No organization can exist in a vacuum

PEST analysisA stands for “ Political, A Economic, A Social, andA Technological analysis ” and depict a model of macro-environmental factors used in theA environmental scanning. Each factor analyses a different dimension of the external environment that affects concern.


This factor analyses and how and to what extent authoritiess intervene with the operation of an industry. The assorted methods in which authorities exerts influence are through revenue enhancement policy, A labour jurisprudence, A environmental jurisprudence, A trade limitations, A duties, and political stableness.


These factors includeA economic growing, A involvement rates, A exchange ratesA and theA rising prices rate. Factors such as involvement rate affect the cost of capital and straight affect the investings houses make on undertakings. The overall wellness of the economic system is a critical index of client purchasing sentiment. Lots of houses have gone out of concern in recessive and down economic systems.


SocialA factors include the cultural facets and include wellness consciousness, population growing rate, age distribution, calling attitudes and accent on safety. This determines purchasing behavior of consumers and general attitudes of purchasers towards houses and their assorted offerings. This besides determines what sort of merchandises are in demand based on age, buying power and lifestyle penchants. Understanding clients is the most critical determiner of a house ‘s fight.


These factors include technological facets such asA R & A ; DA activity, A mechanization, engineering inducements and the rate ofA technological alteration. Technology can turn out to be a major entry barrier to some houses and a beginning of competitory advantage to others. It is critical for houses to aline engineering with the scheme that is followed such as cost leading or distinction. In a extremely complex and dynamic technological environment non maintaining with tendencies could easy destruct concerns.


SWOT analysisA is aA planningA method used to measure theA Strengths, A Weaknesses, A Opportunities, andA Threats involved in aA projectA or in aA businessA venture. It involves placing the internal and external factors that are favorable and unfavorable to accomplishing a house ‘s aim.

Strengths: These are internal features of the concern that give it an advantage over others its rivals such as superior R & A ; D or established distributer webs etc.

Failings: These internal features place the house at a disadvantage comparative to its rivals such as high production costs or deficiency of capable work force.

Opportunities: These areA externalA opportunities to do greater gross revenues or net incomes in the environment such as a turning population or moderation of norms by the authorities etc.

Menaces: Those externalA elements in the environment that could do problem for the concern such as the possible entry of a larger participant or replacements for a house ‘s merchandises.

c. Porter ‘s Five Forces

Menace from new entrants

Profitable markets will pull new rivals. New entrants will go on to be a menace until all chances for doing a net income have been exhausted. Hence for a house to win it must make barriers for entry. This can be in the signifier of: –

High capital demand

Merchandise distinction

Switch overing costs etc.

Dickering power of Buyers

This refers to the ability of clients to dicker with houses for better merchandises and services at cheaper costs. The dickering power of purchasers additions when: –

Low shift cost

Merchandise is more of a trade good

Handiness of multiple sellers etc.

Dickering power of Suppliers

This refers to the state of affairs when the providers of the house deal to increase cost of goods supplied and seek to negociate smaller recognition periods, greater lead times etc. Such a scenario can happen when: –

Suppliers are really few in figure

The stuff supplied is critical and really rare to obtain

There are legion purchasers for the merchandise

Menace of Substitutes

When the merchandises of a house can be substituted by cheaper options so the menace of permutation is said to be high. Factors that aggravate this phenomenon are: –

Lower shift costs

Handiness of cheaper similar quality replacements

Leaning of purchasers to replace

Menace of competition

This is likely the most intuitive factor that affects the attraction of an industry. Rivals tend to react to houses schemes in such a manner that reduces houses ability to bring forth above norm returns. Rivals may vie on multiple spheres: –

Increasing R & A ; D to make more differentiated merchandises

Entering into contracts and procuring distribution channels

Spending immense sum of money in selling

Deploying province of the art engineering to cut down cost and increase efficiency

Porter ‘s Five Forces Model

Menace from Competition – High

The market has legion rivals and market portion of the leaders is n’t sizably in front of any of the tracking service suppliers. The market is already approximately 50 % penetrated which is considered as early adulthood phase. Hence all rivals will get down concentrating on greater market portions.

Dickering power of Buyers -High

Name rates and ARPU have dropped drastically since more and more rivals have entered the market. This consequences in highly low shift costs and clients switch to any supplier who provides better rates and connectivity. Double Sim phones have besides resulted in people utilizing merely certain installations of each supplier and utilizing others for the remainder. With the debut of nomadic figure portability exchanging to a new supplier has become that much easier. Besides the basic call rates and sms battalions have become less of a differentiating factor and clients are demanding more and more at lesser duties.

