A strategic analysis
1. Company Profile
We are 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, for customers predominantly in Asian markets and to provide fulfilment and prosperity for employees, dealers and suppliers.
"TVS Motor - Driven by the customer."
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.
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 in 2008-2009, and is the flagship company of the USD 4 billion TVS Group.
TVS Motor Company Ltd. was established in 1911 by T. V. Sundaram Iyengar in India. The TVS group of companies is mainly situated in Padi, Tamil Nadu, in the outskirts of Chennai (formerly Madras). TVS Motor Company Limited is the flagship company of TVS Group, the USD 2.2 billion group. The Group is the third largest two-wheeler manufacturer in India and globally among the top ten, with an annual turnover of over USD 650 million. TVS manufactures a wide range of two-wheelers including motorcycles, scooters, and mopeds. The company also manufactures three-wheelers, TVS King, in two variants, two-stroke petrol and two-stroke liquid petroleum gas (LPG). It also offers automobile spares and accessories. The company operates in India, Singapore, Indonesia and the Netherlands. It is headquartered in Chennai. Currently the group has more than 30 companies and employees over 40,000 people worldwide. TVS Motor Company, India employs about 4,285 people. With steady growth, expansion and diversification, it commands a strong presence in the manufacturing of two-wheelers, auto components and computer peripherals. They also have vibrant businesses in the distribution of heavy commercial vehicles (HCV) passenger cars, finance and insurance.
1980 is the red letter year for TVS when India's first two-seater moped rolled out that redefined the realm of personal transportation. In 1982, the company entered into a technical collaboration with Suzuki Motor Corporation of Japan which helped the fledgling joint venture gain from the expertise of a global two-wheeler giant like Suzuki. In 2000, the TVS group and Suzuki Motor Corporation parted ways from their joint venture with the former buying out the 25.97 per cent stake of the Japanese company for Rs 9 crore.
Globally, TVS Motor Company is the first two-wheeler manufacturer to be honoured with the hallmark of Japanese Quality - The Deming Prize for Total Quality Management. It is the only automotive manufacturer in India to get the prestigious Deming Prize. One of its subsidiaries Sundaram Clayton was the first company in India to receive the Deming followed by Sundaram Brake Linings also getting the Deming Prize. This prize is "given to organizations or divisions of organizations that have achieved distinctive performance improvement through the application of TQM in a designated year."Sundaram Clayton went on to be awarded the Japan Quality Medal.
1.4. Tour of history of TVS form past to present
The company was incorporated as Indian Motorcycles Pvt. Ltd. on July 1982. In the same year it entered in agreement with Suzuki motors Japan to provide technical knowhow. According to the agreement Suzuki motors would provide all assistance in technology, production, trade secrets and other. In 1986 a new company Laxmi was opened to manufacture engine and critical parts. The company in the following year acquired the assets of Sundaram Clayton Ltd. In the later part of the year the company changed the name to TVS MOTORS Ltd. The company continued to progress under the assistance of Suzuki. In 1991 the agreement with Suzuki expired, then with the consent of Govt. of India the agreement was renewed for three more years. The company continued to introduce new products in the market which include Samurai, then Shogun then Scooty. Finally in 1997 TVS-Suzuki became the first company to launch a 100 cc motorbike in Indian Market. Then TVS made entry in Scooter segment by launching TVS Spectra. However after initial interest the scooter did not took off as thought by TVS Suzuki, and then its variants were introduced. The joint venture continued to bring new products in market with TVS Victor as one of their new brand in 2001. Then later in that year both the companies parted ways and the 15 year long joint venture ended with TVS buying the 25% shareholding of Suzuki for 9 crores. Then TVS competed in the Indian Market all alone. Although TVS has captured a part of the market of leader Hero Honda but it could not capitalise on it. During the following years TVS came with different products in the motorcycle category in 100, 125, 150 cc category. It tried to provide with the best of product quality in each segment. Currently it is 3rd in the market leadership and need to be proactive if it wants to move higher in the market capitalisation war.
1.5. Group companies
With steady growth; expansion and diversification, today TVS commands a strong presence in various fields - two wheelers, automotive components, automotive spares, computer peripherals and finance. The following is the list of different companies under the group:
TVS Motors Company Ltd.
- Lakshmi Auto Component Ltd.
- Lucas Indian Service Ltd.
- Axles India Ltd.
- Brakes India Ltd.
