2/15/2017 ChallengesforEicherMotorswhilerevivingBullet

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Home Business Today Case Study Nov 27, 2011 Story

Biting the bullet

N. Madhavan Print Edition: Nov 27, 2011

ExecutiveSummary:SeniormanagersatEicherMotorsfacedatoughchoice.
TheyhadbeengivenonefinalchancetorevivethelossmakingRoyalEnfield
theirmotorcycledivision.Forthattheywantedtomodernisethebikestoappealto
awidercustomerbase.ButexistingcustomerswantedtheirBulletsjusttheway
theyhadalwaysbeen.Bymodernising,RoyalEnfieldriskedlosingtraditional
fanswithoutpossiblygaininganynewcustomers.Thecasestudydetailshowit
LATEST MUSTREAD TECHNEWS
metthechallenge.
Corporate insolvency set-
Theyear2000couldhavebeendecisive.Thatwaswhentheboardofdirectorsat up to be fully functional by
31 March
EicherMotorsdecidedtoeithershutdownorselloffRoyalEnfieldthe
company'sChennaibasedmotorcycledivision,whichmanufacturedtheiconic When Infosys got bitten by
Bulletmotorbikes.Forallitsreputation,thesalesofthebikewasdownto2,000 Tata bug

unitsamonthagainsttheplant'sinstalledcapacityof6,000losseshadbeen
mountingforyears.Thoughthebikeshaddiehardfollowers,therewerealso
frequentcomplaintsaboutthemofengineseizures,snappingoftheacceleratoror Expansion of Indira Gandhi International
Airport may hit the
clutchcables,electricalfailuresandoilleakages.Manyfoundthemtooheavy, passengers hard
difficulttomaintain,withthegearleverinconvenientlypositionedandadaunting
kickstart.
Overall deal activity jumped
55 per cent in January:
THEPROBLEM Justonepersonstooduptotheboard,insisting Grant Thornton

Despitethebikes'fan
following,themotorcycle
divisionwasbleeding
THEWAYOUT
Appealingtoawiderbase,
makingtheproductsmore
reliable
THECHALLENGE
Modernisingthebikes
withouttakingawaytheir
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uniqueidentity
ECONOMY CORPORATE
couldstillbesaved.
RoyalEnfieldshouldgetanotherchance.Hewas
SiddharthaLal,athirdgenerationmemberofthe Fear over Trump's policies
DelhibasedLalfamily,promotersoftheEicher comes as a boon for Delhi
astrologers
groupofcompanies.Lal,then26,wasan
unabashedBulletfan:heevenrodearedcoloured
Bulletwhileleadingthebaraat(procession)tohis MORE
weddingvenue,insteadofthetraditionalhorse.
"Theboardagreedtogivemeachance,"saysLal. You May Like PromotedLinks
"Itwasnotbecauseofitsconfidenceinme,but HikesToUncoverHiddenHong
becausethebusinesswasdoingsobadlyitcould Kong
DiscoverHongKong.com
hardlygetanyworse."
Jewellersthreatenstrikeover
LalfeltRoyalEnfield 'blackmoney'taxplan [X]Close
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THESUCCESS Thebikehadits
Tweet reputation,acult WhyAreSomeJapaneseCars
Moderntechnologyused,but
BeingMadeInAfrica?
Share
vintagelookretained following,an
CNNInternationalforMOFAJapan
1
improvedmanagement instantlyrecognisable
Share The petrol tank's design was left
practices build,and
largely untouched as it Topcarsinyourbudget:Rs3-8
aspirationalvalue. contributes to the bike's sturdy, lakh
Changeshadtobemadetokeepupwiththetimes vintage look

andmakethebikemoreacceptable,andthereinlaytheproblem.RoyalEnfieldfans
Share likedthebikesexactlythewaytheyhadalwaysbeen."Weneededchangestoattract TheSyrianRefugeeWhoJust
newcustomersbutbydoingsoriskedlosingexistingones,"saysR.L. Can'tStopSmiling
Ravichandran,whomLalbroughtinasCEOin2005aspartofhisrevivaleffort. OurBetterWorld

