TI CYCLES – NEW PRODUCT

STRATEGY

Group 3
1. Overview

1.1. Murugappa Group

Headquartered in Chennai, the Rs.7300 plus crore Murugappa Group is India's leading
business conglomerate, which fosters an environment of professionalism for its strong
workforce of 28,000 employees. The group has 29 registered companies, which are
market leaders in diverse areas of business viz. engineering, abrasives, finance, general
insurance, sanitary ware, cycles, sugar, farm inputs, fertilizers, plantations, bio products
and nutraceuticals. The Group has manufacturing units in 12 states.
The Group has forged strong joint venture alliances with leading international companies
like Roca, Cargill, Cerdak, DBS Bank, Mitsui Sumitomo and Groupe Chimique Tunisien
and has consolidated its status as one of the fastest growing diversified business house in
India.

1.2. TI Cycles of India

TI Cycles of India is a part of Tube Investments of India (TII), a flagship company of the
Rs.7300 plus crore conglomerate Murugappa Group. TI is the second largest
manufacturer of bicycles in India, marketing top brands like Hercules and BSA. The
company is a market leader in the value-added special segment, with a 50 percent market
share. At present, TI has twelve BSA GO stores across India.
Certified with ISO 9001:2000 and ISO 14001, TI Cycles is one of the most quality and
customer centric organizations. TI Cycles is an exporter to many regions across the globe
including Europe, South East Asia and Africa.

1.3. Vision
No one should lose business with whom you do business, so the company will be
successful.

1.4. Mission
Ethical norms in dealing with all the stakeholders
Provide value of money to customers through quality and services
Treat employees with respect; provide opportunity to learn innovativeness and creativity
in business.

2. Competitive Analysis of Indian Cycle Industry

2.1. Competitors of TI Cycles

Table No.1

No Competitors Market Share in 1999-2000

1 TI 23.3
2 Hero 43.43.
3 Atlas 24.95
4 Avon 8.31

Interpretation.

The market share of TI s not significant in terms of its competitors which must be
improved through market and product development. It should exploit the market in
special category and standard category.

2.2. Core Competencies.

Murugappa Family’s experience, knowledge, values, decision making and strong

financial support has played important role in the success of TI over a long time period;
they came to rescue the company when ever the company needed the guidance and
support.

2.3. SWOT Analysis

Strengths:
 Strong Financial Support from group
 Brand name awareness – Most cycle enthusiasts know the TI name.
 TI is known as a high-performance leader in the bicycle industry.
 Good relationships with customers/dealers.
 Research and Development capabilities: TI R&D department keeps them up to
date with the latest technologies involving manufacturing of bicycles.

Weaknesses:
 Accuracy of future analysis.
 Lack of established manufacturing capabilities.
 No products offering in motorcycle category.
 Lack of global operations.
  No new market tapping.(North)
Opportunities:
 Internet/Mobile introduces new avenues to customer. This can save costs of
dealerships.
 New markets in India and around the world
 Entry into the lower cost bicycle market may add to market share.
 Entry into market where Bicycles are the substitute product.
Threats:
 The popularity of less expensive substitute products (Scooty)
 More competitors entering the market.(China,Tiawan)
 Shift of demand for higher priced to lower priced bicycles.
 Unsure trends in the bicycle industry.

3. Value Chain Analysis of TI Cycles

3.1. SUPPORT ACTIVITIES

Firm Infrastructure.

a) Dedicated management team

b) Home-grown Financial Support
c) Formal Planning and Execution

Human Resource Management

a) Unionised
b) Competitive Pay structure
c) Fringe benefits
d) Divisional Monitoring

Technology
a) Indigenous Technical system and facilities
b) Appropriate R&D
c) Total Quality management

Procurement
All necessary inputs provided by one location shop floor only few input are imported.
3.2. PRIMARY ACTIVITIES

Inbounds. Frames, Forks, Mudgaurds, Rims, Tubes, Tyres

Operations. Manufacturing of Metal tubes, assembling of parts by charge brazing and

welding.

Out Bound. Complete Knocked Down kits to dealers in small quantities in cases.

Marketing/Sales.
a) Well knitted dealers network and sub-dealers.
b) Sales cum services showrooms
c) Effective advertisement and sales promotion through celebrities organizing events.

Services.
a) Cyclinics
b) Services and Spare parts available at show rooms

4. Five Force Model Application

4.1. Rival.

TI is facing stiff competition from the rival companies Like, Avon, Atlas, Hero and few
foreign competitors. The competition is strong in standard cycles because the market
growth of standard cycles is slow. But it is weak in a sense that market for special cycles
is growing rapidly. Switching cost in special is low so the buyer may shift the demand.

4.2. New Entrants

Over all the industry is growing so there is strong threat of new players particularly form
China, Indonesia and Taiwan with low priced cycles. It is also weak because access to
distribution channels is difficult and strict regulatory control of the Government.

4.3. Substitute

TI is facing a considerable threat of substitute because close substitute of cycles Scooty

which is offered by Hero but switching cost is high.

4.4. Supplier

TI is not facing sizeable threat from suppliers because the major parts of cycles are
manufactured by them except some of the parts for special cycles are imported from
Japan.
4.5. Buyers

The Dealers and sub-dealers are compelling to provide the cycles of their choice
(Special) which may cause losing the market for standard cycles. Buyers switching
cost is low because of the availability of Hero, Atlas, Avon and Chinese Cycles in the
market.

5. Future Strategic Options

5.1. Market Development

The TI should consider following future strategies for the market development.
a) Northern markets should be focused for broadening sales.
b) Offering cycles to Indian Postal Services.
c) Offering cycles and tricycles to Ice Cream vendors, Home delivery services
restaurants, Tea Companies and Soft Drink Companies.
d) Offer cycles to courier companies.
e) Offering cycles for athletes.

5.2. Product Development

a) The TI should develop an advanced version of standard cycles for rural area by
adding shock absorbers to carry heavy load with ease.
b) light and folding cycles should be developed the urban areas to avoid traffic
congestion and parking problems.
c) A purpose built cycle with wide carrier for lunch providers in the urban areas.
d) Purpose built cycles for house wives with added carriers.

6. Recommendations

1. TI should focus on redeveloping its bicycle manufacturing.

2. Include lower cost segment of bicycles. Create another brand of bikes. These bikes will
be of the lower cost variety.
3. Outsource manufacturing of lower cost products to different countries.
4. Change distribution strategy to include major retailers. Lower cost line can be sold in
these stores.
5. Include sales over the Internet.

Overall, there is great room for improvement on TI’s position. Although the threats to TI
are large, the company has opportunity that it is not currently taking advantage of
favourable environment. Although the situation is not attractive, with the right change in
strategy, TI can have a brighter future.