Assessment Front Sheet PGDBE

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PGDBE Programme : ACL – I Integrated assignment

Assignment Title Flooding the Indian Assessor : Brahm Sharma
Motorcycle Market
Student Name : Year 2009

Given out Required Submission Actual Submission

on : Date : Date:

Submitted to :

Assessment Criteria – To achieve each

OUTCOMES outcome a student must demonstrate the
ability to :

Explore various sales increasing Compare and contrast 4Ps of Marketing Strategy
techniques
Explore various market structures. Compare and contrast how market economics
affect the business

Explore various ways to prepare trial Prepare trial balance.

balance.

Explore various options for Compare and contrast various organizational

organizational structure. structure.

Explore various ways to identify the Compare and contrast marketing strategy at
product on PLC. different stage of PLC.

Higher Level Skills

Students studying PGDBE will be expected to develop the following

skills in this assignment.
Cognitive skills of critical thinking, analysis and synthesis.
Effective use of communication and information technology for business
applications.
Effective self-management in terms of planning, motivation, initiative and
enterprise.

OVERALL ASSESSMENT GRADING OPPORTUNITIES

GRADE
MERIT CRITERIA DISTINCTION CRITERIA
MET MET
M1 Y D1 Y
M2 Y D2 Y
M3 Y D3 Y

Plagiarism is a serious college offence.

I certify this is my own work have referenced all relevant materials.
TUTORS COMMENTS

OUTLINE ASSESSMENT CRITERIA

PASS

A pass grade is achieved by meeting all the requirements defined in the

assessment criteria for the unit.

MERIT

In order to achieve a merit the students must:

M1 Identify and apply strategies to find appropriate solutions.
M2 Select/design and apply appropriate methods/techniques.
M3 Present and communicate appropriate findings.

In addition, students will also show your skills in selecting appropriate sources of
finance from a wide range and discussing in some detail the implications of
making that selection. Illustrative figures will be used but may not be based in
research carried out. Issues relating to financial planning will be raised but may
not be covered in detail, or may omit one of the four key areas.

DISTINCTION

In order to achieve a distinction the students must:

D1 Use critical reflection to evaluate own work and justify valid conclusions.
D2 Take responsibility for managing and organizing activities.
D3 Demonstrate convergent, lateral and creative thinking.

In addition, to earn this grade the assignment must be meticulously planned and
students must be able to demonstrate an ability to anticipate and solve complex
tasks in relation to the case study. Students must demonstrate considerable
research over and above class materials and synthesis information accurately.

Name of Verifier :

Internal Verification Date :

 Flooding the Indian Motorcycle
Market
"Whatever happened to ignite the market for motorcycles in India is one of those
mysteries which will never be explained satisfactorily."

- Business Line, January 2001.

A Spree of Launches
In 1999, Hero Honda, the leading motorcycle manufacturer in India, launched the
CBZ 156-cc motorcycle - and the Indian motorcycle market was never the same
again. Following this, all major players went on a 'motorcycle launching spree.'
Bajaj Auto, the second largest player, launched Bajaj Kawasaki (BK) Boxer AT
and CT. This was followed by Machismo A350 and Lightning 535 from Royal
Enfield, Brat (March 1999) and Kinetic Challenger (September 1999) from Kinetic
Engineering Ltd. The launches continued u Hero Honda launched Joy, Passion
and a remodeled Street. Bajaj launched KB Eliminator, KB Caliber Chroma, KB
Aspire and KB Acer in October 2000. Lohia Motors Limited (LML), known for its
scooters, launched two motorcycles Energy and Adreno in August 2000. Escorts
Yamaha launched Crux and TVS group launched Fiero in 2000.

In August 2001, Yamaha Motors released Crux R. In September 2001, Kinetic

Engineering launched the GF 125 and GF 150. In October 2001, Bajaj launched
the Pulsar and TVS launched the TVS Victor 110-cc. The unusual aspect about
these launches was the frequency - just two years after CBZ, over 15 brands had
been introduced. This was equal to the total number of brands launched in the 4-
year period prior to 1999nabated in 2000.
While in 1992, only one out of every five vehicles sold in India was a motorcycle,
in 2001, one out of every two vehicles sold was a motorcycle. During 2001,
motorcycle sales crossed the two million mark, leading the two-wheeler industry
sales for the eighth consecutive year, recording a compound growth of 25%
(1993-2001). The unprecedented hectic activity in the Indian motorcycle market
between 1999-2001 had taken even auto analysts by surprise, with the players
revealing plans to launch more bikes in the next few years.

