MANAGEMENT

CASE
describes a real-life situation faced, a
TI Cycles: New Product decision or action taken by an individual
manager or by an organization at the
Strategy (A) strategic, functional or operational levels.

Mukund R Dixit and

Abhinandan K Jain

I
n a meeting held on 11th April 1997, Mr Ramkumar, Vice President and
Mr K K Paul, General Manager, Marketing, of TI Cycles of India (TI
Cycles) were discussing the opportunities to increase the sales and
market share of the company. This had become imperative in view of the
near stagnant sales and increased competition in the standard and special
bicycles. They were quite sure that the company’s strength and standing
could be enhanced through new product introductions. For this purpose,
they reviewed the company’s performance, developments in domestic
bicycles market, competition and competitiveness in domestic and
international markets, and the company’s role in developing the ‘Specials’
category of bicycles.
Ramkumar, 40, was a post-graduate in management from the Indian
Institute of Management, Ahmedabad and a cost accountant. He had taken
over as Vice President of TI Cycles in 1995. Earlier, he was General Manager,
Finance, of TII Group, the parent holding company of TI Cycles. He had
worked for 12 years in all with the Group. He had also worked as the head
of finance at TI Cycles itself. Paul had been at TI Cycles in the marketing
function in different capacities including exports and managing the eastern
region immediately before taking over as the General Manager.

COMPANY BACKGROUND
COMPANY

TI Cycles was promoted by the family of Murugappa Chettiars in

September 1949 in collaboration with Hercules Cycles & Motor Co. of UK
to indigenously produce complete bicycles, bicycle parts, and substitute
imports. The factory at Ambattur, a suburb of Madras, now Chennai,
Tamil Nadu, was commissioned in 1951. It was a significant technical and
managerial challenge to put up such a unit in an industrially less developed
KEY WORDS region. The family had also promoted other enterprises like Tube Products
Marketing India Ltd., TI Diamond Chain, TI Miller, Wright Saddles India, and TI&M
New Product Sales. Together they formed the Tube Investment Group. In the 1930s and
40s, the family was involved in money lending in Burma, Malaysia, Sri
Internationalization
Lanka, and Vietnam. In 1940, the group decided to give up banking and
Completition venture into manufacturing. It set up Ajax Products Limited and began
Family Values manufacturing steel products and abrasives.

