strategy management_10p003_10p004

Introduction• Team Details

– Abhishek Arora• 10P003 • [email protected]

– Abhishek Singh• 10P004• [email protected]

• Industry Chosen: 2 wheelers

• Top 4 Companies:– Hero Honda– Bajaj Auto– TVS Motors– Yamaha Ltd

• Efforts spent in whole exercise: Two Weeks

mailto:[email protected]

mailto:[email protected]

CompetitionIndustry Overview

Porter’s 5 force Analysis

CustomersMarket NeedsMarket Issues

Market Segments Market Players and Share

CompanyCompany Overview

Evolution GraphValue Chain Analysis

SWOT AnalysisBusiness Model Framework

ContextSocial Trends

Economic TrendsPolitical / Regulatory Trends

Cultural TrendsTechnological Trends

Business Model Environment – Assignment Framework

3Competition: Industry Overview

• The Indian two-wheeler industry is the second largest in the world.• The market stood at 10.5 million units in FY10, registering a y-o-y growth of 10 percent during the five

year period FY05 – FY10.• The industry can be further segmented into four major segments:

– Motorcycles– Scooters– Mopeds– Electric Two wheelers

• The motorcycle segment constituted 80.33 percent of the total sales.• The scooter segment is in a re-growth phase, after seeing maturity in 90s and decline in early 00s.

This can be attributed to increasing use of gearless scooters in urban areas.• The electric two-wheeler segment is in investment phase with just around 0.02 percent sales

contribution.• The graphs below shows Two-wheeler production in India during the period 2004-05 to 2009-10.

Sources: On last slide

2004-05 2005-06 2006-07 2007-08 2008-09 2009-100

2

4

6

8

10

12

5.19 6.2 7.11 6.5 6.88.45

0.991.02

0.940000000000001 1.07 1.16

1.5

0.350.38

0.38 0.43 0.44

0.57

Two-wheeler Production (million units)

Motorcycle Scooter Moped

Motor-cycle

80.35%

Scooter14.20%

Moped5.43% Electric two-wheelers

0.02%

Two-wheeler production by segment (2009-10)

4Competition: Industry Overview (Contd.)

Maturity Phase: Industry life cycle assessment


Introduction Stage:Electric Scooters

Growth Stage:Motorcycles

Gearless Scooters

Maturity Stage:Mopeds

Decline Stage:Geared Scooters

Time

Sale

s

Key Players: Market Share (Motorcycles)

Hero Honda; 58.5%

Bajaj Auto; 24.3%

TVS Motors; 6.7%

Honda; 6.2%Yamaha; 3.0%Others; 1.3%

• Hero Honda, the largest manufacturer in the industry is also the largest globally.

• Some foreign players such as BMW, Harley Davidson and Ducati have entered the Indian market with high end motorcycles and niche focus.

• Yamaha has increased its presence significantly in past couple of years by aggressive new launches and focused marketing. It is now a significant contributor in 150cc+ motorcycle sales of the industry

• Hero Honda maintains its dominance in the fuel efficient 100cc motorcycle segment

Competition: Industry Overview (Contd.)

• To analyse the market structure present in the two wheeler industry (motorcycles), a concentration test is done by calculating the annual Herfindahl Index for the firms

• A Herfindahl Index value above 0.2 indicates a high concentration• Herfindahl Index for the motor cycle industry varied from .29 to 0.40 with ascending trend leading to

the inference that the industry is oligopolistic in nature• The two wheeler motorcycle segment has a very few market players who dominate the market by

exploiting huge economies of scale• Product differentiation is a very decisive variable in this industry.• Major players being Hero Honda, Bajaj, Kinetic, TVS, Yamaha etc• Sales volume data of the firms has been retrieved from the Emerging Markets Information Service.


0.29 0.30 0.32 0.30 0.32 0.36 0.36 0.35 0.39 0.41

1988-90 1991-93 1994-99 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Herfindahl IndexHerfindahl Index

6Competition: Industry Overview

Growth Drivers


Growth Drivers

Increasing disposable income

Wider range of choices

Increasing rural presence

Improving road infrastructure

Low interest rates

Frequent new launches

Key Trends

• The industry is expected to grow both in high end and fuel efficient segment.

• Whereas growth in high end segment is propelled by an increase in disposable income, fuel efficient vehicles are driven by need to commute at reasonable cost

• The regulatory policies have been favorable for both domestic as well as foreign players

• More and more companies are attempting to differentiate their products by offering variations in quality, styling or fuel efficiency.

• Focus on R&D has increased in recent years, due to increased competition in the industry.

• Apart from satisfying the domestic demand, the industry also exports around 10 percent of its production, and major players, especially Bajaj Auto, have shown keen attempts to increase their global presence. This trend is expected to continue.

• Growth in 100cc motorcycle segment is fuelled by rural demand, whereas demand for gearless scooters is driven by urban demand.

Inter-Organization Rivalry

1. The industry is oligopolistic in nature

2. Dominated by large players offering wide range of products

3. Competition based on differentiation and total cost of ownership

HIGH

Barriers to Entry

• Brand plays an important role as product differentiation is a key in oligopolistic market

• Industry is highly capital intensive with only existing big auto players entering in market

• Industry knowhow is almost same as Indian majors reliy on japanese and european counterparts for knowledge transfer

HIGH

Bargaining power of Buyers

• Though the number of players are less, but the wide range of models give high bargaining power to buyers

• Sales dominated by B2C buyers

• Little threat of cheap substitutes due to government policy

MEDIUM

Bargaining power of Suppliers

• Suppliers of auto components are fragmented

• Supplier management extremely critical for this industry since most of the component work is outsourced.

