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Strategic Management Project
NITESH KUMAR GUPTA | MAHTAAB KAJLA | PRACHI CHAWLA RAHUL MITTAL | VINNY ARYA | VISHAD DUBEY
Strategic Management © Group V
Agenda
Market Overview
OUR FOCUS OF STUDY
YAMAHA’S CHANGING STRATEGY
EXTERNAL ENVIRONMENT ANALYSIS
Porter’s 5 Forces
INTERNAL ENVIRONMENT ANALYSIS
RECOMMENDATIONS
Strategic Management © Group V
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)
Market Overview
Strategic Management © Group V
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
OUR FOCUS OF STUDY
Strategic Management © Group V
• 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
YAMAHA’S CHANGING STRATEGY
Strategic Management © Group V
• 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
YAMAHA’S CHANGING STRATEGY
Strategic Management © Group V
• 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
– High Growth Economy with an expected GDP of 8.5% • Decreases bargaining powers of buyers
– Increasing inflow of foreign capital in the country • Increase the threat of competitors
– Deregulation of petrol • Increases Bargaining power of buyers
• 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
EXTERNAL ENVIRONMENT ANALYSIS
Strategic Management © Group V
• 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
EXTERNAL ENVIRONMENT ANALYSIS
Strategic Management © Group V
THR
EAT
OF
SUB
STIT
UTE
S -Kinetic Mahindra Deal – Gearless bikes: M&M, India’s 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: TATA’s 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 NANO’s 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 E-
Bikes 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
Industry Attractiveness
Strategic Management © Group V
BA
RG
AIN
ING
PO
WER
OF
SUP
PLI
ERS
- 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
- Supplier’s product differentiation is low
-Supplier’s 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.
Industry Attractiveness
Strategic Management © Group V
THR
EAT
OF
NEW
EN
TRA
NTS
-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 doesn’t 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.
Industry Attractiveness
Strategic Management © Group V
BA
RG
AIN
ING
PO
WER
OF
BU
YER
S
-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
Industry Attractiveness
Strategic Management © Group V
IND
UST
RY
RIV
ALR
Y
- The concentration of competitors is high i.e. Bajaj Auto, Hero Honda, KMC, Royal Enfield, TVS,
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
Industry Attractiveness
Strategic Management © Group V
• 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 India’s 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.
Industry Attractiveness
Strategic Management © Group V
VA
LUE
CH
AIN
AN
ALY
SIS
Strategic Management © Group V
RESOURCES
Tan
gib
le R
eso
urc
es
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
RESOURCES
Inta
ngi
ble
Re
sou
rce
s
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.
Strategic Management © Group V
CAPABILITIES
FUNCTIONAL AREAS CAPABILITIES
Finance To invest a large outlay for R&D
To provide funds against losses
Human Resources To keep low retention rate
Training opportunities in Japan
Marketing John Abraham- the Brand Ambassador
Out of the box promotional ideas like
organizing rock concerts,
Technology To manufacture diesel engine
To design innovative models
To make 6 speed transmission bikes
To make liquid cooled engine with
DiASil cylinder
Information Systems Control on demand-supply gap through a
software
Facilitates communication with suppliers
and dealers
Links all the workings with parent
company in Japan
Strategic Management © Group V
Resources Capabilities
Resource Capability Potential access to wide variety of markets
Value contributed to end product
Difficulty in imitation/substitution
Competitive advantage in short run
Competitive advantage in long run
Finance
(Tangible)
To invest a large
outlay for R&D
Moderate High Low Yes Yes
Human
Resources
(Intangible)
Training
opportunities in
Japan
Low Moderate Moderate No Yes
Marketing
(Intangible)
Out of the box
promotional
ideas like
organizing rock
concerts
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
Difficulty in imitation/substitution
Competitive advantage in short run
Competitive advantage in long run
Technological
(Tangible)
-To design
innovative models
-To make 6 speed
transmission bikes
-To make liquid
cooled engine with
DiaSil cylinder
High High High Yes Yes
Information
Systems
(Tangible)
Facilitates
communication
with suppliers and
dealers
Moderate 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
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
SWOT
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
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