M&M WarRoom Entry- Strategy for 2 wheeler segment
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This for our entry for the War Room competition in 2008. This focused on the proposed strategy for the Group's then upcoming entry in the India Two Wheeler Segment
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M&M WarRoom Entry- Strategy for 2 wheeler segment
- 1. By Team Starship- IMTG
- 2. Scenario Analysis 2Wheeler: Growth Drivers remain intact Favorable Demographics Average age for the 1st time buyer down to 18 Need for individual mobility Strong GDP growth Low penetration Poor mass transport system
- 3. Scenario Analysis…contd 2Wheeler: Growth Drivers remain intact Growing retail & service industry. Reduced product life cycle 7 to 5 yrs Increasing replacement demand -35% Export Opportunities
- 4. Scenario Analysis…contd However, the market has de-grown
- 5. Scenario Analysis..contd What has changed? Credit availability Squeeze and higher down payment Credit norms Tightening of lending norms. Impact on eligibility for lower income groups Rising interest rates Increase in the interest rates across the board reducing available disposable income
- 6. M&M’s Strategic intent in the 2W Segment With the acquisition of Kinetic Motors Company Limited it wants and Italian engine designing firm “To design and market a range of scooters, Value engineered motorcycle and high end motorcycles for the Indian and Global markets, helping it establish a robust, end to end two wheeler business in every segment of the industry ”
- 7. Existing Business Strength The following factors were considered for evaluating present business strengths. • Strong equity in Rural due to farm equipment business and in urban with success of the ScorpioBrand Equity • Leverage existing distribution network of Mahindra in ruralDistribution Network • Technological tie ups with design companies and also Kinetic’s existing tie up with SYM. Technological Competency/Tie Ups • Kinetic’s existing production facilities can be put to use. Current Production Facility
- 8. Segment Attractiveness The variant of The GE Mckinsey Matrix has been used to evaluate Market Segment Attractiveness. • The executive segment(125cc) is growing at the fastest.Market growth rate • The entry segment(100cc) is still the biggest in terms of volumes sold.Market size • The entry segment is most interest rate elastic, hence high demand variability Demand variability • Low Margins in 100 cc make it less profitableIndustry profitability • Both 100 and 125cc being fiercely competitiveIndustry rivalry • 100 and 125 cc Bikes are being exported to other third world countries.Global opportunities • Empowerment of women and development of rural infrastructure throwing new opportunitiesMacro environmental factors
- 9. High High Medium Medium Low Low Executive Bikes Entry Bikes Premium Bikes Gearless Geared E-Scooters Segment Analysis SegmentAttractiveness Existing Business Strength
- 10. Proposed Strategy for M&M Short term • Gearless Scooters (New models from SYM) • Premium (Foreign collaboration) • Entry- Rural (100cc segment) MediumTerm • Executive Segment (125 cc + Ergonomics+ Urban) • E-Scooters- (SEC B2/C) LongTerm • Global reach e-scooters/ Entry, executive bikes • Commercialization of Hybrid fuel/engine in 2W
- 11. Time-plan for the Strategy 7M/FY08 FY09 FY10 FY11 FY12 FY13 Premium Bikes Gearless Scooters Entry Segment Executive segment E- Scooters Red cell indicates the year of entry in that particular segment, whereas Grey cell indicates staggered launch in that segment.
- 12. Motorcycle Segment Objective •Establish a market share of 20% (overall) by FY 13(2013-14)
- 13. Exploring bikes.. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 100cc 125cc 150cc 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 03-04 04-05 05-06 06-07 07-08 Bajaj Auto Hero Honda Motors TVS Motors Yamaha Motors Honda Motorcycles & Scooters Projected share of 125cc+ segment to exceed 50% by 2013-14. •Bajaj more hit with the tight credit situation. •Players like Yamaha, TVS loosing market share over the years.
- 14. 100 cc 125 cc 150+ cc INDUSTRY VOLUMES INDUSTRY PROFIT 40% 65% 60% 35% INDUSTRY SIZE INDUSTRY PROFIT Source- Investor presentation –BAL, Oct 2007 Profit VS Size- By Segments
- 15. More on various segments • Rs 33k-44k • Mileage • Style-Design- Looks • Platina • Splendor • Rs 38k-52k • Style • Pick-Up • Mileage • Reliability • Power • Glamour • XCD • Stunner • Rs 50k-1.7L • Riding Experience • Power & performance • Thrill • CBZ • Pulsar 100cc Price Value* *Value refers to the value proposition offered by top selling brands in this segment Brands 125cc 150+cc Dominated by Hero Honda Dominated by Bajaj Models like Bajaj Avenger and Hero Honda Karizma in the 180+cc – redefining biking. Yamaha is also catching up in this segment.
