The runaway growth in motorbike sales over the last few years in India has a niche player hungering for a larger share of the pie. By Pawan Chabra

IIPM makes record 10,000 placements in five years

They never cared two hoots about competition, did not encourage scantily clad babes in their ads and barely batted an eyelid before blithely including a comparison with a tractor in their feature list. Obviously, Eicher Motors’ Royal Enfield has had much more going for it than the sheer deep thump of its rakishly upswept silencer. The downside has been that even as Bullet’s cruiser imagery sells 45,000 bikes every year, Hero Honda makes hay in the commuter segment with unit sales crossing 35,00,000 annually. Sure, one should not compare – after all, bike enthusiasts worship the ground that the stylish Bullet walks on, while Hero Honda is merely a convenience for your daily office-goer. Siddhartha Lal, MD, Eicher Motors agrees, “We have no comparison with mass manufacturers. Royal Enfield riders use their bikes for purposes beyond commuting.”

But quiz Lal a little further and you realise that some changes in existing strategies at Enfield are in order. The niche bike brand, which has sold a meagre five lakh units in its 56-year-old history in India, is now targeting a bullish figure of one lakh annual unit sales by 2013. Explaining short-term targets, Lal says, “We are planning to touch 50,000 unit sales in 2009 (targeting a 15% rise year-on-year), followed by a target of 60,000 for 2010.” Already plans are in place for a Rs.65 crore investment over the next three years at its Chennai plant to double production capacity. Question is, can this planned doubling of sales turnover by 2013 be possible without tapping at least a little into the mass markets, presently dominated by Hero Honda, Bajaj and TVS? But the dilemma then is, will the Bullet come down a few notches from its cruiser positioning or is there more method to this strategy?

Company insiders are at pains to point out that their new ambitions can be achieved without any dilution in brand equity. “We have been able to sell whatever we manufacture and almost all our models have a waiting list,” explains R. L. Ravichandran, CEO, Royal Enfield. Clearly, Bullet’s established aspirational quotient amidst the Indian consumer is fuelling the ambitions of this bike company. Not putting all its eggs in the domestic market only, Enfield is also working on increasing its already expanding global reach. Its ventures in various developed markets are already a success. “We are exporting 5% of our total sales now. But we will take that to 15% over the next three to five years,” vows Lal.

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Buying on A ‘second’ thought...

The optimism of the giants is well supported by the handful of facts and figures. The size of the used-car market in India is estimated at about 10 lakh units per annum, and it is largely fragmented and unorganised. Going by experts claim, the share of the organised market in this segment is just 10% while the balance is shared by unorganised dealers (30%) and the biggest threat to the organised sector, personal dealings between the buyers and sellers (60%). Shashank Srivastava, CGM-Marketing, Maruti Suzuki avers, “The second hand car dealers are not the only threat to the certified pre-owned car dealers as most of the transactions happen on one to one basis.” However, the top honchos of the industry, like Jagdish Khattar, the ex-MD of Maruti Suzuki and CMD of Carnation Auto, expect the organised pre-owned segment to grow in leaps and bounds in the time to come. Set to try its luck in the arena, Khattar’s Carnation, which started a pilot project of selling used cars in Mumbai in August this year, is now all set to enter destinations like Cochin and Hyderabad by the end of this month. Khattar points out, “Awareness is only and the biggest challenge that I see in the used car segment. But as time will pass, the awareness will automatically increase among the buyers.”

However, the problem for the local pre-owned car dealers doesn’t end here. J.D. Power’s Used Vehicle Market Report revealed that the Internet shopping has reached parity with visits to dealer lots as the primary method for buyers to locate used vehicles globally. The report went further to find out that the percentage of used-vehicle buyers (in the US) dependent on Internet to locate vehicles for sale has increased from 40% in 2008 to 46% in 2009. “Internet shopping provides prospective buyers with the opportunity to search through enormous amounts of specific vehicle information without even leaving home, allowing for a more efficient medium of matching buyers with unique used vehicles in the market. In light of this, dealers should expect the Internet to continue to increase in importance among used-vehicle shoppers and adjust their online presence accordingly,” says Arianne Walker, Director- Marketing, J.D. Power and Associates. But does the situation in India show any such trend? Well, looking at the number of automotive websites like Carwale.com, Gaadi.com, Indimoto.com et al that are mushrooming thick and fast, expectations are high that soon the Indian pre-owned car industry will follow the western trends. Affirms Udit Bhandari, CEO, Indimoto.com, “The usage of websites for purchasing vehicles is increasing very fast in the country and I believe it has a lot of potential.”

Indian market, as said, is very different and versatile in the manner it operates. Today, the Indian consumers have moved an inch away from the conventional local car dealers towards the organised players, but when it comes to meeting the global trend, well the day is still far away. Someone has rightly said, ‘In the US people drive from the left, in India people drive on what’s left.’ Unlike the US, there is a dearth of websites like Kelly blue book in India (which provide fair valuations for the pre-owned cars) providing local dealers an opportunity to play foul. Also there is always a high possibility of mileage tampering due to the lack of a centralised database. Still people like Aryan do not subside the idea to peep at the neighborhood used car dealer’s collection before they buy one. Common guys, at least give some value to what is called an authentic warranty by the authorised dealer!

