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Internally, it is this multi focal approach – of refreshing products across segments, investing in brand building, expanding distribution reach – that guys at Hero Honda are cheering for their steep growth over the last few years. The company has gained on toplines quarter after quarter. If the biking king finished the last fiscal with a growth of 12% (total unit sales of 37.22 lakh two-wheelers), more than double that of the industry growth during the period, in the current fiscal, the company has already sold 11,18,987 two-wheelers in the first quarter (April-June’10) – surpassing the million mark in a quarter for the first time; and presently claims to be sitting pretty at about 62% of the domestic motorcycle market. The topline focus albeit is not in total disregard for the bottomline figures. “My CFO won’t allow me to do that, would he?” asks Dua jokingly. On a serious note, he explains, that Hero Honda has done away with all its price offers and discount schemes (once a big favourite of the company to keep Bajaj at bay), investing the money so earned into consuming more media, thereby squaring off any impact on bottomline due to heavy investment in marketing and advertising.

Importantly, the turnaround in Hero Honda’s once sagging fortunes would not have been possible if the slowdown had not hit India when it did. The adversity came as an opportunity. Agrees a candid Munjal: “More focus on sales numbers, market share and promotions could have hurt our margins. But the slowdown worked in our favour and we quickly recovered our bottomline too.” The last quarter of FY09 left rivals Bajaj and TVS reeling, while HH surprised analysts with a net profit growth of 34.6% on the back of improved realisations. The company was relatively untouched (thanks to its large base in rural India that is less dependent on the availability of retail finance) even as its rivals lost market share and developed flat tyres by the slowdown induced credit squeeze.

Having tasted success, Pawan Munjal is hungry for more. Even as the green shoots of recovery offer titillating promises to get the industry back on track, new realities are settling in. For one, Rajiv Bajaj has realised that his (in)famous 100cc segment exit announcement was premature and HH’s old nemesis is back with a series of new launches. Says Vaishali Jajoo, analyst, Angel Broking, “Bajaj realised that shift from 100cc to 125cc would be gradual and so recently launched all new Discover in 100cc segment.” Then there is also the looming rivalry with JV partner turned competitor HMSI, which is increasingly upping the battle cry in the Indian market. Being market leader HH may just have to give-up some market share to HMSI. Adds Jajoo, “Conflict of same technology can also cannibalise market share.”

More important than all this is perhaps the fact that growth in the 100cc segment is tapering off gradually in favour of the executive and premium segments. HH knows which way the wind is blowing and is working hard to shed its entry-level, rural market positioning. Dua vehemently says that the perception that HH is only a rural player is just that – a mistaken perception. “Only about 40% of our sales come from rural areas. The balance 60% comes from urban markets. But why does no one talk about that,” he questions.

A desire to change this perception perhaps explains HH’s bid to increase its portfolio line up (9 new launches are lined up over the next 6 months) and the thirst for a more premium positioning visible in their advertising. So when a Desh ki Dhadkan transformed into Dhak Dhak Go – the message was the same; just the target audience became more urban. Their newest campaign has brought back the decade old ‘Fill It-Shut It-Forget It’ slogan in a new avtaar to appeal to the new generation. The Karizma ZMR flaunts hot guy Hritik Roshan in a snazzy silvery glow. What’s next? Is there a plan to take market share beyond 60%? Pawan Munjal answers all this and more in an exhaustive interview with 4Ps B&M. Read on to relive our 60 minutes with Pawan Munjal and his star-spangled vision for Hero Honda from hereon…

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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