- 16. Premium bikes Entry with a “big bang” of M&M having “arrived”. Consistent with the brand image and create equity in 2W Forge Alliances with foreign players Entry with a “big bang” of M&M having “arrived” Value to M&M of Rs 78mn in 1st year This would make the young consumer more favorably disposed towards M&M as it would shed the “heritage” factor and make them believe that “M&M bikes are for people like me”. This image makeover in thisTG is v . critical as the avg age of buying a 2W is 18 yrs
- 18. Insights from ethnography study Irritants and frustrations while commuting in the entry and executive segment. Long hours of riding bike to work etc Traffic Jams Snail pace movement Exhausted and tired Late to office and back home Irritated / Back ache Less time for self/family/friends More petrol consumption Frequent Re- filling of petrol Pricks the most while paying for the petrol
- 20. Potential of the concept Power Comfort Price Mileage 13 % 23% 64% Premium Executive Entry 21% Rs 764 mn value to M&M in 1st year!
- 21. Defining this Segment Utilitarian consumers who are very value-oriented and are concerned with the comfort and functionality of their products. Factors considered while Buying Quality Comfort Functionality Price Purchases are made based on rational calculations Looking for the mostVFM, without compromising on quality.
- 22. Economical Dependable Prudent HiTechPioneering Modern Parent Corporate Brand Comfort Premium Style at Executive Price Performance with Mileage Mahindra Kinetic “Comfort” Bike :BIKE+ VFM
- 23. Brand as a product • A 2W for the urban market • Comfort as POD • Premium style at executive price • JR combination of power/ mileage and style Brand as a person • Seeking comfort • Looking for mostVFM w/o compromising on comfort. • Concerned with functionality • Not purely image driven Brand as a symbol • Metaphors questioning the traditional logic of buying a bike • Economy of a 100, comfort of a car • Imagery focusing on the comfort andVFM • Heritage ofVFM and innovative products from parent brand. Functional Benefit • Good looks, GREATER comfort, great value Emotional Benefit • Ownership experience of relaxation, feeling at home, style Self Expressive Benefits • City companion / extension of lifestyle. BRAND CUSTOMER RELATIONSHIP
- 24. Other Aspects Need more channel partners end of 2009. Test marketing in cities like b’lore/Mumbai. Comfort value is experiential –Test drives CRITICAL
- 26. The Rural Landscape: Possibilities Unlimited Source: Ministry of Communications and Information Technology, FK Urban Rural Index, 2005 Product Rural HH’000 %Penetra tion Urban HH’000 %Penetra tion Total HH’000 %Penetra tion Two- wheeler 16195 11% 25813 42% 42008 20%
- 27. Current Rural Strategies of Competitors Players Strategies to tap rural market Hero Honda •Has created rural vertical •Plans to cover 1 lakh villages under Har Ghar, Har Aangan scheme •To make use of local festivals for promotions •Reaching out to opinion leaders •Use of Hero Honda Finlease or start a finance arm •Expand dealer network Bajaj •Setting up separate rural dealerships •Launch of two wheelers specifically for rural youth •Selling during festive seasons •Reaching out to opinion leaders and their families •BAFL to take care of financing TVS •Plans to launch 100 cc bikes for semi-urban and rural youth •Emphasis on value for money and not style •Moves to moderate involvement in rural which currently brings in over 70 % of the revenue, to about 50 %
- 28. M&M’s foray into rural Strengths Weaknesses Can tap M&M’s huge distribution network of tractors existent to cater to rural Mahindra image of being a tractor player may affect aspiration value of M&M two- wheelers The Mahindra brand name is very well known in villages and signifies reliability and trust Great understanding of the rural mindset and customers viz a viz competitors Mahindra Finance’s extensive reach in rural and semi-urban markets Opportunities Threats High growth rate of rural areas and increase in transportation needs More sensitive to interest rate and credit availability fluctuations Deep pockets and low two wheeler penetration in rural areas Competitors working hard on tapping rural markets
- 29. From M&M to rural India! Two wheelerType Yes/ No Reasoning Scooters No •Lower mileages •Lack of sturdiness •Bad roads <=100 cc Motorcycles Yes •Cheapest motorcycles •Value for money •Entry level bikes for all the rural youths aspiring for two wheelers •Highest possible mileages 125 cc Motorcycles No •Aspiration levels in rural either for a two wheeler or a power and image bike (like Pulsar) 150 cc Motorcycles No •As of today the rural market for high power bikes is on the smaller side
- 30. Four pronged Rural strategy Rural Regional Marketing Approach Deep Channel penetration WOM Leveraging Mahindra Equity
- 31. Scooter Segment in Details Scooter Segment Objective •Establish a market share of 25% (overall) by FY 13(2013-14)
- 32. Exploring Scooters… Shares of Gearless Scooter have increased from 44% in 01-02 to 94% in 07-08. If present trends continue, it would capture almost entire market by 2014. 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Gearless Geared 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Bajaj Auto Honda Scooters Kinetic Motor TVS Motors Market Share of Kinetic has gone down to 3.28%, while Honda has picked up to 59%.
