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Automobile industry

The auto market is one of the largest segments in world trade. The annual size of automotive export trade in the world has grown to a massive level of over US$ 600 billion, which accounts for about 10 per cent of the world export. Changing models, improving fuel efficiency, cutting costs and enhancing user comfort without compromising quality are the most important challenges of the auto industry in a fast globalizing world. Hence there is a need for exploring the industrial complementarities in the region for better quality, favourable costs, fuel efficiency and attractive designs. Therefore, the requirement of information exchange in the region is much more pronounced now than ever before for keeping the auto industry afloat and competitive.

Pakistan Overview

clip_image002Since its independence in 1947, Pakistan has been able to transform itself to a large extent, from a completely agrarian economy to a fairly developed techno-industrial base. Besides textiles, Pakistan’s exports are largely manufactured items such as consumer durables and engineering products. However, it is also a fact that Pakistan has not been able to realize its potential due to internal and external compulsions and thus it lags behind many developing countries of the world. The following economic indicators constitute the tell-tale of Pakistan’s development performance:

Automobile Industry of Pakistan

The existing population of automotive vehicles in Pakistan is 3.9 million. The annual demand is estimated at 300,000, two thirds of which is being met from local sources and imports and the remaining one third is left unmet. The market value of automotive vehicles in dollar terms is estimated at more than 1 billion, out of which import constitutes around US$ 200 million. The after market of auto parts is estimated at US$ 500 million, imports and local production taken together. Production figures of automobiles are given in the following tables:

clip_image004

Pakistan’s strength of production elements lies in its vast reservoir of land, labour and even capital. But technology and purchasing power of the consumers are its major weaknesses. Technology requirements are being met by joint ventures and technology tie-ups with foreign players in automotive sector. Japanese, Korean and European entrepreneurs have invested almost US$ 1.5 billion in Pakistan’s automotive sector. The local investment in the automotive sector is approximately US$ 1 billion.

clip_image005

The Group

Atlas Honda Limited is a joint venture between the Atlas Group and Honda Motor Co., Japan. The foundation of the Atlas Group was laid in 1962 with the establishment of Shirazi Investments (Pvt) Limited with a capital of half a million rupees and three men doing business in trading shares and real estate. The growth of the Atlas Group is the result of its focus on good corporate governance. Today Atlas is a diversified group dealing in engineering, financial services and trading. It consists of seven public limited companies out of which six are quoted on the Stock Exchanges in Pakistan, and five private limited companies. Atlas shareholders equity now stands over 25 billion rupees; assets have increased to over 60 billion rupees; personnel strength is over 7000 and annual sales have crossed 60 billion rupees. The Group paid taxes of Rs. 15 billion over 2% of the total government revenues.

All this progress is due to the Group's reliance on the intellectual capital, dedicated efforts and team spirit of all the stakeholders. Every member is striving for excellence and taking pride in the Group's motto:

Organization Development 
Through Self Development

The Company

clip_image006clip_image007clip_image008The company was created by the merge of Panjdarya Limited and Atlas Autos Ltd. in 1988. Both these motorcycle manufacturing concerns were established by the Atlas Group. Atlas Honda Limited manufactures and markets Honda motorcycles in collaboration with Honda Motor Company. The Company also manufactures various hi-tech components in-house in collaboration with leading parts manufacturers like Showa, Atsumitech, Nippon Denso and Toyo Denso. Honda motorcycles are by far the largest selling motorcycles in the country with an unmatched reputation for high quality, reliability and after-sales-service.

clip_image009Atlas has undertaken to develop local manufacturing capabilities to the highest, economically feasible level. While a major role in localization has been assigned to vendor industries, Atlas has the country’s largest in-house manufacturing capability at its Karachi and Sheikhupura plants. To support the production facilities, the company has established an R&D wing and tool making facilities through CDA & CAM, which are growing rapidly in size and function as the company expands. Atlas has managed to execute 14 Joint Venture/Technical Assistance Agreements between local vendors and foreign manufacturers for transfer of technology.

Atlas Honda is playing a pioneering role in creating conditions for easy and confident use of motorcycles all over the country. A vast and growing network of over 1600 motorcycles sales service and spare parts dealers has been established. In order to back up this system, Atlas has set up Technical Training Centers in Karachi and Lahore, which provide several courses of varying duration and complexity for motorcycle mechanics and users each year. Mobile training facilities take the latest know-how, technology and maintenance of motorcycles to major rural and urban centers around the country.

