Name AISHA CININTYA, S.E.

Question 1

Question 1A: Based on the data provided in exhibit 3, find out the rate of growth (in percentage
terms) of two-wheeler vehicles in India for the following periods:

Answer 1A:

Period Rate of Growth

2000-2004 27.27%

2004-2010 90.47%

2010-2015 50%

Question 1B: Also, list down the three factors (mentioned in the case) responsible for the
growth (or decline) of the two-wheeler market in India. (1 .5marks)

Answer : 1B

India is a fast-growing economy with large middle class. The total number of two-wheelers in
India was expected to raise from 42 million units in 2004 to 80 million units by 2010. The
primary growth drivers were coming from the younger demographic market, that had an
entrepreneurial energy. This increase In demand driven by following factors.
1. Customers’ increasing disposable incomes:

India is seeing consistent GPD growth, and this results in increase of consumers. This opens
door for consumers to find more ways to purchased valued product and spend on it.

2. An aspiration to own a motorized vehicle:

Consumer in India used bicycles as a primary commute vehicle for years. Any motorized
vehicle presents a smaller luxury for middle or lower middle class. This way motorized
vehicle also became a standard as commuting vehicle.

3. The availability of easy financing:

As more and more banks are coming in market, they started to provide easy finance for any
purchase with fixed EMI. This also make purchase of motorized 2-wheeler in the budget of
consumers. All above factors contributed to significant growth of 2 wheelers.

Question 1 C: In the country where you are currently residing, is the two-wheeler market
growing or declining? Support your answer with one reason (0.5 + 0.5 marks)

Answer 1 C:

In US, the market for 2-wheeler is limited and consistent. There are multiple factors for this:

1. In US, weather is one of the prime factors for restricted usage of 2-wheeler. On northern
US, summer has 3–4-month max, and rest of the year weather is mostly cold. Driving 2-
wheeler in cold weather is risky and hazardous.

2. In southern US, weather is hot but still rain is very frequent. This also impact 2-wheel
drive.
3. Long distances travel: In Us, the locations are much far and daily travelling on 2-
wheeler is not comfortable. In US, 2-wheeler is seen as a leisure driving vehicle.

Question 2

Question 2A: List down two private- and two public-sector players in the industry as
mentioned in the case. (1 + 1 marks)

Answer 2A:
Following are private and public sector players in India market.
Private sector companies
1. Shell
2. Gulf
3. Valvoline

Public sector companies (PSUs)

1. Indian Oil Corporation Limited
2. Bharat Petroleum Corporation Limited.
3. Hindustan Petroleum Corporation Limited.

Question 2B: Also, determine two direct distribution channels and three distribution channels
serviced through the distributor for the lubricant market in India. (1 + 1.5 marks)

Answer 2B:
Following are the direct distribution channel for lubricant market in India.
1. Forecourt: Petrol pump and gasoline stations.
This is direct channel as Castrol company is directly supplying MCOs to petrol pumps
and gas stations.
2. Franchised workshop (FW):
 Authorized workshops that serviced vehicles under warranty and provide all services related to
the vehicles. This is also direct channel as Castrol company directly passing MCOs and other
lubricants.

Following are channels through the distribution channels serviced through the distributor for
the lubricant market in India.
1. NFWs (Non-Franchised Workshops): Small mechanics who setup shop to servie
motorcycles.
2. Accessories and space parts: Stores that stocked and sold vehicle accessories and
space parts.
3. Pure Lubricant outlets: Stores that stocked and sold lubricants of all companies. They
did not stock or sell other products.

Question 3

Question 3A: Consumer buying behaviour (Hint: Think about consumer buying behaviour
during the after-warranty period and the factors driving the behavioural change.) (0.5 + 0.5
marks)

Answer 3A:

Consumer buying behavior:

For most Indian consumers, a motorcycle was a first step on the journey to personal mobility.
It is an effective and economical mode of transport. Consumers consider Oil change as an
important part of their bike maintenance. Their behavior changes when bike is under warranty
period and when bike is not under warranty period as below:
During the warranty period, consumers go to motorcycle dealership or franchised workshop.
They performed maintenance required and covered in their warranty. Here consumer would
like to utilize dealership or authenticated service for their new investment.
Once the warranty period is over, their bike enters into after-warranty market or after-market.
During this phase, consumer behavior changes. Consumers take the bike directly to the
mechanic of non-franchised workshop and trust the mechanic to use right oil. This shift in
behavior caused by trust, convenience and personal attention provided from the mechanic.
This shift in behavior was termed as ‘From Shop to workshop” as per case study.

