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DISSERTATION REPORT

On

Study of Innovative Distribution Strategy in Two Wheeler Segment of Automobile Industry


Submitted By:

SIVARAMAN GOPALAN
Enroll. No. A0102209018 MBA (M&S) Class of 2011

Under the Guidance of

Ms. SWATI BHATNAGAR


Senior Lecturer Department of Marketing & Sales Amity Business School

In Partial Fulfillment of Award of Masters Degree In Business Administration To

AMITY BUSINESS SCHOOL AMITY UNIVERSITY UTTAR PRADESH SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
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AMITY UNIVERSITY, UTTAR PRADESH AMITY BUSINESS SCHOOL

DECLARATION

I, Sivaraman Gopalan, student of Masters of Business Administration from Amity Business School, Amity University, Uttar Pradesh hereby declare that I have completed Dissertation on Study of Innovative Distribution Strategy in Two Wheeler Segment of Automobile Industry as part of the course requirement.

I further declare that the information presented in this project is true and original to the best of my knowledge.

Date: 01/04/2011 Place:Noida

SIVARAMAN GOPALAN A0102209018 MBA-M&S CLASS OF 2011

AMITY UNIVERSITY, UTTAR PRADESH AMITY BUSINESS SCHOOL

CERTIFICATE

I,Swati Bhatnagar, hereby certify that Sivaraman Gopalan, student of Masters of Business Administration at Amity Business School, Amity University Uttar Pradesh has completed dissertation on Study of Innovative Distribution Strategy in Two Wheeler Segment of Automobile Industry, under my guidance.

Ms. SWATI BHATNAGAR Senior Lecturer Department of Marketing & Sales


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Amity Business School

ABSTRACT

The primary purpose of this research is to expand our understanding of the dependence and reciprocal action (i.e. the actions taken by one firm in response to actions taken by the other) constructs in distribution channel relationships and to study marketing mix in distribution channel in two wheeler segment. Alternative strategies are discussed in terms of their operational characteristics and apparent benefits and costs. First, clarify the current conceptual framework on employee training, delivering time of vehicles from manufacturing plant, method of placing orders to manufacturer, profit margin etc. Second, the relationship between a dealers power and its choice of influence strategies within a distribution channel in NCR region was investigated.

Keywords: Reciprocal action; Channel relationship; Profit margin; Marketing mix

ACKNOWLEDGEMENT

First and Foremost I offer my sincerest gratitude to my faculty guide, Ms. Swati Bhatnagar, who has supported me throughout my dissertation with her patience and knowledge whilst allowing me the room to work in my own way. I attribute the level of my Masters degree to her encouragement and effort and without her this thesis, too, would not have been completed or written. One simply could not wish for a better or friendlier supervisor. I am grateful to Mr. Ashok Sharma, our Program Leader for his constant support and interest in me for the past two years. I owe my deepest gratitude to all the professors and lecturers of Amity business school, without them it would be next to impossible to complete this dissertation report. In my daily work I have been blessed with a friendly and cheerful group of fellow students who always encourages me when Im feeling down. Finally I thank my parents for supporting me throughout all my studies at this University

SIVARAMAN GOPALAN A01022019018 MBA (M&S) CLASS OF 2011

TABLE OF CONTENTS Declaration Certificate Abstract Acknowledgement S.NO TITLE PAGE NO.

INTRODUCTION

2 3 4 5 6

LITERATURE REVIEW RESEARCH METHODOLOGY DATA INTERPRETATION & ANALYSIS SUGGESTION & CONCLUSION BIBLIOGRAPHY & REFERENCES

33 36 38 53 55

ANNEXURE

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CHAPTER 1 INTRODUCTION
The feeling of freedom and being one with the Nature comes only from riding a two wheeler. Indians prefer the two wheelers because of their small manageable size, low maintenance, pricing and easy loan repayments. Indian streets are full of people of all age groups riding a two wheeler. Motorized two wheelers are seen as a symbol of status by the populace. Thus, in India, we would see swanky four wheels jostling with our ever reliable and sturdy steed: the two wheeler India is the second largest producer and manufacturer of two-wheelers in the world. It stands next only to Japan and China in terms of the number of two-wheelers produced and domestic sales respectively. Indian two-wheeler industry has got spectacular growth in the last few years. Indian two-wheeler industry had a small beginning in the early 50's. The Automobile Products of India (API) started manufacturing scooters in the country. Bikes are a major segment of Indian two wheeler industry, the other two being scooters and mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. In the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj Auto. Although various government and private enterprises entered the fray for scooters, the only new player that has lasted till today is LML. The motorcycle segment was initially dominated by Enfield 350cc bikes and Escorts 175cc bike. The two-wheeler market was opened to foreign competition in the mid80s. And the then market leaders - Escorts and Enfield - were caught unaware by the onslaught of the 100cc bikes of the four Indo-Japanese joint ventures. With the availability of fuel efficient low power bikes, demand swelled, resulting in Hero Honda - then the only producer of four stroke bikes (100cc category), gaining a top slot. The first Japanese motorcycles were introduced
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in the early eighties. TVS Suzuki and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles respectively. These two players initially started with assembly of CKD kits, and later on progressed to indigenous manufacturing. In the 90s the major growth for motorcycle segment was brought in by Japanese motorcycles, which grew at a rate of nearly 25% CAGR in the last five years. The industry had a smooth ride in the 50s, 60s and 70s when the Government prohibited new entries and strictly controlled capacity expansion. The industry saw a sudden growth in the 80s. The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn vehicles in 1990. In 1990, the entire automobile industry saw a drastic fall in demand. This resulted in a decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles. Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94. Hero Honda showed a marginal decline in 1992. The reasons for recession in the sector were the incessant rise in fuel prices, high input costs and reduced purchasing power due to significant rise in general price level and credit crunch in consumer financing. Factors like increased production in 1992, due to new entrants coupled with the recession in the industry resulted in company either reporting losses or a fall in profits. The two-wheeler manufacturing is dominated by companies like TVS, Honda Motorcycle & Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, etc. The automobile industry in the country is one of the key sectors of the economy in terms of the employment opportunities that it offers. The industry directly employs close to around 0.2 million people and indirectly employs around 10 million people. The prospects of the industry also has a bearing on the auto-component industry which is also a major sector in the Indian economy directly employing 0.25 million people.

1.1 BCG

Matrix Representation of Automobile Sector among various Sectors

In an economy, different industries are present and different industries have different growth rate as compared to the growth of the economy. In an economy, there are a number of major industries and they all occupy different positions in the BCG matrix according to their growth and contribution towards the economy. In the Indian economy, some of the major sectors are FMCG, automobiles, banking and insurance, steel, telecom, software, pharmaceuticals and retail sectors and these can be placed in the different positions in the matrix as shown below: INDUSTRY BCG MATRIX
Hig h M a r k e t G r o w t h R STA Banking Infrastructur e QUESTION

AUTOMOBIL ES Softwa re

Retai l

CASH FMC G Insuranc e Low Hig

DO

Relative market share

Low

BCG matrix is used to determine the relative position of the companies of an industry or different SBUs of any institution, in terms of the market growth rate and the market share of the company in the industry. In the Indian automobile sector, the major players are Maruti Suzuki Limited, General motors, Mahindra and Mahindra, Tata Motors, Hero Honda and Bajaj auto. In the BCG matrix, the companies are placed in one of the following four categories: Star, Cash Cows, Dogs and Question marks. In the Stars we place the companies with high market growth and high market share, cash cows are the companies who have low market growth rate and high relative market share, the category of the question marks include the companies with low relative market share and high market growth rate and dogs include the companies who have low relative market share and low market growth rate.

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The above pictorial representation clearly denotes the market share of all the vehicles and the choice of majority population for commuting process is two wheelers.

