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demand analysis plays an important role in success of the firms and industry at whole; and
two wheeler automobile sectors is the backbone of the automobile sector in India
Declaration: I declare that this Assignment is my individual work. I have not copied it from any other
students work or from any other source except where due acknowledgement is made explicitly in the
text, nor has any part been written for me by any other person.
Students Signature
Evaluatorscomments (For Instructors use only)
General Observations
Marks Obtained:
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1- Introduction
1.1.Summary of the case
The case discusses the demand function in Indian two-wheeler industry. Its focus is on
how despite of overall recession during 1995-98, which adversely affected almost all the
industries in India, two wheeler segment of the automobiles could sustain and grow at a
satisfactory rate of 10% in 1995-96 and 12% in 1996-97.
The planners and economists blamed the lack of demand as well as supply side
bottlenecks, especially infrastructural bottleneck as the main reasons responsible for the
slowdown; but later the detailed study revealed that demand condition was the only
reason for slowdown in many industries.
The study conducted by analysts showed that demand in urban areas was high, but
steady; or in simple terms, a situation where it was not increasing at considerable rate;
and hence it could not be taken as a basic reason for the demand-driven growth in
industry. But in rural areas, where the government implemented the support policies in
terms of providing subsidies, input items of agriculture, such as power, fertilizers etc,
caused a noticeable growth in income of agriculturist, which in turn increased the middle
income people of the society and demand for two wheelers.
The case also shows that the future of two-wheeler industry is promising as long as the
rural income grows along with the middle-class population.
The liberalization policies of the country could attract a huge amount of investment from
the foreign MNCs, which awaken the government for applying the strict environmental
policies. Manufacturers of automobile industry are bound to comply with the
environmental norms introduced by the government.
Although, Indian companies have the capability of running the business by their own, but
the past history of the industry shows that joint ventures with foreign partners guarantee
their success in terms of dealing with international standards. Joint ventures encourage
the domestic firms to expand their operations.
1.2.Brief introduction of two-wheeler segment in Indian automobile industry
India is the second largest producer, and first biggest two wheeler market in the world,
and standing next to Japan and China in terms of numbers of two wheelers produced.
The Indian two wheeler segment contributes the largest volumes amongst all the
segments in automobile industry. This segment can be broadly categorized into 3 subsegments of scooters, motorcycles and mopeds.
Bikes are the major segment of two wheeler industry in India, the others are scooters and
mopeds.
There is a considerable expansion in sales of the scooter segment in last years as far as
the two-wheelers are concerned. The domestic motorcycle sales volume increased up to
10 percent, whereas the scooter segment recorded a growth of 30.7 percent in sales. But
the motorcycle segment lags behind in this regard. This is due to the fact that the recently
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launched gearless scooters cater to the needs of both men and women, while motorbikes
are a segment preferred by men only. The growth momentum is also propelled by the fact
that the two-wheeler manufacturers in India have understood the markets needs and have
been able to deliver as expected.
1.3. Two wheeler market players in India:
The major players and their percentage market shares in Indian two-wheeler market are
as follow:
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Marketing decisions: Demand analysis forms the base for formulating the
marketing strategies. It collects the important data related tastes and preferences of
the customers which in turn helps the managers for choosing the right strategies to
attract the customers.
Production decisions: Demand analysis reduce the unnecessary cost associated
with production. It avoids the unrequired surplus and shortage of resources for
production.
Financial decisions: Surplus and shortage of finance, both are unfavorable
conditions for a business; because both of them associates cost with them. Either
cost of unnecessary accumulation of funds or stoppage due to shortage of
resources. Demand analysis helps the organizations to keep adequate amount of
finance for meeting its future financial obligations on prompt basis, it also avoids
the extra cost burden of finance.
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which increased the demand for two-wheelers in rural areas, and protected this segment
from the effects of the recession.
2.2.Reasons behind economic Slowdowns/recessions
There can be many reasons for economic recessions; the major ones are listed as follow:
Higher rate of interest: Because it limits the overall liquidity in economy or
money available to invest.
Increased inflation: Inflation refers to general rise in the prices of goods and
services over period of time. When inflation increases, it reduces the purchasing
power of the people, which hinders the growth of goods being produced, and
services being rendered.
Consumer negative perception about future: If consumers dont have positive
perception about the future of economy, they are less likely to spend money, and
it leads to recession.
Real wages reduction: Real wages refer to wages that have been adjusted to
inflation. When the inflation rate is increasing and there is no proportionate
increase in wages of the workers, it reduces the purchasing power, and causes
recession.
2.3.Demand function of two-wheeler industry and various affecting factors
Demand function is the amount of a product demanded for each combination of price and
the other affecting factors. It is simply shown as:
F (dx) = (price, contributing factors)
The major contributor factors, which affect the demand for two-wheelers are discussed as
follow:
Prices of Two-Wheelers: Same like all other normal commodities, increase in
price of two-wheelers will decrease, and decrease in prices will increase the
overall demand.
