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"DESCRIPTIVE CASE STUDY"

A descriptive case study is a puzzle that has been solved. It provides the reader an opportunity to know how exactly some individual, company or sector removed the hurdles they were facing.
DESCRIPTIVE CASE STUDY

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DESCRIPTIVE CASE STUDY ON: THE CYCLE MARKET IN INDIA

A descriptive case study is a puzzle that has been solved. It provides the reader an opportunity to know how exactly some individual, company or sector removed the hurdles they were facing. The descriptive case study has enough information in it that readers need to understand. The information could answer the questions like what the problem was and what thinking and analyzing process was undertaken and how they came up with the said solution?

BENEFITS OF STUDYING DESCRIPTIVE CASE STUDY

  1. Good source of ideas about behavior
  2. Good opportunity for innovation
  3. Good method to study rare phenomena
  4. Good method to challenge theoretical assumptions
  5. Good alternative or complement to the group focus of psychology

DESCRIPTIVE CASE STUDY ON: THE CYCLE MARKET IN INDIA

In a global village it comes as no surprise that Korean cycle with Japanese components, Taiwanese Tyres, American Suspension and an Indian frame can be assembled in Lithuania. The world scene in production is dominated by Chinese, Indian, USA, UK and Japanese firms. Current world demand for bicycles is growing fast because population is growing steadily in developing countries which are experiencing high level of economic growth.

Another change in the demand of bicycle is perceptible. More and more consumers are turning towards the trendy bicycles.

 

World Bicycle Production, in Millions, 1986-2000

1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
84
98
105
95
92
99
102
102
105
106
98
92
76
93
101

Source: http://www.bicycleindia.com

From 1970 to 2007, bicycle output nearly quadrupled, while car production roughly doubled. It could be tracked as an indicator of the environment consciousness and state of the "eco economy." While more bicycles are definitely good for the environment, a closer look reveals that a more complex combination of factors lies behind both the rise in global bicycles demand and divergence in world bicycle and auto production levels.

The chart below shows two interesting trends in world bicycle and automobile production over the post-war period. For one, the global production of bicycles increased dramatically beginning in the early 1970s. After nearly doubling from 1950 to about 1970, worldwide bicycle production grew by a factor of six from just over 20 million units in 1970 to 130 million units by 2007. Secondly, the output of bicycles has grown much faster than that of cars, with bicycle production outpacing auto output by a ratio of more than 2:1 since 1970.


Climate Change Science and the Environment
At least part of the increase in world bicycle production is due to an increasing concern for the environment. Since 1970, considerable progress has been made in advancing climate change science and convincing public opinion that global warming and environmental degradation are relevant problems for most of the world's people.

It has been widely accepted fact now that riding a bicycle is good for human health and the environment. In recent years, many world cities have been promoting cycling as a way to help alleviate troublesome traffic congestion, air pollution, and other environmental ills related to increasing urbanization.

International Economic Development
Rather than an Eco Indicator of efforts at environmental conservation, the dramatic rise in the global demand for bicycles is as much or more a function and sign of the rapid economic development that has occurred around the world since 1970. At a tiny fraction of the price of cars, bicycles become affordable to much larger portions of the populations of developing countries long before cars do. As of 2009, private car ownership in China remained at just 26 million units in a country of 1.3 billion people with a long-standing one-child policy.

The timing of the sharp increase and divergence in bicycle and car production aligns well with a particularly productive time in the world's economic development. Over the period 1970-2009, the average increase in the Human Development Index (HDI), which correlates closely with per capita income levels, for countries around the world was a healthy 44 percent.


China - Global Bike Capital
China alone accounts for a large share of the growth in the world bicycle market. The mounting pace of China's rapid economic growth supports the Chinese manufacturers higher rates of market penetration, and its rising per capita incomes also give up-and-coming Chinese the means and motivation to replace old bicycles with better, new models. One result of Chinese residents' move up the economic ladder and bicycle food chain has been strong growth in the world market for so-called e-bikes.

E-bikes
It turns out that electric bicycles, or "e-bikes," have accounted for a large portion of more recent growth in world bike demand and output, with production doubling from 2004 to 21 million units in 2007.

E-bikes use a battery-powered electric motor to assist riders with pedaling. They can typically go as fast as 15 to 20 miles per hour (24 to 32 km/h) or more. Depending on the country, e-bikes are often classified as bicycles and not subject to the level of regulation or laws that can restrict the ownership and operation of cars and other motor vehicles.

Electric bikes require less work on the part of riders and make it easier to negotiate inclines, tolerate biking in hot weather, and, generally, bike under other more strenuous conditions.

The Indian industry doles out 1.25 crore bicycles every year - with almost each day witnessing new designs, colours and features. Even as environmentalists and the health-conscious worry about the rising number of motorized vehicles on our roads, the easy-on-pocket two-wheeled vehicle still pedals its way to almost every Indian household.