Question 3B: Technological advancements happening in the two-wheeler industry (Hint:

Think about the oil requirements during the 2T technology phase and during the shift to 4T
technology.) (0.5 + 0.5 marks)

Answer 3B:

Technological advancements happening in two-wheeler industry:

1. Engine design is evolving with newer technologies. This results in smaller oil sump
sizes and the periods between oil changes were longer. This led to stagnation in
volume growth.
2. Newer engine technologies and shift from 2-stroke engine to four stroke engine impact
the consumer behavior and choices of distribution channels.

Question 3C: Can you list down atleast one impact of consumer buying behaviour and
technological advancement on the motorcycle oil market in your country? (0.5 + 0.5 marks)

Answer 3C:

Impact of consumer buying behavior

- As consumer buying behavior changes from “shop to workshop”, there will be growth of
multiple NFWs(Non-franchised workshops), lubrication store and spare parts store. These
workshops need supply of MCOs, so can be targeted via proper distribution channel. This way
demand can be fulfilled

Impact of technological advancements on motorcycle oil market.

- As engine design evolved from 2-stroke engine to 4-stroke engine, the oil need is no longer
can be fulfilled by PSUs at forecourts like gas stations. This leads for a need of complete
 distribution channel for MCO. This way monopoly of PSU is ended in MCO domain and
multiple private sector companies increased their market share in MCO domain.

Question 4

Question 4A: Channel share (2010), in percentage terms, for the ‘four-stroke oil Market’: For
each channel given in the following table, find out its contribution in ‘sales potential’ as a
percentage of the ‘total sales potential’ in the year 2010. (Hint: Refer to exhibit 11 in order to
answer this particular question.). (0.5+0.5+0.5+0.5 marks)

Write your answer for Part A here.

Channel Partner Channel Share (%) 2010

Franchised workshops 30.95%

Spare part outlets 42.86%

Oil shops 11.90%

Non-Franchised workshops 14.29%

Question 4B: Based on these two metrics, find out for which channel(s) the ‘channel share
(2005), in percentage terms, for the four-stroke oil market’ is greater than the ‘channel share
(2005), in percentage terms, for Castrol’s four-stroke oil sales’. (2 marks)
Write your answer for Part B here.

Based on two metrics (one from ungraded question and other from 4A answer), following 2
channel share (2005) in % for the “four-stroke oil market” is greater than the “channel share
(2005) for “Castrol’s four-stroke oil sales”.
1. Franchised workshops
Here value for “four stroke oil market” is 39.47% while ‘Castrol 4-stroke oil sales’
has value of 29.8% for year 2005.
2. Non-Franchised workshops.
Here value for “four stroke oil market” is 10.52% while ‘Castrol 4-stroke oil sales’
has value of 7.1% for year 2005.

Question 4C: Step 1: In exhibit 12, the data on the total number of outlets is given against
each distribution channel (Refer to the column named ‘outlet universe’). You need to calculate
the sales per channel outlet (for the four-stroke oil market). For each channel, find out the
sales (in litre) per ‘outlet universe’ for the four-stroke oil market industry (for the year
2005). (0.5+0.5+0.5+0.5 marks)

Write your answer for Part C here.

Channel Partner Sales (in litre) per channel outlet, 2005

Franchised workshops =30,000,000/4500

=6666.67

Spare part outlets =22,000,000/38,00

=578.95

Oil shops 16,000,000/14500

 =1103.45

Non-Franchised workshops =8,000,000/20,000

=400

Question 4D: Step 2: Sales per channel outlet (for Castrol): For each channel, find out
‘Castrol’s four-stroke oil sales’ (in litre) per ‘outlet selling Castrol oil’ (2005) (Hint: In
exhibit 12, the number of outlets selling Castrol’s four-stroke oil is given in the column named
‘Outlet Selling Castrol Oil’.). (0.5+0.5+0.5+0.5 marks)

Write your answer for Part D here.

Channel Partner Sales (in litre) per channel outlet, 2005

Franchised workshops =3,540,000/665

=5323.31

Spare part outlets 3,600,000/6235

=577,39

Oil shops 3,900,000/4411

=884,15

Non-Franchised workshops =850,000/1267

=670,88
Question 4E: In 2005, find out for which channel(s) is the ‘sales (in litre) per channel outlet
(for the four-stroke oil market)’ significantly greater than the ‘sales (in litre) per channel
outlet (for Castrol)’. (2 marks)

Write your answer for Part E here.

