China or India
Presented to:
Sanjay Lanka
Presented by:
Josh Kern,
Sebastian Kreps,
Constantine Condos,
Michael Aliotta,
and Chris Beltran
Table of Contents
Company Background ......................................................................................................................... 4
SWOT Analysis: India ........................................................................................................................... 4
Opportunities & Threats................................................................................................................................. 4
Strengths & Weaknesses ................................................................................................................................ 5
SWOT Analysis: China .......................................................................................................................... 6
Opportunities & Threats................................................................................................................................. 6
Strengths & Weaknesses ................................................................................................................................ 7
Competitor Analysis: China ............................................................................................................... 7
Market Leader .................................................................................................................................................... 8
Market follower ................................................................................................................................................. 8
Niche Player ........................................................................................................................................................ 9
Competitor Analysis: India ................................................................................................................ 9
Market Leader ................................................................................................................................................. 10
Market Follower ............................................................................................................................................. 11
Niche Player ..................................................................................................................................................... 11
PESTLE Analysis: China ..................................................................................................................... 12
Political: ............................................................................................................................................................. 12
Environmental: ............................................................................................................................................... 13
Social:.................................................................................................................................................................. 13
Technological: ................................................................................................................................................. 13
Legal:................................................................................................................................................................... 14
Economic: .......................................................................................................................................................... 14
PESTLE Analysis: India ...................................................................................................................... 14
Political issues ................................................................................................................................................. 15
Environmental issues ................................................................................................................................... 15
India’s Social issues ....................................................................................................................................... 15
Economic Issues.............................................................................................................................................. 16
Legal Issues ...................................................................................................................................................... 16
Porter’s 5 Forces: China .................................................................................................................... 17
1. Competitive Rivalry .............................................................................................................................. 17
2. Bargaining Power of Suppliers .......................................................................................................... 18
3. Bargaining Power of Buyer ................................................................................................................. 18
4. Threat of New Entrants ........................................................................................................................... 18
5. Threat of Substitutes ............................................................................................................................... 19
Porter’s 5 Forces: India ..................................................................................................................... 19
1. Competitive Rivalry ................................................................................................................................. 19
2. Bargaining Power of Suppliers .......................................................................................................... 20
3. Bargaining Power of Buyer ................................................................................................................. 20
4. Threat of New Entrants......................................................................................................................... 21
5. Threat of Substitutes ............................................................................................................................. 21
Trade Agreements .............................................................................................................................. 21
Conclusion ............................................................................................................................................. 22
Country Selection ................................................................................................................................ 22
Hero Electric Modifications ............................................................................................................. 23
Product Positioning ............................................................................................................................ 23
Form of Exporting ............................................................................................................................... 24
Target Market ....................................................................................................................................... 24
Geographic ........................................................................................................................................................ 24
Demographics.................................................................................................................................................. 25
Social ................................................................................................................................................................... 25
Behavioral......................................................................................................................................................... 25
Size....................................................................................................................................................................... 26
Pricing Strategy.................................................................................................................................... 26
Distribution ........................................................................................................................................... 27
Promotion Strategy ............................................................................................................................ 28
Conclusion ............................................................................................................................................. 29
References ............................................................................................................................................. 30
Marketing Plan Part 1
Company Background
Hero Electric is a subsidiary of Hero MotoCorp, which was formerly owned by Honda. Hero
Electric started in 2007 and is the largest and most well recognized manufacturer of electric
bikes, in India. The company is considered the leading pioneer and market driver inside the
country’s two-wheel electric bike industry. In 2012 the company had more than 300 exclusive
sales and service outlets across the country of India, and is continuing to grow in other regions of
the world. The company provides a cleaner and more eco-friendly alternative to fuel based
transportation for the people of India, by offering a wide variety of electric vehicles. Hero
Electric’s vision is to make India a cleaner and greener country, by offering zero pollution travel
with its electric transportation alternatives. Hero’s products are one of a kind. Its two-wheel
vehicles are manufactured within its high tech facilities located in Ludhiana, India. (Hero Eco,
2012)
SWOT Analysis: India
Opportunities & Threats
When analyzing the opportunities and threats of a country, it is important to first look at the
overall population as a starting point. India has a total population over 1 billion people and it can
provide a significant source for both opportunities and threats. The average age of its citizens is
about 27 years old, which is an opportunity because they are young enough not to be set in their
buying patterns and are old enough to be open to new ideas and concepts. This also falls into line
with about 40% of their total population being between 25 and 54 years of age (The World
Factbook). This means that they are growing at a significant rate, and the demand for goods and
services will only increase over time. Another aspect of the population that provides an
opportunity for sales and profits is at the bottom of the pyramid, because 30% is below the
poverty line (The World Factbook). This in turn means that with the right price-to-performance
strategy many people will purchase. Some items that the government has implemented to bring
fresh ideas into the country is to reduce control over foreign trade and investment and industrial
deregulation. This can ensure that whether it is produced there or imported, the costs will be
relatively low; additionally, India has the second largest labor market in the world. Moreover, if
a product is to be made in another country, any company could tap into the $467.5 billion import
market; the number one importer to India is China, representing roughly 11% of the market (The
World Factbook).
The opportunities are plentiful, but the threats are at the same level. With high interest rates and
rising inflation preventing people from getting credit it would be hard to sell anything to the
bottom of the pyramid on a cash basis. With inadequate availability of quality basic and higher
education it is very hard to market to the population as a whole and alternative strategies would
need to be implemented (The World Factbook). Even though 4.7 Km roadways are established in
India, Inadequate transportation infrastructure would provide a significant roadblock to getting
any sort of offering to the general population (The World Factbook). Moreover, importing would
be impacted to a greater degree than manufacturing due to necessity to move products long
distances.
