Study on Macro Economics on the Two Wheeler Dealer Industry in Udupi and Manipal

STUDY ON MACRO ECONOMICS ON THE TWO WHEELER DEALER INDUSTRY IN UDUPI AND MANIPAL

DECLARATION

We hereby declare that this project titled “STUDY ON MACRO ECONOMICS ON THE TWO WHEELER DEALER INDUSTRY IN UDUPI AND MANIPAL” is original work done by us under the guidance and supervision of our faculty guide, Dr. T.N.RAMAKRISHNA.

The report has been submitted to Manipal Institute of Management, Manipal in partial fulfillment of the academic requirement for the award of the Degree of Master of Business Administration.

We also declare that this project report has neither been submitted to any other university for the award of the degree diploma associateship or any other similar title nor done by any other student earlier.

DATE:05-03-2010

PLACE: Manipal

Group IX, Sec A, MIM


ACKNOWLEDGEMENT

We express our profound gratitude and thanks to all individuals who have been extremely inspirational and have helped in the completion of this project.

We are specifically thankful to proprietors and staff of “Veechi Motors ,Udupi ;Jayadev Motors ,Indrali ; Kamath Bajaj,Laxmindranagar for giving us this opportunity and support to do this project at their respective company branches.

Our sincere thanks to Dr. K.V.M Varambally and Dr. T.N.RAMAKRISHNA, our faculty guides, for their encouragement and support.

Anooj Shetty

Balachandra Prabhu Chandrakanthi

Saurabh Priyadarshi

Shatrudra Prakash



Index

Objective of the project:- 4

Introduction to indian automobile industry 5

Bcg matrix representation of automobile sector among various sectors 6Overview of two wheeler sector 7

Structure of two wheeler industry 11

An introduction to Udupi 18

Indian market for two-wheeler industry 26

The local two wheeler industry (profile of the dealerships) 28

SWOT analysis of the two-wheeler automobile industry in Udupi and Manipal 47

The business environment 49

Porters five force model for two-wheeler automobile industry 61

The challenges faced by the industry 64

Suggestions: 65

Future prospects of the industry 66



OBJECTIVE OF THE PROJECT:-

The main objectives of the Project study are:

Detailed analysis of Automobile industry which is gearing towards international

standards.

To conduct market research with regard to two-wheeler automobile industry and

understand its marketing strategies.

Analyze the impact of qualitative factors on industry’s and company’s prospects

Comparative analysis of major tough competitor.

To understand the current trends in two-wheeler automobile industry.



INTRODUCTION TO INDIAN AUTOMOBILE

INDUSTRY

Automobile is one of the largest industries in global market. Being the leader in product and

process technologies in the manufacturing sector, it has been recognized as one of the drivers

of economic growth. During the last decade, well directed efforts have been made to provide

a new look to the automobile policy for realizing the sector's full potential for the economy.

Aggressive marketing by the auto finance companies have also played a significant role in

boosting automobile demand, especially from the population in the middle income group.

A Nations economy is well known from its transport system. For instant and rapid growth in

economy, a well-developed and well-networked transportation system is essential. As India's

transport network is developing at a fast pace, Indian Automobile Industry is growing too.

Also, the Automobile industry has strong backward and forward linkages and hence provides

employment to a large section of the population. Thus the role of Automobile Industry is very

essential in Indian economy. Various types of vehicles are manufactured by the Automobile

Industry. Indian Automobile Industry includes the manufacturing of trucks, buses, passenger

cars, defence vehicles, two-wheelers.

The two-wheeler manufacturing is dominated by companies like TVS, Honda Motorcycle &

Scooter India (Pvt.) Ltd., Hero Honda, Yamaha, Bajaj, etc.

The automobile industry in the country is one of the key sectors of the economy in terms of

the employment opportunities that it offers. The industry directly employs close to around 0.2

million people and indirectly employs around 10 million people. The prospects of the

industry also has a bearing on the auto-component industry which is also a major sector in the

Indian economy directly employing 0.25 million people.



BCG Matrix Representation of Automobile Sector among various Sectors:-

In an economy, different industries are present and different industries have different

growth rate as compared to the growth of the economy. In an economy, there are a

number of major industries and they all occupy different positions in the BCG matrix

according to their growth and contribution towards the economy. In the Indian economy,

some of the major sectors are FMCG, automobiles, banking and insurance, steel, telecom,

software, pharmacology and retail sectors and these can be placed in the different

positions in the matrix as shown below:

INDUSTRY BCG MATRIX

BCG matrix is used to determine the relative position of the companies of an industry or

different SBU’s of any institution, in terms of the market growth rate and the market share of

the company in the industry. In the Indian automobile sector, the major players are Maruti


AUTOMOBILES

Market

Growth R

HighBanking & Insurance

Software

STAR QUESTION

Retail

Telecom

CASH

Low

FMCG

DOG

Hig LowRelative market share


Suzuki Limited, General motors, Mahindra and Mahindra, Tata Motors, Hero Honda and

Bajaj auto. In the BCG matrix, the companies are placed in one of the following four

categories: Star, Cash Cows, Dogs and Question marks. In the Stars we place the companies

with high market growth and high market share, cash cows are the companies who have low

market growth rate and high relative market share, the category of the question marks include

the companies with low relative market share and high market growth rate and dogs include

the companies who have low relative market share and low market growth rate.

OVERVIEW OF TWO WHEELER SECTOR

T wo Wheeler Industry

Indian two -wheeler contributes the largest volumes amongst all the segments in automobile

industry. This segment can be broadly categorized into 3 sub-segments viz.; scooters,

motorcycles and mopeds. In the last four to five years, the two-wheeler market has witnessed

a marked shift towards motorcycles at the expense of scooters. In the rural areas, consumers

have come to prefer sturdier bikes to withstand the bad road conditions. In the process the

share of motorcycle segment has grown from 48% to 58%, the share of scooters declined

drastically from 33% to 25%, while that of mopeds declined by 2% from 19% to 17% during

the year 2008-09. The Euro emission norms effective from April 2000 led to the existing

players in the two- stroke segment to install catalytic converters. All the new models are now

being replaced by 4-stroke motorcycles. Excise duty on motorcycles has been reduced from

32% to 24%, resulting in price reduction, which has aided in propelling the demand for

motorcycles.

Within the two-wheeler industry, motorcycle segment grew at a phenomenally high rate of

35% as against a deceleration of 3% for scooters and 27% for mopeds. In fact, motorcycle

has been taking away the share of scooters and mopeds in a 4.3 million two-wheeler market

and surging ahead with its market share of 68%. The increasing demand from semi-urban and

rural segments may have caused this positive shift towards motorcycles. Also, easy credit

coupled with low interest rate regime, constrained personal transport, increasing income

levels in middle class and higher aspirations of young people all seem to be the factors



responsible for such high growth in two-wheelers. The growth in two-wheelers has been

robust enough to counter the slowdown and other factors constraining the overall business

activity in the country. Also, rationalization of excise duty in the Union Budget 2002-03 had

a positive impact on the demand for motorcycles. We also expect the motorcycles to continue

to lead the two-wheeler segment like in all other Asian countries. Available forecasts suggest

that this trend would continue for another couple of years and the industry would record

nearly double-digit average annual growth up to 2006.

During the year, there have been important developments in two-wheeler industry. The

competition has strengthened though there are hardly any new entrants into the industry.

There is an increasing emphasis on price and this has led to cost cutting efforts all across the

industry, thereby, making the customer an ultimate beneficiary. The trend also saw

introduction of new motorcycles with capacity ranging from 100 to 180cc bikes. We

anticipate that many more new models will be launched during the year and provide

customers plenty of choice at competitive prices.

