Project By:Utsav Soni. Akshita Paliwal. Kunal Bhatia. Vidhi Pitroda. Chirag Shah. Submitted to Prof. Surta Mehta.
Flow of presentation.
About Honda Activa. Factors of production. Impact of change in factors of production. Demand / supply. Market structure. Demand / production function. Cost curves. Opportunity cost. Effect of the government policies.
Cont..
Currently Mr. Hironori Kanayama is the president of HMSI. There were basically two model s of activa. First model was launched in 2000, and second model was launched in 2009. Second model was much more energy efficient that increased the demand of the activa.
Factors of production
Land Labor Capital Entrepreneur.
According to Prof. Benham, "Anything that contributes towards output is a factor of production."
LAND
Land is only a the factor which had its supply fixed It is the resource that has no cost of production HMSI 2 wheeler manufacturing plants: Manesar ( Haryana) 210,000 m2 Tapukara(Rajasthan) 240,000 m2 Narasapura (Karnatak) 350,000 m2
Labour
Labour represents the human capital available to transform raw or national resources into consumer goods. It is the flexible factor of production as they can be diverted towards many type of work. HMSI gives employment to Approx 15,000 employee.
Capital
Capital has two economic definitions as a factor of production Capital can represent the monetary resources Physical assets individuals and companies use when producing goods or services. Initial capital invested was 215 corer. Which increase 16 Billion(Approx) .
Entrepreneur
Entrepreneurship is considered a factor of production because economic resources can exist in an economy and not be transformed into consumer goods Mr. Soichiro Honda were the entrepreneur of Honda Motors Ltd. Currently Mr. Takanobu Ito is the CEO of the company. Mr. Takashi Nagai is the operating head in INDIA.
Demand
What is Demand? A function where a consumer desire a good, which is supported by purchasing power is know as demand. Demand for Activa. Activa is one of the leading scoter in Indian market since a decade. It sales have been increasing from the day it sales started.
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55000 54500 Price of activa 54000 53500 53000 52500 52000 51500 0 200 400 600 Demand of activa 800 1000 1200
Supply.
What is Supply? A function where the quantity of the item that is produced and offered for sale is known as supply Supply for Activa. When the plant of HMSI started in 2001 it manufactured 100,000* Activa per year. It supply have been increasing from the day it sales started.
* As per company data.
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Supply of Activa
55000 54500
Price of Activa
54000 53500 53000 52500 52000 51500 0 200 400 600 800 1000 1200
Supply of Activa
Price.
How is price determined? Price is determined where the demand and supply meets at a common point know a equilibrium point Price of Activa. The price of activa is stagnant, it never fluctuated highly. Currently the price of activa is INR 53,134*. Which is in range of all the competing scooter.
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Equilibrium
1200 1000 Demand 800 600 400 200 0 51500 52000 52500 53000 53500 54000 54500 55000 Price.
Suppy Demand
Demand Function
What is demand function? Demand function is a mathematical function showing relationship between the quantity demanded of a commodity and the factors influencing demand It can be represented as: Dx = f (Px, Py, T, Y, A, Pp, Ep, U)
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Py = Price of related goods ( E.g.: Suzuki Accesses, Pleasure, TVS scooty) T = Tastes and preferences of consumer Y = Income level A = Advertising and promotional activities Pp = Population (Size of the market) Ep = Consumers expectations about future prices U = Specific factors affecting demand for a commodity such as seasonal changes, taxation policy, availability of credit facilities.
Production Function
What is production function? An function of combined output of all the input function is know as production function It can be represented as: Q = f (X1, X2,X3,Xn) Where: Q = Production of Activa. X1, X2, X3,Xn = Quantitys of factors of production.
Determinants of Demand
The factors that plays a crucial role are know as determinants of demand. Price of activa This determinant affects the demand inversely Consumer preference ( Of INDIA ) In India the public desire only one thing that is the mileage The new model of activa gives 15 % more mileage, this affect the demand a lot No. of buyers There are many potential buyers in India, By which they influence the demand directly
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Price of related goods. The price of complimentary goods and the substitute goods affects the demand, as a consumer can easily switch over to other related goods Expectation of future A consumer buys the goods as he desire that he would get the benefits out of it, here the future expectation plays a crucial role in determining the demand.
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Price of related goods. The price of complimentary goods and the substitute goods affects the demand, as a consumer can easily switch over to other related goods Expectation of future A consumer buys the goods as he desire that he would get the benefits out of it, here the future expectation plays a crucial role in determining the demand.
Elasticity
What is elasticity?
Elasticity is the measurement of how changing one economic variable affects others There are following type of elasticity. Price elasticity of demand Price elasticity of Supply Income elasticity of demand Cross-elasticity of demand
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For E.g 5% increase in the price of Activa causes a 0% fall in the Quantity supplied the price elasticity of supply will be: PES = 0% = 0 5%
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Market Structure
Market structure is the number of firms producing identical products which are homogeneous There are mainly 4 types: Perfect competition: Many buyers and sellers, none being able to influence prices. Oligopoly: Several large sellers who have some control over the prices. Monopoly: Single seller with considerable control over supply and prices. Monopolistic Competition: Where there is a large number of firms, each having a small proportion of the market share and slightly differentiated products.
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The Market structure of Honda Activa The market structure of activa is PERFECT COMPETITION As there are only few manufacturer of scooter in market, but the buyer market is very huge. Activa Consist approx 60%* of whole scooter market in INDIA. Activa Consist approx 30%* of whole two wheeler market in INDIA. This makes activa the market leader.
*Generalization assumption.
Cost curve
A cost curve is a graph of the costs of production as a function of total quantity produced It includes following curves: Average cost: Equal total costs divided by output Marginal cost: is the change in total cost that arises when the quantity produced changes by one unit Average variable cost: is the variable cost per unit Average fixed Cost: is the fixed cost per unit of output
On Graph
MC = Marginal Cost. AC= Average Cost AVC = Average variable cost AFC= Average fixed cost
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Marginal Cost: In initial run the cost decreases as only the variable cost is incurred and the AFC decrease. Average Cost: It decrease initially as the AFC and AVC have a combined decrease Average variable cost: As output grows, the AVC initially tends to fall. But eventually, diminishing marginal returns will drive up average variable costs. Average fixed cost: It decrease gradually and then at a certain point of time it becomes constant