1.2 INDUSTRY INSIGHT


Indian Two-Wheeler Industry: Rural India to be the next growth frontier. The Indian twowheeler industry has come long way since its humble beginning in 1948 when Bajaj Auto started importing and selling Vespa Scooters in India. Since then, the customer preferences have changed in favour of motorcycles and gearless scooterettes that score higher on technology, fuel economy and aesthetic appeal, at the expense of metal-bodied geared scooters and mopeds. These changes in customer preferences have had an impact on fortunes of the players. The erstwhile leaders have either perished or have significantly lost market share, whereas new
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leaders have emerged. India is seeing the penetration of two-wheelers increasing at a rapid pace driven by the rise in the household incomes, reducing trend in excise duties and hitherto easy availability of two-wheeler finance. Though the two wheeler industry is presently passing through a rough patch, we project the long term outlook to be healthy with increase in penetration levels. Indian two -wheeler contributes the largest volumes amongst all the segments in automobile industry. This segment can be broadly categorized into 3 sub-segments viz.; scooters, motorcycles and mopeds. In the last four to five years, the two-wheeler market has witnessed a marked shift towards motorcycles at the expense of scooters. In the rural areas, consumers have come to prefer sturdier bikes to withstand the bad road conditions. In the process the share of motorcycle segment has grown from 48% to 58%, the share of scooters declined drastically from 33% to 25%, while that of mopeds declined by 2% from 19% to 17% during the year 2008-09. The Euro emission norms effective from April 2000 led to the existing players in the two- stroke segment to install catalytic converters. All the new models are now being replaced by 4-stroke motorcycles. Excise duty on motorcycles has been reduced from 32% to 24%, resulting in price reduction, which has aided in propelling the demand for motorcycles. Within the two-wheeler industry, motorcycle segment grew at a phenomenally high rate of 35% as against a deceleration of 3% for scooters and 27% for mopeds. In fact, motorcycle has been taking away the share of scooters and mopeds in a 4.3 million two-wheeler market and surging ahead with its market share of 68%. The increasing demand from semi-urban and rural segments may have caused this positive shift towards motorcycles. Also, easy credit coupled with low interest rate regime, constrained personal transport, increasing income levels in middle class and higher aspirations of young people all seem to be the factors responsible for such high growth in two-wheelers. The growth in two-wheelers has been robust enough to counter the slowdown and other factors constraining the overall business activity in the country. Also, rationalization of excise duty in the Union Budget 2002-03 had a positive impact on the demand for motorcycles. We also expect the motorcycles to continue to lead the two-wheeler segment like in all other Asian countries. Available forecasts suggest that this trend would continue for another couple of years and the industry would record nearly double-digit average annual growth up to 2006. However rural areas and smaller towns still remains considerably underpenetrated market. The authors foresee rising income levels combined with increase in finance penetration in rural areas
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and smaller towns, the demand for two-wheelers will grow swiftly in short to medium term period. Sighting this huge growth opportunity two-wheeler manufacturers have started launching models catering to the needs of rural demand. The researchers have developed a statistical model that attempts to forecast the domestic two wheeler sales on the basis of ownership cost and the target population that includes young populace that can afford but do not own a two wheeler. Other qualitative factors like macro-economic outlook, consumer confidence, willingness of vehicle financers to finance TWs, etc. have also been quantitatively built in demand forecasting model.After a strong recovery industry posted in FY10, which was continued even in first quarter of FY10, the authors foresee the high growth levels witnessed currently would stabilize in next 2-3 year period. Nevertheless the industry would register a healthy growth during FY10FY15 period. According to this report, rural India would drive the growth, whereas the opportunity in urban India, especially bigger cities, would become limited in days to come.

In FY10, almost all the manufacturers reported healthy rise in their top-line, driven by growth in both volumes and realization. Operating margins also observed improvement owing to drop in raw material prices. However, the researchers foresee that industry would face challenge of rising input cost and rising competition levels which would strain margins considerably in short to medium term period.

Demand Drivers of Two Wheelers


Growing consumer class Demographic transition Rising proportion of female income earners Increasing rural focus TW financing Wide product portfolio New Model Launches Strong Brand Influence
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Competition Product Features

Key players in the Two-wheeler industry:


Hero Honda motors ltd. Bajaj auto ltd. TVS motors company ltd. Yamaha motors India Honda motorcycle and scooters India

STRUCTURE OF TWO WHEELER INDUSTRY

Mopeds:

Over the last 15 years, mopeds contribution in overall 2-wheelers has declined significantly and now it remains a marginal category with just one manufacturer for the product. Its contribution in the 2-wheelers industry now stands at 5% and we expect that this segment will continue to be marginalized. The only player in this segment is TVS Motor.

Scooters:
Advent of fuel efficient motorcycles in the Indian 2-wheelers industry led to decline of Scooters. However, over the last five years, it has made a recovery and is emerging as a niche segment targeted towards women commuters. One of the reasons for this is the increasing need of mobility for the women commuters especially in the urban areas is due to higher number of college going girls and greater participation of women in urban work force. The product itself has gone for a complete revamp and now this category mainly consists of gearless products. This segment is now dominated by Japanese manufacturers with HMSI having the leadership. Hero

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Honda, which is a late entrant in this segment, has also cornered a sizeable market share in the scooter segment. Another development in this segment is the launch of battery operated scooters. However, given the high replacement cost for the batteries, this has remained a marginal segment.

Motor cycles and bikes:

Executive segment is the largest motorcycle segment and this is the stronghold of market leader Hero Honda. Competitors have tried to challenge HH in this segment, however all such challenges have fizzled out over time. With higher growth in economy segment, the contribution of this segment had come below 50% in FY06. However over the last three years, it has made a strong come back and now accounts for almost 60% of the motorcycle share. This segment was creation of Hero Honda with 'CBZ' And KARIZMA; however major boost to the segment was given by BAJAJ through 'PULSAR' which has dominated the segment. The new entrants like TVS Apache , Yamaha-R15, Honda-CBR 250R, HH has remained a marginal player in this segment and one of the reasons for this is presence of Honda Motors and Scooters India (HMSI) in this segment. This segment remains a small segment in the Indian market with contribution of around 23% to the motorcycle industry. This is the performance segment and customers pay a premium for the novelty. Hence constant up gradation in the product is a requisite for success in this segment.

Executive Segment

Premium Segment

Motorcycles in India: Bikes comprise a major segment of Indian two wheeler industry.

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Hero Honda Motors Ltd (HHML )

Hero Honda Motors Limited was established in 1984, as a joint venture between India's Hero Group (world's largest bicycle manufacturers) and Japan's Honda Motor Company. They created the world's single largest two wheeler company and also one of the most successful joint ventures worldwide. During the 80s, Hero Honda became the first motorcycle company in India. They are clocking over 19 million Hero Honda two wheelers running on Indian roads today. A new beginning, a new era Following months of speculation, the Munjal family of Hero Honda Motors (HH) finally signed an MoU to buy out the entire 26% stake of Honda Motor in the joint venture. The deal signed for an undisclosed amount, is expected to be at a substantial discount to HH's current market price. Going forward, we expect the company to employ a three-pronged strategy. While it will continue to collaborate with Honda Motor on technical and product sides until FY14, it is also expected to set up its own R&D and scout for a new venture partner by that time. The royalty payments will remain constant on existing products, and for new products, they could be anywhere between 3% and 5%. Also, we expect the company to source vehicle parts locally at better prices, which will reduce costs and improve operational performance going forward. We upgrade the stock to IN-LINE and increase price target to Rs. 1,920 (from Rs. 1,875 earlier).

Technical support from Honda Motor to continue until FY14


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According to the new license agreement, Honda Motor will provide technical assistance to Hero Honda till FY14. We expect HH to develop its own R&D facilities by that time to retain its leadership position. It is expected to spend heavily to build its own R&D. While powerful brands like Passion and Splendor can give HH a smooth ride for the next few years., it will eventually need to enhance its product base through its own R&D. HH would continue to use the Hero Honda brand name till FY14, after which it may undergo rebranding. This may impact its margins and earnings going forward. Changes in the existing models are also expected to follow the change in the branding of that particular model as per the MoU. Royalty payment issue put to rest Although the market was expecting royalty payments to increase following the news, management has clarified that royalty payments on existing products will be either constant or lower than FY10 levels of 2.6% and will eventually stop after FY14. For the new models, as per management, royalty will be in the range 3% - 5%. HH paid a total of Rs. 4,164m (2.6%) or Rs. 905 /bike as royalty in FY10. It expects the blended royalty on existing products to be 2.75-2.85% for FY11E. Export ramp-up So far, HH has been a marginal player in the export market, with exports totaling only 2% of its total volume. There were restrictions which did not allow HH to export to Honda Motor's established markets. This has ended and HH is now looking to expand its reach to South East Asia, Latin America, Africa and the Middle East.

HH had limited opportunity in the export market, which gave Bajaj Auto a chance to become the

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market leader in exports with a 74% market share. However, after signing the definitive licensing agreement, HH is expected to expand into newer geographies and catch up with Bajaj Auto. In the transition phase, HH will be allowed to use the Hero Honda brand, but we get a sense that the company will re-brand its export products before marketing them abroad. HMSI, on the other hand, is expected to get aggressive in the Indian markets where it has been a marginal player in the 2W segment with 12% market share. It commands a marginal 6% market share in the motorcycle space. Although technologically superior, HMSI is far behind HH in terms of reach and distribution across the country. HH has, over the years, built an extremely strong and well-penetrated network.