Strengths & Weaknesses
Since the early 1980’s India has come from a control regime of an Indian domestic economy to
essentially a free market. It wasn’t until 1991 that a shift happened, in which the government of
India implemented a series of events toward opening up the economy, with foreign investments
and a greater reliance on market forces (Welcome to India in Business). This gradual
evolutionary transition took time, which led to a huge growth of the Indian economy. Today,
India is rated as number four in the world with 4.9 trillion dollars in terms of GDP (The World
Factbook). In addition, India’s wealth per capita has grown steadily since 2000, and currently is
managing an average annual rate of 8% (Keating, G. & O’Sullivan, 2013). If the continual rate of
growth for India remains the same, then it is safe to say that its economy will be as strong as
China. In addition to a thriving economy, India is among the “Largest English speaking
populations in the world “according to Tejvan R Pettinger, an economic professor at Oxford
university. (Strengths of Indian Economy). The use of the English language is a benefit to India
since many highly developed nations use it as a means to communicate between businesses.
Additionally, since a majority of the country is young (40% of 25-54 years old) individuals are
more likely to start business ventures on their own (The World Factbook).
On the other hand, India does have issues that can slow growth. One of the issues would be
overpopulation of the country itself; and with a growing population leads to increased pollution,
scarcity of resources, inadequate transport, growing poverty, and corruption. Poverty and
corruption, having been the two main issues, led India into slowing down economically and as
with any country with prevalent corruption; India has experienced an increasing number of
corruption within the public sector. The corruption rating given to India, 100 being the most
clean, ranked at a 36 according to a study done by Transparency International (Corruption by
Country). As far as the workforce within the general working class, India has total workforce
dedicated to agriculture at about 49% (The World Factbook). Interestingly enough the country
suffers from an economic disparity in which, “94% of the adult population has wealth below
10,000 USD” (Keating, G. & O’Sullivan, 2013). This means that the overall population has to
work longer and harder in unfavorable living conditions to get by on a daily basis which will
indeed slow down further industrialization.
SWOT Analysis: China
Opportunities & Threats
China is the country with the world’s largest population, with more than 1.35 billion people. The
shear quantity allows for many opportunities for the industry. China has an average population
age of 37.5 years old and a labor force of about 798 million people, which is a wealth of
opportunity (The World Factbook). Additionally, almost half of the population is between 25 and
54 years old, which means that they will have a long customer lifetime value. China’s export
market provides about $2.2 trillion dollars towards GDP and that provides an opportunity to
build in China and then export to other countries (The World Factbook). Bicycle manufacturing
represents a $12 billion industry, employing over 150,000 workers, and growing at 8.6%
(Bicycle Manufacturing in China Market Research (IBISWorld).
The oil industry in this country is very strong and they consume about 10 million barrels of
petroleum each day, which provide an opportunity and a threat, because they are still in the
industrialization process (The World Factbook).
Strengths & Weaknesses
China’s economy has continually seen positive growth since the late 70’s to 2010, at a rate of
10%. Due to the tremendous economic growth, China has become the second largest economy in
the world. China was able to do grow substantially because it has sustained an “Industrialized
development model which focuses heavily on investment-driven and export-oriented products”
(Zhang, 2011). Another strength China has is that it provides stable employment to its citizens
4.1% (The World Factbook). The down side to the model is that it cannot be sustained for an
extended period of time. A recent paper done by the National Bureau of Economic Research
(2014) stated that
“China’s rapid export growth raises concerns about the continued absorptive
capacities of the Organization for Economic Co-operation and Development.
China's share of world exports is now around 6 percent and, with a 35 percent
growth rate in exports, is doubling every three years. Continued FDI (foreign
domestic development) flows thus may also encounter problems here if they
are export-oriented. China's large trade surplus with the EU (European Union)
and the United States also fuels protectionist pressures” (p.1).
China’s also struggling with reducing it’s high domestic savings (50%) and low domestic
consumption (The World Factbook). The issue is that the wealth distribution in China is wide;
with an average amount of annual income per family earning 13,000 renminbi or roughly 2,100
USD (Wong, 2013). In addition, China is also struggling with corruption environmental waste
caused by increasing industrialization (The World Factbook).
Competitor Analysis: China
There are currently several major players within China’s electric bike market (E-Bike). For the
purpose of this report the E-Bike market is divided into three groups: The Market Leader,
Follower, and Niche Player. The following is a list of the three groups and the companies that
fall under them.
1.
The Market Leader
● AIMA Technology Co. (AIMA Tech)
2.
The Market Follower
● Yadea Technology Group Co. (Yadea)
3.
The Niche Player
● Luyuan Electric Vehicle Co. (Luyuan Electric)
The information presented below is an analysis of the companies mentioned above according to
their market presence.
Market Leader
The market leader within the E-Bike market in China is AIMA Technology Co., Ltd. or (AIMA
Tech). AIMA Tech was founded in 1999 and is located in Tianjin, China. The company
manufactures its products in Tianjin, Wuxi, Taizhou, and Dongguan. AIMA Tech specializes in
producing and manufacturing E-bikes, E-bicycles, and E-scooters. AIMA tech currently
employees 7,000 employees and of that, 3,700 are employed in Tianjin at the firm’s E-Bike
manufacturing plant. In 2013 the company met its target sales for the year and recorded of 3.5
million in units sold, which was up from the 2012 sales of 3.1 million units. (AIMA, 2013)
AIMA Tech offers more variety of products than any other E-Bike company in China. AIMA
Tech and has over 20 versions of its E-Bike models and give consumers the choice to either have
it powered through Lithium or Lead-Acid batteries. Each E-Bike has a range of 25-40 kilometers
on one charge and takes about 6-7 hours to fully charge the vehicle. The company takes pride in
being socially responsible and offering its customers a green alternative to commuting in China.