• But due to big customers, suppliers are always under pressure

MODERATE

Threat of Substitutes

• There is no perfect substitute to this industry. Though, the trend of low cost cars like TATA NANO may change the industry scenario.

LOW

Competition: Porter’s Five Force Analysis

Sources: on last slide

Social Trends

• Burgeoning middle class with increased disposable income driving sales• • Men dominated the customers of both Bikes as well as scooter segment

Political / Regulatory Trends

• Foreign direct investment: Automatic approval is proposed to be granted to foreign equity investment up to 100% for manufacture of automobiles and components

• Import tariff: Import tariffs are proposed to be fixed at a level such that they facilitate the development of manufacturing capabilities as opposed to mere assembly.

• The auto policy states the Government's intent to align domestic policy with the international practice of imposing higher road tax on old vehicles so as to discourage their use. Technological Trends

• Technology plays an important role in differentiation and reducing total cost of ownership for consumer, hence plays an important role

• Technology is largely imported from European and Japanese manufacturers

• The import of technology/technological up gradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is also allowed under automatic route in this sector

Economic Trends

• The domestic demand for two wheeler vehicles will be spurred by robust consumer demand backed by rising income levels, increased rural penetration, stable interest rates and introduction of new models.

• Exports of motorcycles are also on growth

track.

Context: Environmental Trends

Cultural Trends • Big purchases on festivals like Diwali and Id and other major festivals

• Emphasis on value for money


Customers: Possible Needs, Motivations, Segments

Market Needs

• Different market needs and current offerings to fulfill and gaps etc• Inadequate public transportation system, especially in the semi-urban and rural areas• . Penetration of two–wheelers is quite low in India at around 30 vehicles per 1,000 persons, as compared to 220 in Thailand and 250 vehicles per 1,000 persons in Malaysia.

Market IssuesKey Demand Drivers

• Increased availability of cheap consumer financing in the past 3-4 years• Increasing availability of fuel-efficient and low-maintenance models• Increasing urbanisation, which creates a need for personal transportation• Changes in the demographic profile & increasing youth population

Market Segments

• Market segmented based on engine capacity

•75-124 cc Sales :30%• 125-249 cc Sales : 9.9%• Greater than 250 cc Sales : 24.1%

•Total sales Volume : 84,44,243

Markets Players and Share

Market Share(Domestic)• Hero Honda : 42%• Bajaj Ltd : 27%• TVS Motors : 19 %• Honda Motors : 9%Market Share(Exports)• Bajaj Auto : 46 %•TVS Motors : 16%• Hero Honda : 15 %• Yamaha : 10 %


Companies: Summary Fact Sheet

Hero Honda• Year of Inception : 1984 • Market Share : 42%• Product / Service Portfolio : Motorcycles , Scooters, Spares• Growth Rate(Revenue) :23.91% (2009 to 2010)• Revenue(2010): 16,780.62 cr• Profits(2010) : 2,231.83 cr• Branches: namely Dharuhera, Gurgaon at Haryana and Haridwar at Uttarakhand• Capacity : 5200000 units• High Royalty Cost (2.5 – 5% of sales)

Bajaj Auto Ltd.

• Year of Inception : 1945• Market Share : 27 %• Product / Service Portfolio : Motorcycles , Scooters, 3 wheelers,Spares• Growth Rate(Revenue) :33.91(2009-2010) • Revenue : 12,118.08 cr• Profits : 1,700.11 cr• Branches :Pantnagar, Akurdi,Chakan• Capacity :2250000 units

• Low Royalty cost ( 1.4% of sales)

TVS Motors

• Year of Inception : 1978• Market Share : 19%• Product / Service Portfolio : Automobiles(2 wheelers), Spares• Growth Rate(Revenue): 18% (2009-2010)• Revenue : 4,363.11 cr • Profits: 88.0 cr• Branches : Hosur, Mysore,Solan• Low Royalty Cost (2.3% of sales)

Yamaha Motors India

• Year of Inception : 1964• Market Share : 10%• Product / Service Portfolio : Two wheelers• Growth Rate : 23.6% (in Units)• Revenue : NA• Profits : NA• Capacity : 800000


Hero Honda: Overview

Vision : A mobile and an empowered India, powered by Hero Honda

Mission : Hero Honda’s mission is to strive for synergy between technology, systems and human resources, to produce products and services that meet the quality, performance and price aspirations of its customers. At the same time maintain the highest standards of ethics and social responsibilities

Portfolio : Automobiles(2 wheelers), spares

Main highlights

• Hero Honda Motors Ltd is the World's single largest two-wheeler motorcycle company

• The joint venture between India's Hero Group and Honda Motor Company, Japan has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide

• In the year 1985, the company commenced their commercial production at Dharuhera plant in Haryana and introduced their first motorcycle, CD 100 in the market.