Businesses cannot consistently grow at 25-30 per cent. Each business has a tendency to taper

and plateau after attaining a particular size. An annual growth rate of 10-12 per cent over a

period of time is extremely healthy.

The TCS study rankings are conducted at the motorcycle segment-level to provide

comparisons among similar groups of motorcycles. Motorcycles ranking highest in their

respective segments for TCS are: Hero Honda CD100 SS (best standard motorcycle

segment); Hero Honda Splendor (best executive motorcycle segment); Bajaj Pulsar (best

premium motorcycle segment); and Royal Enfield Bullet Electra (best cruiser motorcycle

segment).

The feeling of freedom and being one with the Nature comes only from riding a two wheeler.

Indians prefer the two wheelers because of their small manageable size, low maintenance,

and pricing and easy loan repayments. Indian streets are full of people of all age groups

riding a two wheeler. Motorized two wheelers are seen as a symbol of status by the populace.

Two wheelers in India are the second largest producer and manufacturer of two-wheelers in

the world. It stands next only to Japan and China in terms of the number of two-wheelers

produced and domestic sales respectively. Indian two-wheeler industry has got spectacular

growth in the last few years. Indian two-wheeler industry had a small beginning in the early

50's. The Automobile Products of India (API) started manufacturing scooters in the country.



Bikes are a major segment of Indian two wheeler industry, the other two being scooters and

mopeds. Indian companies are among the largest two-wheeler manufacturers in the world. In

the initial stages, the scooter segment was dominated by API; it was later overtaken by Bajaj

Auto. Although various government and private enterprises entered the fray for scooters, the

only new player that has lasted till today is LML.

The motorcycle segment was initially dominated by Enfield 350cc bikes and Escorts 175cc

bike. The two-wheeler market was opened to foreign competition in the mid-80s. And the

then market leaders - Escorts and Enfield - were caught unaware by the onslaught of the

100cc bikes of the four Indo-Japanese joint ventures. With the availability of fuel efficient

low power bikes, demand swelled, resulting in Hero Honda - then the only producer of four

stroke bikes (100cc category), gaining a top slot.

The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki and

Hero Honda brought in the first two-stroke and four-stroke engine motorcycles respectively.

These two players initially started with assembly of CKD kits, and later on progressed to

indigenous manufacturing. In the 90s the major growth for motorcycle segment was brought

in by Japanese motorcycles, which grew at a rate of nearly 25% CAGR in the last five years.

The industry had a smooth ride in the 50s, 60s and 70s when the Government prohibited new

entries and strictly controlled capacity expansion. The industry saw a sudden growth in the

80s. The industry witnessed a steady growth of 14% leading to a peak volume of 1.9mn

vehicles in 1990.

In 1990, the entire automobile industry saw a drastic fall in demand. This resulted in a

decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles.

Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94.

Hero Honda showed a marginal decline in 1992.

The reasons for recession in the sector were the incessant rise in fuel prices, high input costs

and reduced purchasing power due to significant rise in general price level and credit crunch

in consumer financing. Factors like increased production in 1992, due to new entrants

coupled with the recession in the industry resulted in company either reporting losses or a fall

in profits.



Two wheeler fleet composition in India:-



STRUCTURE OF TWO WHEELER INDUSTRY

Mopeds:-

Over the last 15 years, moped’s contribution in overall 2-wheelers has declined significantly

and now it remains a marginal category with just one manufacturer for the product. Its

contribution in the 2-wheelers industry now stands at 5% and we expect that this segment

will continue to be marginalised. The only player in this segment is TVS Motor.

Scooters:-

Advent of fuel efficient motorcycles in the Indian 2-wheelers industry led to decline of

Scooters. However, over the last five years, it has made a recovery and is emerging as a niche

segment targeted towards women commuters. One of the reasons for this is the increasing

need of mobility for the women commuters especially in the urban areas is due to higher

number of college going girls and greater participation of women in urban work force. The

product itself has gone for a complete revamp and now this category mainly consists of

gearless products. This segment is now dominated by Japanese manufacturers with HMSI

having the leadership. HH, which is a late entrant in this segment, has also cornered a



sizeable market share in the scooter segment. Another development in this segment is the

launch of battery operated scooters. However, given the high replacement cost for the

batteries, this has remained a marginal segment.

Motor cycles and bikes:-

Executive Segment

Executive segment is the largest motorcycle segment and this is the stronghold of market

leader HH. Competitors have tried to challenge HH in this segment, however all such

challenges have fizzled out over time. With higher growth in economy segment, the

contribution of this segment had come below 50% in FY06. However over the last three

years, it has made a strong come back and now accounts for almost 60% of the motorcycle

share.

Premium Segment

This segment was creation of HH with 'CBZ' And ‘KARIZMA’; however major boost to the

segment was given by BAJAJ through 'Pulsar' which has dominated the segment. HH has

remained a marginal player in this segment and one of the reasons for this is presence of

HMSI in this segment. This segment remains a small segment in the Indian market with

contribution of around 23% to the motorcycle industry. This is the performance segment and

customers pay a premium for the novelty. Hence constant upgradation in the product is a

requisite for success in this segment.

Usage Pattern of two-wheelers in India

Is quite different from other countries

Initial cost and fuel economy are highest priority.



Low maintenance costs are desired.

Small entrepreneurs and farmers conduct their business carrying loads.

Very limited usage for sports bike.

Indians prefer the two wheelers because of their small manageable size, low maintenance, and pricing and easy loan repayments

Key players in the Two-wheeler industry:

Hero Honda motors ltd.

Bajaj auto ltd.

TVS motors company ltd.

Yamaha motors India

Honda motorcycle and scooters India

Motorcycles in India:

Bikes comprise a major segment of Indian two wheeler industry.

Companies:



1. Hero Honda Motors Ltd (HHML )

Hero Honda Motors Limited was established in 1984, as a joint venture between India's Hero

Group (world's largest bicycle manufacturers) and Japan's Honda Motor Company. And

created the world's single largest two wheeler company and also one of the most successful

joint ventures worldwide. During the 80s, Hero Honda became the first company in India.

Over 19 million Hero Honda two wheelers running on Indian roads today.

* Hero Honda CD Dawn* Hero Honda CD Deluxe * Hero Honda Glamour* Hero Honda Glamour-Fi* Hero Honda Karizma* Hero Honda Passion Plus* Hero Honda Pleasure* Hero Honda Super Splendor* Hero Honda Splendor NXG* Hero Honda CBZ X-Treme

2. Bajaj Auto Ltd Company:

Bajaj is the first Indian two wheeler automobile company in the market since 1945 with the

name M/s Bacharj trading corporation private limited. In 1959 M/s Bacharj trading

corporation private limited change its name as Bajaj Auto Ltd. Bajaj Auto obtains license

from the Government of India to manufacture two- and three-wheelers vehicles in 1959.

* Bajaj Avenger* Bajaj CT 100* Bajaj Platina* Bajaj Discover DTSi* Bajaj Pulsar DTSi



* Bajaj Wave* Bajaj Wind 125

3. TVS Motor Company :

TVS Motors is the third largest company in the two-wheeler industry with a market share of

16%. Infect, it is the only Indian company without a foreign collaboration in the two-wheeler

industry. When the company opted out of the collaboration with Suzuki in 2002, many

believed that TVS was headed towards extinction. But the company proved the doomsayers

wrong and came out with a very successful `TVS Victor'. TVS Motors Ltd. originally

incorporated in 1982 to manufacture two-wheelers in collaboration with Suzuki Motors of

Japan, TVS was one of the leaders in two-wheeler industry.