(AIMA, 2013)
Market follower
China’s follower within the Electric Bicycle market is a company named Yadea Technology
Group (Yadea). Yadea produces and manufactures E-Bikes, E-scooters, E-tricycles as well as
other electric vehicles. The company was founded in 1997 and its headquarters is based in
Jiangsu, China. The company currently produces and manufactures its products in four regions,
Jiangsu, Zhejiang, Tianjin, and Guangdong. In 2013 the firm stated that it owned 10-15% of the
E-bike market share within China and reported annual sales of $7.2 billion RMB or $1.8 billion
USD. Currently the company operated with 5,300 employees in China and recorded 3.2 million
units sold in 2013 (Yadea, 2013).
The company offers a wide variety of E-Bike products to consumers ranging from small 50w
battery powered bikes to large 500w powered bicycles. According to the Ministry of Commerce
of the People’s Republic of China, Yadea offers its customers the option to choose bikes that are
powered through Lithium or Lead-acid energy batteries. These batteries power a wide range of
models such as its sports model, urban style, or folding models (MOFCOM, 2013).
Niche Player
China’s niche player in the E-Bicycle market is a company by the name of Shanghai Hua Tuo
Electric Vehicle Company (ShhuAtuo). ShhAtuo was established in 2004 and is located in the
Pudong area in Shanghai China. The company specializes solely in manufacturing and selling
electric bicycles. Employing around 500 people, the company is fairly small compared to most of
the competition within the marketplace (ShhuAtuo, 2013).
The company is considered a niche player in the electric bike market due to the fact that all of
the E-bikes it produces and sells are run on Lithium Ion batteries. Most companies within the Ebike market in China produce its bikes with either Lead-Acid Batteries or Lithium. The firm
wants to become the go to company for consumers when it comes to lithium battery powered EBikes.
Competitor Analysis: India
There are currently several major players within India’s electric bicycle industry. For the purpose
of this report, the electric bicycle market is divided into three groups: The Market Leader,
Follower, and Niche Player. The following is a list of the three groups and the companies that
fall under them.
1.
The Market Leader
● Hero Electric
2.
The Market Follower
● Yo Bykes
3.
The Niche Player
● BSA Motors
The information presented below is an analysis of the companies mentioned above according to
their market presence.
Market Leader
India’s market leader within the electric bicycle market is Hero Electric (Ferris, 2013). Hero
Electric is a subdivision of Hero MotoCorp, which is the largest manufacturer of two-wheel
vehicles in the world. The company is headquartered in New Delhi, and serves the Indian and Sri
Lankan markets. The company was founded in 1984 as a joint venture between Hero Cycles and
Honda Motors. The company became Hero MotoCorp in 2010 when Hero bought out Honda’s
shares in the company (Gupta, 2011). In India, Hero MotoCorp holds 46% of the market share
for two-wheeled vehicles (Hero MotoCorp Annual Report, 2013). In 2013, the company had
revenues of 241.66 billion Indian Rupees (US $3.9 billion) and a net income of 21.18 billion
Indian Rupees (US $340 million) (Hero MotoCorp Annual Report, 2013).
Hero Electric manufactures three different types of electric bikes: high range e-bikes, high speed
e-bikes, and electric cycles. Hero’s high range e-bikes have a top speed of 25 km/h, a range of up
to 70 km per charge, and do not require a license or registration. Hero’s high speed e-bikes have
a top speed of 45 km/h and a range of 80 km per charge. Hero’s newest types of e-bike, electric
cycles, look similar to a normal bicycle but have an electric motor. These e-bikes have a top
speed of 25 km/h and a range of 30 km/ per charge (Hero Electric).
Market Follower
A market follower of Hero Electric is Yo Bykes. Yo Bykes is a subdivision of Electrotherm
India Ltd., and it is the largest manufacturer of electric powered two-wheel vehicles in India
(Mehta, 2010). The company was founded in 1983, and is headquartered in Gandhinagar,
Gujarat, India. The Yo Bykes manufacturing plant is also located in Gandhinagar. The company
launched its first electric bike in the Indian market in 2006, and sold 120,000 units by 2009
(Datta, 2010). Yo Bykes are sold at more than 200 dealers throughout India, and 320 “YoSerivce
Stations” can also be found in India. These service stations offer repairs on damaged Yo Bykes
and are also a place where they can be charged (Business Standard, 2010). Yo Bykes has also
developed an upgradeable battery, the Alpha Weaver, for its electric bikes. The Alpha Weaver
has a longer life cycle and weighs less than a standard battery, which allows the electric bike to
have a higher top speed and longer range per charge (Times of India).
Yo Bykes features five different models of electric bikes: the Yo EXL, Yo Xplor,
Yo Style, Yo Electron ER, and the Yo Spark. The Yo EXL has a top speed of 55 km/h and a
range of 60 km per charge. The Yo Xplor has a top speed of 25 km/h and a range of 60 km per
charge. The Yo Style has a top speed of 25 km/h and a range of 75 km per charge. The Yo
Electron ER has a top speed of 25 km/h and a range of 70 km per charge. The Yo Spark has a top
speed of 45 km/h and a range of 60 km per charge.
Niche Player
A niche player in the Indian electric bike market is BSA Motors. BSA Motors is a subdivision of
the Indian conglomerate, Murugappa Group. The Murugappa Group is one of India’s largest
business groups (Raghunathan, 2011). BSA Motors would be considered a niche player in the
electric bike market due to the fact it is the only company in India to develop an electric bike for
people that are disabled (Ecodeaz, 2014). The BSA Motors Roamer Able is designed to lighter
than other electric bikes, and also has two back wheels for easier balance rather than just one.
The Roamer Able has seen moderate success in India, while the company’s other traditional
electric bikes have been more successful (Forbes, 2011).