- Harita Grammer Ltd.
- India Motor Parts and Accessories Ltd.
- Indian Nippon Electricals Ltd.
- Lucas TVS Ltd.
- Madras Auto Service
- Southern Roadways Ltd.
- Sundaram Brake Linings Ltd.
- Sundaram Fastners Ltd.
- Sundaram Finance Ltd.
- Sundaram Industries Ltd.
- Sundaram Motors
- Sundaram Clayton Ltd.
- TV Sundaram Iyengar & Sons Ltd.
TVS Motors Company Ltd.
1.6. Milestones of the company
1982 India's first 2 seated 50cc Moped TVS 50, launched in Aug.
1984 First Indian Company to introduce 100cc Indo-Japanese motorcycles in Sept.
1994 Launched first indigenous Scooterette (sub-100 cc variomatic scooters), TVS Scooty in June.
1996 Introduced first catalytic converter enabled motorcycle, the 110cc Shogun in Dec.
1997 Launched India's first 5-speed motorcycle, the Shaolin in Oct.
2000 Launched TVS Fiero, India's first 150 cc, 4 stroke motorcycle in April.
2001 Launched TVS Victor, 4-stroke 110 cc motorcycle, in August, India's first fully indigenously designed and manufactured motorcycle.
2004 Launched TVS Centra in January, a world-class 4-stroke 100 cc motorcycle with the revolutionary VT-i Engines for best-in-class mileage.
Launched TVS Star in Sept, a 100 cc motorcycle which is ideal for rough terrain.
2005 Launched TVS Apache, a 150 cc sporty bike with stunning looks which is targeted towards youths.
2008 Launched TVS King, a 200cc three wheeler 2 stroke auto rickshaw targeting goods market
2009 Launched TVS Scooty Streak in Jan, a new variant of already successful product TVS Scooty.
1.7. Major products
Following are the products launched in Indian market trying to cover every segment of the population.
- TVS Star Sport
- TVS Fiero F2
- TVS Centra
- TVS Victor (110 cc)
- TVS Victor GLX (125 cc)
- TVS Victor EDGE (125 cc)
- TVS Flame (125 cc,ccvti technology)
- TVS Apache (150 cc,13.7 Ps @8500rpm)
- TVS Apache RTR 160
- TVS Apache RTR 160 EFI (Electronic Fuel Injection)
- Spectra Dx (150 cc)
- Spectra Ax (150 cc)
- TVS Scooty ES (60 cc)
- TVS Scooty KS (60 cc)
- TVS Scooty Pep (75 cc)
- TVS Scooty Pep + (90 cc)
- TVS Teenz
1.8. Financial report
Net Sales for TVS has been on a steady growth. It has increased from Rs. 1,541.77 Crores in March 2000 to Rs. 3,670.92 Crores in March 2009.
In the past few years, TVS has seen many ups and downs in its operating profit. Due to the economic boom observed during 2003-06, it had huge profits. But, later on due to the recession, its profits decreased. By the year 2009, it managed to make a profit of Rs. 198.59 Crores.
2. Strategic Analysis of the Company
2.1. Opportunities and threats at that time
If we separate the Indian two-wheeler industry's history into two time frames, one would be belonging to the pre 90's era, which was dominated by the Scooters and the second one would be after that dominated by the low powered Motorcycles especially by 100-125 cc.
An analysis on the opportunities and threats is given below:
- Looked like a readymade unending market: During the initial years, there were only a few Two-wheeler company in India. As a result, the competition was bare minimum. The Indian consumers liked Bajaj's products and were quiet happy with the performance and considered it to be safe as well as a family vehicle. Moreover, the average per capita income was low and was not enough for a common man to afford a car or any other four wheelers. Adding fuel to the fire was the existing tax structure at that time which further prevented them from getting a four wheeler, instead going for Scooters. These reasons were enough to explain the long waiting queues for the registration and delivery of Bajaj's scooters creating a readymade market for TVS to tap into and cash on.
- Penetration of scooters was still low and this presented a huge untapped market: Even though the scooter was the most preferred choice of the middle class Indians; the penetration was still very low even in an urban city/area. It was still considered as a luxury product and was looked as a prized and precious possession. The mere scale and scope of Indian market and the low penetration ratio made an excellent opportunity to diverge into new territories.
- Family Drive: Scooter was perceived as a family drive in India and thus the concept of a 'scooter' at that time still appeared to hold a huge potential.