* TVS Apache* TVS Star* TVS Victor

4. Yamaha Motor India:

Yamaha Motor Corporation is the auto mobile company of Japan (1953) which works in

India since 1955 and providing latest technology in India from last two decades. Yamaha

Motor India was incorporated in august 2001 as a 100% subsidiary of Yamaha motor

corporation, Japan



* Yamaha CruxS * Yamaha Gladiator * Yamaha FZ 16

* Yamaha R15

* Yamaha Fazer

5. Honda motor:

Honda motors of Japan is not a new name in the two wheeler scenario in the country, they

were in a tie up with the Firodias owned Kinetic group. However in the late 90s they parted

ways after problems arose over issues like introduction of new models, advertising

expenditure, marketing strategies and other related issues. In the mid 80 Honda motors of

Japan joined hands with the largest bicycle maker of India the Hero cycles to create Hero

Honda which in a couple of decades or so have gone on to become the single largest

motorcycle company in the world. Though Honda has come on its own on the Indian market

yet it will be providing technological support to Hero Honda for the next ten years. Thus

presenting a unique situation in which the company will be in direct competition with the

company which it has been associated for nearly two decades. Honda Motorcycles and

Scooters India limited, a 100% subsidiary of Honda motor company Japan eventually entered

the Indian market with Honda Unicorn in 2004.

* Honda Unicorn

* Honda activa



An introduction to Udupi

Udupi District

Udupi was previously a part of the undivided Dakshina Kannada district, which also

contained the present day Dakshina Kannada area and Kasaragod. During the Reorganization

of States in 1956, Kasaragod was transferred to the newly created Kerala state and Dakshina

Kannada was transferred to Mysore state (present-day Karnataka). The Karnataka

government later, for administrative purposes, split off Udupi district from the rest of the

Dakshina Kannada district.

Udupi district consists of three taluks: Udupi, Karkala and Kundapur. It has one

parliamentary constituency (i.e., Udupi) and six assembly constituencies: Kaup, Brahmavar,


Market share of two wheeler automobile sector

35.60% 27.50%

16%

7%4%9.50%

Hero Honda

Bajaj Motors

TVS Motors

YamahaMotorsHonda Motors

Others

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

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

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

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

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

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

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

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

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

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

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

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


Kundapur, Udupi, Karkala and Byndoor. Karkala, though it belongs to Udupi district, is part

of the Chickmagalur parliamentary constituency.

Udupi District at a Glance

On August 25, 1997 Udupi District has been carved out from erstwhile Dakshina Kannada

District, which is completed almost 200 years of existence. The district accounts for about

2.1% of the total population of the state. The major agricultural crops are paddy, Horse ram,

Black gram, Green gram, Cowpeas. The district is rich in Horticulture products also. The

important fruits grown are Mango, Banana, Sapota, and jackfruit, citrus. The important

vegetable crops are Brinjal, sweet potato, ladies finger, cowpeas, Gourd varieties, cucumber,

and leafy vegetable. The important plantation crops are cashew nut, coconut, Areca nut,

Pepper & chilly.

The Direct has only Industrial Area is located at Shivally-Manipal about 5 kms. From Udupi

Town. There are 3 Industrial Estates, one at Shivally-Manipal at Udupi Taluk and the others

at Koteshwara of Kundapur Taluk and Karkala taluk.

Udupi district is one of the newly formed districts in the Karnataka State. The district has

been long known for being cultural and Religions Center. The district has acquired prominent

place in the field of Education, Health Care and Tourism.

The district has 15 nos. of medium scale industries where in an investment has been made to

the tune of Rs.4645.99 crores, generating Employment to 2259 Nos. Printing, fishnet,

granite, urea, sugar are prominent products under medium scale industries.

The perspective plan will be a guiding document for prospective Entrepreneurs for taking

quick decisions regarding selection of potential products. It gives an idea and information for

financial institutions, infrastructure respectively. The plan will project the overall

Development of Industrial activities, in the District by making use of Natural and Human

Resources.


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

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


Location of Udupi in Karnataka Map



CHARACTERISTICS OF UDUPI DISTRICT

On August 25, 1997 Udupi District has been carved out from erstwhile Dakshina Kannada District, which is completed almost 200 years of existence. The district accounts for about 2.1% of the total population of the state.

1. General Characteristics of the District:

Inauguration of the District : 25-

08-1997

No of sub divisions : 1

(Kundapur sub division)

No of Taluk : 3

No of Hoblies : 9

City municipality :

Udupi

Town municipalities : 3

(Kundapur, Karkala and

Saligrama)

Grama Panchayath : 146

Total coastal length : 100

kms

2. Area : 3575

sq.kms.


UDUPI DISTRICTis formed withThree TaluksUdupi, Kundapuraand Karkala

Area: 3575 Sq. KmsPopulation: 11,09,494Industries: 11,567

Climate March, April May - Hot Summer June, July & August - Heavy Rains September, October - Pleasant November, December- Cool January, February - Cool & Crisp

TemperatureVaries from 27degree to 34 degree celsius

Rain Fall Ranging from 25 -500 Cm.

RiversSwarna, Sita, Netravati, Chakra, Varahi, Kubja

SeaEntire western part Arabian sea stretch. It has a long coastline of 105 km

FlowersJasmine (Mallige), Rose.

TreesCoconut, Cashew, Mango & Jack fruit

LanguageTulu, Kannada, Konkani are main languages. Hindi, English languages are spoken & understood.

Public TransportPrivate Buses, covers the entire route with KSRTC Buses, Auto-rikshaws & Taxis are available in plenty. Private Taxis are available on daily rental basis

http://www.udupipages.com/home/travel/karkal.html

http://www.udupipages.com/home/travel/kundapur.html

http://www.udupipages.com/home/travel/udupi.html


Main rivers : Swarna, Sita, Chakra,

Kollur, Madikal, Haladi Gangoli

No of towns : 9

No of inhabited villages : 244

a. Population (1991 census) : 11.09 lakhs

b. Density of population : 286 per sq.km

3. Agricultural Resources:

Important food crops : Paddy, Horse gram, Blackgram,

Green gram and Cowpeas.

4. Horticulture Resources:

Vegetable grown :Brinjal, Sweet potato, Ladies

Finger, Cowpeas, Gourd

Fruits grown : Mango, Banana, Sapota, Jack

fruit, Citrus

Plantation Crops :Coconut, Areca nut, Pepper and

Chilly

5. 5. Forest Resources:

Area under forest : 101499 Hectare, 26.31% of

the total area of the District.

6. Mineral Resources:

Mineral resources : Granite, Laterite, Silica.

Lime shell, Sand

7. Live stock Resources:

Total live stock : 2274699 nos

8. Other Infrastructure:



Railway lines : 106 kms. Existing

Roads : 2380 Km

Number of Vehicles : 40190

Banks : 206

(Lead bank) : Syndicate Bank

Ports/ Minor Ports : Malpe, Gangoli,

Hangarakatte

Existing Industries (as on 31-3-2001)

a. No of Small scale industries : 5629

b. No. medium and large Scale: Industries 15

c. No. of industrial area : 1

Economy and Industry :

Udupi's economy depends mainly on agriculture and fishing. Small-scale industries like the

cashew industry, other food industries and milk cooperatives are the most prominent. There is

no large-scale industry in Udupi. The Karnataka Government had signed a memorandum of

understanding (MOU) with the Cogentrix Light and Power Industry to set up a thermal power

plant in the district at Nandikur. However, because of stiff opposition from citizens and

environmentalist groups, the project has been temporarily suspended. An attempt by the

Nagarjuna Power Corporation to set up a similar plant at nearby Padubidri also met strong

opposition.

