Even though there has been a negative growth earlier, HH continues to out-compete the market

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Now that the entry level game has been further spiced up with the up-gradation of the old workhorse Splendor, isn’t HH holding on a bit too long? When B&E investigated into the matter of HH’s continued infatuation with the entry segment, Dua clarified “When you have a high potential product like the Splendor then you should leverage it fully. The Splendor Consumer is intensely brand loyal, t he re fore the new Splendor NXG will help us retain the consumer within the Splendor family.” As per the company’s annual reports, HH is heavily banking on the 100 million consumers who find themselves under the Rs.200,000 income bracket. The company feels that barely 2% of the Indian hoi polloi are presently covered by the two wheeler industry and there is immense potential at hand. Even though the so called ‘ideal candidates’ might move into the HH territory, there still might be some hiccups! Firstly the Indian hinterlands are still outside the financing purview. And secondly the consumers might have other appealing options. The foray of super affordable cars in the newly formed entry level four wheeler segment will surely lure away some first time buyers and HH along with other ‘entry segment’ dependent players will surely face the heat of this new found ‘four wheeled competition’.

Furthermore, growing demands on natural and economic resources has brought about pressures on the company’s margins. Even though Hero Honda ecstatically claimed that it was the only company to grow at 19% this year (while the entire sector registered negative growth rate at the same time), things won’t be easy as sustaining profits & market share is a paramount requirement. Dua was however quick to point out, “The inflationary figures are encouraging and it seems that the market will expand even though there has been a negative growth earlier. Hero Honda continues to out-compete the market and we are confident that we will improve further.” In a nutshell it can be safely assumed that the market will undoubtedly recover but Hero Honda may not be a major reason behind this overturn. This is evident from the fact that during FY07, net profit fell by 11.74%, the only two wheeler company to report.

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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