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HH to source parts locally at cheaper prices HH sourced components only from approved vendors. The company can now source better priced deals locally for vehicle parts from other vendors. The JV agreement led to 6% of ancillaries (as a % of raw material) being imported by HH, exposing it to currency risk. As the company is under no such obligation now, we expect it to
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increase its local content per bike, thus lowering its exposure to currency risk. This would make it cheaper than the imported content. Also, since the products are highly indigenized, there is little scope for import substitution. Hence, we expect localization to reduce HH's costs. Valuation We value the stock at 14x FY12E earnings, which is in line with its five-year historical one-year forward multiple. The imputed EV/EBITDA is 10x FY12E at our price target. The valuation is justified given its strong distribution network, export outlook and lower costs due to localization.

Bajaj Auto Ltd Company :

Bajaj is the first Indian two wheeler automobile company in the market since 1945 with the name M/s Bacharj trading corporation private limited. In 1959 M/s Bacharj trading corporation private limited change its name as Bajaj Auto Ltd. Bajaj Auto obtains license from the Government of India to manufacture two- and three-wheelers vehicles in 1959. Bajaj to focus on motorcycles and not scooters: The only company so far to break the jinx is Bajaj Auto. Bajajs are facing discrimination in opinion within them because the chairman Rahul Bajaj wants the company to enter the scooter market and the MD Rajiv Bajaj wants the company to focus on the bike segment for the moment. Rajiv says that the company has clear focus on only one segment at this time i.e. motorcycles and nothing else. He also said that the company will look in to the matter of manufacturing scooters at a later date because that could lead to gain of 20% market share. When Rajiv bajaj was asked if the company would make scooters in future; he redirected the question as he is not
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taking any decisions these days, maybe he wants his son to learn. Whatever may be the reason, we all can be assured of one thing that Bajaj is not going to enter scooter segment anytime soon. Back in 2009, Rajiv Baja took a decision to stop manufacturing scooters because he saw no growth whatsoever in the segment but since then the market for scooters has grown leaps and bounce. HMSI is the leader in the current scooter market mix with its Honda Activa. The fact is over the years the scooter market has grown very good. In fact in April- January period of this fiscal, scooter market grew by over 46.57% selling 16,97,204 as against 11,57,902 units in the same period of last fiscal. All in the entire picture is pretty clear that we are not going to see any scoter launches by Bajaj any time soon. Bajajs Rural Drive BAJAJ AUTO is going at full throttle to challenge maket leader Hero Honda in rural and semiurban markets that accounts for more than half of two-wheelers sold in the country. The countrys largest two-wheeler maker has appointed 135 dealers in small towns and mini metros, where it had only 25 dealers and will offer special finance scheme for rural customers even if they have no bank account.We are reinventing our marketing and distribution strategy to keep up our growth momentum, said Bajaj Auto motorcycle business president S Sridhar. The key lies in addressing a bigger market, he added. New dealerships will be operational by March end. Six out of every 10 new dealers are in small towns such as Hingoli in Maharastras Nanded district, with the rest in mini metros such as Pune and Nagpur. Bajaj will offer a special financing scheme backed by Bajaj Auto Finance with a direct cash collection facility. That is, customers need not provide post-dated cheques to avail of finance; they can pay the installments in cash. The loans will be given on the basis of trust and initial verification and there will be no collateral, Sridhar said. The company has already tried this out out in select areas and, according to him, default rate is much less than in the post-dated cheque system. Bajaj auto is also considering a seasonal collection strategy for rural areas, Sridhar said. This would mean that instead of monthly instalments, rural customers can time their loan repayment to crop cycle, which is 2-3 months for rice and wheat. Expert feel that the rural initiative will make an immediate impact on the companys business.Bajaj Auto will be able to improve its market share to more than 30% with the rural push, said Fortune Financials analyst
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Mahtesh Sabarad. But the rising input cost will put pressure on margins, he added. At present, Bajaj Auto holds a 27% share in the two-wheeler market, dominated by Hero Honda does almost two-thirds of its sales in rural areas, while Bjajs most popular bike in rural areas, Discover, gets 45% of its sales from interior areas. This number will increase soon. The initiative will help Bajaj tap the huge potential in rural India much better. Good rains, increasing crop productivity, high farm product prices have pushed disposable incomes up in rural India. So did the rural job guarantee scheme and development projects that also ensured improved on accessibility. Bajajs Sridhar expects rural markets to grow at a healthy pace for at least 10 years, as at present there are only 18 motorcycles in every 1,000 households in rural India. Motorcycle penetration in evolved markets in 50 vehicles per 1,000 households. Bajaj Auto has appointed 135 new dealers in record time since making an announcement on November 24. A typical Bajaj dealership requires at least 1800 sq ft of showroom space and 2200 sq ft of workshop space, and will have about 50 employees. The investment on each dealership will be around 1.5 crore Rs. The new showrooms will have dedicated zones for the Pulsar and Discover, Sridhar said. Around 20% of the dealership space will be used to showcase technology. Dealer owners and CEOs will undergo a familiarization and dealership management programme in the first week of March and there will be intense programme in the first week of March and there will be intense programme for sales and service training, he said. Most new dealers will be in Maharastra (19), Andhra Pradesh (18) and Tamil Nadu (12). The addition to existing 485 dealers will take Bajajs dealer network beyond 600. Bajaj Auto reported a 46% growth during April-December by selling 17.97 lakh motorcycles, mostly Pulsar and Discover. The Pune based firm, which exited the 100cc segment two years ago, has set a growth target of 40% to clock four million units this year.

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Honda motors of Japan is not a new name in the two wheeler scenario in the country, they were in a tie up with the Firodias owned Kinetic group. However in the late 90s they parted ways after problems arose over issues like introduction of new models, advertising expenditure, marketing strategies and other related issues. In the mid 80 Honda motors of Japan joined hands with the largest bicycle maker of India the Hero cycles to create Hero Honda which in a couple of decades or so have gone on to become the single largest motorcycle company in the world. Though Honda has come on its own on the Indian market yet it will be providing technological support to Hero Honda for the next ten years. Thus presenting a unique situation in which the company will be in direct competition with the company which it has been associated for nearly two decades. Honda Motorcycles and Scooters India limited, a 100% subsidiary of Honda motor company Japan eventually entered the Indian market with Honda Unicorn in 2004.

They might have been together for 26 years in a successful joint venture but now with the time coming for them to compete against each other both Hero group and Honda are cautious about their next strategy and now it has been reported that Honda may reduce its dependence on Munjal-family owned component companies which currently supply parts to both Hero Honda and Honda Motorcycle & Scooter India (HMSI).

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According to a report in the business daily The Economic Times, it has been reported that Honda is re-strategizing its vendor policy to build its own supplier network independent of the Hero Group in India. The report quoted Takashi Nagai , head, south west Asia, Honda Motor Co, as replying We are currently in the process of reviewing various aspects of our two-wheeler business strategy, including supplier network, dealer network and other functions. However since no concrete decisions have been taken yet, we are unable to share any specific information as of now. The report stated that Hero Honda has five vendors as joint ventures or associate companies, from which it gets the bulk of its components which are Munjal Showa, AG Industries , Sunbeam Auto, Rockman Industries and Satyam Auto Components, with most of them part of Munjal family business and several of them supply to HMSI. The report stated that while B M Lall and his family now own Hero Honda others like B M Lalls brother Satyanand Munjals son Yogesh Munjal controls Munjal Showa while Ashok Munjal, son of late Dayanand Munjal, BM Lalls older brother, controls Sunbeam Auto. The report mentioned that Hero Honda has maintained that for its part it will continue sourcing from Honda subsidiaries as long as it makes business sense. The report quoted Hero Honda CFO Ravi Sud as saying The amount of business that Hero Honda gives its vendors is phenomenal because motorcycles is a volume game. He maintained that all transactions with Munjal family-owned component companies are at arms length and they get no preferential treatment. It was reported that years ago when Honda had centralised all parts sourcing in India under Honda Motor India, it had repeatedly requested Hero Honda to join the umbrella company. But the latter resolutely refused. Following the split, Hero Honda has announced it will build capability to develop and launch its own range. Now it was mentioned that Honda for its part wants to build strength in the area where Hero is the strongest vendor sourcing and distributiongiven that it is planning to launch a 100 cc bike in the Splendor/Passion category soon.