- 33. Snapshot of the Gearless Segment Parameter Description Total Market size byVolumes (2008) 990732 units % ofTwo Wheeler Market byVolumes 13.69% CAGR for 100-125 cc (most attractive segment) 31.35%
- 34. The Present Offerings Young girls • Bajaj Kristal DTS-I • Hero Honda Pleasure • TVS Scooty Pep+ • Kinetic Flyte Unisex/Family • Honda Dio • Honda Activa Men • Honda Aviator • Kinetic Blaze
- 35. The NEED Gap Honda Activa Scooty Pep Kinetic Blaze Positioned Explicitly at young girls They are perceived as too delicate, fragile. So, safety concerns in city usage. Consumer Insight: The girls wants a Scooty which is not TOO GIRLY, which the MEN can also drive. Unisex Looks Slightly heavy for the girl to drive.
- 36. The NEED Gap Honda Activa Scooty Pep Kinetic Blaze Positioned Explicitly at young girls They are perceived as too delicate, fragile. So, safety concerns in city usage. Consumer Insight: The girls wants a Scooty which is not TOO GIRLY, which the MEN can also drive. Unisex Looks Slightly heavy for the girl to drive. Need for a Scooty, targeted at women (as she is the key influencer), but not delicate or girlish in appearance, so that the men in the household can also drive, Further, no too bulky , so that the girl herself can drive smoothly.
- 37. Filling the Gap Honda Activa Scooty Pep Kinetic Blaze Positioned Explicitly at young girls They are perceived as too delicate, fragile. So, safety concerns in city usage. Consumer Insight: The girls wants a Scooty which is not TOO GIRLY, which the MEN can also drive. Unisex Looks Slightly heavy for the girl to drive. Not girly or delicate in appearance! Less bulky, so easily handled by women!
- 38. Need to connect with the TG • Make a unisex model but target it to women Unisex • Other HH members not embarrassed • A scooter for women that everyone can use. Every one can use • Time for self • Empowered • Freedom • Life transformation Emotional connect “A Transport solution for YOU , to be the new (Transformed) YOU because only we (M&M, Kinetic ) understand YOU” LEVERAGING ON THE EQUITY OF MAHINDRA (Innovative, easy to ride) and KINETIC (Pioneer in introducing gearless scooter concept)
- 39. Other Aspects Tier II/III, small town –demand increasing and current penetration low Also currentTG is young women. Need to broaden it to include Housewives Need to reassure the older set of women that even they can ride and how it can transform their lives TG •Metros •TierI/II •SEC A1/A2/B1 •IN THE AGE BAND OF 18-40 YEARS Distribution • Apart from traditional channels, concept of network marketing to be explored to break the barrier in the older TG.
- 41. The Case for E-Scooters E Scooters Less air pollution Reduced noise pollution Low price & high mileage Easy to handle The problem with e-scooters which are inhibiting their growth: The need for charging after covering a certain distance. Also, there is a lack of Eco-System for E-Scooters right now, ranging from absence of repair shops to charging points. Need to replace the battery in each year.