RavichandranhadearlierworkedwithbothTVSMotorandBajajAuto."Wewerein
apeculiarsituation,"headds. WiproInfotechbags10-yrcontract
fromMumbaiInternationalAirport

http://www.businesstoday.in/magazine/casestudy/revivingroyalenfieldbullet/story/19892.html 1/5
2/15/2017 ChallengesforEicherMotorswhilerevivingBullet
Thechangehadtobeacalibratedone.Themistakennotionsofprospective
customershadtobeaddressed,andanyreservationsaboutBulletandThunderbird,
HowToFindTheFairMarket
whichwaslaunchedin2002,removed.Atthesametime,LalandRavichandran
ValueForAnyVehicle
wereclearthattheindividualityofRoyalEnfieldbikesshouldnotbecompromised. OrangeBookValue
"Wedidnotwanttogodownthecommuterroute,butinsteadlookedattheleisure
segment,"saysRavichandran.
WhyisHyundaishyoftakingon
MarutiSuzuki?
Retainingthebikes'ruggedlookswasagiven,
includingthebuild,thedesignoftheheadlamp
andthepetroltank.Butshouldthegearsbe HitachiSocialInnovation:Bringing
shiftedclosetotherider'sleftfootasinmost PossibilitiesToLife
After much testing, the silencer was
bikesorretainedontherightside?Thequestion extended to capture, to the extent Hitachi

gaveLalandhisteammanysleeplessnights,since possible, the throb of the old engine

longtimeusersweredeadopposedtothechange.Theenginewasanotherthorny 250laid-offatDisney,replaced
question.Theoldcastironenginewasarelicofthepast.Itsseparategearboxand withIndianH1-Bworkers:NYT
report
oilsumpdesignmadeitpronetooilleaksanditseizedupveryoften.Itsabilityto
meetincreasinglystrictemissionnormswasalsosuspect.Amodernaluminium byTaboola
enginewouldeliminatetheseproblems,butitwouldlacktheoldengine's
pronouncedvibrationsandbeatwhichRoyalEnfieldcustomersloved.Lawsof
physicsmadeitimpossibletoreplicatethesewiththenewengine.


Therearemanyglobalexamplesofautocompanies
goingunderfollowingaradicalchangeintheengine
oftheirproducts.YetLalandhisteamproceededto
bothalterthepositionofthegearsanddesignanew
engine."Weretainedmanyoftheoldengine's
characteristicsthelongstroke,thesinglecylinder,
Diehard fans opposed shifting thehighcapacitywithpushrodmechanism,"says
the gear lever to the left side of
the bike, but the company went Ravichandran.Butthenewengine,unliketheold,had
ahead anyway hydraulictappets,anewenginearrangement,new
metalandfewermovingparts.Obviously,itdidnotproducethevibrationsandthe
beatoftheold,butinternationalexpertswereconsultedandsoundmapping
carriedoutforover1,000hourstoensureitproducedthemaximumrhythmic
vibrationspossibleandabeat,whichwas70percentoftheamplitudeofthe
original.

Thenewenginehad30percentfewerpartsandproduced30percentmorepower
thantheold,withbetterfuelefficiency.By2010,allRoyalEnfieldmodelshad
beguntousethenewengine.Twootherproblemsneededtobeaddressed:the
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qualityofsomeofthecomponentsRoyalEnfieldbikeswereusing,andthesales
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experience.Totacklethefirst,shopfloorprocesseswerefinetuned,whilesuppliers MORE

wereexhortedtoimprovequalitylevels.RoyalEnfieldalsoembarkedonalarge
Tweet scaleinternalexercisetotoneupperformance."Wedeclared2006astheyearof
Share gettingbacktothebasics,"saysRavichandran."Wealsoformedafieldqualityrapid
1 actionforcetobridgethegapbetweencustomerexpectationsandthereality."
Share