SOCIO - ECONOMIC INFRASTRUCTURE:

Post & Telegraphs:

The Dist. has good telephone communication facility with 96 telephone exchanges & 81270

telephones are used. All exchanges have the facility of direct dialing. For every 100


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

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

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

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

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

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


population, 7 telephone are been used. Out of 96 telephone exchanges, 63 exchanges are

provided with optical fiber cables.

Details Numbers

1. Post Office 380

2. Post Office with postal facility only 076

3. Post Office having postal telegraph & telephone facility 254

4. Telegraph Office 004

5. Telephone Exchanges 096

6. Telephone Use 81270

Banks:

The Udupi Dist. has unique destination of being the birth place of one nationalize bank.

There are 195 commercial bank :

Name of Banks Numbers

Syndicate Bank 61

Vijaya Bank 40

Corporation Bank 24

Canara Bank 23

Karnataka Bank 20

Vysya Bank 01

SBI 05

SBM 07



Indian Overseas Bank 03

Bank Of Baroda 02

Central Bank Of India 02

Bank Of India 01

Union Bank Of India 01

ICICI Bank 01

Lord Krishna Bank 01

SCDCC Bank 16

Netravathi Grameena Bank 09

PCARD 03

KSFC 01

INDIAN MARKET FOR TWO-WHEELER INDUSTRY:

The two wheeler industry in India has been in existence since 1955. It consists of 3 segments

viz., scooters, motor cycles and mopeds. The increase in sales volume of industry is proof of

its high growth. In 1971, sales were around 0.1million units per annum, but by 1998 this

figure had risen to 3 million units per annum. Similarly, capacities of productions have also

increased from about 0.2 million units of annual capacity in the 70s to more than 4 million

units in the late 90s.

India is the 2nd largest 2 wheeler market in the world. Today, two wheelers account for 79%

of the total automobile sales in India. Within the 2 wheeler category, motorcycles dominate,

largely because when compared to scooters or mopeds they are seen as objects of desire, in

addition to utility. The proportions of motorcycles 2007/08, to the total number of two

wheelers is 76%, up from 42% in 1998/99.

Out of the nearly 5 million two wheelers sold annually in India today, 3.8 million are

motorcycles. There was an intense competition in the motor cycle market. Recent years have



witnessed state of new product launches, with nearly all the major manufacturers

aggressively promoting their respective products.

Over the past few years, the two wheeler market has major shift from scooter to motorbikes.

It has forced the scooter makers like Bajaj auto and LML to shift to motor cycle

manufacturing , and to cut down scooter production. However, at the same time, a new

market for high power bikes has also emerged recently

About the market in Udupi and Manipal

The district of Udupi has witnessed a tremendous growth in the last decade in terms of its

economy and purchasing potential of the buyers. Previously also it had good base of educated

people who have contributed to its all round development. However, recently due to the

advent of Information technology and other related industries which are knowledge based the

district is now poised for an economic growth on a massive scale. A number of companies

have envisaged their plans for Udupi in the coming period. All this will lead to all round

development of the economy .This will significantly widen the customer base which is at

present also quite huge. Furthermore, most of the people are of the middle income group who

cannot quite afford automobiles and the alternative available to them for private

transportation is motorcycles.



The local two wheeler industry (profile of the dealerships)

KAMATH MOTORS

Brief profile of the organization.



Name of the firm : Kamath Motors.

Location :"Saptagiri”, Udupi-Manipal

Road, Laxmindranagar.

Founder : Mr. Devdas Kamath.

Dealers : Bajaj 2-wheelers and 3-wheelers.

Employment Potential : 58.

Profile

Nature of the firm

Kamath Motors is a Family Business oriented Organization. As there was great demand for

Bajaj vehicles it led to the emergence of opening up a showroom where they would provide

the customers with their requirement. Its location is preferred by the students of Manipal

since it is feasible. Kamath Motors is the sole authorized dealer for Bajaj Auto in the Udupi

District, and generates good amount of profits because of the brand loyalty of Bajaj. It is the

pioneer company in production of two and three wheelers whose market is expanding rapidly.

As the city is small it creates more demand for 2 wheelers and even cheaper in terms of cost

to the customer which are mostly students. This is a very good market for the two wheeler

industry because it is easier to travel and is cost friendly. The demand for the vehicles is

growing day by day.

Location

Kamath Motors was inaugurated on 15th May 2002. It is situated in the prime location of

Laxmindranagar, on the way to Manipal, which is famous for its educational institutions,

banks, small industries, hospitals etc.

Layout

Kamath Motors is spread over wide area of15,000 sq.ft. Out of this, the showroom covers an

area of 4000 sq.ft. The remaining area is covered by the service center, workshop, spare parts



section and customer waiting lounge. This wide area base of the institution enables it to

provide all benefits and services to the customers.

The workshop is well equipped with sophisticated and state-of-the-art machineries which

were recommended by Bajaj Auto

Tie-Ups (Financial)

Kamath Motors has Financial tie ups with the following Financial Institutions:

Bajaj Auto Finance Ltd.

ICICI Bank

Centurion Bank

Shriram Auto Finance.

HDFC Bank.

Relationship with the Company

Kamath Motors has created a brand loyalty for Bajaj. It has created a goodwill with Bajaj

Auto Ltd, and their associates and they share a very cordial relationship with the company.

This is because Kamath Motors has set very high standards and reaches all its targets set by

Bajaj Auto Ltd.

Products

1. Platina alloy wheel

2. Discover KS 110CC.

3. Pulsar- 200cc

4. Bajaj Avenger

5. Kristal – (Ungeared).

Nature of competition

Kamath Motors Faces a relaxed competition from other dealers in Udupi district. There are

about three competitors namely,

1. Hero Honda



2. TVS

3. Kinetic

There is perfect competition in 2-wheelers segment. The main 2-wheelers of Kamath Motors

which competes with other competitors are Pulsar, Platina and Discover. Competitors to the

pulsar are TVS Apache, Suzuki Fiero and Hero Honda’s Karizma and Honda Unicorn.

Competitors for Platina are TVS Star city and Hero Honda’s Splender plus. Competitors for

Discover are Hero Honda’s Glamour and TVS’s Victor GLS.

SWOT analysis of KAMATH MOTORS:Identification of the threats and opportunities in the environment and the strengths and

weakness of the firm in the cornerstone of business policy formulation, it is these factors

which determine the course of action to ensure the survival and/or growth of the firm. The

environment might present many opportunities, but a company might not have the strengths

to explore all the opportunities.

Strength-

Kamath Motors got the following features which are its strength

1. Fully computerized Hi-tech Workshop

2. Digitally Controlled Oil Dispenser

3. This Oil Dispenser automatically calculates as to how much Engine Oil is needed in each

vehicle as soon as it is connected to the Engine

4. Break Down Service

A Break down Service is available round the clock in which a person can call up the

service hotline number in case he suffers a vehicle breakdown. Quick Repair

5. Torque Controlled Pneumatic Tools

6. Factory Trained Technicians

7. Attractive Annual Maintenance Scheme



Weakness-

Kamath Motors got the following features which are its weakness.They low level of

manpower. Lack of adequate storage facilities. Bajaj Auto’s weakness is the poor resale value

of its products and the huge cost incurred in training the middle level workers. The outlets

does not provide for resale of the bikes sold by them. This is the weakness that they have to

overcome.

Opportunities-

Kamath Motors got the following features which are its opportunitiesKamath Motors in

Udupi district has a lion’s share in the market for their products they have a good opportunity

to satisfy their existing customers and even is in a position to increase their sales by their

adequate investment on machinery, spare parts tools and promotional activities and thus can

influence new customers. The motor cycle industry is expected to grow in the coming

years. Kamath motors is looking forward to make most of this opportunity by

introducing bikes with more mileage, style, stability, higher speed in design for the

Indian roads.