- Increasing buying power of Indian consumers - Customers upgrading from cycles to powered automobiles: Due to the opening of the economy, disposable income of an average Indian increased leading them to go for luxury goods such as scooters, cars, etc. Increasing number of non-users of two-wheelers are showing interest towards purchasing a two-wheelers where as the existing two-wheeler customers are upgrading to the four-wheelers. By answering to those non-users, an extremely large market can be tapped.
- Opening up of the economy - Entry of foreign players: The foreign automobile giants were vying for India and were ready to capture Indian market with their technologically superior products and excellent range of services offered. This was an immense threat to the existing Indian two-wheeler manufacturers. As the quality of products was really an issue for the Indian manufacturers, they felt that they are vulnerable to this threat.
- Changing customer preferences: With the opening up of the economy and the increasing per capita income, the tastes of the end-consumers were also changing. With the advent of new emerging Indian middle class, they were now turning their favour from scooters to Motorcycles, which were faster, more fuel efficient and comes at somewhat same price.
- Increasing buying power of consumers - Customers upgrading to cars: The threat of losing a customer who is upgrading to a car was always there. Though the proportion of people upgrading from non-user to user was greater than the proportion of people upgrading to car, still the loss of customer base was a threat.
2.2. Changing customer preference
As said earlier, the customer preferences were shifting from Scooters to motorcycles gradually. Many factors contributed to this sudden change. Earlier, motorcycles were largely perceived as unsafe. But gradually they became acceptable in the mainstream market and were looked upon as a more stylish, faster yet fuel efficient and economical compared to scooters. With 4 strokes, the earlier unseen fuel efficiency of motorcycle engines struck a chord with the Indian consumers. The long waiting line at the Bajaj's outlet was testing the patience of the consumers. As a result, they wanted something to be quick, so many loyalists as well turned away from the scooter segment as such.
The other factors which led to the change in consumer preferences include - changing demographics of India, decrease in the average age of the earning population in India and opening up of the Indian economy lead a lot of youth in finding a good job with a secure source of income. These issues coupled with the perception of the young consumers of status quotient attached to the motorcycles led to the decline in scooter business. These young customers treated scooter as old and slow, and considered it for older generation. They were captivated and mesmerized by the looks, style, economy and the speed of the motorcycles. So gradually motorcycles started coming into the mainstream market. This becomes quite evident from the following table which depicts the growing market for motorcycles and shrinking market for scooter as a whole.
2.3. Benefit gained by TVS due to this change
Predominantly TVS major expertise was in motorcycles. However it launched Spectra to compete with Bajaj, but leadership in scooters was captured by Bajaj only. Until 1990 TVS growth scope was limited due to the demand for scooters in Indian market and aversion to motorcycles. However after 1991 when economy gained momentum the new emerging income earning youth showed a preference towards motorcycles. This was the turning phase for TVS. After that TVS continued registering healthy growth in sales over the past 2 decades. Its sales turnover has risen from Rs. 140 crores in 1991 to Rs. 4,008 crores in 2009.
3. Market Strategies Followed By TVS
3.1. Star and Apache - Key volume drivers
"Much of the volume growth is being contributed by the Star and Apache along with a fillip from the Victor variants. For the period April - October 06, the company recorded 937,405 units of two-wheelers compared to 770,841 units recorded in the previous year, at a growth of 22%. The motorcycles during this period clocked 584,155 units at a growth rate of 30%. TVS Star brand crossed the 1 million sales mark since its launch and with the launch of the electric start variant the demand for the vehicle has grown further in the coming months. Apache continues to be in demand and has captured sizeable share in the premium segment of the motorcycle market."
3.2. Brand Building - Focus to sustain
"The company has been spending whole-heartedly in creating its key model brands. The company plans to capitalize on the sizable success achieved by top brands in respective segments. The Star, Victor and Apache in respective segments have done well and all future efforts would be directed towards keeping the brand image live and fresh by introducing newer variants of the existing successful bikes."
3.3. Trying to capture the imagination of people
TVS Motors, the country's third largest two-wheeler manufacturer, launched seven products in a first-of-its-kind rollout in the Indian automobile industry.
The seven products include a completely new 125 cc motorcycle FLAME, an all new 110 cc StaR City, an Apache variant with fuel injection technology and the electric variant of a Scooty.
