Marketing Plan for Hero Splendor

Analysis of:

Key factors -that may affect the demand and supply of Hero Splendor in 2015-16  compared  to the previous year

Comments on Factors’ impact on the demand/ supply as well as the extent of impact. 

Company

Technological Investment

Overseas and Domestic Expansion Plans

Optimization of Fixed cost

Ambitious Sales Goals

The company after its split with Honda in 2010, is investing heavily in developing technology as a core competency. As an initiative in this front, an upgraded version of Splendor is going to be launched in end of 2015. Also, product variants with superior technology like Splendor iSmart have already been launched.

New plants have been established in Colombia and Bangladesh to increase visibility and sales overseas. Future investment is expected in Argentina. Also, there are ongoing trials for ethanol based-fuel in Brazil. On the domestic front, Gujarat plant will start in 3rd quarter of 2015 and will contribute to supply by 1.8 million units pr year. There are proposals to open a new plant in South India as well to meet expected increase in demands.

Hero MotoCorp has initiated margin improvement projects in Manesar to optimize fixed costs.

Hero MotoCorp have targeted an annual sales of 12 Million units by 2020, with Splendor being the major sales driver. It will lead to the annual turnover of 60000 Crores INR.

Customers

Disposable Income

Increase in Middle class population

Purchasing Power Parity

Increase in disposable income (expected rise of 100% by 2020) is crucial to consumer confidence making them willing to buy a new vehicle.

India’s middle class population, which is essentially Splendor’s target segment, will reach a figure of 267 million in the next 5 years.

PPP significantly increase from 4.7% to 6.1% by end of 2015

Competition

Major Competitors are Honda Activa, Bajaj Discover and Honda CB Shine

Honda Activa is a major competitor in terms of market volume. Its sales volume was 2178227 in 2014 which is an increase by 30.1% as compared to 11.1% of Hero Splendor whose sales volume was 2517189. This depicts an increase in interest among consumers towards non-geared vehicles as positioned by Honda Activa.

Collaborators

Decreasing cost of raw materials

Extensive distribution network in Rural India

Raw materials contribute to 47% percent of vehicle costs. Major contributor to raw material is steel whose costs are declining at 20% CAGR. This in turn leads to lower manufacturing costs, thereby increasing the margins.

Currently, the market penetration in rural India of two wheeler segment is 211 per thousand. The extensive distribution network chain in small towns to reach the masses will help in increasing sales in rural India.

Context/Macro Environment

Access to Credit

Oil Fuel Prices

Rebound in Capital goods production

Falling interest rates (Decline in repo rate by 25 bps) has eased repayment and positively impacted willingness to take out finances for a new vehicle.

Low Oil prices and strong rupee develop huge market potential for vehicles. (The world oil prices have declined by 55.5% in the last year)

Increasing spending in government infrastructure projects (like Make in India) has given a boost to the manufacturing sector especially OEMs.