Vision

Market leader in the motorcycle industry, emerging as a globally competitive centre of production and exports.

Mission

A dynamic, profitable and growth oriented company through market leadership, maximizing export and excellence in quality and service; to ensure attractive returns to equity holders; reward employees according to their ability and performance; to foster a network of researchers and engineers ensuing unique contributions to the development of the industry; customer satisfaction and protection of the environment by producing emission friendly green products and to remain a good corporate citizen fulfilling its social responsibilities in all respects.

Our slogan

For Honda to remain Honda, and for everyone to realize their aspirations, we must believe in "The Power of Dreams"

Company History

Since its inception the company has experienced an unprecedented growth in its operations from a small manufacturing company to the leading motorbike manufacturer of Pakistan. Following is the chronological order of the major events in the company's history.

2004

Contribution to national exchequer reached Rs. 3.18 billion - 72% of wealth generated, out of Group 7.56 billion (1.48% of the Government total revenues). LPDC project completed (New Generation Of Technology). Stared implementation of GDC & Case Damper Production Projects through Showa Corporation, Japan. Launch 500 K Capacity Expansion Project.

2003

Major re-adjustment of prices to pass on the benefits to customers. Best Corporate Report award by joint committee of ICAP & ICMAP. Achievement of landmark sales of 100,000 motorcycles. Technical agreement with Keihin (Japan) for Mgf. Of Fuel Cock Assembly. Switch Assembly Light & Winker + Ignition Coil.

2002

Deletion level reached to 87% and 80% for CD70 & CG125 respectively. Introduction of Gratuity Scheme for staff. Best Corporate Report award by joint committee of ICAP & ICMAP.

2001

Concept of 5S dealership - Sales, Service, Spare Parts, Second hand exchange and Special (Credit) sales launched. New Block for hi-tech engine plant.

2000

Investment in Crankshaft Project. TC Agreement with Toyo Denso.

1999

ISO 9002 certification for both factories.

1998

New models (MMC) of CD70 & CG125 launched.

1997

Investment in Gear Project.

1995

Exports to Bangladesh. Export Agreement signed with Honda Motor Company Limited.

1994

Mr. Kawamoto President, Honda Motor Company Limited, visited AHL.

1992

Change of name to Atlas Honda Limited (AHL).

1991

Inauguration of CG125 Engine Project at Sheikhupura Factory.

1990

Merger of Panjdarya Limited into Atlas Autos Limited.

1989

Export of built up motorcycles to Nepal.

1988

Production capacity expansion III. Joint Venture agreement signed with Honda Motor Company Limited.

1987

Inauguration of CD70 Engine Project at Karachi Factory.

1986

Technical Assistance Agreement with Showa Corporation.

1982

Deletion Project financed by PICIC.

1981

Commercial Production started at Panjdarya Limited. Production capacity expansion II.

1979

Incorporation of Panjdarya Limited as Joint Venture with Honda Motor Company limited.

1976

Production capacity expansion I.

1965

Public offering of Shares.

1964

Commercial Production started.

1962

Technical Assistance Agreement signed with Honda Motor Company Limited. Incorporation of Atlas Autos Limited.

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management

Maintaining a global viewpoint we are dedicate to supplying product of the `highest quality yet a reasonable point for worldwide customer satisfaction. Honda remains its rich culture of customer satisfaction, it being serving nation. For management we have following our management strategy.

· Proceed always with ambition and youthfulness.

· Respect sound theory, develop fresh ideas, and make the most effective use of time.

· Enjoy your work and encourage open communications.

· Strive constantly for a harmonious flow of work.

· Be ever mindful of the value of research and endeavor.

· Respect for all – man has priority over others.