The other three products were the petrol, CNG and LPG version of a three-wheeler passenger vehicle that will compete with the Bajaj group, the only player in that segment."This is the first step to make the announcement of TVS as a young Indian multinational company. TVS have done significant amount of hard work in the last few years and now forthcoming years will mark the emergence of new TVS," said Venu Srinivasan, chairman and managing director of TVS Motors. He added that the simultaneous rollouts are a tribute to the engineering skill of the research and development wing of TVS, making it the first two-wheeler company to make multiple rollouts in a single day."Each new rollout signals avowed intent on the part of TVS to regain market share and momentum within the industry. The new offerings are targeted at different segments of the two-and three-wheeler customers with emphasis on superior technology, styling and engine capabilities," said Srinivasan.
In its bid to make more environment-friendly vehicle, TVS also announced the launch of its new CCVTi (controlled combustion variable timing intelligent) engine, which will be integrated in the newly launched 125cc FLAME."The CCVTi engine not only reduces the carbon dioxide but also cuts down carbon monoxide production by 70 per cent. The Indian auto industry has to make its best effort to make a green revolution," said Srinivasan.
"The auto industry has to make its best effort to make a green revolution by developing the technology of the future," said Srinivasan. The TVS chief added the company has plans for a "hybrid vehicle" but it would take a long time as the cost is significantly high and the market is niche.
TVS Motor has set the stage for entry into the three - wheeler market with the setting up of a new plant at Nanjangud, near Mysore in Karnataka. We understand that the company would be targeting the sub - one tonne passenger and goods carriers segment of the market. It will cater to both passenger and cargo segments with an investment of about Rs. 50 crore in phase-I. The total investment for the three - wheeler and four - wheeler quadricycle project are expected to be in the range of Rs 500 crore in the next 2 to 3 years. It plans to go with the petrol version of three wheelers and expects higher demand to come from B class towns.
3.4. Customer satisfaction and quality
The continued improvement in quality of its products has resulted in the company winning several quality awards as well as bringing in more value for its customers. TVS was the first Indian company to win Deming Quality Award. Company's adoption of Total Quality management has made this possible. Company has adopted policy of employee involvement in the best possible manner. Large number of quality circles has been formed. Equal attention has been given to both process and end product. Every employee ranging from manager to worker has a say as to how the quality can be improved. TVS has always focussed on business reengineering. Philosophies like JIT have enabled TVS to manufacture the product in the most efficient manner. This is one of the strategic advantages that TVS enjoys over its competitor in the market.
3.5. Research and development
Several Advanced Engineering and technological researches are constantly undertaken by the company to ensure that world-class products are offered to its customers. TVS Motor works closely with global Design and Research houses to give the Indian Consumer the very best in terms of technology, style and fuel efficiency. The company has applied for over 150 patents and its R & D team has published 33 technical papers in national and international conferences
3.6. Increasing nationwide network and reach
TVS Motor Company is aggressively increasing its national reach of its sales and service footprint through increased national network for customer access. Currently the products of the company can be purchased and serviced from over 4000 points.
3.7. Creating goodwill in the market - Serving the society
This extended arm of the company believes in social responsibility and has involved itself in several community development initiatives that have significantly improved the standard of living of the people in 51 adopted villages across the country.The CSR activities of TVS focus on following fronts of the society:
- Economic development - The program enables people below the poverty line in these adopted villages to earn their livelihood by involving them in activities that generate income.
- Health - Health is one of the main focus areas of the Srinivasan Services Trust. Dental care camps; eye camps, health check-up and nutrition programs are conducted. The initiative also focuses on primary health, maternal health, child-care and leprosy eradication.
- Infrastructure Development - The Company is actively involved in the community development of the villages by providing infrastructure facilities such as housing, sanitation, roads, drains, bus shelters, medical centre and natural resources management.
- Rebuilding Quake Hit Villages - Supported by Rural Agro Research & Development Society and Kutch Nav Nirman Abhiyan, the Company has rebuilt "Goyersama" a village in the District of Gujarat, which was hit by an earthquake of unprecedented scale and magnitude on 26th January 2001.
- Education and Literacy - In addition to providing infrastructure facilities like new buildings for school, the Company helps establish computer education programs for school children. The Srinivasan Services Trust has successfully achieved 98% primary school enrolment in the adopted villages.
3.8. Changing technology when needed
After the controversial legal duel with Bajaj Auto on ignition technology, TVS Motors launched its 125cc motorcycle 'Flame' with a new and modified engine. It incorporated a single-spark ignition engine based on controlled combustion variable timing intelligent (CC-VTi) technology.
