Strategy Digest Vol. 2 (Oct)

M&M enters bike market

The competitive and high-volume bike industry recently saw another new entrant in the form of the conglomerate Mahindra & Mahindra. Mahindra & Mahindra has vehicles in the MUV, LCV, tractor and the two-wheeler car segments. The market currently is dominated primarily by Hero Honda and Bajaj Auto. They have been market leaders for some time now and it will be difficult to penetrate the motorcycle market.

However, Mahindra & Mahindra is relying on its branding and distribution networks to make it big in the bike segment. They intend to appeal to the cost-sensitive customers by launching the 110cc Stallio and to the more affluent customers by launching the 300cc Mojo.

Marlboro enters regular cigarette market

Marlboro, which entered the Indian markets with the king-size cigarette, has finally decided to enter the regular cigarette market. The regular cigarette market has high volumes and the company, Godfrey Philips, wants to get pie of this share. It will soon launch a campaign regarding this new foray.

The market leader in this segment is ITC. The Marlboro Gold Advance Impact, as the new brand launched by Marlboro will be known, will be priced at rs. 3.50 per stick. In response, ITC is launching a new product in the regular market segment called the Players Gold Leaf which will cost Rs. per stick. This reaction clearly suggests that it recognizes the dangers posed by this move by Marlboro.

Back to its roots

We observe that most commodity companies desire to move up the value chain and build itself a brand name. In this context, the decision of Tata Coffee to transfer its brands to Tata Global Beverages and focus instead on excelling in the coffee commodity business comes as a surprise.

This move has been undertaken by the management of Tata Coffee to focus on B2B business by consolidating their commodity business ranging from plantation to packaging. This is in stark contrast to what most coffee-making companies are doing. They are looking at taking advantage of the fact that a lot of unbranded coffee is sold to consumers.

Tata Coffee is expanding its coffee plantations not only in India but also in African countries. Along with this, Tata Coffee will need to strengthen its distribution network and enter into agreements with coffee brands and retailers.

Reliance Retail banks on toys

After Hamly’s, Reliance Retail is now poised to enter into a joint venture with the US-based toy retailer Toys “R” Us. Toys “R” Us has over a 1000 stores across the world and owns brands such as Babies “R” Us and KB Toys. Hamly’s and Toys “R” Us, however, operate in different operate in different price segments, with Hamly’s catering to the upper class segments while Toys “R” Us caters to the middle and upper-middle class segments.

Reliance Retail wants to be in a position to take advantage of increasing consumer demand and clearly believes that there is huge potential in the Rs. 6,000 crore Indian toy market where over 60% of the market still belongs to the unorganized players.

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