Dickering power of Suppliers – Low

The major providers are equipment sellers such as Ericsson and Nokia Siemens, IT houses such as IBM and substructure such as Bharti and Indus Towers. Supplier dickering power is low as service suppliers by and large hold multiple licenses to run in multiple geographic countries and the top participants are diversified pudding stones and MNCs. Hence the clients based on their size ( multiple JVs ) and keep over the market, cut down the provider ‘s ability to deal.

Menace of Substitutes-High

The market for land line and CDMA has been steadily worsening. The broadband incursion is besides steadily increasing. This has resulted in clients migrating to cheaper options over VoIP that have really low shift costs. Skype, Gtalk, Yahoo Messenger and Social networking web sites are enticing 1000000s of clients off from traditional channels of communicating.

Menace of new Entrants-Low

Entering the Telecom sector requires immense investing in substructure such as a web, nomadic Stationss and exchanging and routing equipment. Apart from this licencing fees and money to purchase spectrum make costs of come ining this market exorbitant. Technology and services are altering and germinating quickly which makes set uping a clasp in this market hard for new entrants. Hence a combination of authorities policies and capital demands creates high barriers to entry.


In the close future houses in the telecom sector will hold to germinate newer concern theoretical accounts and a bigger basket of services to stay competitory. The 2010 study by Booz predicts four distinguishable theoretical accounts that concerns will hold to follow.

As is apparent from the above study, Telecom universe over and in India is at hamlets with new engineerings, such as 3G, and the external environment commoditizing its offerings. It is predicted that the service suppliers will encompass unfastened system architectures and travel off non merely from traditional concern theoretical accounts but besides abandon older service bringing platforms.

Two wheeler Segment-Hero Honda

2.1 Introduction

Hero Honda, the largest two Wheeler maker in the universe, sells more two Wheelers than the 2nd, 3rd and 4th placed two-wheeler companies put together [ 1 ] . Its staff of life & A ; butter theoretical account, theA Hero Honda Splendor, is the universe ‘s largest-selling bike, selling more than one million units per twelvemonth [ 2 ] . It has systematically innovated & As ; set the tendency in the Indian motor-bike market. But over the past few old ages ‘ competition, particularly from Bajaj, TVS & A ; Yamaha, has been doing inroads into its nucleus markets. Formed as a JV between the Hero Group of India, & A ; Honda Motors of Japan, hero Honda today generates 60 % of its gross revenues from Splendor & A ; Passion theoretical accounts [ 3 ] . Hero Honda has three fabrication installations based atA DharuheraA andA GurgaonA inA HaryanaA and atA HaridwarA inA Uttarakhand. Hero Honda ‘s has a big gross revenues and service web with over 3,000 franchises and service points across India

Presently the company is non as strong in the 200 cc+ section as its rivals, & A ; it is wholly absent in the higher superbike section. Superbikes, those wide-bodied, powerful bikes with an engine capacity of 500cc to 2,500 milliliter, are pumping up epinephrine in the metropolitan countries of Mumbai, Bangalore, & A ; Delhi. This peculiar section has been hitherto ruled by imported offerings from Honda, Suzuki, Yamaha, et Al. With the ace motorcycle section steadily deriving its bridgehead in India, it presents Hero Honda with a great chance which if efficaciously tapped can bring forth tremendous hard currency flows in the hereafter. With Honda, Suzuki & A ; Yamaha already present in the section, we will hold really high competition, but the really fact that the market is turning today & A ; Hero Honda is a known trade name name in the motor motorcycle section will assist us get the better of the inactiveness.

2.2 Macro Environment Analysis



Assorted political factors can act upon the two Wheeler market at big. Some of them are:

Environmental Regulations: With greater figure of emanations norms & A ; bounds coming in, newer & A ; cleaner engine engineering becomes a pre-requisite. This entails greater outgo on R & A ; D, besides in the short tally gross revenues would be affect since monetary values of cleaner machines most decidedly would be higher.

Regulations on the degree of FDI allowed in the car sector: With greater sum of FDI allowed the degree of international competition will increase since they can put straight.

Policies related to utilize of surrogate or cleaner fuel engineerings: With subsidies on usage of cleansing agent fuel engineerings already in topographic point abroad, it is about clip that India follows the norm. And when it does, bicycle with more ambitious engineering will acquire more low-cost, this we believe will be a blessing for the likes of Suzuki, Honda et Al, who have such engineerings at their disposal.

Large Scale development of a mass theodolite system: This will non be a major factor with respects to two Wheeler section, but even so the deficiency of such a system augurs good for the sector, though with increasing insisting on urban mass theodolite system, in the hereafter the gross revenues might take a hit.