• Current Models include : Passion Pro (100 cubic capacity-4 Stroke), CBZ-Extreme (150 cubic capacity - 4 Stroke), Pleasure New Aesthetics, Splendor NXG (Self Start), CD Deluxe (Self Start), Glamour FI, Glamour (Carb) and HUNK Special Edition. Also, they launched new motorcycle model, Karizma - ZMR

• Active Sponsor of sports in country, namely Cricket and Hockey


• Hero Honda Motors Ltd was incorporated in the year 1984. The company was established as a joint venture company between Honda Motor Company of Japan and Hero Group. In the year 1983, they signed a joint collaboration agreement and formed the company at Inception

• Hero Honda Motors Ltd was incorporated in the year 1984. The company was established as a joint venture company between Honda Motor Company of Japan and Hero Group. In the year 1983, they signed a joint collaboration agreement and formed the company at Inception

1983

1985

1997-97

1999-2004

2007-2010

• Hero Honda introduced their first motorcycle, CD 100 in the market. In the year 1989, they launched the new motorcycle model, Sleek in the market and in the year 1991, they introduced new motorcycle model, CD 100 SS in the market

• Hero Honda introduced their first motorcycle, CD 100 in the market. In the year 1989, they launched the new motorcycle model, Sleek in the market and in the year 1991, they introduced new motorcycle model, CD 100 SS in the market

• . In the year 1995, the company introduced their extraordinary product, Splendor in the market. In the year 1997, the company inaugurated their second manufacturing facility at Gurgaon in Haryana. Also, they introduced new motorcycle model, Street in the market

• . In the year 1995, the company introduced their extraordinary product, Splendor in the market. In the year 1997, the company inaugurated their second manufacturing facility at Gurgaon in Haryana. Also, they introduced new motorcycle model, Street in the market

. Year 1999,: Launch of Hero Honda CBZ, the India’s first 150cc motorcycle• Year 2001 : Launch of Passion

and Joy in the market, Dawn and Ambition in the market.

• Year 2003,: launched CD Dawn, Splendor+ and Passion Plusand ,Karizma, the industry's first 223cc motorcycle.

• Year 2004, Launched, Ambition 135 and CBZ* in the market.

• Renewed the joint technical agreement with the Honda Motors Company, Japan

. Year 1999,: Launch of Hero Honda CBZ, the India’s first 150cc motorcycle• Year 2001 : Launch of Passion

and Joy in the market, Dawn and Ambition in the market.

• Year 2003,: launched CD Dawn, Splendor+ and Passion Plusand ,Karizma, the industry's first 223cc motorcycle.

• Year 2004, Launched, Ambition 135 and CBZ* in the market.

• Renewed the joint technical agreement with the Honda Motors Company, Japan

Company A: Evolutionary Trends

• 2007: Commissioned t third plant at Haridwar

• increased the installed capacity of Motorised 2 wheelers upto 350CC engine by 1800000 Nos to 5200000

• 2010 :Buyed out 26% share of Honda

• 2007: Commissioned t third plant at Haridwar

• increased the installed capacity of Motorised 2 wheelers upto 350CC engine by 1800000 Nos to 5200000

• 2010 :Buyed out 26% share of Honda


Firm Infrastructure: Financing, Planning, Land, Machinery, Technology, Investor Relations

HRM: Recruiting, Training, Compensation

Procurement: Material, Support Services, Advertising, Contracts

Technology Development: Product and Process Design, Testing, SAP, R&D, Technology Transfer, Patent, Collaboration

Inbound Logistics

Operations Outbound

Logistics

Marketing and

Sales Services

Procure Raw Material ,Aluminium sheets,paints,parts ,spares,machine tools, Maintain Inventory, Manage shipment, Handling of Orders, Orders, Specifications (Type & Volumes)

Production Setup Plan,Manufacturing,Welding,Assembling,Subassembling Technical Testing, Road Testing

Mostly Showrooms, Retail consumers, brand promotions, advertising, Collections, Bulk Consumers(Pizza Hut, Dominoes etc)

Retailer Management, Staff Development

Shiiping,Transportation ,Recall of Automobiles, Spares etc

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Value Chain Analysis


Category of Activity Distinctive Aspects Comments

Firm Infrastructure Best in class prototyping facilities

• Hero Honda Manufacturing setup in India in compliance with global standards• It strictly adheres to the standards of ISO 9001 for quality and ISO 14001 for environmental standards

HRM• Vast pool of technically competent engineers and managers.

• Follow intensive training and development program for developing skills• Compensation along with industry average

Technology Development

• Access to latest technical developments and upgrades from Japanese Counterparts

Lacks In-house Indian RnD capabilities, but compensates it with Technology import from Honda,Japan

Procurement• Global Sourcing Team – China , a key destination for sourcing essential items like tires, power steering units etc

• Centralized Strategic Sourcing for key components

Inbound Logistics

• Long term contract with service provider’s – transporters and agents.• Personnel at regional offices for over seeing the smooth transit of goods

--

Operations

•Kaizen & TPM team – continuous drive to improve efficiencies.• Automated manufacturing processes• Maintenance – technical competence.

Hero Honda: Distinctive Activities from Value Chain Analysis



Outbound Logistics

•Regional Sales Office and Vehicle Dispatch

Section linked through SAP.

• Efficient security system for prevention of any

kind of pilferage

--

Marketing and Sales Institutional Clients and OLMStrong brand image with high brand recall. Largest dealership in a mass market

ServicesMaintenance Warranty, Product Recall capabilities developed at dealership level for flexibility

--

Hero Honda: Distinctive Activities from Value Chain Analysis


Hero Honda: SWOT Analysis

Strengths.• Pioneers of First stroke bike in the Indian market, hence enjoy a great brand image synonym with high performing bikes

• Access to Japanese technology has given it leadership in fuel efficient bikes, one of its USP

•Huge sale network (3500 Dealers)

•Better sale service

•It has the highest share in automobile sector.

•Low Debt company(Debt Equity ratio is 0.1)

Weaknesses

• Plant running close to capacity, may face delay in orders

• High Dependence on Japanese counterpart for technology know how and research capabilities

• Its market share is reducing in wake of competition ,though the absolute numbers are increasing from last few years.