Threats-

Kamath Motors got the following features which are its threatsHero Honda’s Shine, TVS

victors, Kinetic Scooty are the threats that are considered to be a threat to Kamath Motors in

the coming months. The rising price for the steel is a major threat to the industry as the

whole.



JAYDEV MOTORS

Brief profile of the organization

Name of the firm : Jaydev Motors

Location : RAILWAY CROSS ROAD INDRALI,

MAIN ROAD, - MANIPAL

Constitution : Family Business Organization registered

Founder : Mr. Jayaram Suvarna.

Dealers : Hero Honda 2-wheelers

Employment Potential : 25

PROFILE



Nature of the firmJaydev Motors is a Family Business Organization registered under the Partnership Act. Prior

to the launch of Jaydev Motors, customers were forced to travel a distance of 60km to

purchase and service vehicles of Hero Honda Motorcycles Ltd. Jaydev Motors is the sole

authorized dealer for Hero Honda Motors in the Udupi District.

Location

Jaydev Motors was inaugurated on 15th May 2003. Jaydev Motors was first operating in

Laxmindranagar, Udupi and later shifted to the present location in Indrali. On the way to

Manipal, which is surrounded by educational institutions, banks, small industries, hospitals

etc.

Layout

Jaydev Motors is spread over wide area of 10,000 sq.ft. Out of this, the showroom covers an

area of 3000 sq.ft. and the remaining area is covered by the service center, workshop, spare

parts section and customer waiting lounge. This wide area base of the institution enables it to

provide all benefits and services to the customers.

This is one of the best layouts for Hero Honda in Karnataka, costing about Rs.45,00,000 to

the dealer.

Products

1 Splendor plus.

2 Super splendor

3 CBZ x-Treme.

4 Karizma

5 Glamour

Tie-Ups (Financial)



Jaydev motors Financial tie ups with the following Financial Institutions:

1. Shriram Auto Finance

2. ICICI

3. Centurion BanK

4. Canara Bank


Jaydev Motors Faces a relaxed competition from other dealers in Udupi district. There are


1. Bajaj

2. TVS

3. Kinetic

Competition is mainly based on sales and service provided. They are facing a perfect

competition in the case of 2-wheelers.The main 2-wheelers of Kamath Motors which

competes with other competitors are Pulsar, Platina and Discover. Competitors to the pulsar

are TVS Apache and Fiero and Hero Honda’s Karizma and Honda Unicorn. Competitors for

Platina are TVS Star city and Hero Honda’s Splendor plus. Competitors for Discover are

Hero Honda’s Glamour and TVS’s Victor GLS and Suzuki’s Zeus Heat.

SWOT ANALYSIS of JAYDEV MOTORS

Identification of the threats and opportunities in the environment and the strengths and

weakness of the firm in the cornerstone of business policy formulation, it is these factors

which determine the course of action to ensure the survival and/or growth of the firm. The

environment might present many opportunities, but a company might not have the strengths

to explore all the opportunities

Strengths:



Jaydev Motors got the following features which are its strength.Easy availability of spare

parts and accurate designing of parts. As the parts are most important part of a vehicle it

creates huge demand Jaydev motors is the only authorized sales, service and spare parts

dealers for Hero Honda two-wheelers in udupi, so the customers get locked and but parts

from the store. As the market is big so there are frequent break downs and failures, these

create great advantage for them to sell parts at higher cost. They posses well equipped tools

and equipment

Weakness-

Jaydev Motors got the following features which are its weakness.As the authorized service

center is in Udupi, it is not accessible to the people leaving in far off places. The dealer has

limited space for servicing vehicles, which can be handle 40-45 bikes in a day.

Opportunities-

Jaydev Motors got the following features which are its opportunities,

The motorcycle industry is expected to grow by 55% in coming years. Jaydev motor is

expected to use most of this opportunity by introducing bikes with more mileage and style

and in design for Indian roads.

Threats- Jaydev Motors got the following features which are its threats

A threat comes from a large number of mushrooming unauthorized repair shops all over the

region where jaydev motors operates. The major threat from Kamath motors (Bajaj) and

Pooja Motors (Kinetic)



HONDA - HONDA MATRIX



HONDA - HONDA MATRIX


Name of the firm : Honda matrix

Location : Kunjibettu

Founder : Mr D Rajendra Kumar Hegde

Dealers : Honda 2-wheelers


ProfileGroup IX, Sec A, MIM


Nature of the firm

The franchise ‘HONDA MATRIX’ is promoted by Mr D Rajendra Kumar Hegde. He is a

renowned person in the field of automobile sales. He has an experience of over 20 years in

the industry. Honda Matrix is the authorised dealers for the immensely popular range of

Honda bikes and scooterettes.

Location

It is located on the Udupi-Manipal road near Kunjibettu.

Layout

It is equipped with a spacious showroom where the vehicles are kept for display. The Udupi

franchisee was opened two years back but they are into dealership since the past 8 years. The

number of employees at Honda Matrix Udupi is 46. They are into auto ventures. The

products which account for a major part of their sales are their bikes Unicorn and Shine

which are very popular and also the scooterette Activa which is one of the leading Scooterrets

in terms of sales in India.

Tie-Ups (Financial)

Honda matrix motors Financial tie ups with the following Financial Institutions:


2. ICICI

3. Centurion BanK

4. Canara Bank

Relationship with the Company



Honda India was established in the year 1995, when Honda Motor Co. Ltd, Japan and Siel

Ltd. (Siddharth Shriram Group Company) of India came together and formed Honda India

Ltd. The main motive behind the collaboration was to provide Indian customers with Honda's

latest bike models

This manufacturing unit produces Honda Unicorn, Shine and Activa models.. Honda matrix

has been providing a great service. Ease of availability and after sales services and has a

established a good brand image. The Honda activa has had excellent sales and leads in the

scooter segment.

Products

Honda unicorn

Honda active

Honda shine


Honda Matrix Faces a relaxed competition from other dealers in Udupi district. There are


1. Bajaj

2. TVS

3. Kinetic

4. Hero honda


competition in the case of 2-wheelers.The main 2-wheelers of Kamath Motors,jaydev motors

and Tvs motors which competes with other competitors are Pulsar,splendor, Platina and

Discover. Competitors to the pulsar are TVS Apache and Fiero and Hero Honda’s Karizma

and Honda Unicorn. Competitors for Platina are TVS Star city and Hero Honda’s Splendor

plus. Competitors for Discover are Hero Honda’s Glamour and TVS’s Victor GLS and

Suzuki’s Zeus Heat.

SWOT ANALYSIS of Honda Matrix



Identification of the threats and opportunities in the environment and the strengths and weakness of the firm in the cornerstone of business policy formulation, it is these factors which determine the course of action to ensure the survival and/or growth of the firm. The environment might present many opportunities, but a company might not have the strengths to explore all the opportunities.

STRENGTHS :

Honda Matrix got the following features which are its strength:

Honda motors is leading in gearless two wheelers i.e Honda activa. It has great demand for its products for all age groups mostly girls and teenagers and official ladies. It has overall market share of 23% and in Udupi it grabs around 29% of market share. They provide after sales service like one year warranty and replacement is done in case of manufacturing defects, this creates attraction of customer to buy the vehicle from this store. They even provide after sales service and additional offers to its customers

WEAKNESS-

Honda matrix Expenditure made on advertisement is very less this is not sufficient to promote their products. The showroom is not very attractive.

OPPORTUNITIES-

Got the following features which are its opportunities.