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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POWER OF INNOVATION

It’s no mean feat to connect with rural consumers, but with ‘Jalsa’ and ‘ChotuKool’, Coca-Cola & Godrej have accomplished the task with ease

It’s not a cakewalk to think out-of-the-box and companies are aware of this harsh reality. But, if chiseled intelligently this bitter task can turn out to be a sweet verity for a company and that too without even an iota of doubt. Don’t agree? Ask Coca-Cola India and you’ll come to know that how through a unique consumer engagement initiative named ‘Jalsa’ this soft drink major has slotted its rural balls in the right net. And all that it took to accomplish this heavy duty chore were just few shows!

The company had organised shows (with an audience base of around 15,000-20,000) in small towns and villages of Uttar Pradesh and Bihar last year to connect with the locales. Based on a local “Folk Fare” narration through dance, poetry and plays, the show had professional dancers performing live on popular Hindi and Bhojpuri songs and the show generally lasted for about 2-3 hours. Interestingly, the company did all its advertising through an auto rickshaw, just three days prior to the event.

Moreover, in order to participate in ‘Thums Up Jalsa’ the consumers had to purchase a bottle of Thums Up (For instance, Coca-Cola gave one free ticket with every RGB bottle and two free tickets per 600 ml bottle). Not only this, sometimes the ticket also carried a unique number which gave consumer a chance to win attractive prizes like TV, music system, et al, in contests organised during the show. As Atul Singh, President and CEO, Coca-Cola India admits, “In the 3rd quarter of 2009, unit case volume growth for Coca-Cola India grew by 37% against the 18% increase in the prior year.” Apart from innovative thinking in terms of engaging consumers with the brand, the company has also introduced a mirco-nutrient drink ‘Vitingo’ especially keeping in mind the micro-nutrient malnutrition that is caused by the lack of sufficient micronutrients in the diet of the people rural India. Available in 18 gm sachet at Rs.2.50, Vitingo provides affordable nutritional beverage alternatives to the “bottom of the socio-economic pyramid” population.

It’s not just Coca-Cola, which is trying to exploit such opportunities through innovative thinking. In fact, FMCG major, Godrej, has already made its way into the hearts of rural customer and that too through a nano refrigerator – ChotuKool. The refrigerator was specially designed for the Indian hinterland. Red in colour, ChotuKool weighed only 7.8 kg and was priced at Rs.3,200 only. It even ran on battery and had no compressor. Result: Godrej had not only added 1,700 new small towns and 5,000 villages to its rural coverage in the last six months but is now looking at expanding its reach to 50,000 villages in the next three years. Now, that’s what you call the power of innovation!

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
TSI exposes b school ranking scamsters Mahesh Peri of Career 360 and Premchand Palety of C fore. - For Complete Sting Operation Video Click Here

Pioneer Exposes the fraud called Mahesh Sharma and Mahesh Peri of Career 360 and Barbel Schwertfeger of mba-channel.com

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I invest my money in stocks which give me good returns

IIPM: An intriguing story of growth and envy

Though some of these austerity acts have back fired (remember Jet fiasco), but most of them have gradually pushed airlines towards the profitable zone. Well, the recent and long awaited profitable quarterly results of both Jet Airways and SpiceJet (Rs.530 million Q4 ‘08-09 and 260 million Q1 ‘09-10 respectively) stand testimony to the fact. Further, the continuous fall in the price of the air turbine fuel (ATF) over the last one month (Jet fuel form 40 to 50% of the total input cost) has contributed to the cause. “A shift in passenger traffic from FSCs to LCCs coupled with added capacity have helped SpiceJet gain market share. While the total passenger demand is expected to remain unchanged, our goal is to continue to gain market share in 2009,” explains Sanjay Aggarwal, CEO, SpiceJet.

The fact that further encourages investors to invest in the domestic airlines is the favourable attitude of the government towards the sector. Apart from restructuring the ailing Air India, it’s also taking initiatives to fuel the revival of the sector. Reportedly the government is planning to include jet fuel under the purview of goods and services tax, starting next fiscal. This would help airlines in further reducing the overall cost.

Moreover, the contentious proposal by Praful Patel, which allows foreign airlines to pick equity in their Indian counterpart, would definitely give some breathing space to the cash strapped domestic aviators. Apart from easing the norms for Indian carriers to fly abroad, the ministry has also been lobbying for tax sops. “There has been a perceptible change in India’s airport infrastructure, especially with the modernisation of the Delhi and Mumbai airports. We believe this improvement would translate into better airlines’ productivity and profitability,” agrees Mahantesh Sabarad, Aviation analyst, Centrum Broking.

Further, Indian investors can also take a positive clue from the fact that encouraged by the favourable standings and better future prospects the domestic airlines are now raising funds from overseas. While Goyal plans to raise $400 million through a QIP, Mallya has unleashed plans of raising $175 million from overseas investors by March 2010. Not to forget, SpiceJet is already being supported by Wilbur Ross.

No doubt, these are reasons enough to encourage an investor. But then, the one thing that they need to keep in mind before digging too deep into their pockets is that the airlines are still not out of the woods completely. Industry experts continue to stand firm on their prediction of losses for the sector for the current fiscal. Further, debt burdens for these airlines are still mounting. For starters Kingfisher Airlines is burdened by a total debt of Rs.60 billion. “Yields continue to remain weak, and with the industry moving strongly to the low cost model, downward pressure on fares will continue. So it is likely that the outlook, although better, will continue to remain challenging for some months to come,” predicts Somaia of CAPA.

Thus, looking at the prevailing uncertainties, new investors should keep their eyes and ears open before taking the final plunge into the sector. In fact, the best option available for the existing investors is to quickly book profit and exit. Or may be, it’s already too late for some!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

The Sunday Indian:- B-SCHOOL RANKING SCAMSTERS EXPOSED!
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