Background Note
The two-wheeler segment was the fastest growing segment in the Indian
automobile industry. India is the second largest user and third largest
manufacturer of two-wheelers in the world.
The restrictive policy of the government towards the passenger car industry in
the pre-liberalization era, the rising demand for personal transport and the
inefficiency of the public transportation system were some factors responsible for
the strong growth in the two-wheeler segment. The Indian two-wheeler market is
broadly classified into three major segments - scooters, motorcycles and
mopeds. Bajaj Auto laid the foundations of the Indian two-wheeler industry in
1948 by trading in imported Vespa scooters. In 1952, Enfield India Ltd. started
manufacturing motorcycles, followed by Ideal Jawa and Escorts in the 1960s.
Bajaj Auto was the undisputed leader in the scooter market, followed by LML and
Kinetic. The healthy growth of the 1980s continued through to the 1990s, and the
two-wheeler segment registered a growth of 14%. Till the 1980s, Enfield, Escorts
and Ideal Jawa were the only major players in the motorcycle segment. From the
mid 1980s, the segment gradually picked up momentum and its high growth
potential forced all the major two-wheeler players to focus on the segment.

Almost all leading players entered into joint ventures and technical collaboration
agreements with various foreign companies - mainly Japanese two-wheeler
giants like Honda, Suzuki, Yamaha and Kawasaki Heavy Industries Ltd. (Refer
Table I for Tie-ups). In 2000, the motorcycle market was characterized by the
presence of sub-segments based on price - the premium segment (Rs 45,000
and above), the mid-segment (Rs 40,001-45,000) and the entry segment (upto
Rs 40,000).
Major players in the premium segment were Hero Honda, Enfield, Escorts
Yamaha, TVS-Suzuki and Bajaj. In the mid-segment, the activity zone with high
competition, Hero Honda was the market leader with a 35% share, followed by
Bajaj and TVS Suzuki. In the entry segment, Bajaj Auto was the leading player
followed by Hero Honda and Escorts and TVS-Suzuki All the segments in
motorcycle market, specifically the high-growth mid-segment were characterized
by intense competition. In terms of marketshare in 1999-00, Hero Honda was the
leader (43%), followed by Bajaj Auto (24%), TVS-Suzuki (19%), Yamaha (14%)
and Royal Enfield (1%)
Added to that, factors like increased production in 1992 due to the entry of new
players resulted in companies either reporting losses or a fall in profits. In 1993,
the recession began to ease off and the growth in the motorcycles segment
began. The two-wheeler industry saw large-scale structural changes. With the
launch of lighter, 100-cc motorcycles, a significant inter-segment shift began to
take place and motorcycles sales began to grow. The popularity of Hero Honda
motorcycles during this period accelerated the demand for motorcycles.

Soon, the motorcycle segment garnered the largest share of the total two-
wheeler sales. The two-wheeler industry grew at a CAGR of 14.6% between
1993 and 99, aided largely by the above average performance of the motorcycle
segment, which grew at a CAGR of 24.3% compared to 11% and 8.6% for
scooters and mopeds respectively.
Until 1997, all three segments grew in size, however from the fiscal 1999,
motorcycles started directly eating into scooter sales The demand shift from
scooters to motorcycles in the 1990s was without parallel in any comparable
product category in India. This was mainly attributed to the change in customers'
preference towards fuel-efficient and aesthetically appealing models, which
scooter manufacturers failed to provide. The delayed launch of new, advanced
scooter models, fear of four stroke scooters being prone to increased skidding
risks and vibrations and the difficulty of maintenance also contributed to this shift.
Interestingly, the growth in the motorcycle segment was mainly driven by the
demand from rural and semi-urban consumers. An estimated 60% of the demand
for motorcycles came from rural and semi-urban customers.
The joint venture agreement (Hero Honda) between Hero Motors and Honda
Motors was ended in 2004. The reasons for these break-ups were varied and
included differences over issues such as launch of new models, ad spend,
marketing strategies, the foreign counterparts' inability to offer fuel-efficient and
innovative technology etc. As a result of these break-ups, Indian companies were
forced to invest heavily in research and development for manufacturing
indigenously developed models. Analysts remarked that this was just the
beginning of a turbulent phase for Indian motorcycle manufacturers.
Most of the companies are working with their dealers and working out their cash
flow requirements and how to manage funding. Following is the typical ledger
account of a dealesrship.

