SWOT Analysis of Hero MotoCorp

Updated on February 11, 2019

Hero MotoCorp - The Industry Leader

Hero Motocorp is a leading Indian manufacturer of two wheelers (i.e. motorcycles and scooters), headquartered in New Delhi. Based on market capitalization, it is not only the largest two wheeler manufacturer in India but the largest in the world as well. In 2018, Hero Motocorp has already expanded its global presence to 37 countries across 4 continents. In the same year, it became the first two wheeler company in the world to achieve more than 7.5 million unit sales.

It was previously branded as Hero Honda. In 2011, The joint venture between Honda Japan and the Hero Group (managed by the Munjal brothers) ceased after the emergence of a series of problems between the two companies.

Source

Strengths

Hero Motocorp enjoy various competitive advantages and strengths that has contributed to its success and immense growth for more than 3 decades.

Brand Recognition - Brand and brand trust plays a huge part when purchase decisions are made by consumers. Hero MotoCorp is a strong brand which is synonymous with reliability and fuel efficient two wheelers. According to The Brand Trust Report published by Trust Research Advisory, the conglomerate surged 223 places to rank 33 as one of India's most trusted brands in 2018. It was ranked 6 in the automobile category, the highest of any Indian two wheeler manufacturer in the shortlist.

Extensive Domestic Network - Hero MotoCorp has over 6,500 dealerships and service points across India. The large number of service points has allowed it to roll out its Express Service scheme, where it strives to service a customer's vehicle within 60 minutes.

Strong Global Presence - Ever since the termination of the joint venture between Hero Group of India and Honda of Japan, Hero MotoCorp began to establish its global footprint. As of late 2018, its two wheelers are being sold in over 37 countries and has 8 manufacturing plants in 3 countries.

Large Product Portfolio - Not only does Hero MotoCorp provide a large variety of two wheelers, it is moving rapidly alongside current market trends as well. In late 2016, it made its first venture into the electric vehicle market by investing in a Bangalore-based tech manufacturer, Ather Energy. It has a rich and diversified portfolio targeting different segments. For example, the XPulse series is catered towards the international consumer and the Xtreme series is targeted at the growing premium motorcycle segment.

88% of surveyed respondents owned a two wheeler in India.
88% of surveyed respondents owned a two wheeler in India. | Source

Weaknesses

Despite its strong domestic presence and large market, Hero MotorCorp still have some weaknesses that can threaten its growth and future.

Poor Gender Diversification - As of late 2018, Hero MotoCorp had only 256 female employees out of 8266, Although the figure has tripled from a mere 1% in 2014, much more still can be done to address the gender inequality and diversification.

Global Exports - Despite having a gargantuan market share domestically, Hero MotoCorp is still largely focused on India. In 2017, only 12% of the units sold by all two wheeler manufacturers in India contributed to exports. This is greatly eclipsed by China, which had exported more than 46% of units sold, more than 4 times the amount. As more competitors are looking to jump on the two wheeler market in India, it would be unwise for the company to solely focus on its home ground.

Declining Service Quality - In a study conducted by the International Journal of Innovative Research in Science, Engineering and Technology in 2015, the overall service quality for Hero MotoCorp fell below expectations of end consumers. According to the study based using SERVQUAL model of service quality, Bajaj Auto, one of its closest competitors, was deemed to have better overall service and appeal.

Source

Opportunities

Joint Ventures and Acquisitions - Despite the terminated joint venture with Honda Japan, it is crucial to note that for many years, technology in its two wheelers came from Honda. By acquiring start-ups or going into joint ventures will allow the conglomerate to obtain more valuable technology and tap into other market segments. A good example is its 49.2% stake buyout of Erik Buell Racing, which allows Hero MotoCorp to synergize motor technologies and extend sales into the North American market.

Electric Two Wheelers - The electric bike and scooter market is booming globally and it would be an opportunity for Hero MotoCorp to leverage on. The e-bike market is expected to reach about 24.3 billion U.S. dollars by 2025. According to Prescient and Strategic Intelligence, the electric scooter and motorcycles market in India alone will surge past $617.7 million by 2025.

Threats

Strong Competition - Hero MotoCorp faces strong competition domestically despite its strong foothold in India. The two wheeler market in India is very competitive and is dominated by three other major players, TVS Motors, Honda, and Bajaj Auto.

In 2012, Honda launched made-in-China two wheelers which are priced lower than equivalent cost-efficient models. Honda has been expanding aggressively since the joint venture was terminated in 2010. It began enticing Hero dealers to join the Honda network under its subsidary in India, Honda Motorcycles and Scooters India Pvt. Ltd (HSMI). Similarly, TVS Motors has collaborated with BMW to establish its presence in the premium motorcycle market in direct competition with Hero's Xtreme series. Competition will continue to remain strong as India is an extremely large market to delve into.

Public Transport Infrastructure - The government of India is striving to improve on its public transport infrastructure. Projects such as the National Highways Development Project (NHDP) under the ambitious Bharatmala Pariyojana will add on more than 80,000 km of highways in India. In early 2019, India's Union Minister Nitin Gadkari announced that India's public transport will be based on the London model with an MoU with Transport for London (TFL) being signed in the previous year. Government initiatives will definitely reduce the demand for automobiles if public transport becomes more reliable.

References

  • https://www.heromotocorp.com/en-in/uploads/Annual_Reports/pdf/HMCL_Annual_Report_2017_18.pdf
  • http://www.trustadvisory.info/tra/fullReportPdf/BTR2018.pdf
  • https://asia.nikkei.com/Companies/Hero-MotoCorp-Ltd
  • https://www.netscribes.com/india-two-wheeler-vehicle-export-landscape-vs-china/

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