MANGEMENT LIFE CYCLE

clip_image011

PLANNING

Transportations

clip_image012

Purpose

Two Wheeler Road Transportation

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Strategy

Better quality at economical rates

clip_image014

Objective

Produce different models for different customers

CD 70,CD 100, CG 125

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Programs

CD 100 Economical with speed specially for middle-aged, CG 125 Speed specially for Youngsters, CD 70 economical specially for oldies

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Policies

Always on time delivery and return of defected products entertained

clip_image016

RULES

SWOT

STRENGHTS WEAKNESSES OPPORTUNITIES THREAD

Strengths:

· Qualified and well trained staff

· Biggest sale network

· Best production plant in the world

· Financial Strong

· Biggest market share

· People Trusted Products

· High Quality Products

· ISO Certified

· Resale value

· Customer Care

· Customized products

· Brand Image

· Availability of Spare parts

· Best delivery system (Transportations)

Weaknesses

· High Price of Products

· Political instability

· Low per capita income of public

· Less overhead rates of competitors

· Increasing Prices of Oil

· Rising inflation

Opportunities

· Industry expansion

· Technology upgrading

· Strong Position

  • Market Integration opening up
  • Opportunity growing in other countries
  • Newly developed Areas/Markets (e.g. Gawader)
  • Favorable govt. policies
  • Big Market
  • Economy is expanding

Threats

· Chinese cheaper products challenges

· Free Trade & WTO

· Strong competition from competitors in near future

· Instability of Government

· High rate of Taxation

· Bad infrastructure

clip_image018

ORGANIZATION HIERARCHEY

clip_image020

The above chart shows the centralization in the industry. The main decision comes from the Chairman of the company while Board of Directors approves his decisions and this implement in organization by respective committees. The Board of directors is committed to good corporate governance. The company is managed and supervised responsibly and proper internal controls and risk management policy. Its procedures are in place for efficient and effective operations of the company, safeguarding of assets of the company. This is compliance with laws and regulations and proper financial reporting in accordance with International Financial Reporting standards.

As a part of group corporate strategy it has five committees at group level to guide the management in various key areas of the company’s operations ranging from Human Resource, Information Technology, Audit , Environment Safety and health.

Following is summary of role and responsibilities of each committee;

MANAGEMENT PROFILE

BOARD OF DIRECTORS

Chairman Yusuf H. Shirazi

Chief Executive Officer Saquib H. Shirazi

Directors Koji Nakazono

Nurul Hoda

Sanaullah Qureshi

Sherali Mundrawala

Toshitsugu Kaneko

Yoshitaka Kitamura

Company Secretary Zaryab Tarique

GROUP EXECUTIVE COMMITTEE

This is responsible for setting overall corporate objectives and strategies, identifying opportunities, monitoring group business strategies & plans and developing its group members as leaders of their respective fields.

GROUP EXECUTIVE COMMITTEE

Chairman Aamir H. Shirazi

Members Frahim Ali Khan

Iftikhar H. Shirazi

Jawaid Iqbal Ahmed

Saquib H. Shirazi

Secretary Theresa Dias

GROUP HUMAN RESOURCE COMMITTEE

It determines the compensation package for the management staff. The committee has also responsibility to create and maintain conducive work environment that instills trust and ensures respect fair treatment, development opportunities & grooming and make succession plan for all employees.

GROUP HUMAN RESOURCE COMMITTEE

Chairman Yusuf H. Shirazi

Members Aamir H. Shirazi

Bashir Makki

GROUP SYSTEMS AND TECHNOLOGY COMMITTEE

The Group system and Technology committee is responsible to provide an insight towards the various technological aspects of information systems. The objective of the committee is to introduce leading edge technology and IT initiative to automate information delivery and accessibility of data for enhancement of time and cost efficiency.

GROUP SYSTEMS & TECHNOLOGY COMMITTEE

Chairman Iftikhar H. Shirazi

Members Mushtaq Alam

Zia Ullah Begg

Secretary Sarfraz Hassan

AUDIT COMMITTEE

This is most prime committee of board, which reviews financial, and internal reporting process, the system of internal controls, management of risk and the internal and external audit processes. It also proposes the appointment of external auditors to the shareholders and is directly responsible for their approval and oversights of their work. An independent Internal Audit function reports to the committee regarding risks and internal controls across organization. The audit committee reviews reports from external auditors on any accounting matters than might be regarded as critical. The committee consists of three members including chairman of committee are non-executive directors. The audit committee meets three times a year and review quarterly, half year and annual financial statements besides internal audit plan, material audit findings and recommendations of internal auditor.

AUDIT COMMITTEE

Chairman Sanaullah Qureshi

Members Sherali Mundrawala

Nurul Hoda

Head of Internal Audit Aamir Shakoor Khan

Secretary Ashfaq Ahmad

MANAGEMENT COMMITTEE

It acts at the operating level in an advisory capacity to CEO. It provides recommendations relating to the business and other corporate affairs. The committee has responsibility for reviewing and forwarding long-terms plans, capital and expense budget development and stewardship of business plans. It is also responsible for maintaining healthy environment within and outside the company through its environment friendly products.