As at 30.3 2009 , ABC Auto has the following balances on its ledger
accounts.

Balance
Accounts
000 Rs.
Bank loan 12,000
Cash 11,700
Capital 13,000
Rates 1,880
Purchases 12,400
Trade creditors 11200
Sales 14,600
Sundry creditors 1,620
Debtors 12,000
Banks loan interest 1,400
Other expenses 11,020
Vehicles 2,020

On 31.3. 2209 the ABC Auto made the following transactions.

a. Bought spares s for 1,000,000 half for cash and half on credit.

b. Made Rs. 800000 of motorcycle purchases which was for credit.

c. Paid wages to staff of 260000 in cash

The problems with dealer networks were how to organize financing for the
customers, provide better after sales service, follow-up sales leads and create
better goodwill for their dealership. Each manufacturer has several dealers in
each city. There was an urgent need to draw up an organizational structure and
have right staffing. There was also the problem of conflict among dealerships of
the same manufacturer.
The Future
Although the avalanche of motorcycles offered Indian consumers a wide variety
of models to choose from, it also resulted in increased pressure on the
companies to concentrate on cost-cuts, technology enhancements and up
gradations and styling. Their margins came under pressure as marketing costs
escalated. The companies were forced to reduce prices and offer discounts to
survive the competition. Moreover, analysts were skeptical about the segment's
ability to maintain the growth rate in the years to come. One of the major
assumptions underlying the motorcycles rush was that if the market was
considerably large and was growing at a constant pace, there was room for a
profitable existence for all brands. In 2001, there were over 30 motorcycle brands
in the market. However, now with the top five brands accounting for more than
60% of the Despite the launch of more vehicles, the survival prospects of many
of the individual brands were deemed to be rather bleak. Further, the growth in
the motorcycle segment was dependant on continuing favorable market
conditions. Analysts claimed that to sustain this growth rate, the segment would
have to completely cannibalize the market for scooters and a considerable part of
the market for scooterettes and mopeds. Considering the fast growing
cooperates segment, with high demand from female customers, followed by the
moderately growing moped segment and the restructuring in the scooter
segment with major national and foreign players reinforcing their presence, it was
unlikely that the entire growth in the two-wheeler sector would be due to
motorcycles market, only 40% of the market was available for all other new
brands put together.
Analysts also commented that as the two-wheeler industry had grown steadily for
last eight years, stages in the product life cycle would apply to the field sooner,
rather than later and the decline stage would invariably come some day. There
was little differentiation between the brands being launched apart from styling as
most companies had introduced their four-stroke vehicles. With the failure of the
joint ventures, the expected introduction of cheaper Chinese brands, stringent
emission norms and threat from major international players, the survival of
indigenous brands looked uncertain. Constrained with the ruling price levels in
the market place, limited infrastructure and lack of technological innovations
when compared to their foreign counterparts, whether the Indian companies
would succeed in generating the kind of volumes needed to sustain in the
competitive motorcycle market, remains to be seen.

You have been hired by Bajaj Auto to prepare a report in 5000 words which
will be presented to their VPs of operations, marketing. The report must
cover the following.
1. Draw up a Market segmentation plan for their Bajaj 150 CC Pulsar motorcycle.
Explain the reasons for your segmentation approach.
2. TVS-Suzuki has recently launched a SS 125 CC scooter. Draw up a marketing
plan to compete with Honda Activa.Can Bajaj get in to this segment, why or why
not.
3. Hero Honda, Bajaj Auto, TVS Suzuki, Honda, and Yamaha are the major
players in the motorcycle segment. .Prepare a market economics brief and
suggest how Bajaj Auto can benefit from your economic analysis.
4. Suggest an organizational structure for typical Bajaj dealership in a city like
Delhi. Recommend ways and means to avoid inter dealer conflict of Bajaj.
5. Prepare a trial balance for the figures of dealership as mentioned in the case.