Income of consumers: Income changes and its impact on demand for two
wheelers, can be explained in three levels of the society:
High income individuals: increase or decrease in their income may have
very less effect on demand, since a large number of them dont prefer to
buy two-wheelers.
Middle income people: with increase in their income, demand usually
decreases; because they can afford other options such as cars to buy, rather
than buying two-wheelers.
Upper-lower income people: with increase in their income, the demand for
two wheelers increases, and with decrease, demand also decreases.
Financing options: The availability of various sources of finance, can lead to
increase in demand; where people dont have access to loans, banks and other
sources, most of them will be very conservative in their consumption pattern.
Advertising and marketing: It is usually claimed that advertisement creates
demand, and it is very true in two-wheelers. A research conducted in Chennai
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shows that a great majority of youngsters dont buy two-wheelers because they
need it, but because they want it.
Prices of substitutes especially cars: Demand for two-wheelers is also affected
by the price of other substitute, such as cars. Introduction of new cars with lower
prices can affect attract the customers toward them and encourage them to forgo
the decision of buying two wheelers.
Demographic drivers: Changing lifestyle of the people can also affect the
demand for two-wheelers. With a huge difference from the past, now many people
buy two-wheelers for entertainment, rather than to satisfy their need.
Availability of credit for vehicle purchase: The availability and cost of finance
affects the demand for two-wheelers as the trend for increased credit purchases for
consumer durables have increased over the past few years.
New models/offerings: People in all developing countries, especially India, are
highly attracted towards new models. Sales of two-wheelers increases when a new
model hits the market.
Government policies: For example, decisions regarding prices of petrol which are
subsidized by the government can also affect the demand for two-wheelers. When
the government reduces the subsidy, the prices of petrol will increase and this
affect the sales of two-wheelers in market.
Mass transport system: If the plan of having mass transportation system is
implemented, it will reduce the demand for two-wheeler segment in India.
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Yamaha caters to the market of tier I and tier II cities. It caters to males between
the age group of 18 to 35. It caters to upper middle class families. It has high pick
up and speed. It is the most innovative and most stylish bike manufacturers.
Therefore, it is youth centric.
Bajaj Auto Ltd.
Bajaj caters to the mass consumer. It caters to middle-middle and upper middle
income group of consumers. It does not have the rural support. It still lags behind
in the rural areas. It caters to aspiring young men of the country.
TVS Motor Company
The range of TVS bikes are less. It caters to the lower middle class and the
middle-middle class income groups. It caters to the youth. It segments itself on
the basis of gender as well as it caters to male.
Harley Davidson
It caters to tier I and tier II cities. It caters to touring enthusiastic and outdoor
oriented male of high income groups between the ages of 27 to 45. It caters to
innovators or achievers who are self-employed business men and are ready to buy
the product. They want to but it for leisure riding, planning weekend rides etc.
3.3.Application of strategic alliance (Joint Venture) concept:
Strategic alliance is an agreement between two or more parties to pursue a set of agreed
upon objectives needed while remaining independent organizations.
Many times companies enter into joint venture and start a new company or new project;
now the question maybe, why joint venture?
There can be many reasons; we divide them into following groups:
Internal Reasons to Form a JV
Spreading Costs
Connection to Technological Resources
Improving Access to New Help Economies of scale
External Reasons to Form a JV
Develop Stronger Innovative Product
Improve Speed to Market
Strategic Move Against Competition
Strategic Reasons
Synergistic Reasons
Share and Improve Technology and
Diversification
4- Questions of the case and their answers:
Question #1: Comment on the role of market segmentation on the demand for two-wheelers?
Ans:
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Market segmentation plays an important role in demand analysis for two-wheelers. The major
ones can be listed as follow:
Question #2: Critically analyze how various factors will affect the demand function of twowheelers.
Ans:
Same like all other normal commodities there are many factors that affect the demand function
of two-wheelers market at large; the important ones are listed as follow:
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Question #3: Discuss, how despite overall recession in the industry the two-wheeler segment has
maintained an impressive performance.
Ans:
As per our understanding from the case, following were the basic reasons for two-wheeler
industrys survival despite of all pitfalls in other industries:
Question #4: How signification is the role of manufacturers in a demand-driven industry like
the two-wheeler industry?
Case Based Presentation, First Assignment,
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Ans:
Demand Driven Industry follows the proactive technique for the manufacturing of their goods
rather than going for the conventional supply chain method of manufacturing. The manufacturers
play a pivot role in Demand Driven Industries as:
Production as per demand: The manufacturers can study the demands of customers and
end-users and, accordingly manage their sourcing of raw materials and components.
Manufacturers can take care of inventory tracking and proper distribution of two
wheelers across the channels within time. Also this helps the manufacturers to produce as
per the demands which in turn help them not leading to either surplus or shortage.
Demand shaping: It can help manufacturers to sense the demand in the particular
segment and to focus on that particular segment or category to improve the marketing
strategy and shape up the demand of two wheelers in that segment.