The BSA Motors Roamer Able electric bike has a three-wheeled design in order to make travel
easier for people with disabilities. The Roamer Able entered the market in 2011, and has been
moderately successful in the Indian Market. The electric bike has a top speed of 40 km/h and has
a range of 65 km per charge (Bikez).
PESTLE Analysis: China
Figure 1: Pestle Analysis of China
Political:
In October 1949, China became a communist nation under the People’s Republic of China and
maintains tight control over speech, religion and assembly (The Heritage Foundation). China is a
fairly corrupt country; according to the Stefano Pelle, China has a rating of 3.4-10, 10 being
more transparent and less corrupt (Pelle, 2007). The Chinese government previously set
manufacturing limits on the number of electric bicycles produced (Modes of Transportation in
China, 2014). More recently, electric bikes have generally been supported by national and many
local governments due to its low energy consumption and zero tailpipe emissions (Bonifazi,
2013). It would be a benefit to operate in a country which supports the electric bicycle industry.
Environmental:
China has several issues associated with the environment, including pollution and Co2
emissions. China’s air quality is the worst country on the planet (Hsu & Zomer). By the end of
2012, China’s vehicle ownership had exceeded 240 million and over the past decade, it has
increased heavily (Hsu & Zomer). The large population size and high vehicle ownership in
China has resulted in poor air quality and heavy pollution. According to World Bank, China is
the leading producer of CO2 and in 2010; China produced 6.2 tons of CO2 emissions (World
Bank).
Social:
China has the largest population in the world with a population of 1.35 billion people (World
Bank). In the late 70’s, the bicycle market expanded immensely and manufacturers were not able
to match the demand for the bicycles (Modes of Transportation in China, 2014). China is the
largest producer of electric bicycles and the industry has expanded from ten equipment
manufacturers to 481 equipment manufacturers, between 1998 to 2005 (Bonifazi, 2013). The
electric bicycle market has rapidly expanded and China accounts for approximately 95% of
electric two wheelers. In China, the production volume of electric two wheelers surpassed 30
million per year (Bonifazi, 2013).
Technological:
The main technological aspects of the electric bicycle include the motor and the control system.
In 2005, electric bicycles used liquid type lead-acid batteries and were soon replaced by valveregulated Pb-acid types (Bonifazi, 2013). The change improved electric bicycles energy density,
minimized maintenance and prevented electrolyte spills (Bonifazi, 2013). More recently, electric
bicycles have been equipped with lithium ion batteries because of an improved quality and
affordability. In the early 2000s, brushless motors were introduced and improved motor
efficiency.
Legal:
Importing duty fees in China can vary from 0% to 100%, the average duty rate in China is
12.47%. China applies a 45% importing duty rate to electric bicycles exported from India (Duty
Calculator). Electric bicycles are also subject to a 17% VAT rate. As of 2011, China’s applied
tariff rate was 7.9% (World Bank) and its average tariff rate is 4.1% (The Heritage Foundation).
Imported goods into China are subject to sales tax at a 17% rate, certain items apply a reduced
13% sales tax (Duty Calculator).
Economic:
China has an upper middle class income level. In 2013, China had a GDP of $9.24 trillion and
China had the second greatest GDP among countries (World Bank). GDP growth in China has
reduced the previous four years, but has still improved by an impressive 7.6% and the GDP
growth has lifted more than 500 million people out of poverty (World Bank).
PESTLE Analysis: India
Figure 2: Pestle Analysis of India
Political issues
A political issue facing India is its “Black Money Problem”, which resulted in a $419 billion loss
of revenue (Hanna). The “Black Money Problem” is an issue of corruption, in which lots of
money is laundered out of the country. Hanna says, “Indians can deposit funds in Mauritius bank
accounts tax free, allowing politicians to ‘round trip’ their money – it comes back into India as
white money through fake projects or to fund their election campaigns.” According to Stefano
Pelle, she describes the corruption in India as one of the most corrupt and non-transparent
country. She rated India a 2.8 on a rating out of 10, 10 being more transparent and less corrupt
(Pelle, 2007).
Environmental issues
There are many environmental issues relevant to the electric bike including poor quality and
highly congested roads for people traveling in India (India’s Transport Sector, 2013). Roads in
India are the primary form of transportation and account for 90% of country’s passenger traffic
(India’s Transport Sector, 2013). Road conditions in India are in poor condition, “Many roads
are of poor quality and road maintenance remains under-funded – only around one-third of
maintenance needs are met”. Poor quality roads will lead to higher costs for transportation
because it will leave destroyed roads to travel on.
Pollution is a big environmental issue in India. “New Dehli, the capital of India, is the city with
the worst air pollution” (Hsu & Zomer). Patna, Gwalior and Raipur are also cities in India with
the most air pollution in the world and has 13 of the top 20 most polluted cities in the world
(Miles, 2014). Large cities have the worst pollution, “China’s air quality at a national scale is the
worst globally” (Hsu & Zomer). In 2010, India produces 1.7 tons of CO2 emissions (World
Bank).
India’s Social issues
As of 2013, India’s population was 1.25 billion people and has the second largest population in
the world (World Bank). By 2025, India is expected to become the largest country in the world
by surpassing China (Roberts, 2009). India is a country that is heavily populated. A large
population will provide a greater opportunity. Several urban cities get heavily congested during
rush hours due to the high population density in these areas. In India, the most popular forms of
transportation are motorcycles and bicycles.
India has a caste system which includes five levels of the caste system. The top level of the caste
is Brahman which includes priests (Callaham & Pavich). Kshatriya is the next level and includes
rulers, warriors, and landowners. Vaishya are next in the caste system and include merchants.
