Strategic Management Project

NITESH KUMAR GUPTA | MAHTAAB KAJLA | PRACHI CHAWLA RAHUL MITTAL | VINNY ARYA | VISHAD DUBEY

Agenda

Market Overview

OUR FOCUS OF STUDY

YAMAHAS CHANGING STRATEGY

EXTERNAL ENVIRONMENT ANALYSIS

Porters 5 Forces

INTERNAL ENVIRONMENT ANALYSIS

RECOMMENDATIONS

Strategic Management

Group V

Market Overview

India- Second largest producer of motorbikes after China Motorbikes market The big bull of Indian automobile industry - 80% share of motor bikes in two wheeler industry Presence of giants and their diversified portfolio of products: Hero Honda, Bajaj, TVS, Honda Motors, Yamaha Three major bike segments - Entry Segment Bike (till 150cc) - Premium Segment Bikes (150cc-250cc) - Sports Bikes (Above 250cc)

Strategic Management

Group V

OUR FOCUS OF STUDY

PREMIUM SEGMENT BIKES IN INDIA Increase in distinctive and customized products in the market Economy is booming Huge margins Targeting 20% market share in this segment by 2010 financial year end FEATURES OF THIS SEGMENT BIKE - Engine power of 150cc-250cc - Price range between Rs.50000-Rs.200000 FACTORS FAVOURING THE SEGMENT - Increasing income scale of the households - Attractive looks and comforts - High engine power

Strategic Management

Group V

YAMAHAS CHANGING STRATEGY

Four major decisions (2006-07) - Enter into premium segment bikes (150cc-250cc bikes) - First mover advantage in Sports Bike segment like VMAX - Enter into rural markets in Entry level segment bikes - To increase the exports opportunities Shifting of focus from lower segment bikes to premium segment bikes Yamaha has aimed to become the No.1 in customer satisfaction To target 18-25 years young because - They are very conscious about style quotient - They look forward to their ride as a personality statement Eyeing on growing middle and upper middle class segment

Strategic Management

Group V

YAMAHAS CHANGING STRATEGY Before 2007-2008, Cost control strategy by focusing on low end 100cc bikes Market Differentiation Strategy by providing more values to the customers in terms of: - High technology - Superior design - Ergonomics for long distance travelling etc Prospector in nature - Availability of bikes for every market segment - Provides a diversified product range - Always focus on the innovations

Strategic Management

Group V

EXTERNAL ENVIRONMENT ANALYSIS POLITICAL ENVIRONMENT

Under the UPA rule most of the business from across all industries try and win over as much political support
Increases Barriers to Entry

ECONOMIC ENVIRONMENT
Tightening of the interest rates by the RBI
Increases Barriers to entry Decreases bargaining powers of buyers Increase the threat of competitors Increases Bargaining power of buyers

High Growth Economy with an expected GDP of 8.5% Increasing inflow of foreign capital in the country Deregulation of petrol

SOCIO-CULTURAL ENVIRONMENT
Two-wheelers no more seen as just for day-to-day commuting education level in the country increases Expectations from buyers in this segment are very high
Increases the bargaining power of buyers

Strategic Management

Group V

EXTERNAL ENVIRONMENT ANALYSIS

TECHNOLOGICAL ENVIRONMENT
Bike styling and power seen as distinguishing factors Product becomes more and more differentiated
Decreases Bargaining Power of buyers Threat of competition increases

ENVIRONMENTAL FORCES
Pressure on the two-wheeler industry to come up with greener technologies Manufacturing plants to reduce greenhouse gas emissions
Increasing further the R&D and innovation costs; Decreases the threat of new entrants

INTERNATIONAL ENVIRONMENT
The two wheeler industry is currently growing at a CAGR of 9.45% Number of international players like Suzuki Hayabusa, Kawasaki Ninja, Suzuki Zeus entering into India
Increases the threat of new entrants and industry rivalry

Strategic Management

Group V

Industry Attractiveness

THREAT OF SUBSTITUTES

-Kinetic Mahindra Deal Gearless bikes: M&M, Indias largest tractor and utility vehicle maker has already bought the business assets of loss making scooter maker Kinetic Motor Company and has 80% of the share in JV by investing Rs 110 crore to gain an entry into the two-wheeler market. -- E-Bikes: There are several players in this segment which includes YO bikes, BSA Electric bikes, E-bike India, with the increasing global prices of crude oil and gas the demand for such types of bikes is increasing slowly but in consistent fashion. -The NANO Effect: TATAs launch of 1 Lac car has obviously raised concerns for two wheeler automobile industry, as consumer might want to buy a 4-wheeler which is available to them almost at comparable price. -The switching costs in NANOs case would be high -E-Bikes and Gearless Bikes - Female drivers and teens, gearless bikes and E-bikes are preferred. OVERALL: Low/Medium Rationale: Indian two-wheeler premium bike industry has been able to create a niche for itself which primarily runs on three factors namely: Mileage/Maintenance Cost, Reliability and Style. Even though EBikes and Nano might be able to draw some customers away from geared bikes but they are still not capable enough to become the ride of the youth of the country who are more looking at it as a style statement