Introduction of new innovations: Manufacturers should consult the end-users of two
wheelers and based upon the feedback received, they should try to bring new innovations
and technology into the two wheelers to break to monotony and at the same time
fulfilling the demands of their customers.
Focus on the margins: The manufacturers can further investigate and should come up
with the ideas of limiting the components and compact the design of two wheelers which
would ultimately make the two wheelers cost effective as well.
Customers Satisfaction and services: The role of the manufacturer should not end up to
the selling of their wheeler only; also they should be responsible for the post sale
customer satisfaction as well.
Question #5: How do you think JVs can help boost a demand-driven industry like that of the
two-wheeler?
Ans:
Joint venture means that when two companies work in collaboration to catalyze the prospects of
both the companies. The Joint Ventures boost the industry in the following ways:
International Exposure: The collaboration with other industries to form JVs would
enhance the concepts of the production and would imbibe new technologies into
manufacturing of two wheelers. For example, On June 26, Hero Honda, for the first time
in India, launched the fuel injection (fi) technology in two-wheelers under the brand
name Glamour fi. The motorcycle does not have a carburetor. Instead, fuel is directly
delivered to the pre-combustion chamber with the help of a fuel injector. Experts say the
process reduces emissions significantly and improves fuel efficiency.
Increased Resources: When two or more companies combine together to work for a
common objective, both of them would be in a situation to access greater resources,
including specialized staff, technology and finance
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5- Conclusion
After comprehensive analysis of the case, we could conclude that demand analysis plays an
important role in success of the firms and industry at whole; effective segmentation, clear
understanding about patterns of market movements and planning accordingly can help the
businesses to survive and grow at impressive performance rate.
Apart from that we understood that economic slowdown may have many reason behind, they
can either be from demand or supply side.
The industries which have diverse strong demand in market may not be severely affected, no
matter how tough the situation comes. Two-wheelers segment of automobile industry is a
good example of it.
Besides these all, we realized that if the government support the less opportunist segment of
the society, it could reduce the dependency of economy on few pillars, shorten the inequality
gap and protect the economy from collapsing down in challenging situations.
6- Recommendations
After completion of and comprehensive analysis of the case work the we came to some
conclusions which could help the company in development & improvement of service
process. This is helpful in future development of the company. The following points come in
the suggestion parts which came after the analysis and conclusion of the case:
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References:
Study on Two Wheeler Market Segmentation and its Strategy in India by Saillaja .V,
Research Scholar, Bharathiar University, Coimbatore, India
Indian Two Wheeler Auto Industry and Concurrent Engineering, By: Dr. V.Venkata
Ramana, V.Visweswara Reddy, T.Govardhan Reddy
Indian two wheeler market: rural India shines, a case study on the sales of two wheelers in
rural Indian, by: Abhimanyu Upadhyay , Research Scholar, CCS University, Meerut
The Evolution and Structure of the Two-wheeler Industry in India, By: Sunila George, IIM
Bangalore, Raghbendra Jha, ANU, Canberra, Hari K. Nagarajan, IIM Bangalore and
NCAER, Delhi
Customer perception towards major brands of two wheelers in Jaipur city and its impact on
Buying decision, By: Nutan Sharma1, Research Scholar, Jaipur National University, Jaipur,
India
Factors explaining emerging economies growth slowdown, By: K. Buysse, E. Vincent
Trade Chakra,Globalization, [Online] Available: http:// www.tradechakra.com/indianeconomy/globalization.html
two-wheeler industry: growth drivers intact - ICRA
www.yes.honda.co.in/honda-motorcycle-scooter.aspx
http://en.wikipedia.org/wiki/Motorcycle
http://en.wikipedia.org/wiki/Bajaj_Auto
www.indianmba.com/Occasional_Papers/OP48/op48.html
www.ijrmet.com/vol2issue2/amarjit1.pdf
www.marketing91.com/swot-analysis-of-automobile-industry/
www.team-bhp.com
targetmarketsegmentation.com/segmentation.../example-of-demand-analysis
https://en.wikipedia.org/wiki/Automotive_industry_in_India
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Table of contents
1. Introduction
1.1. Summary of the case
1.2. Brief introduction of two-wheeler segment in Indian automobile industry
1.3. Two wheeler market players in India
1.4. Demand analysis and its importance
2. Analysis of the case (Ideas)
2.1. Economic slowdown, and its impact on various industries, specifically on two-wheelers
2.2. Reasons behind economic Slowdowns/recessions
2.3. Demand function of two-wheeler industry and various affecting factors
2.4. Market segmentation and its role in demand for Two-Wheelers
2.5. Role of government support in boosting the economy
2.6. Liberalization and its impact on industries (Two-Wheeler)
2.7. Environmental pollution, its policies and impact on Two-wheeler business
2.8. SWOT analysis of two-wheelers industry in India
3. Practical application of concepts in real world:
3.1. Application of Demand analysis concept:
3.2. Application of Market Segmentation concept:
3.3. Application of strategic alliance (Joint Venture) concept:
4. Questions of the case and their answers
5. Conclusion
6. Recommendations
7. References:
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