VIKALPA • VOLUME 28 • NO 1 • JANUARY - MARCH 2003 113

 Since the inception of TI Cycles, the members of
the Murugappa family had shown keen interest in its
growth. It was a training ground for inducting younger
members of the family into business. In 1996-97, Mr
Vellayan, a member of the Murugappa family, was the
President of Tube Investment Ltd. and Mr Subbiah, an
elder member of the family, was the Chairman. The
family believed in the values of fairness, truth, honesty,
and human considerations in treating people in
managing its businesses. The family advocated strict
adherence to the laws, regulations, and rules of the
land. It was also keen on making a distinct contribution
to the well being of the society.
ORGANIZATION OF TI CYCLES
ORGANIZATION
TI Cycles was organized functionally. The unit head,
called the Vice President, was responsible for the
overall functioning of the unit and reported to the
President of TII Group. The head of production was
responsible for purchase, maintenance, quality control,
and stores of all varieties of cycles. Similarly, the head
of marketing was responsible for pricing, promotion,
distribution, and product management of all varieties
of cycles. He was assisted by regional managers in
South, North, West, and East. The head of personnel
looked after recruitment and training of employees up
to the managerial level. The Manager, Finance, was in
charge of day-to-day accounting and working capital
management. The head of Research and Development
was in charge of product upgradation and new product
development. The Research and Development division
was equipped to develop product and component
prototypes. For quality testing and painting, it relied
on the facilities of the production department. The
functional heads reported to the Vice President of the
unit. The Vice President together with the functional
heads constituted the top management committee
(TMC) of TI Cycles. They met once a month and when
needed to plan and review the performance of the unit.
PRODUCT RANGE
The early emphasis of TI Cycles was on manufacturing
quality bicycles as per the design and drawings from
the collaborator. It started with the assembly of
Hercules brand of ‘Standard’ cycles in its plant at
Ambattur. Hercules cycle was promoted as a life
114
companion to the consumer. It was aimed at the office
goers and workers. The cycle was described as “sturdy
— made from true temper steel to stand rigorous use.”
The advertisement for the product mentioned the
following:
“Strong yet smooth to ride, Hercules is built to
last you a lifetime. Made to the highest standards
of quality and yet moderately priced, Hercules
offers you the ideal bargain in bicycles.”
The product created a market for indigenous bicycles
in India. Encouraged by the success of Hercules, the
company introduced a cycle under the brand ‘Phillip's
for the student segment in 1955. The advertisement
for the product mentioned the following:
“He is good at studies
He is a leader in sports
He is on his way up
His cycle is Phillips.”
“Phillips is handsome — its sleek, powerful look
expresses your taste best. A super bicycle made
for young people like you.”
Both ‘Hercules’ and ‘Phillip's were the registered
trademarks of Hercules Cycles and Motor Company
of UK.
TI Cycles diversified into ‘Specials’ category with
an eye on getting premium prices. The cycles were sleek
with features like wire brakes and multiple colour
options. In 1969, the company introduced the first range
of cycles in this category under the brand BSA —
Aristocrat. The company also introduced a special cycle
with cross frame that was easy to climb on to and ride
by ladies. It offered its models in black and green
colours.
TI Cycles produced 36,000 bicycles in the year 1953.
The production increased to 89,000 in 1955. A total of
one million cycles were produced by 1960. The second
million mark was reached in December 1963 and the
third million in April 1967. Till the 70s, TI Cycles was
the largest producer and marketer of bicycles in India.
With the increase in the volume of cycles sold, the
demand for replacement of cycle parts increased. This
created an opportunity for entrepreneurs in Punjab,
especially Ludhiana, to set up manufacturing units for
independent parts. Over the years, some of them
integrated forward to assemble and sell complete
bicycles under their own brand. With a start like this,
Hero Cycles, promoted by Mr B M Munjal of Ludhiana,
became the largest producer of low cost, value for
TI CYCLES: NEW PRODUCT STRATEGY (A)
money ‘Standard’ bicycles. The company not only
harnessed the opportunities provided by independent
cycle parts manufacturing units in Ludhiana, but also
promoted dedicated units to improve its position. A
nine month strike at TI cycles in 1978 paved the way
for the decline of its leadership in the ‘Standards’
segment.
In 1989, Hero Cycles created the sub-category of
Mountain Terrain bikes (MTB) and in 1990, TI Cycles
responded with the introduction of ‘Streetcat’.
In 1994-95, the production of cycles was 19,46,000.
The production increased to 2,058 thousands in 1995-
96 but reduced to 1,930 thousands in 1996-97. However,
the number of employees had reduced from 4,216 in
1994-95 to 3,236 in 1996-97. In 1996-97, the company
marketed its cycles under two brand names: ‘Hercules’
and ‘BSA’. The ‘BSA’ brand was more profitable than
the ‘Hercules’ brand. The cycles were in different
ranges and had different features. A workhorse cycle
was a standard cycle in black colour with horizontal
handle. The sports and racing cycles had thicker tyres.
The luxury cycles had multiple colours, wire breaks,
thin frames, and thin tyres. The range of cycles targeted
the adults, juveniles, and kids in both male and female
segments separately. For example, Hercules Captain
aimed at the 15 years and above male segment, was a
20” high cycle with no frills except a PVC saddle and
a chain cover. Hercules MTB Jr., aimed at the 8-12 years
old boys segment, had oversized tubing frame, solid
deflected plate carrier, and wheel reflectors. It was in
red colour. BSA Lady Bird Jr., aimed at the 8-12 years
old girls segment, was a blue coloured cross-tube frame
slim cycle with a specially designed wire mesh basket.
The company offered many variants with sub-
brands under both ‘Herculus’ and ‘BSA’ brands. The
Table 1: New Product Introductions: 1994-95 to 1996-97
Category Brand
1994-95 1995-96
Standards — —
SLRs BSA-SLR Photon — —
BSA Lady Bird
Kids Dinosour Cindrella
Bazooka
MTBs Rock&Roll FST
Gripshift
Conquest
Service — Cyclinics
Source: Company records.
VIKALPA • VOLUME 28 • NO 1 • JANUARY - MARCH 2003
variants were built around alternative designs of
carrier, cover chain, tyres, basket attachments, frame
shapes, trainer wheels, etc. The price of ‘Hercules’
brand of cycles ranged from Rs 1,450 for Hercules Kids
in the 4-7 years age group to Rs 2,275 for Hercules
Cannon Barrel meant for kids above nine years. The
price of ‘BSA’ brand of cycles ranged from Rs 1,300 for
BSA Snowwhite meant for children in the 2-4 years
age group (kids) to Rs 2,235 for BSA Lady Bird.
NEW PRODUCT DEVELOPMENT AND
INTRODUCTION
TI Cycles had concentrated on ‘ Specials’ since early
80s and had continuously introduced new products
and services. These were to improve the offerings and/
or meet competitive challenges/introductions. For
example, the company introduced a number of new
products in the last three years to improve the sales of
MTB category that had attracted the competitors after
it had reactivated the category with the introduction
of ‘Streetcat ‘ (Exhibits 1 and 2 give the background on
the introduction of SLR and MTB categories). Table 1
provides the details of new product/service
introductions by the company in the last three years.
Product Management, Product Development,
Manufacturing, and Purchase Departments jointly
shared the new product design and introduction
activity under the overall guidance of General
Manager, Marketing and the Vice President. A Senior
Product Manager headed the Product Management
Department and three Product Managers assisted him.
Each of the Product Managers was responsible for a