Honda Motorcycle to invest Rs 1,000 cr for new facility in Andhra Pradesh

Honda Motorcycle and Scooter India (HMSI), a subsidiary of Honda Motor Company, will soon set up its third two-wheeler manufacturing facility near here with an investment of Rs 1,000 crore, a government official said today. He also said that two more global companies -- Italian
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industrial manufacturing firm Camozzi and Korean power equipment major Hyosung Corporation -- are planning to invest Rs 300 crore and Rs 450 crore, respectively in Andra Pradesh. "Honda wanted 100 acres of land for setting up the facility and we have shown them available land in Medak and Nalgonda districts close to Hyderabad," Andhra Pradesh Industrial Infrastructure Corporation Managing Director B R Meena. "Honda officials said they would invest Rs 1,000 crore on the production facility in a phased manner of which Rs 500 crore will come in the first phase," he added. HMSI currently has a twowheeler manufacturing plant at Manesar in Haryana with an annual production capacity of 1.55 million units per annum while the second plant, with a production capacity of 6 lakh units, is coming up at Tapukara in Rajasthan. The proposed manufacturing facility in Andhra Pradesh will be HMSI's first in South India. Meena said Honda officials have submitted their proposal for setting up the two-wheeler manufacturing facility two days ago. Initially, the unit would manufacture 2,000 two-wheelers per month and gradually increase the capacity. "They are yet to submit a detailed project report to us," he added. Meanwhile, the Camozzi Group has also come forward to set up its textile and other industrial equipment manufacturing units near Hyderabad. "Camozzi has plans to invest Rs 300 crore on the facility and wants 20 acres of land," Meena said. Besides, he said, power and industrial systems major Hyosung Corporation is also headed for AP to set up a Rs 450 crore high-voltage transformers manufacturing plant. The company sought allocation of 25 acres of land at Mannavaram near Tirupati where the NTPC-BHEL joint venture power plant equipment manufacturing facility is coming up. "We had preliminary discussions with representatives of these major companies and are awaiting submission of detailed project reports. The proposals are under active consideration of the government," Meena said. Honda to triple India motorcycle sales in 5 years Honda Motor Co. plans to ramp up motorcycle production and triple sales in India to 5 million units annually in five years as its partnership with the Hero Group nears end, the Nikkei business daily reported on Monday. Honda decided last December to sell its stake in joint venture Hero

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Honda Motors Ltd to Hero Group, the paper said. To offset the expected decline in its local market share, Honda plans to boost production at subsidiary Honda Motorcycle and Scooter India Pvt . from the current 1.55 million units a year, the business daily reported. The unit's second factory is to begin operating in the state of Rajasthan in the second half of 2011 and lift Honda's production capacity in India to 2.2 million units by around 2012. Plans are also afoot to build a third plant in the state of Andhra Pradesh, the Nikkei said. Honda's overall investment to increase production in India is estimated at Rs 10 billion, or roughly 18 billion yen, the newspaper said. Honda plans to begin production on a 250cc sports model in India in March. Honda also plans to open new sales locations in regional cities and rural districts, the paper added.

TVS Motor Company :

TVS Motors is the third largest company in the two-wheeler industry with a market share of 16%. Infect, it is the only Indian company without a foreign collaboration in the two-wheeler industry. When the company opted out of the collaboration with Suzuki in 2002, many believed that TVS was headed towards extinction. But the company proved the doomsayers wrong and came out with a very successful `TVS Victor'. TVS Motors Ltd. originally incorporated in 1982 to manufacture two-wheelers in collaboration with Suzuki Motors of Japan, TVS was one of the leaders in two-wheeler industry. The industry growth rate has been very secular across cities, towns and villages. Having said that, there have been few states where the growth rate has been low for the industry. As far as concerned, TVS have a dominant presence in the south, but we have increased our distribution network in north, east and west, and our growth rate in some of these places is higher than south. Going forward, our growth rate in other parts of the country would be higher than south for the simple reason that TVS will add new distribution network. Backed by strong sales in the third quarter of the 2010-11 financial year, TVS Motor Company
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will introduce upgraded variants of its popular Apache and Scooty Pep+ models in the next few months.

TVS Motor taps Indonesian firms for distribution deal TVS Motor is in talks with Indonesian companies for a distribution alliance for its first overseas two-wheeler project. The company has also decided that the Indonesian plant will manufacture step-thrus with engine capacities in the range of 100-125 cc. The Indonesian plant will become an export hub over time and feed all the Asean markets. Motorcycle exports will continue to all the non-Asean regions from India, TVS Motor chairman and managing director Venu Srinivasan told FE. Elaborating on the Indonesian venture, he said that initially, it would start as an assembly plant by importing completely-knocked down kits from here, and then switch to complete manufacturing. It will have a capacity of 2.5 lakh units, and entail an investment of Rs. 250 crore over three years.

TVS Motor to invest Rs 200 cr on capacity expansion Motorcycle maker TVS Motor Company said it will invest Rs 200 crore by April next year to increase its production capacity to 28 lakh units. The company also said it will set up a design centre in Indonesia where it has a manufacturing facility. "There is an increasing demand and to meet that we are increasing our production capacity to 28 lakh units from the existing 21 lakh units per annum. It will entail an investment Rs 200 crore by April 2011," TVS Motor Company Chairman Venu Srinivasan told reporters on the sidelines of the SIAM summit here. He said the company expects to sell 18 lakh of two wheelers in the domestic market and export 2.5 lakh units this year. On the three-wheeler front, the company expects sales of 50,000 units. Commenting on the overseas operation, Srinivasan said TVS expects its Indonesian arm to break even by next year. "By next year we should have a design center there," he said. He also said TVS plans to make Brazil, where it has an assembly unit, to be the hub for the Latin American market. "We have a capacity of assembling 50,000 units in Brazil per year. We want this to be
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the hub of Latin America and supply to countries like Columbia, which is an interesting market," Srinivasan said. The company assembles its motor cycle 'Apache' in Brazil right now. He also said the company is looking to increase export to Sri Lanka, Bangladesh and ASEAN countries. TVS Motor reported a rise of 14.80 per cent in its total two-wheeler sales at 15,21,912 units in the last fiscal year. TVS Motor Company plans to focus on "clever niches" and avoid taking on its two bigger rivals Hero Honda and Bajaj to grow its two-wheeler business. The approach will drive TVS? product development, marketing positioning and export expansion, says TVS chairman and MD Venu Srinivasan. He is very clear that the only way forward is to avoid being a me-too in the market. "Being a smaller company, we need to be more focused and nimble. We will concentrate on carefully designed products that target niche segments, and will expand geographically," he says. In keeping with this strategy, TVS launched Jive, the urban bike with an auto clutch and the unisex metal-bodied scooter Wego in the previous fiscal, as against commuter bikes and sporty motorcycles that the top two players specialise in. In launching the unisex scooter, for instance, TVS was veering from the Hero Honda positioning of the vehicle for women. TVS top management believes it can only survive through gradual growth in a market dominated by two big-muscle rivals. As the third biggest player in a market that crossed the 10 million unit level in March, TVS? 1.5 million units-a-year share isnt big enough to take on market leader Hero Honda?s 4.6 million tally in FY09-10 or Bajaj Autos 2.5 million units in the same period. TVS mantra is to set less ambitious targets but grow consistently and with enough geographical spread to de-risk its business. It plans to sell 2 million two-wheelers in the new fiscal and will spend around Rs 200 crore in adding capacity at its factory in Hosur, Karnataka.

Yamaha Motor India

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Yamaha Motor Corporation is the auto mobile company of Japan (1953) which works in India since 1955 and providing latest technology in India from last two decades. Yamaha Motor India was incorporated in august 2001 as a 100% subsidiary of Yamaha motor corporation, Japan. Two-wheeler maker India Yamaha Motor today reported a 69.71 per cent rise in its total sales in December 2010 at 34,839 units.The company had sold 20,529 units in the same month the previous year, India Yamaha Motor said in a statement.In the domestic market, the company's sales stood at 26,567 units as against 13,612 units in the same month in 2009, up 95.17 per cent.Exports of India Yamaha rose by 19.59 per cent to 8,272 units from 6,917 units in the yearago period, it added.For the entire 2010, the company's sales increased by 30.75 per cent to 3,50,264 units from 2,67,895 units in 2009. The domestic sales during last year stood at 2,58,987 units as against 2,18,625 units in the previous year, up 18.46 per cent. Exports also rose by 85.26 per cent to 91,277 units from 49,270 units in the year-ago period. "We are pleased with our achievements this year, wherein we have been able to strengthen our brand image and cement our place in the hearts of our esteemed customers," India Yamaha Motor CEO and Managing Director Hiroyuki Suzuki said. The company is confident that 2011 will also be a successful year on the back of strong performance in 2010, he added.