The engine has been developed and patented by Austria-based AVL and has been licensed to TVS in India. AVL is the world leader in internal combustion engine technology and develops power train systems. It is a leading provider of technology to the global engine and automotive industry.
The 125cc segment has blurred the line between the 100cc and 125cc segments and it has been reckoned as the new entry level of the bike riders, considering the element of youth and style attached to it. TVS Motors, considering this approach and segment and its increasing wide acceptance, has pitched 'Flame' against the current rage, 'Bajaj Exceed'.
It is the combination of two factors, which would determine the acceptance of 'Flame'. First, it is the time and then there are the features. Flame comes with the already accepted single-spark ignition. Its launch was to coincide with the 'Exceed'. However, due to a legal duel with Bajaj Auto, its launch was delayed. In this span, the Exceed has been branded and promoted as a motorcycle having premium features (mileage-108km and disc brakes). Hence, a lot would depend on the company's branding strategy and Flame's fight with the features present in the Exceed (almost of a 150cc bike). TVS Motors's OPM has been hovering around 4-5%.
3.9. Launch goods carrier, gearless scooter
TVS Motor Company Ltd has ventured into commercial vehicle segment with launching TVS King 200cc three-wheeler. It was also said that the company would launch a gearless scooter, a segment that is logging growth even when the motorcycles are registering slide in sales.
Apart from the domestic market, TVS Motor will also export its TVS King to countries like Sri Lanka, Bangladesh, Latin America, Nigeria and others.
TVS motors, the Deming medal-winning company, which has a turnover of Rs.39.28 billion ($969 million), has invested around Rs.1.2 billion in developing its two-stroke three-wheeler in three versions - petrol, LPG and CNG.
"There is lot of commonality of components between our three-wheeler and two-wheeler engines. There will be around five-seven percent cost savings due to common parts," Srinivasan said.
3.10. Taking women on a ride
The automobile industry is in a sudden rush to cater to the transportation needs of the fairer sex. Vying with one another, the current bunch of Scooterette manufacturers and potential players are trying to roll out products for women across age groups as their central focus.
The special requirements of two-wheeler riding women; the features that will help ease their riding experience; and accessories that can be showcased as unique selling propositions are now driving innovation in designing Scooterettes for this burgeoning class of riders.
Women were always in the radar for manufacturers of these two wheelers, but only they were not projected as the primary focus. This was the case with the marketing strategies that Bajaj and Kinetic had adopted for the earlier versions of the Safire and the Zing respectively.
The primary targets for these two-wheelers were college-going students, middle-income households and men and women alike. Now, with the category showing signs of growing faster than the other two-wheeler segments and with the growth coming from the surge in purchases by women, manufacturers such as Bajaj, TVS Motor and Kinetic are keen on rolling out the red carpet to woo the divas.
After revamping its Scooterettes, Bajaj has launched 'Wave' a couple of years back. The new Wave is easier to ride, more powerful and, yet, more fuel-efficient and has attributes that are women-friendly. Not to be left behind, both Kinetic and TVS have launched new, snazzier variants of their Scooterettes and will try to hit back at Bajaj's attempt at a comeback into the premium Scooterette segment.
4. Consumer Insight
After deciding that there is a need for the strategic change, they turned their attention toward what consumer actually wants and expects from a motorcycle. The marketing research is the core competency of the TVS and thus they utilized it to the full extent and finally come to the conclusion that, motorcycles are a symbolic consumption for most of the bike riders. The basic role of a bike as just a commuter was changing. Earlier, there was lot of emphasis on the utilitarian need of the motorcycle, but now, a greater deal of importance is also given to styling, finishing and the overall feel and charisma of the motorcycle. Now there is a wish of riders to take on a youthful persona. So power, torque and other extended features are a sought after thing. The type of styling desired in most of the bikes is rugged styling with more power. Even though the Indian roads are not made that way to accommodate speed of 80-100+ still people want to have power control under their hand. They want all these qualities that too in an affordable range and that too with no compromise of quality.
This insight helped a lot in making TVS produce some of the finest bikes in their categories and subsequently ruling the Indian motorcycle sphere. The best example could be taken of Apache, which revolutionized the whole segment and upgraded the motorcycle segment form 100 to 150 cc.