Honda Matrix has an opportunity to increase it is market share by adding some additional features in the products like more comfort more mileage reduction in price and providing eco friendly product. It has plans to tie up with Sam Company which is a South Korean company.

THREATS-

Honda Matrix following features which are its threats.

The major threat comes from its competitor Tvs.



TVS -VEECHI MOTORS

TVS -VEECHI MOTORS


Name of the firm :Veechi Motors

Location : Near city bus stand, Udupi

Founder : Mr Vrajannath Acharya

Dealers : TVS 2-wheelers




PROFILE

Nature of the firm :

VEECHI MOTORS is a famous dealership of motorcycles which is located in the heart of

Udupi. The proprietor of VEECHI MOTORS is Mr Vrajannath Acharya. The numbers of

employees working currently are 32. The main selling bikes at veechi motors are TVS

Scooty, TVS Star City and TVS Apache

Location :

It is located near city busstand Udupi.

Layout :

Its located in the main city which is very favourable for the customers to visit an has a

spacious showroom. 2 floor building and has good display of the product.

Products

Some of the models that the TVS Company produces are as follows

Mopeds

• TVS Super XL

Scooterettes

• TVS Scooty

Motorcycles

• TVS Fiero

• TVS Victor

• TVS Centra



• TVS Star

• TVS Apache

• TVS Pep+

Tie-Ups (Financial)

Veechi motors Financial tie ups with the following Financial Institutions:


2. ICICI

3. Centurion BanK

4. Canara Bank


Veechi Motors Faces a relaxed competition from other dealers in Udupi district. There are


1. Bajaj

2. Kinetic

3. Hero Honda


competition in the case of 2-wheelers.The main 2-wheelers of Kamath Motors,jaydev motors

and Honda Matrix which competes with other competitors are Pulsar,splendor, Platina and

Discover. Competitors to the Tvs Apache are Pulsar and Fiero and Hero Honda’s Karizma

and Honda Unicorn. Competitors for TVS Star city are Platina and Hero Honda’s Splendor

plus. Competitors for Tvs victor are Hero Honda’s Glamour,Discover, GLS and Suzuki’s

Zeus Heat.



SWOT ANALYSIS of VEECHI MOTORS

The environment might present many opportunities, but a company might not have the

strengths to explore all the opportunities.

Strength:

Veechi Motors got the following features which are its strength.

Easy availability of spare parts and accurate designing of parts. As the parts are most

important part of a vehicle it creates huge demand Veechi motors is the only authorized sales,

service and spare parts dealers for Tvs two-wheelers in udupi, so the customers get locked

and but parts from the store. As the market is big so there are frequent break downs and

failures, these create great advantage for them to sell parts at higher cost. They posses well

equipped tools and equipment

Weakness-

Veechi Motors got the following features which are its weakness

As the authorized service center is in Udupi, it is not accessible to the people leaving in far

off places. The dealer has limited space for servicing vehicles, which can be handle 40-45

bikes in a day.

Opportunities-

Veechi Motors got the following features which are its opportunities

The motorcycle industry is expected to grow by 55% in coming years. Veechi motor is

expected to use most of this opportunity by introducing bikes with more mileage and style

and in design for Indian roads.



Threats-

Veechi Motors got the following features which are its threats

A threat comes from a large number of mushrooming unauthorized repair shops all over the

region where Veehi motors operates. The major threat from Kamath motors (Bajaj) and Pooja

Motors (Kinetic) , Jaydev motors.

SWOT ANALYSIS OF THE TWO-WHEELER

AUTOMOBILE INDUSTRY IN UDUPI AND MANIPAL

Strengths and Opportunities



In the economy segment of motorcycles, the industry was operating only with two-

stroke models, the share of which was dropping drastically due to adverse

international trends. This deficiency was corrected by launching 4 stroke bikes in the

economy segment. Executive and premium motorcycle segments are expected to see

new model launches from the industry. The industry will counter this by

strengthening the growth in these segments with new products and variants. The

heavy variomatic scooter which accounts for 14.6% of the 2 wheeler industry is

growing and more new products are expected in the coming financial year 2009-2010.

Almost all the major 2wheeler manufacturers have entered into this segment and this

will be a focus area for the future.

The dealers located near Manipal have an advantage that new students get admitted

every year which opens up new demand all year through.

The new bikes launched in 2008-2009 have found encouraging market response,

especially, the high end bikes, are expected to contribute significantly to the growth

during the year 2009-2010.

Executive and premium motorcycle segments are expected to see new model launches

from the industry

Most of the 2 wheeler manufacturers have explored the scooterette two wheeler

segment. For example , Honda’s Aviator and Activa , Bajaj’s Cristal , Hero Honda’s

Access and Flyte which have a terrific response and this segment holds good

prospects for the near future.

With the increasing scarcity of fossil fuels, the focus of the automobile and 2 wheeler

industry has focussed on alternative sources of energy like electricity, fuel cells , etc

which would definitely be the future of the 2 wheeler industry in the near future.

Various firms have been signing agreements with foreign motorcycle manufacturers

for sharing of technology which holds a good prospect for the Indian two wheeler

manufacturers.

Weaknesses

Raw material prices viz. Steel, nickel and copper have increased considerably over the

past few years. The prices of high quality materials which are used by the motorcycle

industry are rising and are expected to rise up to a limit even though there is global

recession in the picture.



Good 2 wheeler industry growth in the past has resulted in creation of excess

capacity. If the growth rate comes down still further with the onset of recession, it will

affect the capacity utilization and would also increase competition and promotion

cost.

At present, during the time of recession, consumers are pessimistic about spending

and so the 2 wheeler market is facing a downturn in the market.

The people of Udupi and surrounding areas are very elastic to changes in prices. They

are also very budget oriented.

Threats

The increased number of new models required to meet the customer needs will add to

the product development costs and can exert pressure on profit margin.

Foreign bike manufacturers pose a serious threat as the young generation of bikers

prefer sports bikes and other bikes with a lot of torque which at present is above the

technology limits of the Indian manufacturers.

With the new era of budget cars being herded; Tata Nano. The two wheeler industry is

facing a threat because customers may soon begin purchasing budget cars rather than

two wheelers.



THE BUSINESS ENVIRONMENT

Business is an economic activity. It is nonetheless influenced by non-economic environment

as much as its economic environment.

Business environment refers to all the external forces which have a influence or impact on the

functioning of the business.

In a strict sense Business environment refers to only external factors influencing business.

But in a broad sense it includes internal environment also.

INTERNAL ENVIORNMENT

Value System

o Values set by the founders = foundation

o Values shared by the organization

o Values- respect, trust, honesty

Business Mission & Vision


internal environ

ment

external environ

ment

Business


o Vision - picture of the company in the future

o Mission - brief description of a company’s fundamental purpose. A mission

statement answers the question

o “Why do we exist?”

Management Structure

o Degree of professionalism

FDI provisions of 2001 permits up to 49 % stake

Access to Professionalism and world class management practices

o Composition of Board of Directors

o Share holding pattern

Human Resources

o Skill, quality, commitment, morale

o Employee participation

o Independent professional recruitment process unlike pre- liberalization phase

Company Image & Brand Equity

o Brand equity: value of a brand

o brand loyalty, name awareness, perceived quality and strong product

associations

Marketing Capability

o 7 P of marketing

Financial Capabilities

o Factors related to availability, usage, mgt. of funds



EXTERNAL ENVIORNMENTThis consists of institutions , organizations and forces operating outside the company.

It may be classified into:-

Micro-Environment

Macro-Environment

MICRO ENVIRONMENT

1. Customers

Know your customers' needs

However good your product or service is, the simple truth is that no-one will buy it if they

don't want it or believe they don't need it. And you won't persuade anyone that they want or

need to buy what you're offering unless you clearly understand what it is your customers

really want.