Yamaha mulls electric 2-wheeler for India; 2 new bikes in 2011 Japanese auto giant Yamaha today said it might consider launching an electric bike in the fast growing Indian two-wheeler market to offer an alternative mode transportation. The company's wholly-owned subsidiary, India Yamaha Motor, is also developing an India-specific scooter that will hit the roads in the "near future". Besides, it will launch two new bikes in the country in this year."For rising fuel prices, electric bike is a good option. Currently we are selling electric bikes in Japan and Europe. There is a possibility for the Indian market for introducing these products,"
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India Yamaha Motor Director (Sales and Marketing) Jun Nakata. He, however, did not share details like specifications and when the firm was likely to launch the products in India.Last year, the company had said it would focus more on India with more investments and aimed to have 10 per cent of its total global sales from the country within the next 3-4 years.When asked about its plans for the scooter segment, Nakata said: "We are preparing to enter the scooter market. The product is under development in Japan and it will be an India-specific product."Last year, the company had announced conducting a study on the Indian scooter market and it was expected to be complete by the middle of 2010.Nakata said the company was taking longer than expected to come out with the product because the auto giant "wants to offer the best" to the Indian consumers.Asked when the company is likely to launch the scooter, he said it would be in the "near future".Taking about its plans for the current year, India Yamaha Motor National Business Head Roy Kurian said: "Every year we launch new products. This year we will introduce two new bikes and some variants of the existing models."Without giving any detail of the new products, he said the firm was consolidating its position in the 150cc segment."Last year we sold 3.7 lakh units, including exports of 1.2 lakh units. Our target this year is to sell 40-50 per cent more than that of last year," Kurian said. He said the company was aiming for a 10 per cent share in the next three years in the Indian two-wheeler market, which is estimated to grow to 1.5-1.6 crore units from about 1 crore units at present.The company, which has two facilities in Uttar Pradesh and Haryana, have a combined installed production capacity of 6 lakh units a year that can be scaled up to 10 lakh units every year. Yamaha eyes rural demand, double the sales outlets in 5 yrs Yamaha Motor, the worlds second-biggest motorcycle maker, plans to double its sales outlets in India in the next five years to tap demand in villages as economic growth boosts incomes. India Yamaha Motor may increase showrooms to 2,000, mostly in small towns and rural hubs, Koji Arai, director and chief sales officer, said in Surajpur, near New Delhi. India is spending more to build roads connecting villages and improve electricity, phone communication and health care. The infrastructure investments and rising prices for farm produce are boosting rural incomes. Yamaha is following Hero Honda Motors move, to expand in the countryside, where 70% of the nation resides. The next strong demand for motorcycles could only happen in rural and semi-urban areas as people in urban centres shift to cars said Mayur Milak, an automobile
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industry analyst at Alchemy Share & Stock Brokers in Mumbai. The only issue will be branding, because typically it is word-of-mouth publicity that works, and Hero Honda has an advantage in this. Industry-wide motorcycle sales advanced 26% to 7.3 million units in the year ended March 31 2010, according to the society of Indian automobile manufacturers. Yamaha sold 2,23,305 units locally in the period, according to the group. Hero Honda, which sold 58% of the total in the period, gets about 40% of its sales from villages, the company said in March. About 10% of the people living in villages in India own a motorcycle, compared with the national average of 18%, local brokerage Batlivala & Karani Securities said in a report in February. Yamaha fell 0.5% to 1,284 yen in Tokyo. The shares have gained 10% this year. India Yamaha Motor, 70% of which is owned by Iwata City, Japn-based Yamaha, targets an increase in sales from small towns and rural areas to as much as 30% of the total in the next five years, from about 15% now, Automotive Research Association of India (Arai) said. In order to do well, we need to increase the breadth and spread of our network, said Pankaj Dubey, national business head at India Yamaha. First you have to make motorcycles available and only then sales can happen.The company is refurbishing some of the existing outlets in small towns and rural hubs, and adding new ones called Yamaha Bike Corners, organising free motorcycle service camps and test rides, Mr Dubey said. Word of mouth is very important in rural India, said Arai. So we are taking good care of our existing customers. India Yamaha Motor, which can produce 6,00,000 motorcycles a year, is considering selling scooters in India, Arai said, declining to provide details.

ROYAL ENFIELD

Royal Enfield to double capacity in two years

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Royal Enfield, the Chennai-based cult bike maker, is planning to more than double its production capacity over the next 18-24 months to cater to the surging demand.Owned by New Delhi-based Eicher Motors it aims to increase its production capacity to 12,000-15,000 units per month from 5,000 units per month. Siddhartha Lal, managing director and chief executive officer of Eicher Motors, said, We are evaluating various ways to increase our production capacity. Over the next 18-24 months, we should be able to bring the new capacity on stream. Lal declined to comment on the proposed investment for capacity addition, but industry experts said it would cost the company a minimum of Rs 200 crore. Now, Royal Enfield produces five models at its Chennai facility. According to Lal, the company is witnessing good traction for its newest range, including Classic 350 and 500, which cost more than Rs 1,00,000. We had to adjust the bike capacity marginally to accommodate the Classic range and hence, the monthly capacity had dipped to 4,500 per month, which is now back to 5,000-levels. By next year, this capacity should reach 6,000 units per month, said Lal.VE Commercial Vehicles (VECV), a 50:50 joint venture between Volvo Group and Eicher Motors, will invest Rs 800 crore for capital expenditure and setting up an engine manufacturing facility over the next three years.The company is setting up a facility at its existing plant at Pithampur, Madhya Pradesh, for manufacturing advanced truck and bus engines for Volvo. The facility would be operational by the start of 2013.VECV aims to increase its market share to 15 per cent, from 2-3 per cent, by 2015 in the heavy commercial vehicle segment. For the time being, the company wants to focus on the 5-tonne and above segment, as there is more scope for expanding margins, compared to the volume generating small commercial vehicle segment. However, Lal, who is also the managing director and chief executive officer of VECV, said the company could look at the sub-one tonne segment, where Tatas Ace had a majority market share. We could look at that segment once we have our plans through for the heavy and medium segment, said Lal. A senior company executive said Eicher branded products would be sold on a pilot basis by utilising Volvos distribution network in Indonesia.

Royal Enfield mulls new facility to expand capacity

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Auto-maker Eicher Motors on Tuesday said its two-wheeler arm, Royal Enfield, plans to set up a new facility to augment production capacity to up to 10,000 motorcycles per month over the next few years. "We will be continuously looking to ramp up the capacity, even up to 10,000 units to meet excess demand, for which we are looking at options of setting up a new manufacturing location," Eicher Motors managing director and CEO Sidhartha Lal told reporters on the sidelines of the India Economic Summit in Delhi. The company produced 4,000 units on average every month last quarter, far lower than the design capacity of 5,000 units, due to internal constraints at its Chennai facility, he added. "Very soon, we will be back to the 5,000 units per month mark and by next year, we will be reaching the 6,000 units per month mark," Lal said. When asked if the company has zeroed in on a location to set up the new facility, he said neither the location nor the investment requirement of the project have been finalised yet. Talking about its commercial vehicle business, Lal said the joint venture between Eicher Motors and Volvo Group will invest Rs 800 crore over the next three years to increase production capacity and set up a new engine plant. "VE Commercial vehicles will be increasing production capacity to 8,000 per month from the current 4,000 in the next three years and work is already on," he added. He said the investment on the project will be around Rs 500 crore. "We are also starting a medium duty engine plant to meet the demands of both Eicher and Volvo brands of commercial vehicles," Lal said, adding that the plant is likely to be operational by 2013. The investment on the engine plant will be around Rs 300 crore, he said, adding that the combined investment would be funded through internal accruals. The new engine facility will have a production capacity of up 85,000 units per year. Earlier, VE Commercial Vehicles had said the new unit will be constructed at its existing facility in Pithampur, which has an annual output of 40,000 units at present. The new facility is proposed to become the global manufacturing site for Volvo's 5-litre and 8-litre commercial vehicle engines complying with Euro-III and Euro-IV emission norms. There's no threat from super-bikes: Royal Enfield The bullet has rediscovered its speed as Indians take to biking for pleasure. Sales of premium bikes have risen quickly and the iconic Royal Enfield is riding on this trend. Overwhelmed by an increasing demand, the Chennai-based company has discontinued bookings for its fast-selling Classic 350 model. Royal Enfield plans to double its capacity to one lakh units by 2013. The exporter of 500 cc motorbikes to international markets including, Europe and the US, is also
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looking to increase exports to countries in Latin America, Africa and the Middle East, besides strengthening its presence in Europe and the US. It also expects overseas sales to more than double over the next five years. The Eicher Group company is all set to shift entire production to a new engine platform to make products compliant to stricter Bharat Stage III emission norms. Last month, the bike maker introduced its new Bullet model, 'Electra Twinspark 350' as a part of its strategy to modernise its range of motorcycles fitted with unit-constructed engines. As the custodian of a legendary brand, Siddharth Lal, MD of Eicher Motors , is determined to take the legacy forward. In an interview with ET, Lal steers clear of any comparisons with Japanese brands and discusses the attributes that make Royal Enfield click with the Indian consumers. Its a concerted effort and does not happen overnight. Our brand is the oldest motorcycle in production. After we took over the company, we thought about what it should mean to the people. They thought we were related to the Army. But that is not the truth. While we do sell 3% of our bikes to them, its still a very small part of what we do. We then decided to position it as a leisure and practical brand. It is not everything for everyone unlike some of the mass-market brands. Its quite desirable for certain demography of people. Our target consumer is difficult to define. But anyone who has an interest in motorcycling is our target consumer. In terms of demographics, the people who have kept us alive are the hardcore bullet lovers, the ones who have bought the bike through thick and thin. They are our fair and foul weather friends.