MANAGEMENT COMMITTEE

Chief Executive Officer Saquib H. Shirazi

Vice President Marketing Nurul Hoda

Vice President Technical Toshitsugu Kaneko

Chief Financial Officer Suhail Ahmed

General Manager Plants Amir Awan

General Manager CAMA Maqsood A. Basraa

General Manager Development Yoshitaka Kitamura

General Manager Quality Assurance Lt. Col. (R) Sultan Ahmed

General Manager Human Resource Raffat Iqbal

General Manager IT Mushtaq Alam

General Manager Logistic Talha Saad

PRODUCTION STRENGTH

clip_image021Atlas has undertaken to develop local manufacturing capabilities to the highest, economically feasible level. While a major role in localization has been assigned to vendor industries, Atlas has the country’s largest in-house manufacturing capability at its Karachi and Sheikhupura plants. To support the production facilities, the company has established an R&D wing and tool making facilities through CDA & CAM, which are growing rapidly in size and function as the company expands. Atlas has managed to execute 14 Joint Venture/Technical Assistance Agreements between local vendors and foreign manufacturers for transfer of technology. Besides, Atlas has directly executed 5 Joint Venture/Technical Assistance Agreements other than Honda.

In 1994, the plant was constructed with installed capacity of 5,000 units on single shift basis. This moderate capacity continued to cater to the business requirements for some years. For the last couple of years, due to rising demand, the immediate expansion was inevitable. Thus the paint shop, being bottleneck of the process, was expanded with installation of another paint booth at a capital cost of Rs 185.0 million in order to enhance the production capacity. Due to this expansion, coupled with the double shift operation and extended process efficiency, now the plant has annual capacity of 30,000 units on double shift basis against 12,000 units last year.

The expansion of the capacity was inaugurated on December 20, 2004. After running on trial basis for a couple of weeks, the plant started operation on double shift basis from September 2004 and gradually monthly production was increased to 2,403 units in December 2004. Now onward, on an average, the company plans to produce 2,500 units monthly. The paint shop expansion yielded dividend, as the quarterly production showed 33.8% and 23.0% increase in the third and fourth quarters respectively.

Production Capacity in Pakistan

The Atlas Honda has largest production capacity in Pakistan about 400,000 annually. Following is Honda’s production with ratio to other manufacturers in Pakistan.

Company

Production Capacity

Atlas Honda Ltd.

400,000

Dawood Yamaha Ltd.

200,000

Suzuki Motorcycles Pakistan Ltd.

65,000

Saigols Qingqi Motors Ltd.

100,000

Sohrab

42,000

Source: Pakistan Automotive Manufacturers Association

This is graphical representation of Production capacity of Honda with respect to other manufacturers.

clip_image023

Production Strength of Honda

Following is table showing its ten years production and sale.

Year

Production

Sale

1996-97

68,637

~

1997-98

63,463

~

1998-99

59,639

61,536

1999-00

59,357

58,579

2000-01

78,397

78,062

2001-02

90,111

90,027

2002-03

115,924

117,201

2003-04

190,679

190,424

2004-05

287,271

287,172

2005-06

360,561

360,110

2006-07

136,050

135,505

Source: Pakistan Automotive Manufacturers Association

clip_image025Here is chart of its past years performance of sales & production;

Demand and Supply Strategy

The two wheeler industry has continues to enjoy a period of growth since 2000-01. The strength of the demand can be judged from the fact that growth of 25 % on year to year basis was recorded despite the poor agriculture cop. On an annual basis, Industry sales now have crossed 650,000 marks.

ANNUALY SUPPLY CHART

clip_image027

Traditionally, the motorcycle sale has been directly linked to the performance of the agriculture sector.