set of products for which they prepared marketing
plans and monitored the same. The Product Managers
Total
1996-97
Hercules Supreme 1
2
Petz 4
MTB Jr 8
CBL
Dynamix
Trailblazer
— 1
115
were generally either MBAs and/or experienced
company personnel who had worked in sales and/or
marketing. A Manager who was assisted by three
Product Designers/Engineers headed the Product
Development Department. Product Designers were
engineering and/or design graduates with design/
manufacturing/quality experience.
The Product Management Department, as a part
of its task of preparing marketing plans, regularly
collected sales and marketing data about the company
as well as its competitors and the industry. The data
were collected through in-company sources and other
secondary sources. For managing the products, the
Product Managers also designed and collected primary
information about bicycle buying, competitive
positioning, product and communication testing, etc.
The primary data were mostly collected through
reputed marketing research agencies. On the basis of
relevant market information, the Product Managers
generated new product concepts for specific target
segments. The concepts were tested with target
consumers before being handed over to the Product
Development Department for specifications and
prototype development. Prototypes were tested along
with the Product Manager with target consumers and
selected dealers. During this phase, the Product
Development Department constantly interacted with
the Manufacturing and Purchase Departments for
checking out and planning of production and sourcing
requirements. Adequate samples of selected models
were then produced and tested with target customers.
The product testing also provided some idea about the
likely demand which helped in planning the
production.
The Marketing Department identified some
schools in Chennai whose student profile was similar
to that of its target customers. The company also
identified some of its dealers for getting feedback about
new products and other marketing initiatives and
policies. Besides, it had prepared a cycle testing track
(MGM stadium) where new models were kept for
children and others to ride. This move attracted lot of
children and adults who visited the stadium daily and
had bicycle rides. Thus, the company used all the three
methods (the schools, the dealers, and the track) at
various stages of new product design and development
to test new concepts, prototypes, and samples.
116
REACHING THE DOMESTIC
CUSTOMER
Initially, the company sent fully assembled bikes to the
market. To save the cost of transportation and improve
logistics, it changed the format and started sending
ready-to-assemble kits to the dealers. The components
were put in a cardboard box and dispatched to the
dealers by truck. The dealers received the cycles in
cases in completely knocked down (CKD) conditions.
Each case contained 5, 6, 10 or 16 cycles. The dealer
assembled the parts into full bikes at their premise
before sale and trained his technicians himself.
The company had its dealers in 993 towns out of
4,313 in India. It was represented fully in towns with
a population exceeding 1 lakh. However, in smaller
towns with a population of less than one lakh, the
company’s representation was partial. Some dealers
appointed sub-dealers to expand their reach. The
dealers and sub-dealers could stock other brands of
cycles as well. A few dealers stocked automobile
ancillary parts and consumer durables in addition to
cycles.
The company had appointed 40 sales represen-
tatives who booked the orders from the dealers and
passed them to the central marketing office at
Ambattur. The marketing office passed the orders
received from the representatives to the production
unit for planning the production.
The dealers viewed TI Cycles as a supplier of
‘Special’ category cycles. They had lost interest in
selling the ‘Standard’ category of TI cycles. They
expected the company to innovate in features, styles,
and accessories, and give them an opportunity to
charge premium prices. The fancy cycles attracted
customer to the stores. This was reinforced by the
behaviour of the sales representatives. A marketing
executive remarked:
“When our sales representatives met the dealers,
they encouraged them to book orders for
‘Specials.’ They mentioned the ‘Standard’ cate-
gory reluctantly.”
In 1996, the company introduced ‘Cyclinics‘
authorized spare parts sales and service cum cycle sales
showroom. It was a new concept in the bicycle industry.
Mr Nambiar, DGM, (Spares and Service) reflected on
the introduction:
TI CYCLES: NEW PRODUCT STRATEGY (A)
 “We realized that roadside mechanics were not
able to repair the new bikes like MTB. Also,
genuine spare parts were important for proper
repair of the bikes. The concept of an authorized
sales-cum-service showroom (like that for
motorcycles and scooters) was therefore
conceived. The concept was designed and tested
in Chennai from 10 November 1995. We had
apprehensions that the conservative cycle buyer
might view the showroom as the one where only
costly bikes were available. However, the
customer walk-in was pretty good and in fact
better than expectations. This prompted other
dealers to ask for implementing the concept at
their premises.”
REACHING THE INTERNATIONAL
INTERNATIONAL
CUSTOMER*
In the international markets, the company supplied 85
per cent assembled bikes. These were marketed in
different countries through importers to supermarkets
and through them to consumers. Components were
marketed directly to overseas manufacturers.
The company started export of bicycles in the early
60s. Exports in the early years were to Africa, Middle
East, and other Asian countries in CKD form, similar
to the method used in India. The company did not
progress significantly till 1988-89.
In 1991-92, it formulated a four-phase international
marketing strategy. In the first phase, it planned to
establish credibility through entry to European
Community (EC) to cover EC countries one by one,
using one customer (distributor) per country, with a
low-end product and without a brand name. It selected
EC as the key market because of tariff preference to
India and dumping duties imposed on China, the
largest exporter of bicycles. In the second phase, it
attempted to create visible credibility in the EC, through
upgrading the product from low to low-mid range,
designed in the first and second phases with more
emphasis on branding backed by manufacturing
(mostly assembly) in Europe. In the last phase, TI
Cycles was to become a truly international player.
The company initiated measures to develop an
international mindset and capabilities and achieve the
above mentioned strategic goals through overseas
exposure, training, and participation in trade fair. It
improved the product through technology upgra-
dation, and global sourcing, and set up a dedicated
Export Oriented Unit (EOU) of 300,000 units for
catering to the volumes anticipated. Also it set up an
international subsidiary, Perry Overseas Ltd, Virgin
Islands, to manage the operation.
The company made export division as a separate
profit centre and attached product development to
marketing. The exports became a significant part of its
business in the mid-90s (Table 2). However, by 1996-
97, increased production costs at home, tariff changes
in EC, and currency fluctuations made exports an
unsustainable proposition. Exports declined in 1996-
97. The EOU incurred a loss of Rs 1.22 crore.
OPERATIONS A
OPERATIONS T AMBA
AT TTUR PLANT
AMBATTUR
The company’s manufacturing was structured to
produce the parts in batches till 1995. Increase in the
number of models and the total volume of production
led to problems of increased in-process inventory, long
manufacturing lead time, inaccurate delivery and poor
tractability, and fortification of orders for different
brands/models of bicycles. By 1996-97, it had solved
those problems by redesigning its manufacturing
systems. The shop-floor layout was restructured into
five modules: i) Standards, ii) Brazed Specials (SLRs,
Juveniles), iii) Home welded (MTB and Kids), iv)
Table 2: Domestic and Export Sales
(1990-91 – 1996-97)
(Rs Million)