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CHAPTER 2 LITERATURE REVIEW


[1] Dealer Dependence Levels and Reciprocal Actions in a Channel of Distribution in a Developing Country Author: Gary L.Frazier, James D. Gill, & Sudhir H. Kale Publisher: Journal of Marketing Research, Vol.53, No.1 The primary purpose of this article is to expand our understanding of the dependence and reciprocal action constructs in distribution channel relationships. The authors develop a conceptual framework for channel relationships involving the exchange of industrial products within sellers markets in developing countries. The framework is tested with data collected in the tungsten carbide tool industry in India. Results are generally supportive of the conceptual framework and illustrate the need to (1) take the channel context into account in developing channel theory and (2) perform empirical studies in a wide variety of channel settings.
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Two research questions of central prominence in the study of distribution channel relationships are What are the behavioural reactions of the target firm to the source firms influence attempts?(cf. Anderson and narus 1984;El-Ansary and Stern 1972; Etgar 1976; Frazier and Summers 1986). The dependence of the target firm on the source firm (i.e., the targets need to maintain the channel relationship in order to achieve desired goals) and the reciprocal actions that take place by one firm in response to actions taken by the other) are among the more important constructs that must be examined in attempts to answer these questions. Since being introduced into the channels literature by Stern and his associated (cf. Beier and Stern 1969; El-Ansary and Stern 1972), based on pioneering work by Emerson (1962), the dependence construct has had a reasonably prominent role in channels research (cf.Brown, Lusch, and Muchling 1983). However, empirical evidence on the determinants and effects of dependence levels in channel relationship is mixed. Reciprocal actions in channel relationships have received much less attention in a relative sense. Though several channels researchers have developed theoretical arguments about the tendency of firms to reciprocate, only Frazier and Summers have addressed this issue empirically.

[2] Dealer Perceptions of Manufacturer Power and Influence Strategies in a Developing Country Author: Sudhir H. Kale Publisher: Journal of Marketing Research, Vol.XXIII , 387-93 The author reports a held study of dyadic channel relationships in Indio. Among the findings is that a manufacturers perceived power is related positively so the frequency of use of relatively high pressure influence strategies by its field representatives. The need to conduct studies across several industries and countries is underscored by the study findings. Dealer Perceptions of Manufacturer Power and Influence Strategies in a Developing Country A limitation of previous research on power within a distribution channel is that all studies have been conducted in the United States or other highly developed economies (e.g., Heim' and Stern 1969; El-Ansary and Stern 1972; Etgar 1978; Frazier and Summers 1984; hunt and Nevin 1974).
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Therefore. a question arises as to the applicability of research findings pertaining to the construct of power and its applications in developing countries (Cunninghan) and (keen 19841. With the increasing emphasis on global marketing (Levitt 1983), it is important that research on constructs such as power and influence strategies be conducted in developing countries and integrated into a general theory of the distribution channel as a behavioral system. From the viewpoint of practitioner, developing countries like India and Chinawhich account for almost half of the world's population have been projected robe high growth markets in the near future (Porter 19801. An understanding of behavioral aspects of channel systems within these and other developing countries is vital for the future growth of U.S. multinational corporations. The general objective of the research reported here was to study the power-influence process within a distribution channel in a developing country. Toward this end, three research issues wore examined. First, the relation-ship between a manufacturer's power and its choice of influence strategies within a distribution channel in a developing country was investigated. Second, interrelationships between the various influence strategies used by a manufacturer to alter the behavior of its dealers were analyzed. Third the relationship between a manufactures power in a channel dyad and the level of influence attributed to that manufacturer by a target dealer was examined. FINDINGS FROM PREVIOUS RESEARCH: The relationship between the power of a firm and its choice of influence strategies within a dyadic channel setting has only recently been investigated. Roering and lawyer and Walker collected data in an experimental setting and concluded that in a simulated bar-gaming encounter, the greater the power of a Fern, the more likely that firm is tense high pressure or coercive means of influence in its interactions with another (in its channel of distribution. Frazier and Summers Who based their findings on a field study of automobile dealers in the United States, present conflicting evidence. Their findings indicate that in a franchise channel system. a manufacturer's power correlates negatively with its frequency of use of relatively high pressure or coercive influence strategies.

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In the last decade, more than five million passenger, multi-utility, and commercial vehicles were sold in India. Unfortunately for their owners, the poor roads on which these cars are driven and the low-quality fuel that they consume are leading to rapid wear on steering, suspension, brake, and engine systems. As a result, owners will be forced to repair and replace a wide variety of parts, thereby accelerating demand for aftermarket components. This Frost & Sullivan study offers in-depth analysis of Indian distribution channels for aftermarket automotive components. It examines what type components are sold in addition to location, method, and vendor. By providing detailed discussions of major and alternative brand distribution systems as well as imported and spurious components, this research gives its users an unparalleled study of the field.

CHAPTER 3 RESEARCH METHODOLOGY & RESEARCH DESIGN OBJECTIVE 1) To study the various components of distribution management of the two wheeler. 2) To study the effectiveness of the distribution network in developing the market share. HYPOTHESIS Distribution strategies play a significant role in efficient function of the showroom. Null hypothesis: There is a significant relationship between distribution strategies and efficient function of the showroom.

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Alternate hypothesis: There is no significant relationship between distribution strategies and efficient function of the showroom. METHODOLOGY The following was the methodology adopted for the study Type of Research It is descriptive in nature. The research is conducted to study the distribution strategy of two wheeler market in India and Dealers attitude regarding the flagship companys dealership. The research is carried to analyze the Marketing Mix of dealership with the reference to flagship companies like Hero Honda, Honda, Bajaj, TVS, Yamaha, Royal Enfield. Sample Type The respondents were selected through simple random sampling process, a process in which every sampling unit has a known and equal chance of being selected.

Project reach The study was conducted in and around NCR (National Capital Region) and authorized dealers of two wheelers were investigated during the time of internship. The reach of the project was very well planned and executed by weekly formulated schedules. Sample Size Total of 36 respondents were surveyed in Delhi NCR. Data Collection The data and information are collected from primary sources i.e Authorized dealers (General Manager or Sales Manager). This data collection was carried out through a questionnaire specially designed for this purpose. Analysis

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The data thus collected was analyzed using the software IBM SPSS Statistics Version 19, various statistical techniques and tools were made use of. Limitation of the study 1. Study about distribution strategies is limited only to Delhi/ NCR region due to unavailability of time. 2. According to the project plan, there were two questionnaire one to deal with dealers and another one to deal with manufacturers. Former one was successfully done as per the devised strategies but manufacturers didnt entertain me to study about their current and future plans with dealers. 3. The report might be more effective if I had dealt with automotive aftermarket sales and service.
4. SUZUKI dealers were not counted into account due to their minimum scattered presence

across NCR. As well as MAHINDRA also not accounted into the study due to new entrant into the market and poor quality products.

Research Design

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CHAPTER 4 DATA INTERPRETATION & ANALYSIS 1) Are you an exclusive dealer or a multibrand dealer? Since our Survey deals with the Marketing Mix of dealerships, we start the survey by asking the respondents whether they are an exclusive dealer or a multibrand dealer.

EXCLUSIVE OR MULTIBRAND DEALER Cumulative Frequency Valid EXCLUSIVE 36 Percent 100.0 Valid Percent 100.0 Percent 100.0

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Interpretation: The result shows that almost 100 percent of the dealers are EXCLUSIVE, which makes it easier for us to move forward with the survey. They dont wish to lack their exclusivity as well as support from manufacturer.

2) Do you deal with all the product lines (two wheeler) of the company or particular product line you focus? The product lines which a dealer sells clearly depict his motive behind the particular product line. Every customer has different expectations from the same product, thats why many competitors exist in the market. This question is purposefully asked to segment the dealers according to their choice of selling, profit margin basis and conduct further analysis.
PRODUCT LINES Cumulative Frequency Valid ALL PRODUCT LINE OF MOTORCYCLE 36 Percent 100.0 Valid Percent 100.0 Percent 100.0

Interpretation: From the above tabulation it clearly shows that all the 36 dealers of different flagship companies are dealing with all the product lines of motorcycle. It shows that all the dealers want to equip themselves with all range of product lines. 3) What is the approximate profit margin per vehicle that you obtain through selling? Since the questionnaire is based on Marketing Mix of 7 Ps, it is mandatory to analyze the gross profit margin that obtained through selling of vehicles. So that we could interpret which dealership gets higher profit margin than others.