However, during the past few years the product has established itself as a necessity for a large segment of the urban population too. It is now well recognized its sale as an indicator of the economy’s performance. The growth in sales has attracted all sorts of entrepreneurs to the arena. In addition to the manufacturers with long standing, and who are members of PAMA, new entrance from backgrounds and business interests have started importing and assembling motorcycles. The difference in business practices has also effected the environment of “doing business”. Those who go strictly by the law are at distinct advantages as the slack and selective applications laws leave them competing with virtually an unorganized that avoid duties and taxes with impunity. The difference in cost structures that ensue leaves and uneven playing field for the organized sector.

clip_image029

ANNUALY DEMAND CHART

The company accepts the realities of a growing market and expects no more then a level playing field. One is glad to see that the government is finally pursuing this normally with vigour. A recent raid of ten units in the unorganized sector, so far, has inearthed a huge tax evasion scam over 1 Billion penalties have been assessed. Your company continues insistence of tax evasion as the main cause of price differences has been proved accurate. One hopes that will not only to recover from the existing ones the past evasion but also from the close down fraudulent assemblers. Atlas Honda has invested and is continuation to invest heavily in localization. It has the strongest vendor base as well as the state of the art in house manufacturing capabilities. This is a result of decades of strong commitment to the localization cause,

Motorcycle industry has now reached a point where it has achieved production surpluses. Your company has already established export markets but had production constraints that kept is from serving these markets to their satisfaction. The company has now received global export rights for Honda CD 100. This is recognition of over 40 years of consistent performance. It is indeed a huge leap forward for atlas Honda and is a larger commendation for the potential of Pakistan’s auto industry .in next three years. Atlas Honda is targeting at least10% of its sales to come from exports. For this an enabling export policy is being pursued at the highest levels of the government.

FACTORS EFFECTING DEMAND & SUPPLY

clip_image030clip_image031Demand Factors:

· Population

As the population of the country is increasing the demand of the bikes are also increasing.

clip_image032

· Income

As income increasing, his purchase power will also increase. It will effect demand to increase. The purchase of the newly launched CG 125 model is decreased due to less per capita income.

clip_image033

· Fashion

Honda motorbikes are in fashion of Pakistan society. They are symboling of pride and good willing so its demand increasing day by day.

clip_image034

· Govt Policies

Since motorbike industry is emerging industry and 2.2 % of total economy depends upon Honda Industry. So Govt always makes favorable policies for the company. So its demand is upwards.

In short:

All factors of demand are favorable for company

Supply Factors:

clip_image035

· Cost of Production

The company has best plant of the world; it enables it to produce more products which cover the people needs by adopting concept of “Cost Effectiveness”.

clip_image036

· Technology

As technology upgrade the quality of goods increases. That’s innovate products which creates more demands thus resulting more supply.

clip_image037

· External Environment Factors

Natural hazards and disasters badly damage product delivery and production process which results in less supply. We have seen recently the earth quack which damaged the market.

clip_image038

· Govt Policies

Govt policies are always favorable for the Market leader in Pakistan. Which take its supply to peak.

clip_image039

· Future expectations

Company is excepting strong competition with its competitors especially cheap bikes of china. In future they want to overcome the market so they will increase their supply.

· clip_image040clip_image041Taxation

Govt has imposed huge tax on Atlas Honda Company. It is estimated that company pays 35 % annual as Tax to government. This huge tax increases the production cost which reduces its Supply.

clip_image043

CIRCULAR FLOW OF INCOM AND PRODUCT

clip_image045

Condition of Honda in Product Market

Atlas Honda is the leader in motorcycle industry. It is selling three products named as CD 70, CG 125 and CD100 respectively. CD 70 and CG 125 are old brands while CD100 was launched on 11 October 2004 in Lahore on 13 October 2004 in Karachi.

MOTORCYCLE MARKET V/S HONDA MARKET SHAREclip_image047

It has market share of 56 % currently. It is the biggest manufacturer of motorcycles in the country. Last year it produced 1,90,395 bikes. It means company achieved 62 % growth in production. Now according to the increasing demand and market it has doubled its production capacity. The market size for two wheeler segment was around 340,000, while demand for Atlas Honda touched 230,000. Parts of bikes are being manufactured 85 % locally.

Last year an investment of 4 billion has come in the motorcycle industry, form that Atlas Honda invested 2.5 billion alone. Honda is a popular brand in the market and people want to buy it because of its quality, durability, after sale services and good resale value. In the motorcycle industry Honda has become an aspiration group for those who have some other brand.

clip_image050Competitor Brands

In Pakistani motorcycle industry Honda is a leader. Although there are 50 brands of bike are available yet many of them have not got recognition among the people.

All these exist in different segments of markets.

