The Escorts - Yamaha Motors Break-Up


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Case Details:

Case Code : BSTR008
Case Length : 7 Pages
Period : 1985-2001
Organization : Escorts, Yamaha Motors
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

And each business was spun off into a separate company, leaving Escorts, the flagship, to focus on agri-business. Nanda then identified four thrust areas for Escorts-agri-business, telecom, software and healthcare. The idea behind giving Yamaha Motors the majority stake in the joint venture was to focus more on the four thrust areas.

Two Wheeler Industry in India

The 3.8 million two-wheeler market in India included scooters, motorcycles and mopeds. In the late 1990s, the domestic two-wheeler industry had undergone many structural changes. Motorcycles consistently gained market share from the scooter and the moped (Refer Table I). The trend was expected to continue in 2001-02. 150cc vehicles from Bajaj Auto and LML dominated the scooter market. Northern India was the major market accounting for nearly 46% of the total scooter sales. The Indian motorcycle market could be broadly categorized into Indian motorcycles and Indo-Japanese motorcycles. The Hero group, Bajaj and Escorts dominated the Indo-Japanese motorcycle segment in collaboration with Japanese vehicle manufacturers Honda, Kawasaki and Yamaha respectively.

In 2000, the market for motorcycles was segmented into three categories based on price: the premium segment (45,000 and above); the mid segment (Rs 40,001-45,000); and the entry segment.(upto Rs 40,000)

In the premium segment, the competition was between TVS Suzuki, Hero Honda and Escorts Yahama Motors. In the mid segment, Hero Honda was the clear leader with 35% share. In the entry segment, Bajaj Auto was the choice of many (Refer Table II for segmentwise sales & marketshare). Yamaha Motors was a major competitor in the premium segment, but after the break up with Escorts in May 2001, there was no sign of rejuvenation. The Indian market favored four-stroke vehicles. This posed a problem for Yamaha Motors, whose strength was two stroke vehicles. TVS-Suzuki was not very aggressive as far as new launches were concerned. Between 1992, when the Samurai was launched, and 2000 when the Fiero was launched, the company had nothing really new to offer...

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