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Interpretation: The above chart diagram which describes the gross profit margin per vehicle. Out of six manufacturing companies, Royal Enfield dealer gets 5% profit margin, Yamaha dealer gets 4.5% profit margin, Honda dealer gets 3%, TVS gets 4.5%, Bajaj gets 2.5%, Hero Honda gets 2.9% Royal Enfield dealers which gets maximum profit margin when comparing to other manufacturers.

4) Do you have any intermediaries like agents, retailers to sell your product? (in special cases) Since the competition in automobile industry is getting aggressive day by day, it is necessary to penetrate deep into the market with the third party agents or sub-dealers to cover the target market.

INTERMEDIARIES LIKE AGENTS OR SUB-DEALERS Cumulative Frequency Valid YES NO Total 21 15 36 Percent 58.3 41.7 100.0 Valid Percent 58.3 41.7 100.0 Percent 58.3 100.0

Interpretation: From the above chart , it is clear that out of 36 samples, 58.30% dealers having intermediaries and 41.70% dealers doesnt have any form of intermediaries to sell their products to the target market. Intermediaries help them to penetrate deep into the market. All the intermediaries are appointed by dealers on their own effort to promote their vehicle sales.

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5) What kind of support do you receive from the company for an efficient function of your showroom? Dealers are the one, who represent companys philosophy, products, customer service etc. So it is manufacturers first and foremost duty to support dealers for the efficient function of showroom.

Interpretation: From the above chart, it shows that Training and Promotional Activities are the important criteria for the efficient function of showroom which has been received by dealers from manufacturers, followed by Sales and Staff Training and Promotional activities. Training in the form of front end sales, training the chief mechanic regarding new technology or product updates. Promotional activities like newspaper & TV Ads, demo ride etc. 6) What promotional initiative do you undertake to promote your showroom? Do the manufacturers also contribute for the same? In this modern world to compete with different potential competitors Promotion is used as an efficient and effective tool to stay ahead. It may be festival schemes, Advertisement on newspaper and local TV channels, banners, Demo & Test rides, Hoardings, pamphlets.

Interpretation: Dealers and manufacturing companies are spending much on ADs like local TV channel and newspaper, followed by Hoardings & Banners. The least preferring promotional activities are festival schemes and Demo & Test rides. Because demo and test rides cost are incurred by dealers alone. 7) How do you train your employees to maintain the relationship with customers? Or what kind of training that you provide to your employees to enhance personal selling? Training the employees is the important thing to build a good relationship with customers and to enhance personal selling.
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Interpretation: From the above chart, it is clear that Companys orientation program plays a significant role in building and maintaining a good relationship with customers. Company orientation program helps in front end sales, employee training, location preference and ambience of the showroom.

8) How long does it take to deliver a vehicle once placed an order with your showroom and how do you place an order to the manufacturer? The speed and delivery rate are important in processes, it helps to reduce the response time as well as enhance the business transaction. The above question helps to identify the response time between dealer and manufacturer.

Interpretation: All the stated manufacturer delivers the vehicles within the span time of 1 to 2 weeks except Royal Enfield. Greater the process, slower the response time. Manufacturer should identify the right sales forecasting parameters to deploy the vehicles at the doorstep of dealers in minimum lead time.

9) What according to you in the major USP of your showroom? Has it contributed to sales or customer satisfaction?

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Every product or company has its own USP to retain its brand image in customers mind. This question talks about visibility, location, customer satisfaction and others.

Interpretation: More than half of the dealers believe that customer relationship is the major USP of their showroom followed by location and visibility. Customer relationship brings profits not only in terms of servicing their motorcycles but also customers providing referrals to their friends, colleagues or family members. 10) How do you differentiate your showroom in order to stay ahead from your competitor? This question helps to identify the dealers perception about their own showroom as well as from which point they stand unique from other competitors.

Interpretation: Many dealers believe that Trained Employees make difference to stay ahead from competitors. Even in the absence of sales manager, front end employees able to provide technical details about motorcycles to the walk-in customers.

11) What is the average number of sales of two wheelers from your showroom in the monthly or quarterly wise? It helps to identify which manufacturers product selling fast and in higher number.

Interpretation: Hero Honda which dominates others in term of sales followed by Bajaj. Royal Enfield is the least seller in motorcycle segment.
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12) Have you ever been a dealer of any other company in the past? This helps to identify the companies which have been switched by dealer.

DEALER OF ANY OTHER COMPANY IN THE PAST Cumulative Frequency Valid NO 36 Percent 100.0 Valid Percent 100.0 Percent 100.0

Interpretation: From the above frequencies, it has been obtained that none of the dealers were in dealership with other companies in the past. The interviewed dealers are having dealership with the concerned manufacturer for more than 10 years.

13) What is the reason or preference for choosing a particular company? To identify the grounds for choosing the particular dealership

Interpretation: Most of the dealers prefer brand value of the manufacturer for choosing the particular dealership. It clearly shows brand building is necessary to attract and choose right dealers to represent their companies product.

14) Are you happy being a dealer for the current company?
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It helps to identify the satisfaction level of dealers with respective to the concerned manufacturer.

SATISFACTION Cumulative Frequency Valid YES 36 Percent 100.0 Valid Percent 100.0 Percent 100.0

Interpretation: Overall, all the dealers are satisfied with their dealership.

Z-test for Hypothesis testing Null Hypothesis: There is a significant relationship between the efficient function of the showroom and the training and promotional activities. Alternate Hypothesis: There is no significant relationship between the efficient function of the showroom and the training and promotional activities. Level of Confidence: 95 %

T-Test

One-Sample Statistics N EFFICIENT FUNCTION OF SHOWROOM 36 Mean 2.39 Std. Deviation .864 Std. Error Mean .150

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One-Sample Test Test Value = 3 95% Confidence Interval of the Difference t EFFICIENT FUNCTION OF SHOWROOM -4.030 df 32 Sig. (2-tailed) .000 Mean Difference -.606 Lower -.91 Upper -.30

Interpretation : Since the significance value Sig. (2-tailed) lies below the acceptable level (>.10) we accept the null hypothesis, i.e. there is a significant relationship between the efficient function of showroom and training & promotional activities.

Z-test for Hypothesis testing Null Hypothesis: There is a significant relationship between the major USP of showroom and the customer relationship. Alternate Hypothesis: There is no significant relationship between the major USP of showroom and the customer relationship.

Level of Confidence: 95 %

One-Sample Statistics N MAJOR USP OF SHOWROOM 36 Mean 2.33 Std. Deviation 1.315 Std. Error Mean .229

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One-Sample Test Test Value = 1 95% Confidence Interval of the Difference t MAJOR USP OF SHOWROOM 5.825 df 32 Sig. (2-tailed) .000 Mean Difference 1.333 Lower .87 Upper 1.80

Interpretation : Since the significance value Sig. (2-tailed) lies below the acceptable level (>.10) we accept the null hypothesis, i.e. there is a significant relationship between the major USP of showroom and the customer relationship.

Z-test for Hypothesis testing Null Hypothesis: There is a significant relationship between choosing the particular dealership. Alternate Hypothesis: There is no significant relationship between the major USP of showroom and the customer relationship.

Level of Confidence: 95 %

One-Sample Statistics N REASON FOR CHOOSING A PARTICULAR COMPANY 36 Mean 2.30 Std. Deviation 1.357 Std. Error Mean .236

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One-Sample Test Test Value = 1 95% Confidence Interval of the Difference t REASON FOR CHOOSING A PARTICULAR COMPANY 5.514 df 32 Sig. (2-tailed) .000 Mean Difference 1.303 Lower .82 Upper 1.78

Interpretation: Since the significance value Sig. (2-tailed) lies below the acceptable level (>.10) we accept the null hypothesis, i.e. there is a significant relationship between choosing a particular showroom and the brand value.

CHAPTER 5 SUGGESTIONS

The dealers are uncertain about differentiation between the competitors showroom and their own showroom. Manufacturer should provide in-depth knowledge about competitors advantageous or disadvantageous over them.
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Currently, Demo/ Test ride cost are incurred by dealer alone. So manufacturer should provide compensation for the same above.

From the analysis it has been found that ambience and visibility does have an impact on customer purchase. Therefore dealers should give importance to the above in addition to customer relationship.

All the manufacturer takes span time of one to two weeks to deliver their vehicles to customer. If they want to make uniqueness service from others, vehicles must be delivered within 2 or 3 days.