In 2008, China bought 21 million e-bikes, compared with 9.4 million autos. In 2009, China had about four times as many e-bikes on the road as cars. As of early 2010, there were estimated to be a total of about 120 million e-bikes on China's streets and bike paths. In 2009, about 60 percent of Taiwanese Giant Manufacturing's 300,000 e-bike shipments went to mainland China.

In Germany, sales of e-bikes nearly tripled in 2007. Analysts are forecasting sales of roughly one million e-bikes in Europe and 300,000 e-bikes in the U.S., about doubling the number sold in the U.S. E-bike sales have also been growing rapidly in the Netherlands and India.

India - Second largest manufacturer and Third largest exporter in the world
India was the fourth largest producer of bicycles after China, USA and Japan from 1978 to 1991. It outsmarted USA and Japan in 1992 to become the second largest producer of bicycles in the world.

India produces approximately 10% of the world annual bicycle production, which is estimated at 125 Million units. Major players in the domestic bicycle industry are Hero Cycles, TI, Avon & Atlas with 40%, 22%, 17% & 10% of share of volume respectively. Most cycles manufactured & sold in India are in the low price bracket of Rs. 2,500 to 3000.

The market for the premium or the lifestyle bikes targeted towards the lifestyle consumer is just about emerging. The definition of high end bikes itself is changing. Earlier the high-end bikes were considered as those selling between Rs. 5000 to 8000. However now with global brands moving into the country this definition is also changing with price-points starting from Rs.15000 to as high as a few lakhs!

Not only are the price points changing but even definition of the segment is. Hitherto, cycles were simplistically segmented into gents, ladies, kids and high end. But now the lifestyle bikes are being segmented in line with the global trend that is based on their usage. There are Road bikes, Mountain bikes, Tourers, Hybrids, BMX' to name a few. Virtually all the big names are present in the country like Giant, Trek, Merida, and Canondale etc.

The demand for these cycles at this stage is very limited but is set to grow at a frenetic pace in future. While the mass-market segment is experiencing a sluggish growth of between 4-6% annually the premium & lifestyle segment is growing at a CAGR of over 30%. The market size for the lifestyle cycles is estimated at not more than 0.25 million units annually but its only time that this segment will form an important part of the industry

Indian Bicycle industry eyes urban market
A silent revolution is pedaling its way into city dwellers' lives. As more Indians living in cities take to cycling for reasons ranging from keeping fit, to general purpose, office commuting and leisure, cycling clubs have mushroomed on social networking sites. Seeing demand, bicycle companies are focusing on this niche but growing segment of recreation bicycles.

The Indian bicycle market, which till a year ago was mostly about Hero, BSA, Hercules, Avon and Atlas, has seen international players set up shop here. The brands that are now present in India include Trek, Kona, Schwinn, Fomas (an Indo-Chinese venture) Decathalon and Bianchi. Rock Machine too is expected soon.

These bicycles' prices range between Rs 3,000 and Rs 3.6 lakh. As a reaction to this influx of international brands, most Indian bicycle manufacturers have also expanded their base in the professional and recreational categories in metros. Offerings beyond the occupational bicycle are growing.

According to industry estimates, the bicycle market in India is 12 million units a year, of which five to seven per cent are niche bicycles, a segment now growing at 25-30 per cent annually.

Indian firm Firefox Bikes, for instance, entered into a tie-up with US bicycle brand Trek. Firefox, with 52 outlets and adding at least two every month, has begun retailing Trek besides its own range. It claims to be selling around 2,200 bikes every month and anticipates 25 per cent annual growth.

In India, the traditional and the fancy segments dominate the market. These are early days for international bikes in India as they try to establish footprints. The buying trend is certainly picking up. In a few years, the cycling culture will pick up. We are looking at rapid expansion and growth in the segment.

Most of the bicycle manufacturers in India are trying to have an active presence in social media and are building up community interaction through bike trails and city-based activities.

In November 2009, TI Cycles - part of the Murugappa Group - entered into a tie-up to sell the American range of leisure bikes, Schwinn, in India. TI is the owner of the BSA and Hercules brands and has used Schwinn to complement its range. Using TI Cycles' distribution strength, Schwinn bicycles are reaching out widely. Schwinn's bicycles are priced between Rs 7,000 and Rs 21,000 and newer models are introduced regularly. TI Cycles expects to sell 3,000 Schwinns by the end of 2010.

The company also distributes the Cannondale and Bianchi range of bikes that are focused on the performance rider. It has launched its Track & Trail retail format to sell its international brands. These outlets have opened in Bangalore, Delhi and Pune, and will soon cover Mumbai, Hyderabad, Chennai and other major cities. These stores also offer cycling apparel, accessories, spares and components. Track & Trail will also service international bicycles being marketed by TI. These brands are also retailed through the BSA and Hercules Express stores and shop-in-shops.

Longshine Global Enterprises, an Indo-Chinese joint venture, has rolled out the Fomas brand. It is also observed that until 2005, just few brands dominated the Indian bicycle market. But now, their dominance is reduced by 20 per cent. Initially, dealers and customers were reluctant about bicycle products from any new company, but all of this is changing. Although it will take few more years for the market to grow and the mindset of the people to change.

