Eicher Motors

Group 9

Industry Background• Commercial vehicle industry in early 1990’s

– Heavy commercial vehicles (10 tonne) • Tata motors: 75% ; Ashok Leyland 25%

– Light commercial vehicles (6 tonne)• Bajaj Tempo 60% ; M&M 40%

• Distribution Network of existing players– Ashok Leyland stronger in south, Tata dominated the rest of the country– Spare parts market of sizeable size

– Non-genuine parts sold at lower cost

• 4 new entrants in between HCV & LCV (2.5-3.5 tonnes) • Vehicles were faster, safer, more comfortable and highly reliable• Huge capital and running cost• Strategy for early movers in new entrants:

– Strong brand name– Down payment and booking system– Helped gain premium by creating artificial and long waiting period– Large showroom and workshops

• Market Variables• Market geography: Wide area coverage • Market size and density: Difficult to estimate, sluggish sales for the competitors

in same segment• Product Variable

• Bulk and weight: need to minimize transport cost by transportation in large lots• Perishability: Not applicable• Unit value: High priced product, lower for spare parts• Newness and Technology: Updated version and better than competitors

• Company Variable• Financial capacity: Limited capital for investment• Managerial Expertise: New entrant in LCV, presence in tractor market

• Intermediary Variable• Availability: Difficult to acquire dealer with good infrastructure• Cost: Not ready to invest large capital • Service: After sales services and spare parts available with intermediary

• Environmental Variable • Economic (purchasing power of a particular geography) , Sociocultural,

Competitive, Technological and Legal (state and central taxes)

Parameters affecting Distribution Channel Design

Attracting suitable Channel Partners• Complete assistance (including financial) in running their business

– For example: In setting up showrooms• Higher margins for channel members compared to industry standards

• Better Credit Period, Better Payouts• Advertisement & promotions for boosting sales• Training and educating sales force and other channel members• Providing spare parts support