CONCLUSION
From the analysis it has been clearly identified that effective distribution strategies are very important for an efficient function of showroom. The efficient function of showroom has been interpreted in terms of training & promotional activities, customer relationship, and companys orientation program which eventually helps the dealers and manufacturers to increase their
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market share. The various components of distribution management of the two wheeler studied in terms of current conceptual framework on employee training, delivering time of vehicles from manufacturing plant, method of placing orders to manufacturer, profit margin etc.

CHAPTER 6 BIBLIOGRAPHY & REFERENCES

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[1] Marketing Research Within a Changing Information Environment ,Hair/Bush/Ortinau, Tata McGraw-Hill Edition,2008 . [2] Antecedents and consequences of brand loyalty: An empirical study , [3] The Economic times, Bajajs Rural Drive, dated 05, Dec,2010. [4] http://www.xbhp.com/articles/p220/page1.php [5]Bajajs exclusive showroom for higher segment bikes
http://www.bajajauto.com/probiking/index.html

[6] Finding sources of brand value: Developing a stakeholder model of brand equity(2005), RICHARD JONES. [7] The marketing advantages of strong brands,(2003 ), STEVE HOEFFLER, KEVIN LANE KELLER. [8] Julian Dent, Distribution channels, Kogan Page Edition

[9] Finding sources of brand value: Developing a stakeholder model of brand equity(2005), RICHARD JONES. [10] Hero splits with Honda -Economic Times Dec,16,2010 http://economictimes.indiatimes.com/news/news-by-industry/auto/two-wheelers/munjal-family-honda-motor-to-discuss-hero-honda-split-today/articleshow/7108838.cms [11] Honda to triple India motorcycle sales in 5 years: Report -Economic Times Jan,14, 2011 http://economictimes.indiatimes.com/news/news-by-industry/auto/two-wheelers/honda-to-tripleindia-motorcycle-sales-in-5-years-report/articleshow/7213827.cms
[12] http://www.bajajauto.com/probiking/index.html

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[13]http://www.team-bhp.com/forum/motorbikes/20253-bajajs-pro-bikingshowrooms.html [14]http://www.fadaweb.com/probiking.htm [15]http://motoroids.com/news/bajaj-clears-doubts-on-pro-biking-dealershipsservice-centers-shutting-down.html [16] http://www.motorbeam.com/bikes/bajaj-bikes/bajaj-auto-to-open-moreprobiking-outlets/

CHAPTER 7
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ANNEXURE QUESTIONNAIRE FOR DEALER

1) Are you an exclusive dealer or a multibrand dealer?

2) Do you deal with all the product lines (two wheeler) of the company or particular product line you focus?

3) What is the approximate profit margin per vehicle that you obtain through selling?

4) Do you have any intermediaries like agents, retailers to sell your product?(in special cases)

5) What kind of support do you receive from the company for an efficient function of your showroom?

6) What promotional initiative do you undertake to promote your showroom? Do the manufacturers also contribute for the same?

7) How do you train your employees to maintain the relationship with customers? Or What kind of training that you provide to your employees to enhance personal selling?
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8) How long does it take to deliver a vehicle once placed an order with your showroom and how do you place an order to the manufacturer?

9) What according to you in the major USP of your showroom? Has it contributed to sales or customer satisfaction?

10) How do you differentiate your showroom in order to stay ahead from your competitor?

11) What is the average number of sales of two wheelers from your showroom in the monthly or quarterly wise?

12) Have you ever been a dealer of any other company in the past?

13) What is the reason or preference for choosing a particular company?

14) Are you happy being a dealer for the current company?

SYNOPSIS
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Format - 3 AMITY BUSINESS SCHOOL Dissertation FORMAT FOR OUTLINE OF PROPOSED RESEARCH WORK DATE : September 27, 2010

Name of the Student: SIVARAMAN GOPALAN Fathers Name: GOPALAN K Programme: MBA-M&S A0102209018 Contact No.9650354300 Sivaraman.gopalan@gmail.com E-Mail id: AUUP Enrollment No. :

1.

Title of the Research : Study of Innovative Distribution Strategy in Two Wheeler Segment of automobile industry

2.

Rationale of proposed investigation: Im an automobile enthusiastic right from childhood. Even I have done my summer internship at REVA Electric Car Company as well as one of my passion is to design and modify bike. Recent news lie Honda broke up with Hero group, Bajajs penetrative strategies in rural areas as well as increase in executive bike segment, it made me to opt for study about two wheeler segments with reference to Flagship Company.

3.

Review of work already done on the subject: More Vehicles and Poor Roads Signal Growing Demand for Aftermarket Parts In the last decade, more than five million passenger, multi-utility, and commercial vehicles were sold in India. Unfortunately for their owners, the poor roads on which these cars are driven and the low-quality fuel that they consume are leading to rapid wear on steering, suspension, brake, and engine systems. As a result, owners will be forced to repair and replace a wide variety of parts, thereby accelerating demand for aftermarket components.

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This Frost & Sullivan study offers in-depth analysis of Indian distribution channels for aftermarket automotive components. It examines what type components are sold in addition to location, method, and vendor. By providing detailed discussions of major and alternative brand distribution systems as well as imported and spurious components, this research gives its users an unparalleled study of the field. Competitive Pricing Strategies Crucial to Aftermarket Penetration There is strong potential for both vehicle manufacturer (VM) components and component manufacturer (CM) parts in the Indian aftermarket, says the study's author. Nevertheless, VMs and CMs compete against one another as well as with alternate brands. Vehicle manufacturers and CMs need to adopt a pricing policy that takes into account the buying power of the Indian consumer, says the author. Coupling lower prices with more efficient distribution should help VMs and CMs penetrate more effectively into the marketplace. This report examines industry trends and identifies winning strategies, enabling your company to formulate a successful business plan. Counterfeit Products Threaten Revenues Counterfeit components account for as much as 45 percent of passenger car aftermarket sales and 15 percent of commercial vehicle aftermarket sales, reports the author. Suppliers and mechanics play a major role in the promotion of spurious components. Although customers are usually unable to distinguish between an original and a spurious part, the use of these products is impacting CM and VM revenues. Over the long term, the threat of spurious parts should diminish as stricter legal penalties are implemented, and CMs and VMs work to increase customer awareness. With its identification of industry challenges and its effective strategic recommendations, this research can help your company optimize resources, maximize gains, and overtake the uninformed competition.
1.

Distribution Channel Member Analysis A. Exclusive Distributors B. Exclusive Stock list C. Vehicle Dealerships D. Multiple-Brand Distributor E. Multiple-Brand Stock list F. Wholesalers G. Semi-Wholesalers H. Retailers

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2.

Key Decision Variables a. Equal Terms of Trade b. Presence of Alternate and Spurious Parts in the Line c. Sales Support d. Payment Terms e. Reliability of Supply f. Brand Equity g. Profitability of the Line K. Profile of Key Channel Members

3. Objective(s) i)To study the various components of distribution management of the two wheeler. ii) To study the effectiveness of the distribution network in developing the market share. 1. Hypothesis Distribution strategies play a significant role in efficient function of the showroom. Null hypothesis: There is a significant relationship between distribution strategies and efficient function of the showroom. Alternate hypothesis: There is no significant relationship between distribution strategies and efficient function of the showroom. 2. Materials and Methods RESEARCH METHODOLOGY:The methodology used in this research is descriptive in nature. The objective of this exploratory research is to study the all marketing variables used by two Wheeler Company. The research would provide useful insights in to the marketers preferences for Innovative distribution channel. This research will help to make specific predictions about future too. RESEARCH PLAN:A well set research plan is formed with a pre-planned questionnaire. The research plan includes the following important stages

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1. Data collection 2. Formulating Research Approaches 3. Sampling Plan DATA COLLECTION: 1. Primary Data Collection: The method used for primary data collection is Questionnaire method for consumers and depth interview for Marketers.
1. The questionnaire uses simple conversationnel language.

2. The questions are sequenced in a proper order to ensure continuity and to maintain interest of the respondent. 3. Depth interview technique will be used to understand the mind set of marketer for rural India. 2. Secondary Data Collection: The secondary data will be collected through a wide range of books, journals, magazines, newspapers and the internet, Company reports. FORMULATING RESEARCH APPROACHES: Since the required data sources and the variables are available in normal environments, our study will be carried out in field conditions. A combination of self-administered questionnaires with due assistance from the interview will be used. 1. Tentative Chapter wise details of proposed research 1. Executive Summary 2. Introduction 3. Literature Review 4. Data collection 5 Data Analysis 6. Conclusion
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7. Recommendation 8. References 9. Bibliography

Signature of the candidate with date Outline Approved Name and signature of supervisor with date

Comments by reviewer

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