Bike Industry

SCENARIO:

In this assignment, we are given with the task of analyse the motorbike or two wheeler industry of Pakistan, and then identify the strategic groups, mobility barriers and strategic spaces. Analysis is based on our common observation and data collected through internet.

INTRODUCTION ABOUT TWO WHEELER INDUSTRY IN PAKISTAN:

Motorbike industry is one of the flourishing and growing industries of Pakistan. In past three years from 2010 many local assemblers come in the market. Two wheel vehicles available mostly in 70cc, 100cc, and 125cc in all over the Pakistan with the help of local dealers and company own retail chains. But strategic groups working in Pakistan are also domain specific; mean hitting some areas of Pakistan. Production of bikes increases from 100,000 units in 2000 to 2 million units. It is surprising fact that due to change in government policy regarding motorbike industry lead to decrease in import duty which increases the number of assemblers in Pakistan. The ¾ demand of motorbikes is in the Asian region of the world, and china accounts for 50% of the market.

1.       IDENTIFICATION OF STRATEGIC GROUPS:

Pakistan motorbike industry basically falls in following three categories;

1)      local assemblers

2)      local manufactures

3)      multinational companies

1.1 Local assemblers:

Local assemblers are one of most influential strategic group of motorbike industry, because in recent years government of Pakistan reduce the import duty on import of motorbike spare parts and Chinese motorcycles. This is the opportunity for many new entrepreneurs in Pakistan whom invested millions of dollars in establishing the assembling plants in the Pakistan and imports the Chinese motorbikes. Some of following companies are;

1.                   Eagle motorcycles

2.                   Metro motorcycles

3.                   ZXMCO motorcycles

4.                   Super Asia motorcycles

5.                   Ravi motorcycles 

6.                   Road prince motorcycles

It include the following characteristics;

·         These companies assemble the spare parts imported mostly from china, and then convert them into finished good for the final customers and also imported Chinese motorcycles to market in Pakistan

·         These companies focusing on low cost leadership strategy to gain maximum number of share and to attract more customers

·         These companies offering the motorbike to specific cities of Pakistan, and not exported to other countries

·         They are just focusing on low price, and only fulfilling basic quality level

·         Facing a lot of direct competition among each other

·         There are 72 registered assemblers are working in Pakistan, mostly deal in 70cc

1.2   Local manufacturers:

There are number of companies who focus on concept of “localization” or companies which are Pakistani. These companies have separate technology, infrastructure, different competencies level etc. from the local assemblers and multinational companies. Local manufacturer include some of following companies;

1.       Sohrab Motorcycles

2.       Habib Motorcycles Pvt Ltd

3.       Ghani Automobile Industries

Local manufacturers have the following characteristics:

·         These companies like Sohrab not only offering its product in many cities of Pakistan, but also export like its specialty bike 100cc to neighbours countries which include Srilanka, India and Afghanistan.

·         The prices of these motor bikes are relatively higher than the local assemblers, because of good quality product and develop motorcycles according to the country’s road conditions. As there are no proper roads in villages therefore bikes like Sohrab, Yamaha are popular in rural areas of Pakistan 

·         The local manufacture has expertise to manufacture bikes according to local needs and has focus on niche segment

·         Potential of local manufacturer is decreasing because of indirect competition and overlapping with other strategic groups. However direct competition is low.

·         They manufacture spare parts and motorcycle, which is made in Pakistan

1.3 Multinational companies

The major players of the industry fall in this strategic group, who has good reputation in term of quality and availability. This group include some of following companies;

1.       Atlas Honda

2.       Pak Suzuki

3.       Yamaha

4.       Kawasaki  

Includes the following characteristics;

·         These companies manufacture as well as assemble motorbikes in Pakistan

·         Always follow the high quality international standards

·         Target customer in whole Asia not limited to Pakistan or its neighbours

·         These companies has their own retailers all over Pakistan

·         They charge higher prices than other two strategic groups, expert in manufacturing 70cc,100cc and 125cc

·         These companies has international expertise in product development

2.       MOBILITY BARRIERS:

2.1 Barriers face by local assemblers:

Local assemblers face the following difficulties or barriers to enter into above two strategic groups;

·         Local assemblers has lack of expertise in manufacturing the motorbike, for that purpose they have to invest in establishing the manufacturing plants with required skilled people that cost them higher and it move against their strategy of cost leadership

·         They face barriers if they want to exports their products internationally because they already importing the spare parts and motorcycles, they will face high transportation cost

·         They face difficulty to move into local manufacturer group because local assemblers focus on making bikes that are suitable for cities not for villages

2.2 Barriers face by Local manufacturers:

Following barriers face by local manufacturers;

·         Local manufacturer face barriers if they move downwards, because they have to decrease their prices in order to sustain in this segment which decrease their revenues

·         If government of Pakistan increase the import duty which increase mobility barriers for local manufactures to become local assemblers

·         If they move upward into multinational companies, they have to update their current knowledge, skills and also require a lot of foreign direct investment and also face competition globally by larger established MNCs. 

2.3 Barriers face by MNCs:

In Pakistan MNCs are present at that stage, where they can attract the customers not from all over Pakistan but also internationally because of skills, experience, technology and diversified portfolios however one of important barriers for them to move to downward is “low price”, for that purpose they have to compromise their quality for which they are not ready.