Shudra is the next level of the caste and includes artisans and agriculturalists. The bottom level
of the caste system is Harijan and that refers to people “outside” the caste system (Callaham &
Pavich).
Sanitation is another issue of people in India. 818 million people don’t have any access to
sanitation facilities. Sanitation issues affect the lives of many Indian people. Diarrhea is a deadly
disease for many of the people of India. In fact, diarrhea is the result of nearly 90% of deaths
among children in India (Unicef, 2013).
Economic Issues
The income level in India is lower to middle class. In 2013, India’s GDP amounted to $1.877
trillion (World Bank). In 2014, GDP grew in India by 5.5% and has been increasing the previous
two years. World Bank reported, In 2012, India has a 21.9% poverty rate meaning 21.9% of its
population is living in poverty (World Bank). The poverty rate has improved drastically in the
past decade, improved from 37.2% in 2005, and 29.8% in 2010. “Scientists predict that nearly
half of the projected growth in urban area by 2030 will be in China and India alone” (Hsu &
Zomer). The growth in these urban areas is an important statistic to be aware of, when selecting a
target market. “In 2007, the nation’s transportation sector contributed to 5.5% of the nation’s
GDP” (India Transport Sector, 2013).
Legal Issues
Importing duty rates in India can vary from 0%-150%. The importing duty of electric bicycles
into India and exporting from China is 100% (Duty Calculator). India has additional taxes and
custom fees which may apply, including: Landing charges of 1%, CESS fees of 3%, and
additional CVD of 4% (Duty Calculator). The average duty rate is 11.9% (Duty calculator). As
of 2009, India’s tariff rate applied was 10.2% (World Bank) and its average tariff rate is 7.2%
(The Heritage Foundation, 2014). India does not apply a sales tax for imported good and could
be a significant advantage over importing to China.
Figure 3: Corruption level in China, India and United States (Pelle, 2007)
Porter’s 5 Forces: China
1. Competitive Rivalry
In China, the competitive rivalry within the electric bike industry is considered moderate-to-high.
There are many competitors already competing in China. China is a popular destination for
electric bikes; the market has expanded greatly over the past two decades (Bonifazi, 2013). The
industry in China expanded from ten manufacturers to 481 between 1998 and 2005 (Bonifazi,
2013). Companies in the electric bicycle industry will replicate the competitor’s significant
improvements in products, if the products are successful in the market. The quick replication
process of the competing company creates little differentiation from competitors. The industry
has improved recently due to the improved technology of batteries and motors for the electric
bicycles. In 2013, China had the second largest GDP among countries in the world amounting in
$9.24 trillion (World Bank). China is also the leading producer of electric bikes (Bonifazi, 2013).
The electric bicycle industry is rapidly expanding; in 2011, total production surpassed $30
million (Bonifazi, 2013).
2. Bargaining Power of Suppliers
In China, the bargaining power of Hero Electric’s suppliers is moderate. There are many
suppliers located in China, which makes it easier to get parts for an affordable price. It would
also leave switching costs low due to the high competition among suppliers. Supplier parts don’t
differentiate to a large extent because the batteries and motors of the suppliers are very similar.
China is home to lots of manufacturing work and it leaves greater opportunity in a country like
China. There are several attractive direct substitutes in China. The large growth of the industry
and high population result in China being an ideal location to conduct business; the Chinese
market has the potential market to support several competitors in the market. Forward
integration is a definite possibility for Hero, in China; Hero currently already offers its product
using an e-commerce website, but the website only offers products in India. Expanding the
market in China could be a benefit for the company to take advantage of.
3. Bargaining Power of Buyer
In China, the bargaining power of buyer of Hero’s customers is considered low. The products
quality is hard to match for such an affordable price. Switching costs from a Hero product to a
different brand will be more expensive; this will give the bargaining power to Hero. China has a
population of 1.35 billion people (World Bank). By 2012, China vehicle ownership had exceeded
240 million, with the major growth coming in the past decade (Hsu & Zomer). There has been
increase in the BOP consumers, who have climbed out of poverty. These consumers will be able
to make purchases that they would not typically make useful purchases. Backwards integration
would be more effective in China, because the abundance of resource. Backward integration
would be more effective if outsourced to another company. China has such a large
manufacturing industry; it would be more effective to outsource the manufacturing to a
manufacturer in China.
4. Threat of New Entrants
In China, the threat of new entrants into the electric bicycle industry is considered moderate-tolow. In the late 1970’s, China’s government needed to regulate the bicycle industry and set
production limits for the manufacturers (Modes of Transportation, 2013). More recently, an
electric bike has generally been supported by national and local government, due to low energy
consumption and zero tailpipe emissions (Bonifazi, 2013). There is plenty of access to resources
and distribution in China because of the large size of the country. There is a moderate capital
requirement needed to enter the industry. According to Understanding Emerging Markets, China
has a fairly corrupt nation; the book rates China a 3.4/10, 10 being less corrupt and more
transparent (Pelle, 2007). The duty rate for importing electric bicycles from India to China would
include a 45% import rate, a 17% VAT rate, and a 3% consumption tax (Duty Calculator).
5. Threat of Substitutes
In China, the threat of substitutes is moderate. There are several competitors in the industry, and
there isn’t too much differentiation between the brands. The quality, brand name and
affordability of its product will be the competitive advantage. The switching costs are moderateto-low; it would be difficult to find a better price for a reliable form of transportation.
Automobile, bicycle, scooter and the Segway could all be considered substitutes. An automobile
may be out of the price range of many individuals living in China and the individual may be
shopping for an electronic form of transportation. The target market is ideal for Hero’s product.