Opportunities

• Huge export potential, CD Dawn is the most popular brand of motorcycle in Columbia• Under presence in scooter market can be improved for higher sales • Increased opportunity in heavy motorcycle market

Threats

• Big uncertainty in minds of investor about drop in quality of technical knowhow after recent buyout• Increased competition especially from Bajaj Auto eating into market share• Increasing cost of supplies especially aluminum reducing the profitability of company


Hero Honda: Business Model Framework


Refer to the attachment: Hero Honda.xls

Bajaj Auto: Overview

Vision : Mobilising,globalising,financing and de-risking India through its operations

Mission :Rapidly enhancing production ,exports and international facilities to become among the top three largest 2 wheelers makers in the world

Portfolio : Automobiles(2 wheelers), spares

Main highlights

• .The company is well known for their R&D, product development, process engineering and low-cost manufacturing skills

• The company is the largest exported of two and three-wheelers in the country with exports forming 18% of its total sales.

• The company has two subsidiaries, namely Bajaj Auto International Holdings BV and PT Bajaj Indonesia

• Current Models include : ›Bajaj Pulsar 135 LS,Bajaj Pulsar DTSi, Bajaj Pulsar 200CC,Bajaj Avenger,Bajaj Pulsar DTS-Fi 220 CC, Baja jDiscover DTS-Si 100cc, Bajaj Pulsar 220 S

• Operations in more than 60 countries


http://auto.indiamart.com/motorcycles/bajaj-pulsar-135-ls/

http://auto.indiamart.com/motorcycles/bajaj-pulsar-135-ls/

http://auto.indiamart.com/motorcycles/bajaj-pulsar/



http://auto.indiamart.com/motorcycles/bajaj-pulsar/index.html

http://auto.indiamart.com/motorcycles/bajaj-avenger/

http://auto.indiamart.com/motorcycles/bajaj-pulsar-dts-fi220/



http://auto.indiamart.com/motorcycles/bajaj-discover-dts-si/



http://auto.indiamart.com/motorcycles/bajaj-pulsar-220s/

It started off by selling imported two- and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two- and three-wheelers and it went public in 1960

It started off by selling imported two- and three-wheelers in India. In 1959, it obtained license from the Government of India to manufacture two- and three-wheelers and it went public in 19601945

1970-80

1981-90

1991-2000

2001-2010

• In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a single financial year

• In 1970, it rolled out its 100,000th vehicle. In 1977, it managed to produce and sell 100,000 vehicles in a single financial year

• In 1985, it started producing at Waluj near Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year

• In 1985, it started producing at Waluj near Aurangabad. In 1986, it managed to produce and sell 500,000 vehicles in a single financial year

• In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million vehicles in a year.

• This decade also saw the launch of popular models like Boxer, Caliber, Legend , Saffire

• In 1995, it rolled out its ten millionth vehicle and produced and sold 1 million vehicles in a year.

• This decade also saw the launch of popular models like Boxer, Caliber, Legend , Saffire

Bajaj Auto: Evolutionary Trends

• The company was incorporated on April 30, 2007 as a wholly owned subsidiary of erstwhile Bajaj Auto Ltd (the holding company)

• 2007, the company inaugurated their green field plant at Pantnagar in Uttarakhand.

• Bajaj Auto International Holdings BV, a wholly owned subsidiary company acquired 14.51% equity stake in KTM Power Sports AG of Austria

• The company was incorporated on April 30, 2007 as a wholly owned subsidiary of erstwhile Bajaj Auto Ltd (the holding company)

• 2007, the company inaugurated their green field plant at Pantnagar in Uttarakhand.

• Bajaj Auto International Holdings BV, a wholly owned subsidiary company acquired 14.51% equity stake in KTM Power Sports AG of Austria


Firm Infrastructure: Financing, Planning, Plants, Machinery, Technology, Investor Relations

HRM: Recruiting, Training, Compensation


Technology Development: MIS capabilities, Product and Process Design, Testing, SAP, R&D, Technology Transfer, Patent, Collaboration

Inbound Logistics

Operations Outbound

Logistics

Marketing and

Sales Services

Procure Raw Material ,Aluminum sheets,paints,parts ,spares, machine tools, Maintain Inventory, Manage shipment, Handling of Orders, Orders, Specifications (Type & Volumes)

Two Wheeler Business Unit, and Commercial Vehicles Business Unit &International Business Unit for manufacturing, assembling and maintenance shops

Retail consumers,Niche Customers,Showrooms ,brand promotions, advertising, Collections, Bulk Consumers(Pizza Hut, Dominoes etc)


Working with Subsidaries,Exports Department for geographies, Shiiping,Transportation ,Recall of Automobiles, Spares etc,

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Bajaj Auto :Value Chain Analysis



Firm Infrastructure

Bajaj invested hugely in infrastructure while

simultaneously developing product design and

innovation capabilities, which is the prime reason

behind the energetic Bajaj of 21st century

•Banking on improved infrastructure, Bajaj had impressive performance growing at a rate of 20%• Won BBC World Wheels, Business Standard Motoring awards 2004 etc for Baja Pulsar

HRM The Company affirms that its competitiveness is interlinked with talent management, hence view HR as Strategic role in its growth

• The Company has a partnership programme with educational institution/s for training and development• In case of equal business offers, the Company will select a business partner belonging to a socially disadvantaged section of society.


Bajaj has been investing heavily in the latest, sophisticated technologies to scale down product development lifecycles and enhance testing capabilities.

Bajaj Auto R&D also enjoys access to the specialized expertise of leadinginternational design and automobile engineering companies working in specificarea

Procurement• Global Sourcing Team – China , a key destination for sourcing essential items like tires, power steering units etc

• Centralized Strategic Sourcing for key components

Inbound Logistics

• Long term contract with service provider’s – transporters and agents.• Personnel at regional offices for over seeing the smooth transit of goods

--

Operations

•Kaizen & TPM team – continuous drive to improve efficiencies.• Automated manufacturing processes• Maintenance – technical competence.