explore possibilities of establishing a brand, and selling Year Domestic Sales Export Sales

directly to retailers. Simultaneously, it continued the 1990-91 850.34 93.48

1991-92 1000.40 139.40
thrust of the first phase (unbranded) to provide
1992-93 1082.40 287.00
stability. In the third phase, it planned to substantially
1993-94 1246.40 492.00
increase the market share in EC through both strategies
1994-95 1517.00 545.30
1995-96 1810.56 549.40
* This section draws on a presentation made by Mr H S Goindi of TI Cycles 1996-97 1836.80 289.46
to students of Post-Graduate Programme at IIM, Ahmedabad in November
1995. Source: Company records.

VIKALPA • VOLUME 28 • NO 1 • JANUARY - MARCH 2003 117

Exports, and v) Rim. The first four were grouped
according to bicycle models having similarities in
features, technology of joining the metal frames, and
requirements of colour and design changes. The Rim
module was a common support module for the rest.
The company created a Dispatch module to take care
of dispatches of domestic bicycles. A module was
expected to be a ownership responsibility centre for
buying out components, maintenance, stores of raw
materials and intermediate production planning,
assembly in batches of 500 cycles, and dispatch to the
dispatching module. The company centralized the
remaining functions and grouped them under the
following departments: Marketing, Sourcing
(procurement in modules), Product Development,
Maintenance, Quality, Production Engineering, Central
Planning, and Personnel.
WORK CULTURE
CULTURE
After taking over as Vice President in 1995, Ramkumar
spent considerable time in understanding the people,
the decision-making processes, and work culture
through interactions with senior executives and
workers and visits to the shop-floor. He shared the
performance of the company with executives and
introduced a system of sharing, questioning, and
provision of answers through team efforts. He also
introduced the concept of ‘Saturday meetings’ where
various issues facing the company were openly
brainstormed by a cross-functional team of senior
executives. This process helped the work culture to
change to a significant extent. A senior executive
commented:
“The Saturday reviews were a real help. They
opened our eyes to the deteriorating
competitiveness and financial performance of
the company. We were shocked to know that the
company was incurring losses. Earlier, we were
working in our own silos and thought that the
situation was ‘hunkey dorey.’ It also brought in
a change in our mind set. Earlier, we did not
involve ourselves in resolving the issues faced
by the other functions. For example, competition
and dealer complaints were to be addressed by
the marketing executives. Similarly, IR issues
were to be tackled by the HR department. For
that matter, quality was the concern of
118
production people only.”
An executive described the work culture, till 1995,
as easy going. Each one did the task that was assigned
to him. The supervisor and managers focused on
problems relating to their areas of operations. For
example, competition and dealer ’s complaints were to
be addressed by the marketing executives only.
Similarly, industrial relation was the concern of HR
executives. Quality was the problem of production
executives. Hierarchy was respected. Everyone waited
for initiatives and instructions to emanate from the
higher ups. One of the executives described the culture
as “risk averse.” However, the atmosphere was very
informal.
PERFORMANCE TILL 1996-97
In 1995-96, the sales volume (value) in domestic market
was 1.7 million (Rs 1810.56 million) and in export
market was 3,58,000 (Rs 549.40 million). In 1996-97,
the domestic sales volume declined to 1.63 million (Rs
1836.80 million) and the exports declined substantially
to Rs 3,00,000 (Rs 289.46 million). The export sales got
affected primarily by the devaluation of Chinese
currency and the imposition of import duties on Indian
bicycles by the EC. However, the exports of components
continued to do well. Till 1996-97, the company
continued to hold more than 50 per cent of market
share in the ‘Specials’ segment.
In 1994-95, the company had incurred a loss of Rs
2.98 crore which reduced to Rs 1.51 crore in 1995-96. In
1996-97, it turned the corner and earned a profit of Rs
3.04 crore. Its domestic operations were profitable
throughout with profits increasing from Rs 0.65 crore
in 1994-95 to Rs 4.02 crore in 1996-97. The losses from
export operations had declined from Rs 3.62 crore in
1994-95 to Rs 2.93 crore in 1995-96. They declined
further to Rs 0.98 crore in 1996-97.
COMPETITIVENESS OF TI CYCLES
The company had established a name and reputation
for quality. Its brands Hercules and BSA were
recognized across the country. Till the early 70s, being
a dealer of Hercules cycles was a symbol of prestige. It
lost its exclusivity when competitors from the North
entered the industry and built leadership positions on
the basis of lower price. The entry of competitors was
TI CYCLES: NEW PRODUCT STRATEGY (A)
facilitated by the growth of independent parts lakh and third in towns with less than one lakh
manufacturers in Ludhiana in particular and Punjab population and in rural areas (Table 5). Nowhere was
state in general. The new entrants did not have to set it number one.
up integrated facilities like TI Cycles. They made a few
core parts like frames and forks, did the painting, NEW OPPORTUNITIES
OPPORTUNITIES
bought complementary parts from independent
manufacturers, and prepared the ready-to-assemble Domestic Market Opportunities
kits. They promoted their own brands like Atlas and
The bicycle purchase in India was 1 per 100 persons in
Avon.
1996-97. This compared quite poorly with developed
At the end of 1996-97, TI Cycles faced competition
countries like Holland and Japan where the ratio was
from Hero Cycles, Atlas Cycles, and Avon Cycles, all
1 per 13 persons. In the US, Germany, UK, and France,
located in North India. They competed on price in both
the ratio was 1 per 20 or 25. In China, it was 1 per 45
‘Standard’, and ‘Special’ categories. Studies had shown
persons.
that there was a cost differential of about 10 per cent
The Indian bicycle market had grown from a sales
between TI Cycles and the other key competitors. This
volume of 586 million bicycles in 1986 to 949 million
was primarily because of the integrated nature of
bicycles in 1996-97. Table 6 provides rural, urban, and
manufacturing and the higher wage costs at TI cycles.
total domestic market size and total market growth
The company was considering ways of cutting costs
rate for the period 1985-86 to 1996-97. In the year 1996-
by outsourcing, but the extent of cost reduction needed
97, the North Zone accounted for about 31 per cent,
to make a significant increase in its contributions in
East Zone 26 per cent, and West and South Zones, which
‘Standards’, was not likely to materialize soon. Exhibit
were equal in size, the remaining 43 per cent of the
3 provides the details of competitors’ profiles. The sales
total domestic market.
of various players in the industry in different categories
The composition of domestic market (‘Standards’
of bicycles were as provided in Table 3. TI Cycles was
vs. ‘Specials’) was changing slowly since the 70s. See
a leader in the southern region of India closely followed
by Hero (Table 4). Population strata-wise, the company Table 5: Market Share by Population Strata in
was second in towns with a population more than 10 1996-97
Estimated Market Size by
Table 3: Bicycle Industry — 1996-97 Population Stratas Hero % Atlas % TI%
(Figures in # 000s) Rural 50 25 15
Type of Cycles Company Towns (<1 Lakh) 35 30 27
TI Hero Atlas Avon Total 1-10 Lakh 40 20 35
10 Lakh+ 40 20 30
Total Bicycles 1605 4210 1996 968 8780
Of these Source: Company records.
Standards 787 3437 1685 745 6654
Table 6: The Market for Bicycles in India – 1985-86
Specials 818 773 311 223 2126
to 1996-97
Of Specials ( 000’s)
SLRs 317 103 38 17 475
Year Rural Urban All India Growth (%)
MTBs 240 223 60 59 582
1985-6 - - 5862 -
Kids 107 165 36 71 379
1986-7 - - 6213 5.6
Juveniles 149 276 175 76 675
1987-8 - - 6577 5.5
Source: Company records. 1988-9 5050 1638 6688 1.4
1989-0 5120 1772 6892 3.4
Table 4: Regional Market Shares of Cycles — 1990-1 4900 1720 6620 -3.9
1996-97 1991-2 4550 1654 6204 -4.8
1992-3 4750 1936 6686 4.5
Firm North East West South
1993-4 4804 2000 6804 3.3
Hero 45 53 31 39 1994-5 5900 2671 8571 26.0
Atlas 24 7 36 18 1995-6 6450 3043 9493 10.8
TI 4 22 18 43 1996-7 6400 3200 9600 1.1
Source: Company records. Source: Company records.