- 42. Advantages to Mahindra and Mahindra Opportunities Government Incentives to spur growth Export Revenues Goes with the Green Warrior Image
- 43. Ecosystem Development ‘Bijlee’ Electric 3- wheeler Lithium Ion Battery Create Ecosystem Competitive Advantage Expertise developed • Charging Stations • Service Centers
- 44. CAVEATCultural AND Operational changes post- acquisition Successful Acquisition of Kinetic Turnaround from Kinetic culture to M&M culture Reduced time to market for new products Streamlining of operations
- 45. Blue-chip Mantras – Achieved! Leadership • Attainment of No. 2 or No. 3 player spot in all segments Global Potential • Long term plans to export entry level bikes to Asian countries like Sri Lanka, Bangladesh,African countries including Nigeria and most parts of South America Innovativeness • Introduction of comfort as a lifestyle element in the 125 cc segment bikes • Introduction of electric scooters in SEC B2/ C • Introduction of a gearless scooter to the hitherto un-catered to segment of elderly women, at the same time offering a vehicle for the family
- 46. Ruthless focus on financial returns • Setting of aggressive financial targets to reach No. 2 or 3 position in the respective segments in 5 years • Attainment of 323 throughout operation period Customer Centricity • The vehicles in each segment ranging from e-Scooters to gearless scooters to 125 cc bikes are styled to cater to customer needs in unique ways
- 47. Projected value (in Rs mn) for M&M 0 10000 20000 30000 40000 50000 60000 70000 7M/FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Premium Executive Entry 0 2000 4000 6000 8000 10000 12000 Gearless e-Scooter Motorcycles Scooters
- 48. THANKS We are open to questions
Editor's Notes
- The parameters were quantitatively and qualitatively judged for different segments. The score obtained on each score were weighted by the importance attached to each parameter. The importance of each parameter was judged after discussions with industry experts. Scores on parameters like demand variability were found out by taking the standard deviation of the annual demand over a period of 6 years from 2001-02 to 2007-08.
- Critical for M&M to get it “right” for the urban TG in the first launch itself. Time and effort given to prototype testing and test marketing.
- Maximum pain has been felt by the 100cc segment because of tightening of credit norms. Segment de-grown by -20% & -23% in Q1/08 and Q2/08 respectively. Product fatigue in this segment. Suzuki entered the market in 125 cc segment in 2006-07 and has captured 1% of the market with heat/Zeus models.
- In the 100cc segment, apart from mileage, Add ons... given to consumers revolve around stylish looks and aesthetics. The 150cc+ segment is about the biking experience- Thrill/power and performance. Whereas, the mid segment offers style, power along with mileage. Given the interst elastic, fatigue, competitive pressure and declining margins in the 100cc segment, it is recommended not to get into this segment in the urban market and keep the focus of 100cc in rural and semi urban markets (Major thrust area for 100cc). Also, as seen before the 100cc segment consumer is expected to trade up to the executive segment and M&M should play a leading role in the same.
- Before the Launch of Scorpio, M&M was considered as a rugged, economical, difficult to drive, down market, rural brand. With scorpio –the image changed to that of technologically advanced, innovative, customer focus, urban. This image with kinetic association is further enhanced and is also apt for entering in the premium segment. This would create saliency of M&M in 2W and further enhance its equity in the segment. Also, this option is expected to add Rs 78 mn in the 1st year of launch assuming a worst case penetration of .01%. Possible acquisition in the pipeline can be Malaguti Moto Italian manufacturer of scooters and bikes (250cc+).
- On doing participative observations with respondents who are currently owning a 100cc-125cc bike, it was found that the major irritant (at latent level ) emerged the posture in which one has to ride a back. The problem is on account of riding a bike for long hours. This problem is not overt as it is associated to be a problem with the entire two wheeler category. On making them sensitive, towards the real cause of the problem-respondents reverted saying that “a bike can never offer the comfort of a car.” Also, the consumers are often stuck in long traffic jams and for kms, the bike doesn’t move beyond the speed of 20km/hr. This impacts the mileage and they feel the real prick while paying for the petrol. This “prick” was more evident in the owners of 100cc segment bikes (SEC B1/B2)
- Using Ergonomics, a design can be created (similar to a cruiser bike), that offers better seating posture and comfort for those long hours of drive. As indicated by research, the willingness to pay premium for such a bike is higher in 125cc segment. Also, consumers are willing to trade off performance parameters like power, pick up, top speed as these parameters are not very relevant in the context in which the bike is used. The reason for buying 125cc as against 100cc was the “style”/”aesthetic” aspects and this need was also fulfilled by the comfort bike concept exposed to the consumers
- On exposing the concept, 73% of consumers who intend to buy 125cc segment bike and 38% of the consumers in the intenders of 100cc segment showed high intention to buy the comfort bike at Rs 45,000. Even if the diffusion rate in the first year of launch is 1%, this concept has the potential to give sales value of the order of Rs 756 mn in the first year of launch itself.