Yamaha

It is a basically two stroke 100 CC motorcycle. It is very popular in villages because people consider it more durable and a smooth driving bike on rough roads. It is second second largest selling brand of Pakistan.

Sohrab

It is first Pakistani brand that was introduced. First time it introduced heavy bike look in a four stroke and 70 CC motorcycle. Its price is low as compare to Honda but. It is not direct threat for Honda. But to some extent people like it because it is rapidly increasing its quality, after sales services and resale value. It is getting popularity in villages.

Suzuki

It is third selling brand in Pakistan and it also targets the villagers. Its image is also approximately same as Yamaha in the mind of people and it also targets the village areas

FACTOR MARKET

clip_image052

Land:

Atlas Honda has two plants in Pakistan at Shiekhupora and Karachi. The area of Shiekhupora Plant is 27 Acres and the area of Karachi plant is 5 acres. Sheikupura plant is newly constructed.

clip_image021[1]Labour:

The company created a good environment, new trees, green belts and grassy lawn have been planted and developed which have been appreciated by those who have attended the factory

Honda Company believes that when the organization grows, the employ should also grow. During the year 2006 the company put up a new factory and as a result 131 management associates were recruited. To train them the company arranged extensive in-house and external trainings. Atlas Fundamental Course (AFC-1) and junior management course for non-management and middle management associates respectively. Such activities enable the new associates to mash into Atlas culture as well as learn sharp floor management skills. In all 436 employees AFC-1 & J course during year 2006. During the same year 12 employees were also sent abroad for training. The Traditional Family Day functions are being held at both plants which are well attended by families of associates. Company also give good performance awards to well performed employees.

The labour of company are fully trained and 93.4 % are literate. Following is the table showing data about education profile of company labour.

EDUCATION PROFILES

Sr.

Qualification

Mgmt

Non-Mgmt

Total

1

CA/FCMA/ACMA

26

-

26

2

Masters

143

-

143

3

Bachelors

283

4

287

4

Intermediate

85

5

90

5

Certificates Holder(T.T.C)

81

--

81

6

Matric

67

219

286

7

Middle

--

88

88

8

Illiterate

-

65

65

Total

685

381

1,066

Literacy Percentage

93.91 %

Illiteracy Percentage

6.09 %

Presentation in Chart

clip_image054

CAPITAL:

Money:

The Atlas Honda company is part of Atlas Group which is financially strong group is Pakistan. The company was established with a small amount of money.

From first day to now Honda strive hard time. In the begging company was established with a loan of 560,000 and only three men working. Now Honda’s annual share is Rupee 60 Billion. Honda is sharing 2.2% of Pakistan’s GDP. This indicates it has enough capabilities to face challenges and hardships of Pakistan Market. Honda power lies truly in his financial power and mass production which are from his group.

Technology:

Atlas has the country’s largest in-house manufacturing capability at its Karachi and Sheikhupura plants.

clip_image056

To support the production facilities, the company has established an R&D wing and tool making facilities through CDA & CAM, which are growing rapidly in size and function as the company expands. Atlas has managed to execute 14 Assistance Agreements between local vendors and foreign manufacturers for transfer of technology.

Honda has world’s upgraded Japanese technology production plant. This enables them to enhance their production. By adopting technology Honda is producing their best quality products. Which helping them to increase their production and this makes them Pakistan’s Market Leader.

clip_image058


mARKETING

MARKETING STRAGETY

The marketing team rightly takes pride in achieving an all time high sales. The real achievement of the company has been in shouldering its responsibility as the market leader in the growth of the total motorcycle industry. Atlas Honda has taken some tough decisions in enhancing the total customer base as well as dealing with the menace of the unorganized sector. On the achievement of the landmark, Atlas Honda with the support of its large supplier network readjusted its prices to pass on the benefit to its customers. Other players followed suit and the unprecedented adjustment of prices changed the two wheeler market in the country in a way that has never been seen before.

The volumes that have now become possible will provide the all-important base for more investment and even better quality. In the process, Atlas Honda is now leading the two wheeler industry towards a path that will enable it to become globally Competitive. The Company will adopt the middle way of push and pull strategy because due to increasing demand pull strategy is not suitable. Similarly push strategy does not give a good impression to the customer.

MAKETING MIX

clip_image059

PRODUCTS

Maintaining a global viewpoint, we are dedicated to supplying products of the highest quality yet at a reasonable price for worldwide customer satisfaction.

