HERO HOND

Hero Honda offers many services to customers besides selling the motorcycles; it gives them the service, spare parts and warranty for their product through authorized dealerships, service and spare parts outlets and much more. Hero Honda offers many services to customers besides selling the motorcycles; it gives them the service, spare parts and warranty for their product through authorized dealerships, service and spare parts outlets and much more.

HERO
HOND
A
May 27
2011
MANAGEMENT ACCOUNTING IS A NUMEROUS
KINDS OF TECHNIQUES TO EVALUATE AND
ANALYSE THE WORKING OF AN ORGANISATION
IN AN APPROPRIATE MANNER AND TO USE ALL
THE RESOURCES IN A MANNER TO GAIN HIGH
PROFITS.
MANAGEME
NT
ACCOUNTIN
G

NAME: - NAVNEET LALIT
GOYAL
STUDENT ID – 1031512
COHORT – 7
CAMPUS – PUTTERIDGE BURY
SUBMITTED TO: - Mr. ARTHUR
DYIRA

TABLE OF CONTENTS
INTRODUCTION
BACKGROUND OF THE COCA-COLA
PRODUCTS OF THE COCA-COLA
COMPETITORS IN THE MARKET
PROCESS OF MANUFACTURING
COMPANY POLICES
MANAGEMENT ACCOUNTING
ANALYSIS OF MANAGEMENT ACCOUNTING TECHNIQUES
CONCLUSION
REFRENCES

BACKGROUND OF HERO HONDA
Hero Honda Motors Ltd. Is the world’s largest manufacturer of two
– wheelers, based in India. The company is a joint venture
between India’s Hero group and Honda Motors Company, Japan
that was formed in 1984. In 2001, this company achieved the
position of India’s largest two wheeler company and the World’s
no. 1 in the terms of unit volume sales in a calendar year by a
single company and till the date this company has retained its
position. In India, every second a Hero Honda bike is delivered to
its prestigious customers (every second = till the operating time
of Dealerships).
This company’s growth in the two wheeler segment in India is
because of an intrinsic ability to increase new geographies and
growth markets. This company has always given the customers
what they wanted by keeping in mind the demand of customers.
As there is a saying, “If demand is there, Supply has to be there”,
so the company has always understood the demand and fulfilled
it to reach at this level.
This company launches many events to promote and highlight
their product like by organizing games on national levels,
sponsoring world cricket and much more for branding and to
achieve their vision.
PRODUCTS
Hero Honda has a variety of products in its range of motorcycles
that have set a new path breaking record across all the market
segments. The company had also started manufacturing gearless
scooters for women in 2006. Hero Honda offers many services to

customers besides selling the motorcycles; it gives them the
service, spare parts and warranty for their product through
authorized dealerships, service and spare parts outlets and much
more.
PROCESSES
The company is a manufacturing unit and a very large enterprise
so it cannot directly sell the products to customers. There are
appointed dealers in the country which are authorized to sell their
products by them. In the manufacturing process, the raw material
or the finished parts to make the motorcycles are gathered in the
assembly line and it has to be monitored regularly in order to
provide sufficient material for a day so that the manufacturing
does not stop due to this reason. An efficient team has been
assigned to keep a check on this which includes the dealing with
vendors and other manufacturing key areas.
The main process is to deliver the bikes to the dealers as per
there requirement, by making a monthly plan of all dealers which
sums up to more than 750 dealerships across country. Every
dealer received the products in their showrooms by giving an
advance payment to the company.
There is lots of hard work and there are also many workshops
conducted to motivate the dealers in order to achieve specified
goals.
COMPETITORS
Hero Honda is the top ranking company throughout the country
but its main competitor which turned out recently is Bajaj. Bajaj

previously dealt in scooters but in the last few years this company
had started manufacturing motorcycles. Competition does not
means that Bajaj is leading; it means that it affects the sales of
Hero Honda. There are more competitors like Yamaha, Suzuki,
Royal Enfield, Honda (HMSI) but the market share of Hero Honda
is more than 53 % and Bajaj has 30 % and the rest of it for
various companies.
POLICIES
Every company or an organization has its own policies and work
ethics. Hero Honda is all about a commitment to a customer,
quality and excellence which is achieved by maintaining the
highest standards of ethics and societal responsibilities. The key
Policies of Hero Honda is as follows:-
 To integrate environmental attributes by practicing the
substitutions of hazardous chemicals.
 Innovation in products processes and services.
 Teamwork and responsibility.
 To ensure safety and health matters in all the activities
performed.
Mr. Brijmohan Lall Munjal the worthy Chairman has a famous
quote about their policies “We must do something for the
community from whose land we generate our wealth”.
Management Accounting