Economic factors like the degree of rising prices, employment degree, per capita income etc decides the future class of any consumer industry. The undermentioned factors though will do a seeable impact:

Petrol Deregulation: In India this has hitherto been a mix of politico-economic policy, but in today ‘s universe, this deregulating has become an economic world! With gasoline deregulating, we will hold a fuel witting client who will progressively look at motorcycles with higher milage. But we do n’t believe that this will impact the superbike section, since the cats purchasing those are fundamentally partisans who do n’t trouble oneself about the green-ness of the merchandise

Faster Economic growing ( @ 8 % p.a: This gives a wide thought as to the growing of the state, a healthy consumer demand & A ; increasing market potency. A steady & A ; high growing rate auspexs good for the makers.

Infrastructure Development: With a better & A ; a wide route web, the use cars have increased on a whole. Better route side substructure like motels etc. has greatly aided route travel doing bicycling etc. more popular

Ready handiness of funding: Emergence of participants in the vehicle funding sector has late help fuel the growing in gross revenues of higher terminal two Wheelers like superbikes


Social tendencies are one of the cardinal factors impacting a concern. The undermentioned tendencies augur good for motorbike gross revenues:

Increasing use of minibikes amongst childs

Puting up of biking nines, on the lines of Harley Davidson nines abroad, the biking civilization is a approval in camouflage for the superbike section.

Minibikes today are seen as a necessity, & A ; superbikes the natural reply to the epinephrine haste seeking young person.


Technology has ever been a gross driver, may it be the assembly line or fuel efficient engines! The undermentioned technological inventions have had a positive impact on the car sector:

Fuel efficient engines

Carbon fiber bodywork, metal wheels & A ; moulded plastics which are being progressively used in the fabrication, has been possible due to the lower cost of production of these hitherto expensive articles.

Improved Design & A ; Styling

Internet roar: This benefits the sector in more ways than one:

Enhanced easiness of aggregation and analysis of client feedback

Faster & A ; greater entree of information has helped client recognize the full value of the offering

Supply Chain integrating: This has helped to greatly cut down losingss and increase profitableness.


Favorable legal model AIDSs in development of most sectors, Legal commissariats associating to environmental pollution by vehicles and safety of vehicles besides impact the market. The legal factors impacting the industry can be of three types:

Competition statute law

Employment statute law: Presence of worker brotherhoods under jurisprudence

Consumer protection statute laws: A blessing for consumers, these are norms which makers heed to avoid legal action against them.

b. Porter ‘s Five Force Analysis

This model, formed by Michael E. Porter, explores five chief forces that determine the degree of competition and the attraction of a market. While in the old section we looked at the Macro Economic forces that affect the industry and the economic system on the whole, this section will concentrate chiefly of the Micro Environment forces within the Two Wheeler industry. These forces are independent of any maker.

Menace of new entrants- High

Given India ‘s growing rate ( GDP at 8.9 % , stoping September 2010 ) , there is still a batch of possible for growing, as the personal income degrees addition in the in-between category section. Besides the increasing urbanisation and roadways coverage will better the incursion.

But the entry barrier ( capital outgo & A ; expertness ) for the car fabrication concern is rather high ; hence merely established concern houses with related experience and ability to turn inorganically could dispute the position quo. E.g. late Mahindra & A ; Mahindra chose the M & A ; A path to do entry in the market by purchasing out Kinetic Motors.

Entries can besides be made by foreign maker ‘s viz. Yamaha, Ducati, and Suzuki. One major advantage Indian participants have is the cognition of the demands specific to India which will necessitate a batch of development attempt from incoming participants. This along with the bing trade name penchant and trueness created over decennaries creates a ‘hard to retroflex ‘ scheme.

Menace of Substitutes – High for minibike section in general, Low for the superbikes peculiarly

To avoid selling nearsightedness, one must recognize that the industry we play in is fundamentally the transit industry ; therefore the menace of replacements is reasonably high. This stems from the overplus of theoretical accounts available within the 2-wheeler industry. Besides under JNNURM, urban conveyance has late got a much needed face lift in some of the major metropoliss. Such steps along with the bing local Railway services might cut down the demand of two-wheelers for short distance theodolite.

Small, low cost autos like the late launched Nano by Tata and the much awaited auto by Bajaj besides provide a feasible conveyance option for the little household. Although, if the gross revenues figures of Nano are anything to travel by, these will non turn out to be a large menace.

Dickering power of clients – High

Because of the broad array of picks available and the established leaning of the Indian consumers to look for deals, the menace of exchanging trade names remains.

Since information is readily available, the consumers are at an advantage because they can compare characteristics and monetary values across trade names. With increasing handiness of funding options, consumers do non detain purchase determinations. Extra services like service centres and handiness of spares come paired with the funding option, which gives another point of favoritism to the consumers and an chance to the car shapers to distinguish.

The client is the ultimate gainer, as the industries offer more services to pull them.

Dickering power of providers – Low

Most of the makers being established & amp ; big in size, hold considerable purchase over the providers. But with providers consolidating, in future it might go a more flat playing field.