Slowly,thetideturned.EnginerelatedproblemsandoilleakagesinRoyalEnfield
productsalmostdisappeared.By2008dealerswerereportinglowerworkloads.
Warrantyclaimsfellsharplytoo.Malfunctioningofthespragclutch,onwhichthe
Share electricstarterdepends,declined,forinstance,fromfivepercentin2005/06to0.2
percentin2010/11.RoyalEnfieldalsobeganconductingmarqueeridestopromote
leisurebiking."Suchstepsremovedthefearsaboutourproducts'reliabilitysome
customersmayhavehad,"saysVenkiPadmanabhan,whosucceededRavichandran
asCEOearlierthisyearafterRavichandranwaselevatedtotheboardofEicher
Motors.Toimprovesalesexperiencenewcompanyownedshowroomswere
launchedanddealershipsexpanded.

InOctober2008,RoyalEnfieldlaunchedinGermanyitsnewlydesigned500cc
ClassicmodelinspiredbyJ2,a1950modelBulletwiththenewengine.Itwasa
success,admiredforitsperformanceandfueleconomy.

Emboldened,LallauncheditinIndiainNovember
2009initiallyasa350ccbike,pricedatRs1.20lakh.
Thisprovedahittoo."Now,ourcapacityutilisationis
NEWSYOUCANUSE
100percent.Yetthereisasixmonthswaitingperiod
To counter Reliance Jio, Bharti Airtel to
fordeliveries,''saysVenki."Weplantodoubleour offer free data for 12 months
capacitysoonto1.5lakhbikes."
How to calculate the EMI on your loan

Today,RoyalEnfield'sproblemsareofadifferent The new aluminium engine Mistakes to avoid while doing tax
improved the bikes' planning in 2017
kind.Howshoulditscaleupwithoutdilutingbrand performance, but could not
equity?Italsofaceschallengesfromiconicglobal recapture fully the beat of the Five things to know about new Suzuki
old one Swift 2017
brandssuchasHarleyDavidsonwhichhasentered
http://www.businesstoday.in/magazine/casestudy/revivingroyalenfieldbullet/story/19892.html 2/5
2/15/2017 ChallengesforEicherMotorswhilerevivingBullet
old one Swift 2017
brandssuchasHarleyDavidsonwhichhasentered
theIndianmarket.Withotheroptionsavailable,willitscustomerscontinuetosit Service charge by hotels and restaurants
not mandatory
outthesixmonthperiodittakestoprovidedeliveries?
Here's what you need to know to save
taxes in 2017
Drivingchangewhenthechipsaredowniseasy:thereisnootheroption.InRoyal
Enfield'scasethechangeworkedforit.ButcanSiddharthaLalandhisteamdothe
samewhenthegoingisgood? SocialNews
BusinessToday

ReadalsowhatourexpertsthinkRoyalEnfieldshoulddo.Wewelcomeyour
responses.Writetousatbtcasestudies@intoday.com.Yourviewswillbepublished
inouronlineedition.

EXPERTSPEAK
Needsmoreresearchfocus

RoyalEnfield'sturnaroundisanidealcasestudyin BusinessToday
@BT_India
productplanning,processandbrandmanagement.
MoreimportantSiddharthaLal'sandR.L.
2h
Ravichandran'spassiontodotherightthing,toremain
patient,andkeepanearopenforthecustomer,has

beentransmittedthroughtherankandfileofthe
company,andthathasultimatelymadeallthe
It is an ideal case
study in product difference.
planning, process and
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brand management: AnumberofqualityinitiativeshavemadetheRoyal
ECONOMY
B. V. R. Subbu CORPORATE MARKETS MONEY INDUSTRY TECH OPINION PHOTOS VIDEOS MAGAZINE
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Enfieldproductasignificantlybetterpropositiontoday
thansayinthe1990s.Butcustomers,particularlytheurbanrecreation
Tweet
seekingones,stilltendtocribaboutitsreliability.The'bikecubs'lovetheir
Share
Bullets,butwhenitisaridetoLehtheyarecontemplating,theystillcross
1
theirfingers.Ruralandsmallurbancentrecustomers,albeitwithdifferent
Share
performanceexpectations,arenowalsostartingtolookforgreatercomfort
andbetterfuelefficiency.Thesearetoday'schallenges.