Knowing and understanding customer needs is at the centre of every successful business,

whether it sells directly to individuals or other businesses. Once you have this knowledge,

you can use it to persuade potential and existing customers that buying from you is in their

best interests.

This guide tells you what you need to know about your customers, how to use this

information to sell to them more effectively, and how to win business from your competitors.

Why do your customers need you?

Every business needs a reason for their customers to buy from them and not their

competitors. This is called a Unique Sales Proposition (USP). Your USP can be identified

by completing the phrase "Customers will buy from me because my business is the only..."



Your USP can change as your business or your market changes, and you can have different

USPs for different types of customer.

For example:

A 2 wheeler retailer should deliver to the customers on time and should provide a goo after

sales services to the customers providing competitive advantage and satisfaction to the

customers.

What do you know about your customers?

The more you know about your customers, the more effective your sales and marketing

efforts will be. It's well worth making the effort to find out:

who they are

what they buy

why they buy it

If you're selling to other businesses, you'll need to know which individuals are responsible for

the decision to buy your product or service. For information on targeting decision-makers,

see our guide on how to target the right people in an organisation.

It's also well worth keeping an eye on future developments in your customers' markets and

lives. Knowing the trends that are going to influence your customers helps you to anticipate

what they are going to need - and offer it to them as soon as they need it.

You can conduct your own market research and there are many existing reports that can help

you build a picture of where your customers' markets - and your business - may be going. For

information on market research, see our guide to market research and market reports.

2. Competitors –

Knowing who your competitors are, and what they are offering, can help you to make your

products, services and marketing stand out. It will enable you to set your prices competitively

and help you to respond to rival marketing campaigns with your own initiatives.



You can use this knowledge to create marketing strategies that take advantage of your

competitors' weaknesses, and improve your own business performance. You can also assess

any threats posed by both new entrants to your market and current competitors. This

knowledge will help you to be realistic about how successful you can be.

Who are your competitors?

All businesses face competition. Even if you're the only restaurant in town you must compete

with cinemas, bars and other businesses where your customers will spend their money instead

of with you. With increased use of the Internet to buy goods and services and to find places to

go, you are no longer just competing with your immediate neighbours.

Your competitor could be a new business offering a substitute or similar product that makes

your own redundant.

Competition is not just another business that might take money away from you. It can be

another product or service that's being developed and which you ought to be selling or

looking to license before somebody else takes it up.

And don't just research what's already out there. You also need to be constantly on the

lookout for possible new competition.

3.Intermediaries /suppliers:

A supplier is defined as the person or organisation that provides a product or service to another business.

Finding a reliable and competitively-priced supplier is vital to the success of your business.

The terms that you negotiate with your supplier need to be based on:

the way that you pay them - overdraft, commercial bill paid for by bank, foreign currency potential costs - administration, taxation, transport, general payments and transactions possible risks - late payment to supplier, or faulty, late or undelivered goods

This guide explains how to build strong business relationships with your suppliers, through good negotiation, collaboration, management and performance review skills.

Building good relationships with suppliers



It pays to invest time in building good relationships with your key suppliers. If you can save money or improve the quality of the goods or services you buy from your suppliers, your business stands to gain.

Get quality service from your suppliers

To ensure a productive working relationship, select suppliers who offer a quality service and meet your specific needs.

4. Financiers

Selling shares in your company is one way of raising long-term finance for your business.

This is also known as equity finance. The advantage of equity finance is that you don't have

to repay the finance or pay interest on it as you would with an overdraft or bank loan.

Shares represent ownership in a company. When an individual buys shares in a company,

they become one of the owners of the business. This entitles them to a share of the distributed

profits of the company, known as dividends.

This guide will explain how shares are issued and sold, what dividends are and the tax

implications associated with dividends.

5.Public

–group having actual / potential interest in / achieving co. objectives

– Financial publics – influence Co. ability to obtain funds

– Media , Govt.

– General – public at large

Internal – members of the org



MACRO ENVIORNMENT

A Company and the forces in its micro environment operate in a larger macro environment of

forces that shape opportunities and pose threats to the company. The macro environment is

also known as general environment and remote environment.

Important macro environment factors include economic environment, and non-economic

factors such as political and regulatory environment, social and cultural environment,

demographic, technological, natural, and global environment.

COMPETITIVE STRUCTURE OF INDUSTRIES.

The competitive structure of industries is very important business. The following are the

important common entry barriers

a) Government policy.

b) Economies of scale.

c) Product differentiation.

d) Monopoly elements.

e) Capital requirements.

RIVALRY AMONG EXISTING COMPETITORS

Rivalry among existing competitors is often conspicuous of the competitions. Firms in an

industry are mutually independent, competitive moves of the firms usually affects others and

may be retaliated.

There are number of factors which influence the intensity of rivalry, these include:

a) Number of firms, and their relative market share, strengths

b) State of growth of industry

c) Fixed or storage cost

d) Indivisibility of capacity augmentation

e) Product standardization and switching cost.

f) Strategic stake

g) Exist barrier

h) Diverse competitors.



BARGAINING POWER OF BUYERS

Important determinants of buyer power are

a) Volume of purchase.

b) In terms of total cost

c) Extent of standardization of differentiation

d) Switching cost

e) Profitability of the buyer

f) Extent of buyers information

BARGAINING POWER OF SUPPLIERS

Important determinant of suppliers powers are

a) Extent of concentration and domination in the supplier industry.

b) Importance of product to the buyer

c) To the supplier

d) Extent of substitutability of product.

e) Switching cost.

f) Potential for forward integration by suppliers

The Economic Environment of the industry

The economy of India is a mixed economy. Various economic factors influence the 2 wheeler

industry in Udupi. The ownership, control and management of enterprises bring out the

nature of the economic system. Because of the parliamentary system of administration, most

decisions are processed by the Cabinet Ministers. The pricing mechanism is of a free market

economy. The individual manufacturers consider cost of production, government taxes and

registration fees when setting the price as well as the market forces forecasting of demand

and supply.

Effect of the monetary policy-



The monetary policy changes may be due to a change in the bank rate policy of the

government and so the prospective customers may not be able to get credit or loans

easily and so he will delay his purchase decisions with regard to the two wheelers.

Similarly, reduced money supply in the market will reduce the demand for two

wheelers and other durable goods.

The interest rates of the stock markets also have a bearing on the industry because if

the interest rates are low people would rather spend their money than invest. Whereas

if the market is on the rise, people will be optimistic and would curb their expenditure

on durables and rather invest in the stock market.

Effect of the fiscal policy

The effect of taxation is well known. People always compare the tax amounts on the

various bikes and scooters before they make a purchase decision. If the tax rate is low

people wouldn’t mind purchasing a slightly higher product than the budget which they

had set aside. But if tax amounts on bikes are high, people would rather settle for the

cheaper brand.

Government spending on infrastructure like roads , bridges , etc. May encourage

many more people to go for two wheelers.

The Non-Economic Environment of the industry

The non- economic environment of the 2 wheeler industry can be broadly classified as

follows-



Political Factors:

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

How stable is the political environment?

Will government policy influence laws that regulate or tax your business?

What is the government's position on marketing ethics?

What is the government's policy on the economy?

Does the government have a view on culture and religion?

Is the government involved in trading agreements such as EU, NAFTA,

ASEAN, or others?

Demographic environment

Due to a variety of different people of different ages and income, the bikes have to

be manufactured as per the various target segments in segments like sports class,

executive class , mileage class, etc.


political and legal

environmenty

demographic envt.

natural envt.

technological envt.

socio-cultural envt.