5. Strategy Implemented
The motorcycle industry is such that the uniqueness couldn't exist for a long period of time and the technology is also imitable. So, the only strategy for a company having a competitive scope of broad target and cost as a competitive advantage ought to have cost leadership as its primary strategy.
In order to capture the market share and to have the economy of scale and scope they needed to have a broad target as their competitive scope. And as discussed earlier, even if they try to have a differentiation, that would be imitable. So they finally zeroed in for the integrated price leadership/differentiation strategy. So they had technologically advanced products, greater than 100 cc, that too at a price just slightly higher than a 100 cc motorcycle.
They also observed that volume wise the 100 cc generates a lot of volumes, but if seen in terms of profitability it did not add value to the segment. As a result, in 100 cc the profits are less but the hassles are more. In contrary to this, the 125cc+ segment is the most profitable, in which the profit is also higher with less hassles. Even though the total industry size is 40% for the 125cc+, the profit share contributed by this segment is whopping 65%. So, TVS decided to focus on both 100 cc and 125 cc segment and started producing 125cc+ motorcycle. The prices were set competitively so that the switch from 100 cc to 125 cc+ could be easy and the consumers could easily be convinced.
5.1. Business level strategy
The main concern in setting up the business level strategies is that the company needs to see that the strategies chosen are effectively managing relationships with customers and whether superior quality and superior value is delivered by the products offered. If the relationship with the customers via the products is not maintained and taken care of, then it is really difficult for a company to attract business and generate volumes and profit. Also apart from providing superior value to the customers we also need to see that the reach, richness and affiliation are also there. This basically means that the superior quality products which the company is offering to the consumers are finally reaching them through an effective channel and there is adequate access for the products and connection. There must be a two way flow of information between a company and the customers as it will help them to constantly update the products and if there are any grievances and complaints, they should be taken care of immediately. Apart from this very important and vital thing, the business strategy must answer the following three basic questions -
- Who - Determining the customers to serve: The market should be properly segmented as each product is targeted especially to a particular market. The choice and purchasing power of a particular segment is unique in its context. Knowing well which segment is being served, helps to formulate the business strategies in tandem with the operational strategy and is helpful for the company.
- What - Determining which customer needs to satisfy: The need of every customer is not exactly the same and the driving force behind the purchase for the consumers is also not the same. Different customers may have different unique needs and if the company figures that out, then it directly hit the bull's eye. For example, a customer may look for a normal bike for commuting between his home and office and is not willing to spend much, so for him no frills bike would be suitable, or let's say some people want their motorcycle to have lots of power, style, torque and should be designed to be ready for racing or sprints. For them, a different approach is needed to sell a motorcycle. So if that particular need of the customer to be satisfied is rightly identified, then it will be beneficial for the company.
- How - Determining core competencies necessary to satisfy customer needs: If the company could determine what its core competencies are, then it will be easy to formulate the business level strategy. Also the core competencies could be leveraged upon and made beneficial for the company as a whole.
5.2. Implementation of Business Strategy by TVS
Who: TVS has clearly segmented its target market. It has been rendering keen emphasis on the aesthetics of the product in different segment. For female riders it has been maintaining a line of 100 cc moped viz. Scooty. In the motorcycle segment TVS has divided its target segment in entry level buyers who are interested in 100cc or 125 cc motorcycles. Whereas, there is another segment with a liking for power and speed vehicles which include the high end customers for whom TVS has launched bikes in 125+ cc segment.
What: After a detailed market research it has been found that people buy motorcycle not only for utilitarian purpose but also for persona. So TVS focus is to manufacture a product which defines the personality of the rider, along with quality. So TVS is also giving greater emphasis on the aesthetics of the product. It is maintaining a number of variants so that the buyer can have a large number of alternatives to chose from. Along with that, TVS is bringing in newer variants of the existing brand line, so that new features can be incorporated while maintaining the same superior quality.
How: Since the needs of the customers are clearly defined, TVS finds it easy to implement them. It has a vibrant and creative R&D and Design teams which try to fulfil the changing needs of the product and incorporate them in the best possible manner. It follows the philosophy of Lean Manufacturing in its plants so that quality can be ensured in the product. Deming Award is a proof of this. Employee involvement ensures that TVS has the best information on every possible changing demand of the customer and how it has to be fulfilled in the most efficient manner.
