Sales (no.) (%) Total Income Growth in Total Income (%) Profit before Tax Profit after Tax Share Capital Reserves and Surplus Total Debt

7 Particulars Net Fixed Assets Total Assets Market Capitalisation Economic Value Added KEY RATIOS Long Term Debt/Equity OPBITLDA*/Net sales-% OPBT**/Net Sales*(%) Profit after tax/total Income(%) Return on Avg. Equity (%) Return on Avg. Employed(%) Capital EVA/Capital Employed(%) Dividend Per Share (Rs)*** Dividend Payout (%) Earnings Per Share (Rs)*** Market Value/Book Value * OPBITLDA = Operating profit before interest, tax, lease rental, depreciation and amortisation **OPBT= PBT before other income *** On reduced face value of Rs 2 per equity share, following share split in the ratio 5:1. Sales Performance Hero Honda begins 2004 in the 5th Gear! Records phenomenal January Sales Retails expected to cross the 21akh motorcycle mark in the month Growth Of 35 % in Sales During January 2004 New Delhi, February 02, Continuing with its incredible performance over the past many months. Hero Honda, the World No.l two-wheeler company, has begun the New Year with a leap! While the company sold 1,95,982 motorcycles in January, the retails are expected to be more 177

8 than 2-lakh motorcycles. This is the third instance in the last four months when the company has come close to, or exceeded the 2-lakh-motorcycle mark. The company achieved a solid growth of 35% as compared with sales recorded during January The cumulative sales of the company for the period April January 2004 are 16,73,421 motorcycles, a notable jump from 14,27,052 units sales achieved during the corresponding period last year (April 2002-January 2003). This reflects a growth of 17% in the cumulative sales of the company. Following the highly successful launches in the past few months, Hero Honda has just strengthened its premium segment range with the launch of Ambitionl35. It is an ideal model for consumers wanting a combination of contemporary style and power, with good fuel efficiency. Ambition 135 has a styling which is very close to CBZ. It provides the customers a great blend of Style and Power. HERO HONDA does it again Sells 21ac plus units for the second consecutive month New Models Consolidate Their Market Leadership New Delhi, December 01, Repeating the Success of October, Hero Honda, the World No.l two-wheeler company, has sold over 2 lac motorcycle units a month, for two consecutive months. Hero Honda sold 2,04,533 units in November, registering a superb growth of 26 %. The success has been well spread across all major motorcycle segments. The Splendor + and Passion Plus duo together consolidated the company s leadership in the executive segment. Launched in mid-april 2003, CD Dawn cemented its leadership in the entry segment. CD Dawn is now the second highest selling motorcycle model in the country, after the Hero Honda Splendor. Commenting on the record performance, Mr. Brijmohan Lall, Chairman, Hero Honda Motors Ltd., said, Our new products strategy, to identify and satisfy emerging and latent needs, has shaped this success. On this achievement, I would like to thank and congratulate our customers, employees and all stakeholders for their continued faith in the brand - Hero Honda. 178

9 Speaking on the future outlook of the company, Mr. Pawan Munjal, Managing Director, Hero Honda Motors Ltd, said, Passion Plus, with its national appeal, has got back the style customer, thereby leading to an increase in our market share in the executive segment. CD Dawn s tremendous success, since launch, continues strongly. Going forward, we would aim to further strengthen our leadership in the entry and executive segments, and also augment our product offering in the premium segment. Following this incredible performance, the company s outlook for the year looks to be great. The company had sold 2,07,472 units in October 2003, as against 1,65,066 units sold during October 2002, registering a strong growth of 26 %. Hero Honda Motors Ltd. Year Sales Growth New Delhi, April 1, 2003 Hero Honda Motor Ltd., the country s largest two-wheeler maker, finished the year with total motorcycle sales of 1,677,535 units; a growth of 18% over last year s sale of 1,425,302 motorcycles. For the month of March 2003, the company posted sales of 115,722 motorcycles compared to 135,464 in March As reported earlier, the economic slowdown, as a consequent of drought in certain parts of the country, and low agricultural production, affected the demand for a whole lot of durables including motorcycles. Lack of clarity on VAT issues also impacted sales. The company achieved a significant landmark in exceeding its sales turnover target of Rs crore during the year; up from Rs crore in the previous year. 4* 179