Bajaj Auto: Distinctive Activities from Value Chain Analysis


Outbound Logistics

• Based on their own brand of globalization,

they have built their distribution network over

60 countries worldwide

• Company will set-up separate sales channels

for every segment of its business and

consumers

Ales network involves separate dealer networks catering to theurban and rural markets as well as its three-wheeler and premium bikessegments. Bajaj Auto also plans to set-up an independent network of dealersfor the rural area

Marketing and Sales

Large market are USA, Argentina,Colombia, Peru, Bangladesh, Sri Lanka, Italy, Sweden, Germany, Iran and Egypt.Bajaj leads Colombia with 65% of the scooter market, in Uruguay with 30% ofthe motorcycle market and in Bangladesh with 95% of the three-wheelermarket.

Latest offering from Pulsar and Avenger stable has given Bajaj Brand an aspirational value globally which was missing earlier

ServicesBajaj has a robust after sales service and spares network in many countries

Sales and service network reach have been expanded substantially covering the major cities of Jawa, Sumatara, Baliand Sulawesi islands. Total showroom strength stands at around 63 numbers,covering 46 cities of Indonesia.--

Bajaj Auto: Distinctive Activities from Value Chain Analysis


Bajaj Auto: SWOT Analysis

Strengths

•Highly experienced management• Product design and development capabilities•Extensive R & D focus • Widespread distribution network.• High performance products across all categories.• High export to domestic sales ratio• Great financial support network (For financing the automobile)• High economies of scale.• High economies of scope

Weaknesses

• Hasn't employed the excess cash for long

• Still has no established brand to match Hero Honda's Splendor in commuter segment

• Not a global player in spite of huge volumes

• Not a globally recognizable brand (unlike the JV partner Kawasaki

Opportunities

• Double-digit growth in two-wheeler market•Untapped market above 180 cc in motorcycles• More maturity and movement towards higher-end motorcycles• The growing gearless trendy scooters and scooterette market• Growing world demand for entry-level motorcycles especially in emerging markets

Threats

• The competition catches-up any new innovation in no time.• Threat of cheap imported motorcycles from China• Margins getting squeezed from both the directions (Price as well as Cost)• TATA Nano is a serious substitute for the motorcycle segment


Bajaj Auto: Business Model Framework


Refer to the attachment: Bajajauto.xls

TVS Motors: Overview

Vision : TVS Motor will be responsive to customer requirements consonant with its core competence and profitability. TVS Motor will provide total customer satisfaction by giving the customer the right product, at the right price, at the right time.

Mission : TVS is committed to being a highly profitable, socially responsible, and leading manufacturer of high value for money, environmentally friendly, lifetime personal transportation products under the TVS brand

Portfolio : Automobiles(2 wheelers),Three Wheelers, Spares

Main highlights

• . TVS Motor Company is the third largest two-wheeler manufacturer in India and one among the top ten in the world, with annual turnover of more than USD 1 billion i

• TVS Motor currently manufactures a wide range of two-wheelers from mopeds to racing inspired motorcycles. Motorcycles (Apache RTR 180, Flame DS 125, Flame, TVS Jive, StaR City, Sports) Variomatic Scooters (TVS Wego, Scooty Streak, Scooty Pep+, Scooty Teenz) Mopeds (TVS XL Super, TVS XL Heavy Duty)

• The company has 4 plants - located at Hosur and Mysore in South India, in Himachal Pradesh, North India and one at Indonesia. The company has a production capacity of 2.5 million units a year.


In the year 1979, Sundaram-Clayton Ltd started Moped Division at Hosur to manufacture TVS 50 mopeds

In the year 1979, Sundaram-Clayton Ltd started Moped Division at Hosur to manufacture TVS 50 mopeds1978

1980-90

1991-2000

2001-2010• In the year 1982, the company

entered into a technical know-how and assistance agreement with Suzuki Motor Co Ltd of Japan and in the year 1985, they incorporated a new company Lakshmi Auto Components Pvt Ltd for the manufacture of critical engines and transmission parts.

• In the year 1982, the company entered into a technical know-how and assistance agreement with Suzuki Motor Co Ltd of Japan and in the year 1985, they incorporated a new company Lakshmi Auto Components Pvt Ltd for the manufacture of critical engines and transmission parts.

• In year 1993, they launched TVS Scooty. During 1999-2000, TVS Suzuki Ltd was amalgamated with Sundaram Auto Engineers Ltd, an unlisted group company which was incorporated in the year 1992

• In year 1993, they launched TVS Scooty. During 1999-2000, TVS Suzuki Ltd was amalgamated with Sundaram Auto Engineers Ltd, an unlisted group company which was incorporated in the year 1992

TVS Auto: Evolutionary Trends

• The TVS group and Suzuki Motor Corporation parted ways from their 15-year-old joint venture on September 27, 2001

• In June 2008, the company entered into a contract manufacturing arrangement with Mahabharat Motors Manufacturing Pvt Ltd

• The company introduced four stroke version in Petrol, LPG and CNG fuels for domestic and export markets during 2008-09

• The TVS group and Suzuki Motor Corporation parted ways from their 15-year-old joint venture on September 27, 2001

• In June 2008, the company entered into a contract manufacturing arrangement with Mahabharat Motors Manufacturing Pvt Ltd

• The company introduced four stroke version in Petrol, LPG and CNG fuels for domestic and export markets during 2008-09


HRM: Total Employee Involvement ProgrammeRecruiting, Training, Compensation


Technology Development: Highly dedicated RnD Team, Production, Testing, SAP, Technology Procurement Patent, Collaboration