Clearly,greaterresearchfocusonpowertrainandbrakesisanimperative.
Share Asthingsstand,thereisnorocketscienceinvolvedinmakingbikes:once INSIGHT
youhaveagoodpowertrainandagoodframeeverythingelsefallsinto
Procedures like angioplasty will not be
place.Therestisbuiltaroundefficientproductionandprocurementsystems limited to tier 1, tier II cities: Dharminder
ontheonehand,anddistributionandbrandbuildingontheother.Whilethe Nagar of Paras Healthcare

formeriswellwithinthecompany'scapabilities,onthelatterfront, Joe C Mathew

RavichandranwhohasjoinedtheEicherboardwillsurelybemissed.

TriumphandHarleyDavidsonwillnotmakeanimpactinIndia,butwhatif
JapaneseversionsofclassicbikesstartbeingassembledinIndia?The
responsethathighendHondabikeshavegotinrecenttimesisagood
indicatorofhowconsumertasteischanging.

V.R.Subbu,BikeenthusiastandformerPresidentofHyundaiMotorIndia

Strategywillbekey

Foracompany,successcanbedefinedbythree
parametersmarketshare,profitabilityandcategory
substitution.RoyalEnfieldwillprobablyhaveprofits
butnotmarketshareifitaimstobeanichebrand.It
willalsonotlookatcategorysubstitution.Thatmeansit
willbeprofitablebutnotbig.Thisgoaliseasyto
Going forward, Royal
achievegivenRoyalEnfield'straditionalstrengths.And En eld needs to
thestorysofarhasbeengoodforabrandthatwasgiven clock more revenue
and prots: Y. L. R.
upasastretchercase.Butgoingforwarditneedsto Moorthi
clockmorerevenueandprofits.

WhileHarleyDavidsonandotherscanbecrediblethreats,muchdependson
howRoyalEnfieldplaysitsstrategy.Inseveralproductcategorieslike
detergents,Indianbrandshavedoneaswellasmultinationalbrands.Then
againwehavetheconsumerelectronicsmarketwheretheKoreanshave
moreorlesswipedouteverybodyelse.SowhathappenstoRoyalEnfield Why Infy, TCS, Wipro should
not repeat Cognizant's
dependsonwhatitdoes.Competitionwasalwaysthereandwillremain. mistake on share buyback
Rajeev Dubey
ThequestionsbeforeRoyalEnfieldnow:whatisthepenprofileofits
prospectivebuyer?Howisthispenprofiledifferentfordifferentofferingsof Is it the right time to transfer
your home loan?
RoyalEnfield?Forinstance,Bajajsayswhileits'Pulsar'isanIndiabike
Adhil Shetty
(urban),itsBoxerisa'Bharat'bike(rural).Inthissensethebuyersforeach
ofthecompany'sofferingsmustbeclear.Alsowillthenichethatappealed
http://www.businesstoday.in/magazine/casestudy/revivingroyalenfieldbullet/story/19892.html 3/5
2/15/2017 ChallengesforEicherMotorswhilerevivingBullet
ofthecompany'sofferingsmustbeclear.Alsowillthenichethatappealed
MORE
yesterday,appealtoday?WhatshouldRoyalEnfielddotogettoday's
aspirersonboard?Whatarethevolumesithopesforinthisniche?Howto
stayprofitablethere?Thesewillbethequestionsfortomorrow.

Y.L.R.Moorthi,Professor(Marketing),IndianInstituteofManagement,
Bangalore

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