Porter’s 5 Forces: India
1. Competitive Rivalry
In India, rivalry among the electric bike industry is Moderate. There are several competitors
competing in India, but Hero is “India’s largest selling electric bike” (Hero Electric). India is a
popular destination for electric bikes and the market has expanded significantly during the recent
years. “In 2007, the nation’s transportation sector contributed to 5.5% of the nation’s GDP”
(India Transport Sector, 2013). Hero is currently the market leader in India, so a product with a
different price point could draw significant popularity among BOP consumers. Companies in the
electric bicycle industry replicate the improvements of the competition. The quick replication
process of the competing company creates little differentiation from competitors. In 2013,
India’s GDP amounted to $1.87 trillion (World Bank). In 2014, GDP grew in India by 5.5% and
has been increasing the previous two years (World Bank). The poverty rate in India has
improved drastically over the past decade. The poverty rate improved from 37.2% in 2005 to
29.8% in 2010. In 2012, India had improved additionally to a 21.9% poverty rate, meaning
21.9% of its population is living in poverty (World Bank).
2. Bargaining Power of Suppliers
In India, bargaining power of Hero Electric’s suppliers is moderate. There are several suppliers
located in India, but not nearly the number of suppliers there are in China. The large number of
suppliers would also leave switching costs low due to the moderately high competition among
suppliers. In India, the motors and batteries won’t differentiate much between different suppliers.
India has a moderate level of manufacturers, currently Hero being the market leader in India.
There are several attractive direct substitutes in India. India has a large potential market to
support several competitors in the market. In India, forward integration is already being
implemented; Hero currently already offers its product using an e-commerce website in India.
3. Bargaining Power of Buyer
In India, the bargaining power of Hero’s customers is considered low. In India, the switching
costs from a Hero product to a different brand will be more expensive; this will give the
bargaining power to Hero because it is already operating in India. India will provide Hero with
the greatest price point for its product; it will create a competitive advantage for Hero. India has
a large population with 1.25 billion people (World Bank). In India, the primary form of
transportation is roads; 90% of the country’s passenger traffic is accounted on roads (India’s
Transportation Sector, 2013). The roads in India are often poor quality and can be highly
congested during rush hours (India’s Transportation Sector, 2013). In India, the most common
forms of transportation are Motorcycles and bicycles (India’s Transportation Sector, 2013).
Backwards integration would be more effective in India, because there is less access to
manufacturing in India. India has a large manufacturing industry; but not nearly the size of
China. It would be more effective to outsource the manufacturing to a manufacturer in India.
4. Threat of New Entrants
In India, the threat of new entrants in the electric bicycle industry is considered low-to-moderate.
Similarly to China, India has a moderate capital requirement needed to enter the industry, due to
the start-up equipment, inventory, parts, and facility. There is plenty of access to resources and
distribution in India because of the large size of the country. According to Understanding
Emerging Markets, India has one of the most corrupt nations in the world; the book rates India a
2.8/10, 10 being less corrupt and more transparent (Pelle, 2007). The duty rate for importing
electric bicycles from China into India is 100% (Duty Calculator). India also includes a landing
charge rate of 1%, countervailing duty rate of 12%, a CESS rate of 3% and additional
countervailing rate of 4% (Duty Calculator) . India does not include sales tax into the purchase of
imported. India does apply several additional custom fees for certain products but a country
without sales tax would be a slight advantage to creating a better price point.
5. Threat of Substitutes
Threat of substitutes would be relatively high. There are several competitors in the industry, and
there isn’t too much differentiation between the brands. The quality, brand name and
affordability of its product will be the competitive advantage. The switching costs are much
higher if looking for a similar product; it would be difficult to find a better price for a reliable
form of transportation. Customers could select a more affordable option with a bicycle or
scooter, but to purchase an electronic form of transportation, a customer needs select an electric
bicycle, a Segway or an automobile. An automobile may be out of the price range of many
individuals living in India and considering the quality of roads the Segway may not be suitable
for the population of India. The target market is ideal for Hero’s product.
Trade Agreements
India and China have bilateral trade agreements through the Asia-Pacific Trade Agreement
(APTA), but they do not share Free Trade Agreements. According to the Indian Embassy’s
website, the largest commodities exported from India to China in 2012 were its plastics and
articles and machinery parts. This could positively affect the import of the materials used to
manufacture the electric bicycles and its export from India to China (IndiaE, 2013).
Conclusion
China and India are two countries that both have an expanding market and would be profitable to
enter. Due to the high competition in China, Hero would be more successful to modify an
existing product and export it from China and Import into the Indian market. India is the second
largest country, but the growth of India will make India the largest by 2025 (Roberts, 2009). The
young population is creating the increased population of India. The large population is an
untapped demographic, with a huge opportunity to capitalize upon. The young customers are an
ideal target market, because they will provide a long customer lifespan. There is currently high
growth in India’s urban cities; the poverty level in India has decreased from 37.2% to 21.9%
between 2005 and 2012 (World Bank). The high percentage of growth out of poverty will
provide disposable income to people living in India and the people will purchase useful products,
such as a form of transportation. For these reasons, Hero will be modifying a product to be
affordable, accessible and available for the people of India. It is important to keep the quality of
the product high, while also making the price more conservative.
Marketing Plan Part 2
Country Selection
Based on information gathered in Part 1 of the marketing plan, India is the perfect location to
offer the new custom Hero products. China has a high exporting fee in regards to the electric
bike industry. Electric bikes contain a 100% fee when imported from China to India. As a result,
the imported products would be twice the cost of a product which is manufactured in India and
sold in India. The city in India which would be the most beneficial for would be Pune, India.
Pune, India is an ideal location for Hero to offer its products. In 2011, Pune recorded a
population of nearly 9,500,000 (Brinkhoff, 2014). The distance between Pune and Mumbai,
India’s capital and largest city is 2 hours and 21 minutes, via the Expressway. Mumbai is the
largest population in India with 12,500,000 and the population density is 20,482 per square
kilometer (World Population Review). For theses reasons, after analyzing the factors associated
with India and China, it would be more beneficial for Hero to manufacture its custom bikes in
India and offer the products to the individuals in Pune, India and target the Southern district in
Mumbai, India.