Inbound Logistics

Operations Outbound

Logistics

Marketing and

Sales Services

Procure Raw Material ,Aluminum sheets,paints,parts ,spares, machine tools, Maintain Inventory, Manage shipment, Handling of Orders, Orders, Specifications (Type & Volumes)

AssemblyForgingWeldingTesting,ElectroplatingChassis formingHeat TreatmentPainting, Machining,Road Testing

Retail consumers,Niche Customers,Showrooms ,brand promotions, advertising, Collections, Bulk Consumers(Pizza Hut, Dominoes etc)



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TVS Motors:Value Chain Analysis



Firm Infrastructure

TVS Motors company ,along with other

subsidiaries of Sundaram Clayton group has a

large end to end infrastructure to support its

automobile business

TVS was the first two wheeler company in the world to win a Deming Prize for quality in year 2002

HRM Company follows Total Employee Involvement and Daily Work Management Programmes to improve employee efficiency

•TEI ensures sharing of responsibility across value chain for company’s performance•


Actively pursuing Research and development to constantly improve performance,styling,efficiency and alternate fuels

• Was able to launch seven models on a single day, f first time in automobile history

Procurement

• Extends its core values to all its vendors through continuous training programs like Total Productivity Maintenance .Follows reverse auction process

• TVS has been able to connect to its 72% of its vendors in real time to ensure seamless flow of information about products and components

Inbound Logistics

TVS follows following systems for efficient inbound logistics •Kanban Systems•Direct delivery to usage and web based ERP

TVS has been able to automate its process to ensure supply frequency optimization via SCM

Operations

TVS uses state of art technology as well as modern operational practices like JIT , Online Design Collaboration, Reverse Auction Process and TPM

Company possess prestigious certifications like ISO 9000,QS 9000 and TS16949

TVS Motors: Distinctive Activities from Value Chain Analysis


Outbound Logistics

•TVS possess capabilities in outbound

logistics, warehousing and value added

services like line feeding, high sub-assemblies

and SCM consultation

• Services of its subsidiaries are sleeked by other manufacturing companies like M&M and General Motors

Marketing and Sales

•Riding on their quality and cost effectiveness

TVS is a big exporter with 25 % of its

distribution from SAARC

countries,Africa,Argentina and Mexico

TVS saw a rise of 25 % exports in exports in past two years

ServicesTVS has a good after sales service and spares network but is much smaller than its bigger competitors

TVS Motors: Distinctive Activities from Value Chain Analysis


TVS Motors: SWOT Analysis

Strengths

•Huge sale network (3500 Dealers)

•Better sale service

•Highly competitive in export markets

•It has a good brand image

•Known for quality service.

•Debt equity ratio is only 0.1.

Weaknesses

• Apart from Apache, other models have limited popularity and aspirational value

• Increasing price of supplies

• Not a global player in spite of huge volumes

• Not a globally recognizable brand

Opportunities

• Improvise the fuel efficiency of offering in Scooter and Scooterette market Make its product as competent as Honda

• Green Vehicles like electric scooty can be a big opportunity in near future

•Growing world demand for entry- level motorcycles especially in emerging markets

Threats

• Threat of cheap imported motorcycles from China

• Margins getting squeezed from both the directions (Price as well as Cost)

• Inflation may hamper the sales

• Credit squeeze due RBI policy will make expansion expensive


TVS Motors: Business Model Framework


Refer to the attachment: TVS Motors.xls

Yamaha Motors: Overview

Vision : To establish YAMAHA as the "exclusive & trusted brand" of customers by "creating Kando" (touching their hearts) - the first time and every time with world class products & services delivered by people having "passion for customers".

Mission : Be the Exclusive & Trusted Brand renowned for marketing and manufacturing of YAMAHA products, focusing on serving our customer where we can build long term relationships by raising their lifestyle through performance excellence, proactive design & innovative technology

Build the Winning Team with capabilities for success, thriving in a climate for action and delivering results

Portfolio : Automobiles(2 wheelers), Spares

Main highlights

• . Yamaha Motors India was incorporated in August 2001 as a 100'% subsidiary of YMC, Japan

• YMI two State-of-art manufacturing plants in India i.e Faridabad and Surajpur a wide range of motorcycles that meet International technology standards are manufactured.These cater to domesric as well as international markets.

• An agreement has recently been reached between Yamaha Motor Co., Ltd. (YMC) and its joint venture partner in India, Escorts Limited under which YMC will acquire all of the 26% of the stock presently held by Escorts Limited

• Launched highly successful models Yamaha FZ and YZF R1


1964

1985-1990

1990-2010

• Established second plant at Surajpur with an area of 3780900 sq ft with bikes Yamaha Crux and RX100

• Established second plant at Surajpur with an area of 3780900 sq ft with bikes Yamaha Crux and RX100

Yamaha Motors: Evolutionary Trends

• In 2008, Mitsui & Co., Ltd. entered into an agreement with YMC to become a joint-investor in the motorcycle manufacturing company "India Yamaha Motor Private Limited (IYM)“

• introduction of FZ-16, FZ-S, Fazer, and R15 they have made an impression on the mid range bike market in India

• In 2008, Mitsui & Co., Ltd. entered into an agreement with YMC to become a joint-investor in the motorcycle manufacturing company "India Yamaha Motor Private Limited (IYM)“

• introduction of FZ-16, FZ-S, Fazer, and R15 they have made an impression on the mid range bike market in India

Established first plant at Faridabad in 1964 with part manufacturing capabilities

Established first plant at Faridabad in 1964 with part manufacturing capabilities


http://en.wikipedia.org/wiki/Yamaha_FZ16

http://en.wikipedia.org/wiki/Yamaha_FZ-S

http://en.wikipedia.org/wiki/Yamaha_Fazer_(India)

http://en.wikipedia.org/wiki/Yamaha_YZF-R15

http://en.wikipedia.org/wiki/Yamaha_FZ16

http://en.wikipedia.org/wiki/Yamaha_FZ-S

http://en.wikipedia.org/wiki/Yamaha_Fazer_(India)

http://en.wikipedia.org/wiki/Yamaha_YZF-R15


HRM: finding, screening, recruiting and training job applicants, Appraisal,as well as administeringemployee-benefit programs.