Strategic Management

Group V

Industry Attractiveness

BARGAINING POWER OF SUPPLIERS

- Suppliers of auto components are fragmented and extremely critical for this industry. - Most of the component work is outsourced proper supply chain management is costly yet needed. - Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. This is done in order to capture profits from the market - The industry being capital intensive the switching costs of suppliers is high - Suppliers product differentiation is low -Suppliers threat of forward integration is low as the capital investment required is very high and suppliers are small and fragmented.
OVERALL: Low Rationale: Even though the availability of high quality components is very critical for the auto manufacturers, the parts are not highly differentiated when it comes to additional features and a huge number of small companies have already come up who manufacture such components.
Strategic Management Group V

Industry Attractiveness
-Political influence of incumbents helps them get favors from the government which makes it difficult for new entrants to flourish - HIGHER-END BIKES: Higher end bikes such as Kawasaki Ninja (Priced at Rs 2.7 lacs, Ninja is a 250cc 4-stroke bike), BMW bikes, Ducati etc. have also entered into India. Since they have global presence and strong brand recognition worldwide, Bikes such as Yamaha R15, R1 can face competition from these players, but the customer base in high end market is not very significant. - Presence of strong players like Yamaha, Hero Honda, TVS etc -After the liberalization policy of 91 barriers to entry for this segment has reduced and government regulations and taxes have been relaxed. - Cost disadvantage would be there for the new players since existing players already benefiting from economies of scale. - Initial Capital Requirements for setting up production plant, marketing costs, supply chain management would be high -Access to Distrubution channels would be tough and capital intensive if the new competitor doesnt tie up with any of existing player. (e.g. Kawasaki has tie up with Bajaj Motor Limited) OVERALL: LOW Rationale: Looking at the high barriers to entry due to the initial capital requirements and other infrastructure like access to distribution channels and also the low growth rate, the industry should not see many new players entering the arena. Strategic Management Group V

THREAT OF NEW ENTRANTS

Industry Attractiveness

BARGAINING POWER OF BUYERS

-High per capita income makes buyers less price sensitive thereby decreasing the bargaining power - High expectations from buyers in terms of Styling and power - Due to increase in number of models in all the categories, the buyers are empowered to a large extent. - Dealers threat of backward integration is low as the capital investment required is very high and buyers are small and fragmented. - Importance of the product to buyers is high due to other factors like traffic congestion, fuel prices - Product differentiation definitely exists and whole industry is different from other industries - The other industries are having products that can act as substitutes but then the switching costs of buyers is high OVERALL: HIGH

Strategic Management

Group V

Industry Attractiveness - The concentration of competitors is high i.e. Bajaj Auto, Hero Honda, KMC, Royal Enfield, TVS,

INDUSTRY RIVALRY

LML etc -The relative size of competitors is large and they have enough operational excellence and financial muscle - Industry is earmarked with high profit margins - Product differentiation acts as less of a long term competitive advantage as any product being matched in a few months by competitor - Buyers switching costs are low as each company has its own portfolio of products and it can cater to each and every segment
OVERALL: HIGH/VERY HIGH Rationale: The industry is earmarked with large and powerful competitors like Bajaj and Hero Honda, who already have a huge market share. Due to moderate industry growth rate of 10%, the struggle to increase sales is being reduced to a constant-sum game where everyone is trying to outsmart the competitors by innovations and price wars

Strategic Management

Group V

Industry Attractiveness With the rising levels of per capita income of people, the Indian two wheeler market offers a moderate potential for growth. This growth is relevant in the light of the fact that 70 per cent of Indias population is below the age of 35 Years and 150 million people

The threat of new entrants, the threat of substitutes as well as bargaining power of suppliers are favorable forces. Even though the industry is bound to see a lot of competition, looking at the high profit margins along with some moderate growth opportunities, we would say that the Industry is Attractive.

