Eicher Motors Ltd: Royal Enfield Comeback

...

Royal Enfield enjoyed an unbeatable position in the market because of the loyalty it garnered from its buyers. It was per say the only player in the lifestyle and power segment of the market and thus had a strong position. The bike had character and larger than life charm, and making it relevant to motorcycle, travel and adventure enthusiasts all over the world.

But to those amongst many who still craved for the authentic sound of it's engine and the riding quality, this bike always remained a dream to achieve.

- Threat of new entrants:

The incumbent firms had fewer threats from entrants as these incumbents had an edge in terms of reach and network. Also the relationship that players had built with their customers over the years put them way ahead of their rivals. With a strong network of established dealers, efficient after-sales services and spare parts shops set up throughout the country, any new entrant would face difficulty to compete with these manufacturers on price.

The huge amount of capital requirement, large distribution networks and brand image constitutes to other factors that restrict the entry of new player. The existing loyalty to major brands, incentives for using a particular buyer, higher fixed costs, scarcity of resources, high costs of switching companies and government regulations constituted as additional barriers to entry.

- Supplier Power:

The supplier part in this industry refers to all the suppliers of parts, tires, components, electronics, and even assembly line workers. These suppliers rely on one or two motorbike manufacturers to buy majority of their products. Thus suppliers are extremely susceptible to the demands and requirements of the automobile manufacturer and hold very little power.

- Buyer Power:

The buyers wield considerable power in the motorbike industry (lifestyle segment). The manufacturers depend on them to stay in the business. If they cannot keep the buyers happy, they risk loosing their business to the competitors. The manufacturers compete amongst themselves on value, features, quality, style and customization to appeal to the customers.

However, the bargaining power of the buyers is moderately high because the buyers are not large but few in numbers. And they also don’t have the ability to integrate backwards into the industry. With India experiencing the emergence of a true middle class, people were buying a motorcycle for dual purposes: For utility and transportation, but also for recreation. Thus with a surge in the number of people to want bikes for recreational purposes and power status, Royal Enfield could enjoy a great boost in this country. Buyer Power was less as bikes in this lifestyle segment were few, with Royal Enfield being the iconic one for its history and being the only bike in the market that was a long distance cruiser.

- Threat of Substitutes:

Substitutes include other modes of transportation such as walking, cycling, taking a rishaw, etc but none offers the utility, convenience, power, freedom that a motorbike does. Substitute products such as using trains, airplanes, etc depends on the geographical location of the consumer. The threat of substitutes is pretty mild.

[pic 4]

[pic 5][pic 6]

[pic 7][pic 8][pic 9][pic 10][pic 11]

[pic 12][pic 13][pic 14]

[pic 15]

[pic 16]