During the year 2006, the company launched new models. In the 125cc segment Honda CG-125 Deluxe was launched. Modern styling, added power and a disk brake function has made it the choice purchase for a selected segment that was looking for added value in the existing popular CG-125. In addition to this, the regular CG 125 also underwent a Minor Model Change (MMC) which proved to be huge success. A 53 growth in sales on year to year basis in the 125 cc category is a testament to the success of the new model and the CG-125 MMC. The MMC has been a major success and Honda CD-70 is the best selling motorcycle in the market qwith sales of over 300,00 annually. A 25 % increase to last year is a measure of popularity of this model.

Currently we have following products to fulfill the needs of market.

· Honda CD 70

· Honda CD 100

· Honda CG 125

clip_image061

HONDA CD 70

Honda CD 70 is the No. 1 choice in motorcycles. In addition to its established superiority in terms of great speed and fuel economy, the Honda CD 70 is presented with special features;

  • The new attractively designed CD 70
  • clip_image062 Aerodynamic shape
  • Super econo-power
  • Smoke-free 4-Stroke engine
  • Special Honda 12-volt CDI technology.
  • New eye-catching graphics,
  • Front and rear mud-flaps
  • Comfortable seat and the new utility box
  • High resale value
  • Excellent petrol average makes
  • Easily available spare parts

Honda CG 125

Honda CG 125 is the ideal combination of elegance and power. Its speed and performance symbolizes the true essence of modern life. It has following features;

clip_image064

  • 125 cc 4-stroke engine
  • 11-Horse Power
  • Low fuel consumption.
  • CDI Ignition System
  • 12-volt battery (instead of 6-volt).
  • Brighter Headlight and indicators
  • Easy starting-up of the engine.
  • Ideal for
    • High speed
    • Long runs
    • Rough pathways.

HONDA CD 100

Honda Motorcycles are defined by Quality, Performance, Speed, Economy Petrol and Re-sale Value. All these have managed to successfully bag your trust on the New Honda CD100.

clip_image065

It is a stunning result of advanced Japanese technology and right up there as an outstanding performer representing all the qualities that make Honda motorcycles so special.

  • Bigger Headlight
  • Catching stylish look
  • Low oil consumption
  • Easy go

PRICE

Atlas Honda products are well known due to its quality and reliability. Company commitment is not to just sale products for profits but quality which enables us to win the confidents of people and customer satisfaction.

Following are our prices of our products.

MODEL

PRICE

Honda CD 70

Rs. 54000

Honda CD 100

Rs. 64000

Honda CG 125

Rs. 71000

PLACE

Atlas Honda has developed Pakistan’s largest after sale services network. The company has made its 1 to 5 S dealers through out the country.

These 5S stands for

  • Sales
  • Services
  • Spare Parts
  • Second Hand Exchange
  • Special Sales (credit)

According to the company these are not the simple selling points but these are the complete HONDA Company. The company has made Dealer Development Department, which is responsible for the co-ordination with dealers and training of mechanics.

The year 2006 saw improvement in almost all the major marketing areas. The 5‘S’ dealer network was further expanded dealers have upgraded their dealerships to a modern, global standard. The resultant image enhancement in the eyes of the public has generated more customers for the company. The effective media promotion has made your company and its products household names. The recall value of the promotion has been rated as one of the highest ever. This policy has further cemented the value of the product and a greater number of first time users are now Atlas Honda customers.

COVERS ALL PAKISTAN

clip_image066Atlas Honda has Pakistan’s biggest sales network. The company focused all over the Pakistan, they sale their products by their authorized dealers.

Delivery System

Since Honda Company established, company has given the contract to Saleem Raza Goods Transports Co. for delivering their products to their sales points. They have very good relation with the company and they are contributing their best in growth of company.

PROMOTION

The company focuses on its promotion campaign very seriously. There are several internal and external programs to increase its sale.

INTERNAL PROGRAMS

Service Development Department

The company has made Service Development Department, which is responsible for the co-ordination with dealers and training of mechanics. Department conducts massive campaigns to familiarize and train the service and sales dealers about the technical features of new models. In 2006, there were different training programs. These attended by 931 Service dealers, 80 Antenna dealers and 3650 Honda 4 stroke mechanics. Moreover, 296 sales dealer’s staff and 85 Marketing staff of AHI were familiarized with the features of new models.