Strategic Management

Group V

VALUE CHAIN ANALYSIS

Strategic Management

Group V

RESOURCES
Financial Resources - Parent company from Japan provides the required funds to Yamaha India. - Maintains a good working capital as they provide very less credit to their dealers. Organizational Resources - Floor workers are encouraged to plan their work schedule on their own. - Afterwards schedule and resources are finalized through direct interaction of workers and management. - Minimum level of productivity is desired from workers- per day or per week and any deviation is corrected by management Physical Resources - Two plants in industrial areas of Faridabad - manufacture the engine, gears and Surajpur - assembling. - Two parallel assembly lines. - Easy access to Raw materials Technological Resources - Unique technologies like liquid cooled engine, DiAsiL cylinders Patents
Strategic Management Group V

Tangible Resources

RESOURCES
Human Resources - (>2000) employees including both the plants - Human capital is high due to experienced workforce. - Decentralization of work clear hierarchy facilitates the smooth flow of working. - Recruitment of casual workers mainly for the purpose of procurement and assembling. Innovation Resources - Sound R&D development from Japan Innovative products to serve the customer from each segment. Reputational Resources - Strong brand image - Long term relation with their suppliers.

Intangible Resources

Strategic Management

Group V

CAPABILITIES
FUNCTIONAL AREAS Finance Human Resources Marketing
Strategic Management

Technology

Information Systems

CAPABILITIES To invest a large outlay for R&D To provide funds against losses To keep low retention rate Training opportunities in Japan John Abraham- the Brand Ambassador Out of the box promotional ideas like organizing rock concerts, To manufacture diesel engine To design innovative models To make 6 speed transmission bikes To make liquid cooled engine with DiASil cylinder Control on demand-supply gap through a software Facilitates communication with suppliers and dealers Links all the workings with parent company in Japan

Group V

Resources Capabilities
Resource Capability Potential access to wide variety of markets Value contributed to end product High Difficulty in imitation/sub stitution Low Competitive advantage in short run Yes Competitive advantage in long run Yes

Finance (Tangible)

To invest a large Moderate outlay for R&D

Human Resources (Intangible) Marketing (Intangible)

Training opportunities in Japan Out of the box promotional ideas like organizing rock concerts

Low

Moderate

Moderate

No

Yes

High

Low

Low

Yes

No

Strategic Management

Group V

Resources Capabilities
Resource Capability Potential access to wide variety of markets Value contributed to end product High Difficulty in imitation/su bstitution High Competitive advantage in short run Yes Competitive advantage in long run Yes

Technological (Tangible)

Information Systems (Tangible)

-To design High innovative models -To make 6 speed transmission bikes -To make liquid cooled engine with DiaSil cylinder Facilitates Moderate communication with suppliers and dealers

Moderate

Low

Yes

No

Strategic Management

Group V

CORE COMPETENCIES

Liquid cooling system better engine performance by keeping the temperature down and absorbing the engine noise DiaSil cylinder facilitates cooling performance because aluminium dissipates heat 3 times faster than steel. Single-axis balancer in R15 and FZ Reduces engine vibration

All these technologies facilitate a better engine performance, good acceleration capability, a good balance which will provide a good riding performance. A good R&D is always a valuable for any company. The above technologies which Yamaha develops are very rare. It is also very costly to imitate because setting new R&D requires huge investment for the competitors.

Strategic Management

Group V

SWOT Analysis
Strengths
Back-up support from the parent company Highly experienced management Good R&D set up Premium technology Established Brand Prime location near raw material providers

Weakness
Below industry standard production capacity Poor Distribution channel No marketing aggressiveness Internal HR issues Operational ineffectiveness Storage problems Lack of diversified product portfolio

SWOT
Opportunities
Increasing urbanization leads to growing premium segment First mover advantage in sports premium bikes (500cc+) Double digit growth in two wheeler geared industry Exports opportunities

Threats
High competition in the market Rise in raw material products Increase in interest rates on finance Cars available in the same price range

Strategic Management

Group V

Recommendations
FOCUS ON METRO CITIES FIRST - Per capita income of households is high - Roads conditions are suitable INCREASE PRODUCTION CAPACITY - Should also utilize Faridabad plant for assembling - Storage capacity should also increase MORE MODELS IN DIFFERENT VARIANTS - To serve the need of each customer - Provides more choices in the market IMPROVES AFTER SALES SERVICE - Spare parts should be easily available - Professional Engineers for services STRENGTHEN THE DEALERSHIP NETWORK - Provide credit limits and financial support to the dealers - Improve display of bikes at showrooms YOUTH ORIENTED PROMOTION - The Ads should focus on the targeted consumers - Features should be well shown

Strategic Management

Group V

Strategic Management

Group V