Five forces Analysis of Two-wheeler industry

Topics: Automobile industry in India, Automotive industry, Competitor analysis Pages: 20 (4503 words) Published: February 6, 2015


TWO WHEELER INDUSTRY
Business Model of 2 wheeler Industry in India

As shown above, the business model is formulated as input  process  output. For a two wheeler industry, The inputs to the OEM constitutes of
1. Import of parts: the basic ingredients for model building are the parts such as drive chains, engines, components, transmissions etc. 2. Auto Component Manufacturer: There are 300+ players in the industry which manufacture auto parts components and perform tasks such as castings, forgings, tires etc 3. Raw material Supplier: This forms the initial requirement for the development of any vehicle. The raw material of which it is composed of consists of sheet metal, aluminium etc. The processing involves:

1. Manufacturer
Original Equipment Manufacturer(OEM): The industry is highly concentrated with 3 players constituting 80% of the market share, namely Hero Moto, Bajaj Auto & Honda Motors. This industry has a turnover of 55K Cr by producing over 13.33mn units in the FY 2011. 2. Dealership Network

Dealer: In the Indian domestic market, the dealer are numbered over 2000 Sub- Dealer: The sub dealers, also known as the touch points are over 12000. This dealership network forms the competitive advantage of a company in the market Service Centers: These provide after sales service for the two wheeler industry and form the part of maintenance and helps in building customer loyalty.

The output part of the business model comprises of
1. Domestic Customers: There is a low penetration in the domestic market with coverage in rural market as low as 7%. 2. International Customers: The major markets for two wheelers are Africa, Latin America & South East Asia INDUSTRY ANALYSIS

The industry is highly concentrated and there is a strong foothold by 3 major players in the industry namely Hero Moto constituting 39% of the market share, Bajaj Auto constituting 27% of the market share and finally Honda Motors with 14% market share. So, these 3 major players sum to 80% of the total industry market share.

The Indian Auto sector had a volume growth of 13% CAGR over the last 5 years- Driven by two wheelers which account for 80% of the total volumes

Two wheeler sales reached INR 55K Cr and volumes reached 13.3 mn units clocking a CAGR of 15% and 13% respectively over 2006-2011. This works to an average realization – Rs 42000 or 1.2x the real per capita GDP of India.

Domestic volume growth has been strong over the past five years growing at 11% CAGR

Exports have been a significant factor to contribute to overall volumes with a growth of 27% CAGR over the last 5 years.

Year to date, the volume sales growth in two wheelers has surpassed all other automobile segments.

FIVE FORCES ANALYSIS
What is it?
Five Forces Analysis is a tool that enables managers to study the key factors in an industry envi­ronment that shape that nature of competition: (1) rivalry among current competitors, (2) threat of new entrants, (3) substitutes and complements, (4) power of suppliers, and (5) power of buyers. When do we use it?

In a strategic analysis, Five Forces Analysis is an excellent method to help you analyze how competi­tive forces shape an industry in order to adapt or influence the nature of competition. Collectively, the Five Forces determine the attractiveness of an industry, its profit potential, and the ease and attractiveness of mobility from one strategic position to another. Because of this, the analysis is useful when firms are making decisions about entry or exit from an industry as well as to identify major threats and opportunities in an industry. Why do we use it?

This analysis was originally developed by Michael Porter, a Harvard professor and a noted author­ity on strategy. While all firms operate in a broad socioeconomic environment that includes legal, social, environmental, and economic factors, firms also operate in a more immediate competitive...
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