Technology Development: Highly dedicated RnD Team, Production, Testing, SAP, Technology Procurement Patent, Collaboration

Inbound Logistics

Operations Outbound

Logistics

Marketing and

Sales Services

Procure Raw Material ,Aluminium sheets,paints,parts ,spares,machine tools, Maintain Inventory, Manage shipment, Handling of Orders, Orders, Specifications (Type & Volumes)

Two Wheeler Business Unit, and Commercial Vehicles Business Unit &International Business Unit for manufacturing, assembling and maintenance shops

Mostly Showrooms, Retail consumers, brand promotions, advertising, Collections, Bulk Consumers(



Su

pp

ort A

ctivities

Prim

ary Activities

Yamaha Motors:Value Chain Analysis



Firm Infrastructure

TVS Motors company ,along with other

subsidiaries of Sundaram Clayton group has a

large end to end infrastructure to support its

automobile business

TVS was the first two wheeler company in the world to win a Deming Prize for quality in year 2002

HRM

• Transparent & Team-Based Organisation •Focused & Target Oriented (MBO Driven) working •Developing New Work-Culture (Yamaha Identity)

Human Resources Development Division consists of the Personnel Department, Employee Relation Department, Human Resources Development Department, Health & Safety Department


Engine and FRP technology were used as a base to actively diversify and globalize the area of business

•Access to Research and Development Capabilities through parent company in Japan

Procurement•Vendors based in Delhi Suburban areas to reduce cost of transportation

• TVS has been able to connect to its 72% of its vendors in real time to ensure seamless flow of information about products and components

Inbound Logistics

Possess inhouse IT capabilities under Yamaha InfoTech, a wholly owned subsidiary of Yamaha India to provide IT capabilities for Inbound Logistics

Operations

Yamaha was the early adapter of comprehensive quality control systems and quick to put in place a TPM (Total Productive Management) program

Company meet standards like ISO 14001,QS 9000 and

Yamaha Motors: Distinctive Activities from Value Chain Analysis


Outbound Logistics

Dealer network works on the "3S"

fundamentals of -SALES SERVICE and

SPARE PARTS under one roof..

Yamaha posses a strongly dedicated team of Sales and Service engineers constantly trained by parent companies

Marketing and Sales

•Recent initiatives have been launched by

Yamaha in the field of business-to-business as

well as business-to-consumer cooperation with

Dealers. The new showrooms based on

YAMAHA VISUAL IDENTITY are one of the

many steps in this direction.

Strong brand image with high brand recall. Largest dealership in a mass market

ServicesTVS has a good after sales service and spares network but is much smaller than its bigger competitors

Yamaha Motors: Distinctive Activities from Value Chain Analysis


Yamaha Motors: SWOT Analysis

Strengths

• Access to Japanese technology has given it competitive edge with respect to Indian counterparts

• Possess strong brand name synonym with quality

• Competitive edge in producing motorcycle for mass markets

Weaknesses

• High Dependence on Japanese counterpart for technology know how and research capabilities

• Losing grip on lower price range motorcycles which had traditionally been its bread and butter in India

• Sales not a true reflection of capability

• Not a globally recognizable brand

Opportunities

• Recent success in >150 cc category augments more emphasis in that direction with more models like FZ and R1

• Increasing consumer disposable income with preference for styling and quality gives a huge opportunity to Yamaha

• No Presence in Scooters market yet which could be tapped in future

Threats

• Threat of cheap imported motorcycles from China

•Increased competition especially from Bajaj Auto may eat into market share

• Technology imports from Japan hampers domestic research and development process

• Inflation may hamper the sales


Yamaha: Business Model Framework


Refer to the attachment: Yamaha.xls

Business Model Comparison (Economic Value, Social Value, Organization Framework)

40

Business Model Components

Hero Honda Bajaj Auto TVS Motors Yamaha

Value Proposition

*Low cost quality products suited to withstand tough Indian conditions

* Niche products for high end customers

8High value for money by offering improved style at a

competitive cost

* Low cost competitive products

* Superior quality high end products

* Differentiated products•Superior quality products*Sports segment ,premium

bikes

Key Activities

*World class manufacturing of almost all segment in the Indian

Motorcycle segment* Partnerships with sports events

such as Cricket and Hockey

World class manufacturing in all segment in the Indian

Motorcycle segment* Innovative products aimed at

youth *Latest niche products for Pro-Bikers

* Manufacturing in different segments in India

* Assembling in international markets which assemble CKD

kits

Manufacturing in different segments in India

* Importing high end motorcycles for sale in India

Key Resources

*Manufacturing facility at three units* Strong R&D from the Japanese

counterpart* Vast pool of technically competent

engineers and managers

*3 plants at Waluj ,Chakan and at Pant Nagar

Extensive R&D focus* Huge distribution network

* Highly competent management

* Extensive R&D focus* Extensive distribution

network* Highly diversified business,

apartf rom two-wheeler manufacturing

* Extensive R&D focus* Qualified engineers and

managers *Technology support by Yamaha

Key Partners

* A JV between India's Hero Group and Japan's Honda Group (to be

terminated in 2014) * Minami-aoyama Minoto-ku

for Technical collaboration

14.51% equity stake in KTM Power Sports AG of Austria

*International Logistics Partners :Maersk Sealand,

P&O Nedloyd and APL * Key

Suppliers :JBM,MRFReinder,Makino and Endurance

* Partners in international markets to assemble CKD kits

for sales* Partners in Indian markets to boost its auto spares business *Only company of this size not