Management accounting is a process to prepare management
reports and accounts which provide the accurate and timely
financial and statistical information required by managers for
daily and short term decisions.
There are many definitions to define this term, according to the Chartered Institute
of Management Accountants (CIMA), Management accounting is a technique used
to identify, measure, accumulate, analyze, preparation, interpretation of
information used by management to involve in the control of entity and to ensure
the appropriate use of all the available resources.
According to the Institute of Management Accountants (IMA) the management
accounting is a profession which includes decision making, devising planning and
performance management systems and to provide with their expert reports in order
to achieve a smooth running of an organization and the techniques which should be
followed to ensure the maximum profits.
There are many techniques used in the management accounting.
These techniques includes the information about how to
implement them, why to implement them and how to follow them
on a regularly basis.
We will talk about the techniques needed to be used in this
company as every organization is different from each other.
These techniques are referred after an analysis of the company,
about its operations and work ethics.
TECHNIQUES
MARGINAL COSTING
It is the change in the total cost which arises when the quantity
produced change by one unit. So it is the cost of producing one
more unit of a good. The size of a marginal cost will change with

volume if the product being manufactured is infinitely divisible.
Cost Volume Profit Analysis (CVP)
It shows the effect of change in the company’s operating income.
CVP is a very simple model useful for elementary instruction and
for short and quick decision making. The main part of CVP
analysis is the point where the total revenues equal total costs. A
breakeven analysis is needed to provide the information for CVP
analysis. It can be calculate as:
Contribution / sales * 100 = PV ratio (Profit volume ratio)
Breakeven Point
It is a level of activity where an organization is neither earning
profit and nor loss. It is an important process to initiate because it
tells us to know that how much sales is required to earn profit. It
can be calculated in units and currency also.
In Units: - Fixed costs / Contribution per unit
In currency: - Total fixed cost / Total contribution.
Margin of Safety

It is a level where the actual sale arises and exceeds the
breakeven point. A good level of margin of safety indicates that
the business is secure.
Margin of safety = Actual sale – Break even sale.
BUDGETING
Budget is a list of all planned expenses and revenues. It is a plan
where the money is saved from unnecessary expenses and used
in a proper manner. A budget is the most important process for
an organization as it gives us the futuristic way to ensure the
safety of business. In such organizations budget is prepared after
a detailed view of many things like
1. Sales
2. Production
3. Cash flow
4. Marketing
5. Projects
6. Revenue
7. Expenditure
8. Salaries and wages

TECHNIQUES APPLIED TO MANAGEMENT OF HERO HONDA
COST VOLUME PROFIT AND MARGINAL COST
ANALYSIS
As told earlier that this company is engaged in manufacturing
which produces different models with different specifications so
the sale of all their products is very necessary for this company to
survive in such hostile environment. Individual approach to every
product is present so the policies needed to implement vary for
such companies. An analysis should be done to see the
performance of each product and to increase or decrease its
manufacturing according to the needs of their consumers or
market. The Profit volume ratio is helpful in getting the
profitability of the product. Hero Honda is manufacturing more
than 13 models so that this company should use this approach to
make decisions easy and fast where the results are also very
reliable. The Break even analysis in CVP and MC shows the level
of activity at which the company starts earning profit so this
approach is recommended to the company.
BUDGETING
As discussed above, this technique is to plan all the expenditures
to be incurred by the company in future. Basically, the budget is
prepared yearly but some companies make it on Quarterly basis
also. While reading the company’s financial statements this
company is not able to achieve its planned budget so it has to be
taken care while preparing the budget that all the necessary
expenditures are noted down from the past and the new budget

should be prepared while analyzing the previous financial
statements. This company is spending millions on advertising
and it increases the company’s brand image.
Like, this company is going to start a new project to start a new
manufacturing unit so they should check their budget accordingly
so that their current situation of business which is on positive side
does not gets affected. This company gets advance payments
from their dealers and they should keep in mind that their
budgetary information has a direct link with their budget too, so
all the things should be kept in mind because in the end of
financial year, their decreased performance will affect their
shares and will give a positive impact to their competitors.
CONCLUSION
The major weakness of our analysis is that we do not have the
financial data for the company to analyze and to support our
analysis. The analysis showed that this company will need some
more capital towards the building up of new manufacturing plant
and it may change its whole budget properties. So, if the data was
present then the actual picture could be given in order to improve
the budgetary information of report.
Although, after using the management accounting we found out
new and innovative ideas to keep the business running smoothly
and to continue rising in this hostile environment.