Answer 4E:

Following channel(s) is the ‘sales (in litre) per channel outlet (for the four-stroke oil market)’
significantly greater than the ‘sales (in litre) per channel outlet (for Castrol)’

For channel, spare parts outlets, it is marginally higher (578.95 > 577.39 in liters per outlet)
for the ‘sales (in litre) per channel outlet (for the four-stroke oil market)’ significantly greater
than the ‘sales (in litre) per channel outlet (for Castrol)’.

Question 4F: Based on these key metrics, determine the area(s) where Castrol is facing a
problem(s). (1.5 marks)

Answer 4F:
Following are the areas where Castrol is facing some issue and can do better.
1. The Franchised workshops channel has only 14.8% market share in outlets that is less.
Also, sales per outlet is also low compared to overall MCO market.
2. Oils shops have sales per outlet is higher for all MCOs while for Castrol it is less.
3. One major issue across all channels, I see the “Width issue”. Castrol is being sold only in
fractions of outlets. This WIDTH seems to be the bottleneck in sales and revenue.
Question 5

Answer 5A:
In 2005, Total four-stroke oil market is 76 million liters. NFW’s market is for 8 million liters
that constitute 10.53%.
As per Castrol team, NFWs are categorized in three segments. Their characteristics as basis
on following parameters explained as below:

Segment 1 : Stock and Sell mechanics

Segment Size 10% of mechanic

Share in Oil Change Process 30%

Oil Buying Behavior They usually stock and sold the lubricants.
They are frequently serviced by distributor.
They are highly skilled and trusted by
customers for major jobs on their bikes.

Financial Condition They have years of experience. They are

called “USTAADs” (Champion) in the work
they perform and so they charge premium
price and customer happily pays that also.
They are financially better also.

Segment 2:
Mechanics who have worked at the franchised workshops and are ready to set up their
own business.

Segment Size 40% of mechanic

Share in Oil Change Process 50%

Oil Buying Behavior These mechanics normally received their
supply of MCOs from nearby spare parts
shops. They were hesitant to stock oil
products for a couple of reasons. They
worried that their customers would ask for
credit for the cost of the MCO and they were
 reluctant to burden their current spare parts
suppliers with more requests.

Financial Condition This category of young mechanics required

financial support. They were short on
finances Based on their business
relationships, they could usually manage to
get some credit on MCOs and spare parts,
but such sales were normally settled daily
basis.

Segment 3:
Mechanics who are approached for small/minor jobs.

Segment Size 50% of mechanic

Share in Oil Change Process 20%

Oil Buying Behavior Consumer buys their own bottle of MCO
and take it to the shop. Consumer only
shows little trust on these mechanics for
minor issues such as clutch wire change and
brake adjustments.
Financial Condition They are struggling to build their clientele
and reputation. They are having issues with
financials also as the have limited
knowledge of cash flows and payment
cycles.

Question 5B: Evaluate these three models on the following parameters (Answer as ‘High’ or
‘Low’.):

• Parameter 1: Willingness of these channel partners to supply to the NFWs (0.5 + 0.5 +
0.5 marks)

• Parameter 2: Channel partners’ preliminary knowledge of the local market that they
are operating in (0.5 + 0.5 + 0.5 marks)

• Parameter 3: Potential of conflict(s) with other channel partners (0.5 + 0.5 + 0.5
marks)
 • Parameter 4: Capital investment required to set up this model (0.5 + 0.5 + 0.5 marks)

• Parameter 5: Cost incurred by the channel partner to supply to the NFWs (delivery
cost) (high, medium, low) (0.5 + 0.5 + 0.5 marks)

Write your answer for Part B here.

Answer 5B:

Parameter 1: Willingness of these channel partners to supply to the NFWs

Parameter 2: Channel partners’ preliminary knowledge of the local market that they are
operating in
Parameter 3: Potential of conflict(s) with other channel partners
Parameter 4: Capital investment required to set up this model
Parameter 5: Cost incurred by the channel partner to supply to the NFWs (delivery cost)

Module Parameter 1 Parameter 2 Parameter 3 Parameter 4 Parameter 5

1 Low High Low Low High

2 High Low High High High

3 High High Low Low Low

Question 6

Answer 6:
1. CASA will report to distributor for better control on product attributes.
2. CASA serves NFW’s second segment mainly who has worked at franchised workshops
and ready to setup their own business. This segment is 50% of total oil change and it is the
best candidate.