having a major international technology supplier like hero

Honda

* JV with mitsii* Originally a JV with Escorts

Customer Relationships

*PUC certification support *Warranty on proprietary items

handled by OEM*Recall capabilities developed at

dealership level

Robust sales service not only in India, but most of the

countries it operates in * Online capabilities for service, spares ,test ride and financing

* Robust sales and service network. *Online

buying,maintainence scheduling available *MoU

with SBI for Financial Loans

* Robust sales and service network

*Follows 3S philosophy fundamentals of -SALES

SERVICE and SPARE PARTS under one roof.

Customer Segments

* Individual customers* Bulk customers such as pizza hut

* Mileage and cost conscious customers (100cc, 125cc)

* Style conscious customers (150cc+ segment)

* Mileage and cost conscious customers (100cc, 125cc)

* Style conscious customers (150cc-200 segment)

* Pro Bikers(More than 200 cc)

* Cost concious customers *TVSM continues to hold a monopoly position in the

moped segment with 100% market share

* Quality concious customers

*Quality focus customer *Cost focus customer

*Premium bikes customers

MetricsSalesof different product segments

* Average maintenance cost per year

Geographical distributon of sales

*Different needs for different customers

Average service cost per motorcycle

* No. of innovative features compared to its rivals

*Ability to exceed consumer expectations

* No. of innovative features compared to its rivals

41

Business Model Components

Hero Honda Bajaj Auto TVS Yamaha

Channels

Network of 550 dealers and 3,500 service centres * rural channel

partners work on the rural vertical through the ‘Har Gaon Har Aangan’

program

*498 dealers and over 1,500 authorised service

* For other countries, has established its own sales

network

•Sales are done through the showroom route in India

*Large presence with 3500 dealers

* Factory sales for bulk clients

•Sales are done through the showroom route in India

*Relatively lower presence of service stations and dealerships

Revenue Streams

* Majority of revenues from fuel efficient 100 cc segment, focusing

on individual customers *Hero Honda’s market share has improved to 45%in entry segment bikes *Only 4.7% of revenue

from spare parts

* The company’s growth is primarily driven by the

domestic market, with sales rising by 23% * Product mix is tilting more towards premium with

50% market share

The scooterette business is an established one and has a strong brand recall *However ,

68 % of revenue come from motorcycles

*12% of revenues come from scooterette * 20 %

revenue through mopeds

* Recent focus has shifted towards 150cc+ segment *Entry level bikes

such as Crux also showing good growth owing to the rural

demsnd

*125 cc segment relatively underperforming

Profit Formula

Organization Form

* A Vertical organisation structure involves key personnel from boh

Hero and Honda* Functional hierarchy *Joint Managing Director Toshiaki

NakagawaChairman Brijmohan Lall Munjal Managing Director & CEO Pawan

MunjalDirector Shobhanan Bhartia Director (Technical) Sumihisa

Fukuda

* Strong management team with top positions held by bajaj

family* Divided intothree broad

business vericals of Executive Search, Business

Development and Client Retention and Relations *Chairman Rahul Bajaj

Vice Chairman Madhur Bajaj Managing Director Rajiv Bajaj

Executive Director Sanjiv Bajaj

* Innovation focussed leadership

* Independeent Research facilities apart from vertical

structure *Chairman &

Managing Director Venu Srinivasan -

Director H Lakshmanan Director T Kannan Director C R Dua

*Innovation focused leadership* Functional hierarchy

Leadership Style and Attributes

Expansion Driven, HierarchalHierarchal andInnovation

DrivenParticipative and Quality

DrivenParticipative, Quality and

Consumer Oriented

Others

Company A, B, C, D: Business Model Comparison (Economic Value, Social Value, Organization Framework)

Sources: Company Annual Reports, CMIE Industry Report (2009), business article name and web link etc

References

References:

• http://www.ibef.org/download/Automotives_270111.pdf • Dept. of Heavy Industry India

http://www.dhi.nic.in/autopolicy.htm• Society of Indian Automobile Manufacturers

http://www.siamindia.com/scripts/market-share.aspx• EMIS Emerging Markets

http://site.securities.com/• Federation of Automobile Dealers Associations

http://www.fadaweb.com/two_wheeler_industry.htm

http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/automobile.htm• CMIE data base for November 2010• World Bank Data

http://data.worldbank.org/country/india

http://india-reports.in/transitions/two-wheeler-segment-in-india/

http://www.parsoli.com/budget_highlights_parsoli.pdf

• The Evolution and Structure of the Two-wheeler Industry in India

By Sunila George, RaghbendraJha, Hari K. Nagarajan• http://www.yamaha-motor-india.com/• http://www.herohonda.com/• http://www.tvsmotor.in/• http://www.bajajauto.com/

http://www.ibef.org/download/Automotives_270111.pdf

http://www.fadaweb.com/two_wheeler_industry.htm

http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/automobile.htm

http://www.yamaha-motor-india.com/

http://www.herohonda.com/

http://www.tvsmotor.in/

http://www.bajajauto.com/

strategy management_10p003_10p004

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