VIKALPA • VOLUME 28 • NO 1 • JANUARY - MARCH 2003 119

Table 7 for an overview. The detailed mix of bicycle Table 8: Mix of Bicycles in India
types in the Indian market in 1996-97 is given in Table 8. (Figures in Lakh)
Among durable products, bicycles were owned by 80 1994-95 1995-96 1996-97
per cent of households and were the second most ‘Standards’ 69.1 70.2 67.5
owned durable in 1996. The ownership of bicycles ‘Specials’ 17.5 19.5 20.6
among households (rural and urban) and by income SLRS 5.0 4.9 4.8
categories is provided in Table 9. The projected number Kids 3.2 3.7 3.8
of households in different income groups in urban and MTBs 4.6 5.5 5.8
rural areas up to 2006-07 is given in Table 10. Juniors 4.7 5.4 6.2
Total 86.6 89.7 88.1
International Market Opportunities
Source: Company records.
A review of the European Union market by the
company management in 1996-97 revealed that the 40 % price compared to that of Indian producers),
demand for bicycles in EU as a whole as well as in each 26” MTB (roughly 60% of Indian price), and
of the key countries had declined over the last three standard bikes (roughly 90% of Indian price).
years. The key countries, accounting for 75 per cent of
• Most bicycles preferred in the developed countries
EU demand, faced falling demand and imports during
were geared and were meant for fun, exercise, etc.
1993-94 to 1996-97. Total imports to EU countries
(as opposed to their use as workhorse in developing
dropped by 20 per cent (Exhibit 4). During the six-
countries). Among the model types, the major ones
month period (January-December 1996), EU’s import
were ATB/MTB, BMX, Roadster, etc. The newer
from India went down to 3,83,000 from 6,26,000 a year
designs were towards use of lighter materials
ago, a drop of 40 per cent. The company’s volume also
(special alloys) and of folding type. TI Cycles did
went down to 1,71,000 from 365,000 over the same
not have design and manufacturing capabilities to
period, a drop of 52 per cent. Further, the company’s
produce the middle and upper end of bikes required
share of Indian exports to EU fell from 57 per cent to 45
by these markets.
per cent. This was primarily due to its failure to
• The export operation and international thrust
compete on prices. Its early starter lead was neutralized
by other domestic competitors. helped TI Cycles in acquiring technologies and
attitudes to produce international quality products,
Some key findings of the review of world bicycle
particularly in the EOU. Specifically, the experience
market were as follows:
• The US and Europe were the two largest importers helped in improved learning of welding, assembling
of bikes, and painting. Learning of order tracking
followed by Japan. China was the largest
of a variety of mix of bicycles was another new skill
manufacturer and exporter of low cost bikes and
was upgrading through Taiwanese technology. The that was developed which triggered the restru-
cturing of the shop-floor.
major producers in China were China Bicycle
Company, Forever, and Pheonix. • The export supplies/rejects were marketed in the
• Chinese producers with their low production costs domestic market. While the initial acceptance was
were likely to pose a major threat in ‘kids’ (roughly better, the customers found the maintenance and
the servicing of geared bikes a serious problem. This
was because the dealers and their mechanics did
Table 7: Industry Trends — Mix of ‘Standards’ vs.
not know the product and its servicing require-
‘Specials’
ments.
(in %)
Mid-80’s Early 90’s Mid-90’s • TI cycles learnt to procure high quality components
Industry TI Industry TI Industry TI from Japan for assembly into export cycles. For
‘Standards’ >90 75 90 60 76 50 example, it learnt that the best gear systems were
‘Specials’ <10 25 10 40 24 50 designed and manufactured by Shimano of Japan.
Total Sales 100 100 100 100 100 100 Export demand was for cycles fitted with Shimano
Source: Company records. gears.