The Fomas range is available for Rs 2,500 to Rs 1,75,000. There is a growing demand for high-end models. The target group of the manufacturers is the middle class looking for style and convenience at affordable rates. Currently, Fomas imports 10,000 units a year and is looking at a 25 per cent annual growth.

American brand Kona is also present in India. It has no exclusive retail shops; it is distributed by its sole Pune-based distributor. Its price range is Rs 18,000 to Rs 1,00,000. Currently, they import 200 bikes every three months from Holland. Besides the metros, the demand is also pouring in from cities such as Pondicherry and Cochin.

An even smaller market emerging out of the leisure bicycles is customized bicycles. A number of cycling enthusiasts and experts deliver bicycles according to different needs. India is seen as a good market and a lot of people are getting into cycling. The customized bicycle market is still small but the responses are commendable. The major drawback that the buyers and sellers are facing is that parts are not easily available here.

After sales service and accessories are two important arms of this business. After-sales for leisure and high-end bicycles plays a major role in getting customers, as only trained staff is able to do the repair work. In the interiors of India, dealers do not want these leisure bicycles because they cannot do the after-sales service. All the new players of this industry need to focus on this issue as it is already hampering a good amount of business.

With an annual turnover of more than 12 million bicycles, the bicycle industry is one of the most established industries in India. It has raised the country's position to that of the second largest bicycle manufacturer in the world, next only to China. India has seen a tremendous increase in the number of bicycle manufacturers and bicycle exporters in the recent past. Today, the Indian bicycle manufacturing and bicycle spares industry is well accepted and is also widely recognized for its quality standards in international markets.

Most bicycle components, spares and bicycle accessories in India, except for free wheels and single piece bicycle hubs, are manufactured by the Small Scale Sector (SSIs), while the large scale units are permitted to manufacture bicycle frames, chains and rims for captive consumption. Manufacture and export of complete bicycles falls within the purview of the Organized Sector.

The Indian bicycle industry is currently in the midst of making endeavors for enhanced and increased bicycle exports since the scope for export of Indian manufactured bicycles in the international market is significant. As per public reports the present level of exports falls within the range of Rs. 150 crores. This includes Bicycles, bicycle spare parts and bicycle accessories.

Indian cycle industry, today, is churning out beauties that could easily make a style statement but the road ahead is not at all easy for the manufactures. It is rather rough for the two-wheeled bikes.

Undoubtedly Indian bicycle industry has a great future as long as the prices are kept competitive and specialized attention is paid to quality and delivery schedule, it will be placed in the world market due to its cheap labor, adequate engineering coupled with low cost of production. Today India is the third largest exporter of bicycles in the world.

Basic stumbling blocks in the industry are:

  • Inadequate availability of funds for modernization
  • Heavy duty burden on imported spares
  • Lagging behind in technological advancement as per world standard


Doing away with these hurdles, Indian bicycle industry will flourish.

Here we are including an example of how cycling is becoming relevant in India, not only for common people but for Indian Corporate personals as well.  

 

Dr D. Raghuram, President (Bicycles and Fitness), Tube Investments of India Ltd.

Dr D. Raghuram is passionate when it comes to cycling. He himself rides a BSA FoldmanSpring and cycles enormous distances - sometimes the 20 km from his home to the TI factory on the outskirts of Chennai or to his club where he plays tennis and cycles back home. A Ph.D. in thermo sciences from the University of California, Berkeley, Raghuram abandoned academia for consulting before he joined TI Cycles and is now a passionate marketer.

He has made it very evident that bicycles are not only his profession but cycling is his greatest passion. He has also shared few of his thoughts regarding cycling and bicycle industry on his Companies' website:
http://www.tiindia.com/article/investors/152

Benefits of cycling

There's neither an impact on the knees nor wear and tear; secondly, it exercises the largest muscle in your body, the thigh muscle - if you need to burn calories, you need to exercise your largest muscle; the next largest one is your brain!

Growing Ladies segment

Growing Ladies segment is one aspect that is clearly stating the social changes that are happening. And these changes are helping sales, without any doubt. Growth is upwards of 35 per cent in the ladies segment.

Growth in the men's segment though is very small but the base is larger. Three of us (TI, Hero and Atlas) hold 80-85 per cent of the market so we need to drive the market. We are approximately at 30 per cent share each.

On Chinese cycle brands

Progressively, the cost differential between Chinese and Indian products is narrowing in the mass segment in the developed countries on a landed cost basis. The cost structure is reflecting the true costs now. Because of the anti-dumping duties that Chinese products attract, on a landed cost basis we are competitive now.

On new materials for the cycles

Manufacturers are using new materials, from steel to aluminum to carbon, for more efficient cycles. An entire cycle made from carbon now weighs 6.5 kg. The indications are that we should be able to significantly bring down the price points in top-end cycles through local manufacture.

Hope you would have got sufficient information on Cycle Market in India. You may mail your response at editorial@mbarendezvous.com

For any further query, you may mail at contact@mbarendezvous.com

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