Hero Electric Modifications
The primary modification to Hero Electric’s marketing mix will be the “place” and “product”
elements. The placement for the products is an important aspect to consider. An elegant
showroom will be constructed to display sample models, which will be further discussed in the
distribution section of the analysis. The product placement, if implemented properly, can provide
additional brand recognition to the target market in India. The main goal in the “placement” of
the products is to reach the target market. A showroom will provide an exclusive platform to
offer its high-end products to the ideal customers. Located in Pune, India, the showroom with
provide an ideal atmosphere for all Hero’s potential customer.
The product element of the marketing mix is another important aspect to take into consideration.
The people of India will have the opportunity to modify their custom electric bike. The products
will be completely customizable from its brakes to its battery. The color of each part of the
electric bikes can be substituted. Providing the customers the opportunity to customize all the
aspects of the products, will allow customers to receive their desired product. The customizable
accessories include: the color, brakes, battery, motor, tires, and seat in addition to any other
preferences of the individual customer. Customers will be provided a default model without any
customized parts, which will be available for the base price. Customers will have the option to
make custom modification; each custom part will be available for modification for an additional
fee.
Product Positioning
Hero’s custom products will be targeted as a high-end product, and marketed toward the wealthy
individuals of India. The customizable bikes will be included with the superior brand name
associated with Hero. The electric bikes will be available in a glitzy, exclusive showroom
facility, which will provide customers the opportunity to enjoy the atmosphere available in the
stylish showroom. The showroom will provide a different selling-point to its customers. Potential
customers have the opportunity to enjoy the atmosphere, while enjoying snacks and beverages,
in addition to viewing the magnificent products of Hero. The products will be manufactured inhouse and available within several days for pickup or delivery.
Hero’s custom products will bring brand recognition to individuals in the area. Although
products will be desired by everybody, only a small niche will have the ability to purchase the
product. Hero’s custom products will be fairly expensive for most people of the country. As a
result, these custom Hero Electric bikes are a luxury item and will primarily be purchased by
wealthy Indian citizens.
Form of Exporting
Hero electric bikes will not need to be exported because the manufacturing facility will be
located in India and distributed in the same country. In addition, there will be two methods of
getting the product to the customer. One, delivery to their home. Two, they can pick the bike up
at the showroom.
Target Market
Geographic
Hero will primarily be targeting its product within one of India’s most populated cities, Mumbai.
According to census reports, Mumbai’s population reached 12.5 million people in 2014 and it is
one of the densest cities in the world. Currently the city houses approximately 55 thousand
people per square mile (World Population Statistics, 2014).
Hero has chosen to focus on selling the E-Bikes in South Mumbai as its primary geographic
target. Southern Mumbai is one of the wealthiest urban centers within India and attracts many
sophisticated and wealthy looking to spend money and have a good time while doing so.
Demographics
Hero Electric will be targeting its product towards young, wealthy, upper middle, and upper class
males ranging from the ages of 25-35. The main reason Hero will be targeting these wealthy
individuals is due to the fact that the product will be sold at a price that is well within reach of
the target markets price range. Hero’s E-Bike falls under the high tech category which will
appeal to the wealthy within South Mumbai. According to a study conducted by Kotak Wealth
Management, India’s wealthy spent 13% of their total earnings on high tech equipment and 15%
of their income accessory products (Kotak, 2014). With the E-Bike being both a high-tech
product as well as an accessory, the upper and upper middle class will be highly interested in
purchasing this product.
Social
Currently, India has a total population of more than 1.2 billion people and is still growing at a
rate of 1.58% per year (India’s Population, 2014.). Of the current population, the aspiring upper
class which is centered around urban cities, accounts for 27.8% of India’s total population
(India’s Population, 2014.) According to India’s 2011 census data, the total population of
Mumbai’s Metropolitan area is about 18,414,288 with an average literacy rate of 90.78% male
and 93.85% female. Middle Indians are the target market which inherently falls under the
category of upper class citizens. These citizens are educated and wealthy and are generally status
conscious. The upper class are heavily consumer oriented and are driven towards products that
represent their lifestyle. Middle Indians earn on average between Rs. 90,000 and Rs. 200,000 per
month which translate to between $1,500 and $3,300 per month. So, spending power is
significant with the affluent population.
Behavioral
The aspiring upper class in India is referred to as middle Indians. They are typically young, eager
to succeed and aspire for a better quality of life. They challenge norms and embrace nontraditional method of having fun and getting things done. In many situations, this young
population is often the first serious adopter of a product or habit. For example, middle India is an
early adopter of watches, embracing the ‘edgy’ campaigns of Titan Fastrack and driving product
adoption and sales (Advani, n.d.). Middle India is also characterized by certain traits: primary
and secondary education, access to two to six durable consumer goods, including LPG stoves
and refrigerators (Advani, n.d.). One of the issues being dealt with regarding the wealthy Indian
population is the sense of entitlement. This feeling helps them cope with and legitimize the
inequalities present all around them on a regular basis ("India's elites have a ferocious sense of
entitlement -- New Internationalist," 2013).
Size
As state previously, the population of India is around 1.2 billion people. There is a formidable
portion of the population who aspires to be in the upper class of their society. They have income
that is disposable and typically live in domiciles which rival much of Pebble Beach. Middle India
can be defined as the segment comprising of 135 million households with incomes between Rs.
90,000 and Rs. 10 lakh per year or Rs. 1 million, up from 52 million in 2002 (Advani, n.d.).