120 TI CYCLES: NEW PRODUCT STRATEGY (A)

Table 9: Bicycle Ownership
Income Group Urban Rural Total
(Rs per Month) Total House- % Total House- % Total House-
holds Penetration holds Penetration holds
Lower (< 2000 per month) 17.70 40.00 98.60 39.00 116.30
Middle (2-6000 per month) 24.60 57.00 25.80 60.00 50.40
Upper (> 6000 per month) 5.40 54.00 3.00 60.00 8.40
Total 47.70 127.40 175.10
Source: Company records.
Table 10: Projection of Households in Income Groups
(in Million)
Income Group Urban Households Rural Households
1994/95 2001/02 2006/07 1994/95 2001/02 2006/07
Lower (<2000 per month) 15 7 2 71 49 34
Middle (2-6000 per month) 23 30 30 40 68 89
Upper (>6000 per month) 7 15 28 5 11 16
Total 45 52 60 116 128 139
Source: NCAER Whitebook.

NEW THREAT: COMPETITION FROM

THREAT popular as mode of transport for mid/lower middle
MOTORIZED TWO-WHEELERS income households.

The cycle industry faced competition from the moped
category of motorized two-wheelers. These were
mostly of 50 cc engine capacity and priced around 2 to
3 times the price of top end of bicycles. Kinetic
Engineering in the West, Luna, and Hero Majestic in
the North, and TVS in the South were the key
competitors. Kinetic and Hero had over 60 per cent of
the moped market till early 80s. TVS emerged as a
strong contender in mid-80s. Simultaneously, the south
market penetration increased. With the introduction
of 100 cc bikes and scooters by Kinetic and Hero, the
moped market was led by TVS in late 80s/early 90s.
Enfield, a Southern India based manufacturer of
“Bullet” motor cycles, decided to enter the moped
market by introducing and pricing a product at Rs 2,500
in late 80s. The product with the brand name Mofa
was a gearless moped, without frills, which gave a
mileage of 100 km to a litre of petrol. Bicycles cost Rs
1000-1100. Mofa failed to take off and was withdrawn.
Bicycle prices grew but remained around Rs 2000 plus.
Moped prices had risen to Rs 10,000 plus by 1997.
A new development in early 90s was the
introduction of a 50 cc scooter (Scooterette) by Bajaj,
the leader in the ‘Scooter ’ category of two-wheelers.
Later, TVS and Kinetic also followed with similar
products. This category had become quite popular with
children in high-income households. Mopeds and
second hand scooters/motor cycles were becoming
BICYCLE USER
Research by TI Cycles had revealed that the ‘Standard’
and ‘Special’ bicycles had distinct user groups. The
‘Standard’ bicycle was a functional, lower priced, and
semi-urban or rural market bicycle. It was used as a
workhorse to travel to workplace or carry loads (like
milk cans by milk vendors). The user typically belonged
to 20 years plus age, lower to lower-middle income
group, blue collar/farmer/semi-skilled labour,
belonging to Social Economic Classification (SEC) C
or D. The brands favoured were Hercules Popular
(TI), Hero Royal (Hero), Atlas Goldline (Atlas), and
Avon. Invariably, the user purchased the bicycle on his
own from the dealers.
The ‘Special’ bicycles were aesthetically (looks and
design) superior, trendy, fetched higher price, and used
primarily for recreational purposes. The user group
consisted of students, both boys and girls, of 6 to 16
years of age, belonging to mid to upper income groups
in SEC A and B. The MTBs which were introduced
much later than SLRs had caught the fancy of boys and
constituted the premium range of ‘Specials’. The SLR
users were mostly girls. Leading brands in ‘Specials’
were BSA SLR (TI), BSA Mach (TI), Hero Impact (Hero),
and Rockshock (TI). The parents or elder relatives of
the users bought these bicycles for the users. A TI
marketing executive mentioned that the “pestering