- As this is would be the test of M&M mettle in the 2W market for the urban market, it’s essential to “get it right” in the first launch itself. Need to add on to existing channel partners of kinetic in the metros. Need for test marketing as the “right” design offering comfort has to be assured. Phased launch is recommended rather than going for a full national launch. The new parameter through which we are trying to create value is “comfort ride for the commuter”. This proposition is experential, hence it is essential to make customer realise this proposition through test drives.
- Source: Ministry of Communications and Information Technology This data shows that the number of rich people is almost the same in rural and urban areas. This along with low penetration of just 11% shows immense potential in the rural landscape.
- Secondary research shows that scooters are not sturdy enough for the bad rural roads. Thus a bike is called for. It was to be seen that there are two categories of aspirers in the rural areas – one who wanted to shift from cycles to a motorcycle and the other category which currently owns some motorcycle and is aspiring for a specific premium, high-end motorcycle. Hence the in between category of 125 cc was ruled out. The rural market for 150 cc or above bikes is relatively small. Thus a 100 cc, sturdy motorcycle offering good mileage and value for money emerges as the best option for rural markets.
- Regional marketing approach by clubbing the promotions to suit regional festivals in each region and so on. Deep channel penetration to be achieved through using the widespread Mahindra tractor network for selling two-wheelers also. Mahindra is well recognized in rural India and signifies trust and reliability. This can be leveraged to promote the two-wheelers. Word of mouth publicity to be used as this is crucial in rural areas. Also the sarpanchs, teachers and other opinion leaders of each rural area are to be reached out to. Another emerging group of opinion leaders is young people who have left their villages for towns for education or work and have returned. These people are seen by the rural folk as “people who have seen the world.” The opinion leaders are to be found out through enquiring around and are to be offered significant incentives for each sale which happens through their reference.
- As already explained before, we have not considered the geared scooter category as the current MS is only 1% and is rapidly degrowing. Hence, the overview of only the geared scooter is taken into account.
- On the basis of in depth interviews with buyers of gearless scooters in the last 6 months, we found that women is the influencer in the deciding which brands to buy and the male (Husband/Father/Brother) is the gatekeeper. More often than not, Too delicate/ Feminine are not accepted by the women as well as the “gatekeeper”. Given, the context-> Activa is preferred over scooters like Flyte/ Scooty. However, we found that Activa is considered to be a little too heavy and the height is not suited for the average Indian women.
- With macro economic trends projecting further fuel price increases and also with rising with environmental concerns, e-scooters are a big opportunity.
- The need for technology development is in the area of Lithium Battery because they last longer and covers 4 times the distance covered in a single charge by present batteries. These address the concerns which are inhibiting the growth of e-scooters.
- The culture at Kinetic is in stark contrast with the one at M&M. Though M&M and Kinetic are both known for innovation, Kinetic has gone through a horde of work-culture issues in the recent past. Challenge is in transforming the Kinetic culture and making it gel with the Mahindra culture, failing which Mahindra will fall short of its objectives. Kinetic has been slow in the recent past to reach the market with new products; something Mahindra has to turn around, besides streamlining operations.
- We have managed to achieve all the Blue Chip Mantras which Mahindra follows in other businesses, in this sector. Our strategy is designed to take M&M to No. 2 or 3 spot in all the segments it is getting into, in two-wheelers. We have long term plans to go global, including supplying CKD units, developing new products for countries of interest and entering global markets with vehicles successful at home. We usher in a culture of innovation in the two-wheeler business for M&M with the introduction of comfort as a new lifestyle element in the 125 cc, besides introducing innovative models of e-Scooters and so on.
- Our focus on financial returns is indeed ruthless, the Mahindra way, since the targets set are stiff and designed to reach market leadership in the shortest span as is practically possible. Customer centricity is at the heart of our operations with a portfolio of products all catering to very specific needs and problems of the customer in unique ways. We also put utmost focus on environment with our range of e-Scooters. All in all, our strategy is not merely about doing things well. It’s about doing well, the Mahindra way.