Pricing Strategy
Electric bicycles will be available for purchase starting at 33,981 Indian Rupees ($550). The
company will use a premium pricing strategy for the electric bicycle because of the middle and
upper class market that is targeted. Hero electric bicycles are already considered a premium
brand in India, and will be priced as such. The company’s electric bicycles will be considered
inexpensive to the Indian upper-class, but will be marketed as a luxury and premium product that
are a “must have”.
Hero Electric is already market leader within the Indian electric bicycle market, and is followed
by the market followers Yo Bykes and BSA Motors (Ferris, 2013). Yo Bykes and BSA Motors
are considered Hero Electric’s main competitors in India (Mehta, 2010).Yo Bykes top selling
electric bicycle is the Yo EXL, a high end luxury bike, which is priced at 50,171 Indian Rupees
($810), and BSA Motors top selling electric bike is the Roamer Able, an electric bike made for
the disabled, which sells for 46,518 Indian Rupees ($750) (Mehta, 2010). Hero customized
electric bicycles will start at 33,981 Indian Rupees, and will get more expensive as certain
customizations are added to the electric bicycle. Since the Hero is already considered a premium
brand and the current market leader in the country, consumers will be drawn to the low starting
price of the electric bicycle and will likely customize it to their own specifications.
Hero’s customers will have the ability to customize their own electric bicycle in the company’s
showroom. Every aspect of the electric bicycle is customizable and upgradable. Customers can
choose to upgrade to a faster motor, an extended range battery, or even a different style of seat.
These upgrades and customizations will increase the price of the product. The list of upgrades is
as follows:
● Motor-- $200 to upgrade to a higher speed motor that is able to go to 60 km/h
● Battery-- $150 to upgrade to a high-efficiency battery that increases range to 80 km per
charge
● Seat-- $100 to upgrade to waterproof leather. Fabric seat standard.
● Colors-- Choose from any color at no extra cost.
● Handlebars-- $30 to upgrade to high quality grips. Change handlebar shapes for $75.
● Tires-- $100 for sport performance tires.
Distribution
The company has chosen to go with a showroom type of distribution method that will make
shopping for the E-Bike both a memorable and enjoyable experience for consumers. Each
customer will have the opportunity to experience how the E-Bike is made, and actually see the
process it goes through from manufacturing to the final showroom floor. The showroom will
have a futuristic and postmodern look to it, giving the customers a futuristic fancy feeling when
shopping for the E-Bike. Each customer will be offered drinks and beverages while they look for
the E-Bike of their liking to create a friendly and relaxed atmosphere. The most interesting
feature of the showroom is the customization center which will truly give our customers the
power to make the E-Bike their own. The showroom will feature a customization bar where
buyers will be allowed to design, customize, and upgrade each E-Bike so that it will fit their
personal lifestyle needs. The company wants the showroom to be a fancy, elegant, and classy
experience for the company’s high class customers. The showroom will be located in Pune,
India.
Promotion Strategy
India is identified as a developing country that has a tremendous amount of purchasing power
due to the fact that India accounts for about 17% of the world’s population (Burke, 2014)
According to the India’s latest 2011 census India has shown an increase of about 181 million
new citizens and is continually growing. The strategy that will be used to promote the bike will
cater to the needs of the upper class citizens. The implementation will be by utilizing popular
social media outlets such as Facebook, Twitter, and Zedge.net.
Hero would also like to point out it will accomplish three key objectives to succeed in India. The
list is used as such:
1. Organize Hero’s structure for the Indian market
2. Customize their offerings for Indian markets
3. Establish partnerships with other Indian companies
The same objectives listed above can be seen just as successful in companies that sell in local
home markets. For example in the U.S. products that are, “Made in the U.S.A” are more likely to
generate positive attention since it represents the country and its citizens. Consumers are more
inclined to purchase a product in which they feel has a connection to as well; thus, personal
identification with a common of interest is supported. All of the local marketing promotions,
pricing strategies, and distribution channels will also be catered for the Indian market as well.
As another means of distribution The products will be displayed in commercials featuring the
most recognized celebrities in India. The products will be promoted by prominent celebrities,
such as: Salman Khan, Priyanka Chopra, and Deepika Padukone. These actresses/actor are
movie and film stars in India and are ranked in India’s top ten most recognized celebrities
(Forbes India Magazine, 2014). Salman, Priyanka, and Deepika will all provide the perfect
marketing position for Hero’s custom products. These celebrities will promote, “if an individual
has the money to buy this product; that individual needs to purchase it in order to stay in the
upper-class society”.
Conclusion
After the analysis of the two chosen countries taking into account the relative population,
demographic, and regional constraints the final decision is to integrate a plan which will be the
best possible solution for marketing Hero electric bikes in the country of India. The vast
population will be distilled down to the Middle India as a target for our marketing efforts. With
their ability to use disposable income and the want to be in a stature of the upper class, they are
the perfect market. Middle Indians are the aspiring upper class, and they have an eye for luxury,
knowledge of the world, and are immensely brand loyal. They live in a region that is not
affordable to most of the population and that is why we have decided to focus on Mumbai.
Mumbai has a significant population and, most notably, a major section houses some of the
wealthiest people in India. We will be able to reach this market because of the luxurious
accoutrements in the whole sales process. Integrating a very posh experience will bring them to
our showroom where they will decide how the bike will be customized to fit their lifestyle,
desires, and truly reflects their stature to the world. The experience will be akin to purchasing a
Tesla automobile. The manufacturing facility will need to situated close enough to the showroom
to eliminate the hassles associated with importing, but far enough away to take advantage of
inexpensive labor. This is why Pune is chosen for this facility. There will be two methods for
receiving the final product. The first method will be for the client to come back to the showroom
to take delivery, and the second will be for the item to be delivered directly. The whole process
will entice our target market and the final product will induce the required reaction of their peers.
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