Rivalry among bing participants – High

Harmonizing to Apr-Nov 2010 gross revenues figures, 80 % of the market is divided among Hero Honda, Bajaj Auto and TVS. Among these, TVS has a major portion in South India. Bajaj late stopped its scooter production in a conjunct attempt to shift itself among the young person as a lifestyle merchandise. For now Hero Honda remains the major participant because of its broad array of merchandises & A ; besides since Bajaj & A ; TVS have been concentrating on exports for a piece. But there is a batch of competition among them in the local market every bit good.


As a new entrant with no anterior concerns related to cars, a company would hold a tough clip to acquire the needed expertness in this country. As it is a capital intensive industry, it would necessitate a high volume of production ( and gross revenues ) to accomplish economic systems of graduated table, which will be hard without trade name consciousness in such an oligarchy market.

However, if entry is made by an already established cars maker through M & A ; A, or by an established two-wheeler maker with the needed expertness, it could give stiff competition to the bing participants in the of all time burgeoning Indian two Wheeler market.

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Company Analysis:

After a wide industry analysis we need to now analyse our built-in strengths & A ; failings, one of the best known tools available for the same is SWOT Analysis, which will throw some visible radiation on internal every bit good as external factors impacting our company.


World ‘s largest two Wheeler maker: It has been the market leader for more than 10 old ages, holding about 40 % of entire market portion in 2010

Recognized and good established trade name name: As a trade name, it ‘s synonymous with the 2 Wheeler industry and fuel efficient motorcycles.

Quality after gross revenues service: It lays immense emphasis on immediate and effectual after gross revenues service via its extended gross revenues and service web with over 3500 client touch points across India.

Broad portfolio of motorcycles: It has an offering for every known section of minibikes.

Unique CRM enterprises: Plans like Hero Honda passport plan, Convenient vehicular funding through its association with PNB etc. have helped hike its gross revenues & A ; loyal client base

Low Maintenance cost and High resell value as compared to its rivals viz. Bajaj, TVS etc.


Weak R & A ; D of the parent: Earlier Honda was chiefly responsible for the R & A ; D portion, now with the JV falling through Hero Group will hold to to a great extent put in R & A ; D to keep their ain in the hereafter.

Low Brand value of the parent, Hero group, on its ain in the car industry.

Low leading pool: It ‘s still a household controlled concern, without a professional leading pool, one time the 1st coevals boosters retire, a leading vacuity is at hand.

Highly import dependant: 31 % of the parts for its fabrication & A ; after gross revenues service are imported

Absence in the high border super motorcycle section means it is losing out on tapping this high growing section.

Reliance on merely 3 fabrication workss: In instance one of them shuts due to political or technological grounds, about tierce of its production would travel down.

Lack of recycling bit: Owing to the car roar, by 2020 it is expected that the car parts bit generated due to the terminal of life of vehicles in India will be about 2.5 million metric tons & A ; 40 % of this would come from the two Wheeler section. But unlike its rivals, viz. TVS Company et Al, Hero Honda is n’t capable at recycling the bit generated and hence may be the cause of a minor environmental menace. This can do harm to their future gross revenues every bit good.

Labor dealingss: Due to the absence of an organized labor brotherhood, it internal construction is fractured & A ; the household members of the proprietors hold immense clout & A ; happen ready employment. Most of the fringe benefit & A ; features available to the regular workers though are absent for the bulk of the production workers, who are hired through sub-contractors. This has in the yesteryear caused work stoppages & A ; has the capacity to upset production marks.


Fast turning minibike section, ( around 9 % p.a. ) would supply avenue for farther gross growing

Opportunity of planetary enlargement particularly in Carribean, Africa and Central America which are untapped district

Untapped & A ; fast turning super-bike ( turning at 20 % p.a. ) & A ; adult females ‘s two Wheeler market.

Increasing buying power & A ; deficiency of replacements make rural India an attractive market.


Intense competition from the likes of Bajaj, TVS, Yamaha & A ; new entrants Honda & A ; Suzuki

Increasing natural stuffs costs like that of aluminium & A ; steel.

Global giants Suzuki & A ; Honda ( this menace is even more, now that the JV with Honda has fallen through ) increasing their footmark in the lower scope motorcycle section.

Introduction of low cost and fuel efficient autos like Tata Nano

Increasing gasoline monetary values

Ever rigorous Pollution norms

Supply Network

The above figure represents the supply web for Hero Honda, it beginnings its points from 5 major providers which are all owned by the Munjal Family, while some other parts are sourced from general two wheeler portion shapers, but certain constituents are sourced from providers which are to the full owned subordinates of Honda Motors India. Now following the split with them, certain jobs might crawl in in this supply web.