The company is mostly using push strategy to promote its motorcycles.

  • As CD-100 is their new product to promote it they force the dealers to keep a CD-100 bike with them so that when customers come they offer him to try the new bike.
  • The company is offering package to dealers that for every ’x’ bikes of CD 70 or CG 125 you have to take “y” bikes of CD 100. This also forces the dealers to try to sell this new product.

Dealer Promotion

For the promotion of its dealers the company arranges meetings and buffet dinners. One promotion activity was held on 27th of April 2006 in Mughal-e-Azam near university campus.

Technicians Training

For the promotion of its products the company has trained 7000 mechanics. These mechanics are not only providing repairing services to the people but also publicize the products of company by word of mouth.

EXTERNAL PROGRAMS

Honda Company organizes different types of promotion activities, some of them are following;

For the promotion of its products the company arranges rallies.

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Print media

The company is giving different types of commercials on different print periodicals.

Some are following;

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FINANCE

The Company has strong financial position. The year 2005-06 was a good year; The Company undertook several major projects which were executed in a timely and cost efficient manner. The sales revenue grew to Rs. 17.42 billion. This represents an increase of 23.37 % as against the previous year’s Rs. 14.12 billion. In the financial year 2005-06, your company continued to build on the successes of the previous year by selling 360,108 units as compared to 287,184 units in the corresponding period of 2005 which shows 25 % growth. clip_image072

The gross profit margin for the period slightly decreases to 9.35 % from 9.52 % of the corresponding period. This was largely due to unprecedented rise in raw material prices and utility costs. However, the net impact has been more or less offset by an increase in sales, volume, benefits of localization and efficient fund management.

Operating Expenses

The operating expenses increased to Rs. 528.32 million as against Rs. 445.27 million for the same period last year. This escalation was in line with the increase in sales and the launching of new CG-125 deluxe, a premium model. The increase in interest rates and additional borrowing for capacity expansion and new projects led to an increase in financial expenses to Rs. 151.61 million. The company had budgeted this rise feels comfortable with the current capital structure ot finance its growth. The company earned ever highest profit before tax of Rs. 1,047.06 million as against Rs. 905.63 million for previous year a bottom line growth of 15 %.

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Govt. Expenditures

The company paid taxes to national exchequer amounting to Rs. 5.034 billion which are higher ever. On account of sales tax, income tax and custom duties as against Rs. 4.5 billion contributed last year. Payment of these taxes was more than 7.5 times the net after tax earning. The company’s contribution to the national economy by way of value addition this year amounts to 7.04 billion 71.46 % of net receipts from operations 13.6 % higher as compared to last year.

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Cash Flow:

The cash flow generated through the operating activities was Rs. 543.86 million in 2006 as compared with Rs. 1489.11 million during 2005. Net income after tax increased to Rs. 676.83 million in 2006 from Rs. 597.12 million in 2005, reflecting higher volume and growth on impact of Localization.

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The positive cash flow during the year was mainly deployed for capital expenditure (Rs. 2,125.86), debt repayment (Rs. 231.98 million).

Conclusion:

The reduction in tariff rates liberalization and global image of Pakistan has resulted in substantial growth in foreign investment and exports. At the same time, there are significant challenges that can be a threat if not addressed timely. The company is faced with a great cost increase problem due to the continuous rise in input raw material especially steel prices, rubber and petroleum products.

The year 2005-06 turned out much as planned, although the task was made harder by the burden of global raw material price hike. Next year will be a difficult year for the country economy. The business environment and the economy are becoming more open and the business environment more difficult. The automobile industry policy of deletion and “forced” localization have been abandoned by the government. The implications are severe i.e. “survival of fitness”. In this environment, competitiveness is the key success factor. However, your company is well positioned in terms of capacity & efficiency. Barring any unforeseen economics adjustment, Atlas Honda should maintain its growth momentum. There is excepted strong competition from Chinese and its Japanese competitors. So Honda should recover from its internal and external expenditures hence it would reduce cost of production. Customers will buy more Atlas Honda in case if price still low.

It is strongly believed that under WTO agreements the developing countries economies will be seriously affected. The auto industry, and especially the motorcycle industry, is poised for growth. The results speak for themselves. This is the time to further nurture the industry otherwise a great opportunity to diversify the industry will be lost to the country.

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