VIKALPA • VOLUME 28 • NO 1 • JANUARY - MARCH 2003 121

power” of the children played a key role in influencing
the purchase decision.
The youth segment looked for something different
every time. Cycle manufacturers differentiated their
offerings by unconventional brand names like devil,
rebel, etc., multiple colour schemes, designs of handles,
tyres, carriers, stand, and overall shape of the cycle
and tried to give “my bike is different” image.
Company research had shown that the youth
segment was expected to grow by more than 20,000
per month and it constituted about 35 per cent of the
total cycle market. TI Cycles led the segment with 50
per cent market share followed by Hero Cycles (35%)
and Atlas (10%). Atlas was expected to take its market
share from 10 per cent to 20 per cent of the segment in
the near future.
THE TASK AHEAD
Ramkumar and Paul had to think through the nature
Exhibit 1: Creating SLR Category*
TI cycles introduced the Sports Light Roadster (SLR) category
of bicycles through the introduction of BSA Aristocrat in 1969-
70. The Aristocrat was positioned as a sporty bike. It was
designed to be light, flashy, and colourful to attract the children.
The bicycle had both gents and ladies models. The launch used
print advertising to support the image. Though advertising
resulted in increased brand awareness, the initial high sales
growth could not be sustained. Two reasons were identified for
this trend: higher price and ‘flimsy’ and non-durable perception
of the product.
In 1984, the company revamped the product with a view to
address the two problems. It effected minor product changes
which led to increase in contributions by 25 per cent and better
perception of the product. This was supported by renaming the
brand as BSA SLR and was backed by the slogan, “Built Like a
Champion” to position it appropriately in the minds of consumers.
The company featured Vijay Amritraj, one of the best tennis
The new features added to BSA SLR over the years were:
1987 1988 1989
- New chain cover - New levers - Black plastic pedals
- Chrome-plated carrier - Centre pull brakes - New carrier
- Centre stand - Opening of BSA shop
- Sticker redesign
122
and size of opportunities available to TI Cycles. They
were aware of the lack of technical competencies in the
company to cater to the export market. Growth
opportunities existed in penetrating the different
regions, in extending the coverage to smaller towns,
and in expanding the product ranges. They had
concluded that the geared bikes were the major chunk
of the market in the developed countries. However,
the introduction of geared bikes as export surplus had
not succeeded at both the consumer and the trade level
in India. In addition, the SLR and the MTB range had
reached a stage of almost no growth in the market. The
key issue of concern for them was:
“Having turned around the unit from a loss-
making one to a profit-making one in the last
two years, how do we chart out a path for
sustained and profitable growth, to take TI
Cycles to number two position in the near future
and number one in the long term?”
players of India and Kapil Dev, a leading cricketer of the time,
in the advertisements to communicate the position of Champion
and its durability. It also used the emerging TV medium to
promote the brand. The BSA SLR volumes touched 102,000 in
1986. Later, in 1988, the company expanded SLR range along
with non-personality-based advertising and communication. The
slogan was changed to “BSA SLR: Moves Like a Champion.”
The sales reached 2,00,000 units in 1988. It took another initiative
in 1988 by opening a BSA shop in Cochin to explore a new
channel. Subsequently, it introduced a lower priced SLR, branded
as Hercules Pilot, to fight competition. It also sponsored a popular
TV Quiz programme. All these efforts led to a sale of 25,000
Hercules Pilot and 2,50,000 BSA SLRs in 1989.
The growth in the category did not go unnoticed by competitors.
Atlas, Hero, Road Master Industries (RMI), and Avon introduced
lower priced look alike versions in mid-1984-85. These were
followed by new competitive offerings in 1988: ‘Royal Hunter’
from Gujarat Cycles (associate of Hero) and ‘Atlas Funfleet’
range from Atlas. These later versions were not particularly
successful and were withdrawn soon. TI Cycles continued to
dominate the SLR category with more than 50 per cent share,
though the market growth had gone down significantly.
* This section draws on a case by Mr S Ramachandar, Consultant to
TI Cycles for a class at IIM, Ahmedabad.
TI CYCLES: NEW PRODUCT STRATEGY (A)
Exhibit 2: Developing All Terrain Bikes*
Hero introduced All Terrain Bikes (ATBs) in 1989. ATBs were
bicycles of distinctive design with sturdy and tough looks, straight
handlebars, and thick and deep treaded tyres. Atlas Cycles
introduced Rebel in this category. TI cycles followed with “Street
Cat” in 1990. According to the company management, the late
entry was far more determined and well thought-out. Within
three months of its launch, it sold 25,000 bicycles. This was
followed by Hercules MTB in the price range of Rs 1600 to Rs
1700. This increased its share in ATBs as well as helped the
category grow.
In late 1995, consumer research by the company
demonstrated that an ATB user was typically an urban teenager,
westernized, 12 to 15 years of age, very knowledgeable about
the bike, and its features. The research also showed that the
decision-maker was pre-sold (before entering the outlet) on brand
and was a heavy TV viewer. His leisure activities were sports
and music. Also, peer group acceptance was an important
influence on choice of brand. The consumer research further
found that the current options in the range had gaps in terms of
desirable attributes of (i) easy handling of bike, (ii) looks, and
(iii) colours. TI Cycles developed a two-pronged strategy to design
a suitable offer: product and communications. The final offer,
branded as Street Cat, had the following product and
communication. The final product, chosen after testing
prototypes, consisted of:
• thinner tyres
• unique ‘crackle’ finishes with a range of colours
• powder-coated handle bar
• reflectors in spokes (of wheels)
• attractive stickers.
Exhibit 3: Profile of Competitors
Hero Cycles
Mr Brijmohan Lal Munjal who set up Hero Cycles in 1951 started
as a small time trader of cycle parts and supplier of frames to
Atlas Cycles. The company became the largest player in the
bicycle industry over the years and was supported by over 100
ancillary units whose production was dedicated to Hero Cycle’s
requirements.
Initially, the quality of Hero brand of cycles was poorer
than that of TI Cycles. The cycles of TI Cycles lasted a lifetime
while the cycles of Hero lasted for three years. However, the
Hero brand of cycles were rugged and could take extra loads of
milk cans and vegetable baskets. The prices were lower than
that of TI brand of cycles. Their load carrying capacity made
them the preferred bike in the rural and semi-urban areas. Hero
Cycles strengthened its position consistently by investing in
quality improvements, brand building, and innovations in painting.
With the help of a closely-knit networ k of cycle par ts
manufacturers, it emerged as the largest producer of cycles in
the world. It introduced innovations in painting and brought out
attractively painted bikes.
In 1989, Hero Cycles launched Hero Ranger at a price of
Rs 800 to satisfy a need that TI Cycles had overlooked, i.e.,
cycles for peddling on rigid terrain. It had also introduced fitness
bikes under the brand name ‘Hero Allegro.’ Hero Cycles further
built its market position by diversifying into moped and motor
cycle businesses with the help of collaborations from Germany
and Japan.
Hero Cycles was a cost leader in the industry. It had four
regional sales managers and about 20 sales representatives,
roughly one per state, all operating out of Ludhiana. The company
VIKALPA • VOLUME 28 • NO 1 • JANUARY - MARCH 2003
The communication strategy, developed on the basis of
consumer research and managerial insight, was as follows:
Promise A fashionable bike
Support Range of colours, product looks, and BSA brand
Brand name BSA Streetcat
Tone Fun, a dash of wildness
Manner Urban setting
Music – the executional idiom
Execution “Boom Boom Shaka Laka”
Media mix TV — sports, music-based channels
Print — sports, youth magazines
Event sponsorship — youth-oriented
The launch of Street Cat in 1995 resulted in:
– excellent launch response
– bikes sold at premium price
– built the segment as well as the TI Cycles’ share in the segment
– introduced the dimension of ‘fashion’ in ATB segment distinct
from the dimension of ‘tough,’ the traditional platform of ATBs.
* This section is based on a presentation by Mr Suresh Kumar from TI
Cycles to students of Post-Graduate Programme of IIM, Ahmedabad in
1995.
had limited design organization but had acquired the capabilities
of faster time to market. It had the strongest dealer organization
with excellent relations between the head of the company and
the dealers.
Atlas Cycles Ltd.
Mr Janaki Das Kapoor, the promotor of Atlas Cycles Limited,
started by manufacturing bicycle saddles in 1950. In 1951, he
set up the Atlas Cycles Industries Ltd. to produce and market
complete cycles. Initially, he was granted a license to produce
1,00,000 bicycles a year.
The unit was initially located at Sonipet in Haryana. Later
Mr Kapoor set up another unit in Malanpur in Madhya Pradesh.
He also set up a steel tube manufacturing plant at Gurgaon and
a component manufacturing division at Sahibabad in Uttar
Pradesh and at Ludhiana in Punjab. Atlas Cycles exported to
40 countries and was the only company with an R&D wing
recognized by the government. It introduced Rebel in the MTB
category to compete with Hero Cycles. It also introduced a range
of fitness equipments like exercise bicycles, walkers, and
steppers. It produced more than 25,00,000 cycles per year.
Standard black cycle constituted 80 per cent of the production.
The company had plans to revamp its black cycle segment and
launch a new range.
Avon Cycles
Avon Cycles was also located in Ludhiana. The major focus of
Avon Cycles was on ‘standards’, though market share-wise it
was third in ‘kids’ segment. The company sold through distribution
and had hardly any marketing and product design organization.
123
Exhibit 4: Demand and Imports for Bicycles in Europe
(Million Units)