6. Competition Analysis
6.1. Introduction and market development
Two wheelers give the euphoria of freedom and the feeling of being one with the nature. In India, the high congestion on the roads combined with a two-wheeler's low maintenance, price and easy loan repayments, has resulted in a stupendous growth in the sector. The Indian two-wheeler industry has come a long way from its early days when in 1948, Bajaj Auto started selling imported 'Vespa' scooters in India. A lot has changed since then. Customer preferences have shifted from metal-bodies scooters and mopeds to motorcycles and gearless scooterettes owing to their superior technology, fuel economy and aesthetic appeal. The change in customer preferences has changed the industry dynamics - past leaders have either been pushed down the order or were eliminated completely. While new leaders emerged, that rode the wave of change in line with the changing needs and expectations.
Several factors have contributed to the impressive growth of the two-wheeler industry in India - rising income levels, reducing excise duties, higher loan tenure and easier loan repayments. Furthermore, deteriorating traffic conditions combined with limited parking space are adding on to the demand for two-wheelers. Furthermore, with increasing women working population, changing social philosophy and broad-mindedness, the penetration of two-wheelers that is currently at abysmally low level is expected to increase significantly going forward.
India has emerged to be one of the largest low-cost producers of two-wheelers in the world, thanks to an abundant supply of skilled and semi-skilled manpower and local availability of important raw materials like steel, aluminium and natural rubber. Thus, the export market also looks promising in the long run.
Bikes currently dominate the two-wheeler market, accounting for the bulk of the sales and revenue, the other two prominent segments being scooters and mopeds. 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. Presently Hero Honda and Bajaj are the largest sellers of motorcycles in India.
The Indian two-wheeler market was opened to foreign players in the mid 80s. The then market leaders - Escorts and Enfield were caught unaware by the sudden surge of the 100cc bikes brought in by the four Indo-Japanese joint ventures. With the availability of low cost and fuel efficient bikes, demand increased making Hero Honda, then the only producer of 4-stroke bikes, the market leader. The first Japanese motorcycles were introduced in the early eighties. The first two-stroke and four-stroke engine motorcycles were brought by TVS Suzuki and Hero Honda respectively. Initially, starting with assembly of CKD kits, these two players later moved on 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 over several years.
6.2. Key Players in the Two-Wheeler Industry
There are many two-wheeler manufacturers in India which can be broadly categorized into two levels:
Major players: Hero Honda Motors Ltd (HHML), Bajaj Auto Ltd (Bajaj Auto) and TVS Motor Company Ltd (TVS).
Other key players: Kinetic Motor Company Ltd (KMCL), Kinetic Engineering Ltd (KEL), LML Ltd (LML), Yamaha Motors India Ltd (Yamaha), Majestic Auto Ltd (Majestic Auto), Royal Enfield Ltd (REL) and Honda Motorcycle & Scooter India (P) Ltd (HMSI).
6.3. Competitor Analysis
A competitor analysis has been performed between the companies Bajaj Auto, Hero Honda and TVS Motors. The rationale behind selecting these companies is that Hero Honda, Bajaj Auto and TVS are the top three market leaders in the two-wheeler industry in India. The comparison has been conducted on several parameters which are outlined below:
6.4. Promotional Strategies used by competitors
6.5. Resource Similarity and Market Commonality
Another framework of competitor analysis was used. This framework studied competitors of TVS on two parameters - Market Commonality and Resource Similarity.
From the analysis, it can be seen that Hero Honda is a very strong competitor for TVS as it has a very high market commonality and resource similarity. Next bigger competitor is Bajaj as it is high on market commonality. On the other hand, Royal Enfield scores low on both these parameters and is not a major threat to TVS at this point in time. Other players like Honda and Yamaha lie somewhere in between - meaning they pose moderate competition to TVS, given their product portfolio.
- As the automobile market is highly competitive, no differentiation remains for long as it can be easily imitated. So cost differentiation can help maintain the edge over others. Along with cost cutting it is imperative to maintain the same high quality standards as customer expectation levels have risen due to intense competition in the market. So it is extremely important that company maintains a integrated cost/differentiation strategy to improve its market share and move up the ladder.
- As the company grew, it has started exporting to other countries, particularly Africa, Latin America and some Asian countries. It has to tackle the task of defining its international strategy. It is understood that in their business model, the need to understand local culture and local responsiveness is very important. So, it is suggested that they chose between transnational and multi-domestic strategy; the differentiation in these two be governed by costs associated with local procurement and manufacturing vis--vis global integration.