The sex-ratio determines the demand for the various 2 wheelers targeted

particularly to men or women.

The size of the population determines the demand for the two wheelers.

The employment status affects what segment of the two wheeler industry will see

sales.

The rural and urban distribution of population determines the demand for the 2

wheelers in a town like Udupi and Manipal.

The local language determines what type of marketing and sales activities must be

carried out in what language.

Sociocultural Factors:

The social and cultural influences on business vary from country to country. It is very

important that such factors are considered. Factors include:

What is the dominant religion?

What are attitudes to foreign products and services?

Does language impact upon the diffusion of products onto markets?

How much time do consumers have for leisure?

What are the roles of men and women within society?

How long are the population living? Are the older generations wealthy?

Do the population have a strong/weak opinion on green issues?

Technological Factors:

Technology is vital for competitive advantage, and is a major driver of globalization.

Consider the following points:



Does technology allow for products and services to be made more cheaply and

to a better standard of quality?

Do the technologies offer consumers and businesses more innovative products

and services such as Internet banking, new generation mobile telephones, etc?

How is distribution changed by new technologies e.g. tickets via the Internet.

Does technology offer companies a new way to communicate with consumers

e.g. banners, Customer Relationship Management (CRM), etc?

Natural environment

Issues of pollution have caused change in the attitude of the society towards

motor vehicles releasing harmful residual gases.

Monsoon and climate changes indirectly affect the purchasing behaviour of

the customers.

Porters five force model for Two-wheeler automobile industry:-



Bargaining Power of suppliers:

Suppliers of auto components are fragmented and are extremely critical for this industry since

most of the component work is outsourced. Proper supply chain management is a costly yet

critical need.

Bargaining Power of Buyer:

Buyers in automobile market have more choice to choose from and the increasing

competition is driving the bargaining power of customers uphill. With more models to choose

from in almost all categories, the market forces have empowered the buyers to a large extent.

Competitive rivalry:



The industry rivalry is extremely high with any product being matched in a few months by

competitor. This instinct of the industry is primarily driven by the technical capabilities

acquired over years of gestation under the technical collaboration with international players.

Threat of substitute Products:

There is no perfect substitute to this industry. Also, if there is any substitute to a two-

wheeler, Bajaj has presence in it. Cars, which again are a mode of transport, do never directly

compete or come in consideration while selecting a two-wheeler, cycles do never even

compete with the low entry level moped for even this choice comes at a comparatively higher

economic potential.

Threat of new entrants

Here the threat of new depends on the economies of scale of the cost of production

, and customer switching costs, access to industry distribution channels.

TWO WHEELER DEALERS IN UDUPI AND MANIPAL

The automobile market is one of the fastest growing segments of the manufacturing sector in

the recent years. And the role of the two wheelers in achieving this impressive growth cannot

be ignored. All the leading players in the Indian two wheeler segment such as Hero Honda,



Bajaj Auto, TVS Motor, Yamaha Motor and Kinetic Motor have continuously been working

on enhancing their product value and customer care facilities. An important aspect of their

sales promotion has been the dealer network.

The dealers play a very important role in the sales promotion of the company's products and

talking of the two wheelers, one really cannot hope of a better way of reaching out to the

customers' except with a strong dealers network.

The two wheeler companies offer dealership to a selected few based on certain parameters

like sound financial background, availability of space in a prime location in the town/city and

a decent understanding of the two wheeler business. Motor cycle dealers act as a link between

the company and the potential customers. All the leading players from the Indian two wheeler

market have set up a network of dealers' spanning over the towns and cities almost all over

the country.

A two wheeler dealer provides a detailed insight into a two wheeler, their brands and range of

options, financing and other relevant information as expected from a customer's perspective.

While the company in its advertisements and promotional campaigns highlights on the broad

features of the product, the customer is expected to get detailed information on everything

that s/he wishes to know on the concerned two wheeler from the dealer. Further, the dealer is

expected to help and encourage the customer on identifying the best possible two wheeler

that will meet her/his needs and how best to acquire them. In addition to, the financing

options, if and when needed and how best to secure them, is also arranged by the dealers. A

dealer in proper loop with the manufacturer can start various promotional programmers like

two wheeler for sale, zero percent finance, exchange offers etc.

THE CHALLENGES FACED BY THE INDUSTRY

Awareness of the general public about the latest bikes, the specifications of the

various bikes is very less.



The people of Udupi are very cost conscious and are slightly pessimistic when they go

for purchasing of durable products like 2 wheelers.

The people of the region are seasonal i.e. people go for purchasing durable goods only

during festivals and not all through the years.

Lack of infrastructure like poor condition of roads has caused many potential

customers to prefer using public transport or cars rather than 2 wheelers.

The monsoon in the Western Ghats is quite prolonged which amounts for more than 3

months of heavy rain. During this season people do not go for purchase of bikes.

Increasing prices of fuel have caused many people to not go for purchasing bikes thus

amounting to less sales.

Marketing infrastructure is not as developed as much as the firms dealing with

electronic durables.

The lead time for receiving an ordered bike is quite long (one week to one

month in some cases)

SUGGESTIONS:

(a) Locating service points near the customer:

Taking service to the customer is some of the useful tools in improving service quality.

This option demands that instead of the customer having to seek out service outlets, the

firm’s service centres should seek out the customer. Service at an arm’s length at the

time customer wants it is the premise of this option.



(b) Making Delivery Points user friendly: Cleanliness + Friendly + Courteous

people, warm hospitality shown verbally as well as non verbally can make delivery

point customer friendly.

(c) Reducing time gap between services sought and delivered:

The firm should work to reduce the time gap between the customer asking for service

and it being delivered.

(d) Product Design:

The firm should also take a close look at its product design and examine which

technology can help better serve the customers.

(e) Unconditional guarantee:

The firm must also plan to give unconditional guarantee to its customers. And when this

is done and none else that the Chief Executive of the firm commits it to the customers,

the customers confidence goes up in the firm and its product.

FUTURE PROSPECTS OF THE INDUSTRY

The motorized 2 wheeler is ubiquitous on Indian roads. It is cheaper than car and costs less

to run. It can be used throughout the year in India because of its tropical climate and best of

all, comes in a variety of shapes;mopeds, scooters, motorcycles and scooterettes. Not

surprisingly, India is the second largest market in the world for two wheelers after China.

Over the past 5 years, the Indian Market has swelled at a steady annual rate of 13.79% helped

by a lusty demand for motorcycles. By contrast, the rest of the automotive industry has been



hobbled by weak consumer demand. Sales of cars have stagnated and those of commercial

vehicles have plunged.

The robust 2 wheeler performance has attracted overseas investors and virtually every

domestic two wheeler company has a foreign collaborator. However, the relationship

between Indian and foreign partners in this sector is different from those in other industries,

in that, the Indian side in 2 wheeler ventures is typically stronger than its foreign counterpart

in terms of management control and strategic planning.

To a large extent, this reflects the financial muscle, marketing skills and technical capabilities

of Indian two wheeler companies and their better understanding of the Indian consumer.

Indeed, Indian companies in 2 wheeler ventures need foreign partners mainly to access

technology. This is especially true for the production of Japanese models of motorcycles; in

scooters, most Indian companies have absorbed the technology and are much less dependent.

In a nutshell, the future prospects for the 2 wheeler industry are bright provided that the

manufacturers and dealers keep innovating and updating.


Study on Macro Economics on the Two Wheeler Dealer Industry in Udupi and Manipal

Documents

Transcript of Study on Macro Economics on the Two Wheeler Dealer Industry in Udupi and Manipal