Countries 1993-94 1994-95 1995-96 1996-97 Growth Rate (%)

France
- Demand 3.40 3.10 2.80 2.80 (18)
- Imports 2.80 2.50 2.30 1.50 (46)
Germany
- Demand 5.60 5.40 5.00 4.60 (18)
- Imports 2.40 2.30 2.10 1.90 (21)
UK
- Demand 2.30 2.20 2.08 2.10 (9)
- Imports 1.30 1.60 1.70 1.80 15
Scandinavia
- Demand 1.12 1.20 1.25 0.95 (15)
- Imports 1.00 1.10 1.00 0.80 (20)
Total
- Demand 12.42 11.90 11.13 10.45
- Imports 7.50 7.50 7.10 5.70
Source: Company records.

Mukund R Dixit is Professor in the Business Policy Area of Indian
Institute of Management, Ahmedabad. A Ph.D. from IIT, Kanpur,
he has specialized in strategic management and has published
cases and papers in this field. His research interests include public
policy and corporate strategy, competition and competitive
advantage, and innovations in management.
email: dixit@iimahd.ernet.in
Abhinandan K Jain is Professor in the Marketing Area of Indian
Institute of Management, Ahmedabad. A Fellow from IIMA, his
specialization is in the field of quantitative models in marketing,
strategic marketing, and international marketing. His publications
include a book on marketing management, several articles on
media planning and case method, and a large number of cases.
email: akjain@iimahd.ernet.in

I am more of a sponge than an inventor. I absorb ideas from every source.

My principal business is giving commercial value to the brilliant but
misdirected ideas of others.

Thomas Edison

124 TI CYCLES: NEW PRODUCT STRATEGY (A)