Tuesday, December 6, 2011

BPCL MAK Lubricant


Acknowledgement
It‟s our pleasure to take this opportunity to thank all those who helped me directly or indirectly in preparation of this project.
We are very much thankful to Dr. Kartik Dave & Prof. Gagan Katiyar, for their real time help. Having healthy discussions & valuable inputs from them, helped us a lot in giving the present shape to this report. Their constant encouragement & co-operation have been a source of inspiration for us all the time.
-Group 1 Members
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Index
Sr. No
Topic
Page No.
1
Executive Summary
4
2
Introduction
5
3
Lubricants SBU
6
4
Current Scenario of BPCL Lubes Business
7
5
Marketing
8
6
BPCL in lubricant Business (4P‟s)
11
7
STP Analysis
20
8
PORTERS Five Force Analysis
22
9
SWOT Analysis of MAK Lubricants
23
10
Product Life Cycle
24
11
Reasons for Study
25
12
Customers Response Analysis
27
13
Mechanic Response Analysis
35
14
Suggestions & Recommendations
43
15
SPSS Analysis
45
16
Finding & Conclusion
48
17
Bibliography
49
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Executive Summary
Increasing globalization, new products and services and innovative marketing have resulted in a very market-savvy consumer. The production-based success philosophy of marketers has now been replaced by a customer-oriented philosophy.
The Indian lubes market was regulated till 1993, with the market dominated by the 4 public sector undertakings including IOCL, BPCL, HPCL and IBP. It encouraged foreign majors to set shop in India. The number of players increased overnight to over 25 with entry of MNCs like Shell, Exxon, Mobil, Caltex, Elf, etc. Competition has become intense. This sector will witness severe competition, which may lead to a price war. With the entry of MNCs with deep pockets, better technology and brand power, the exit of marginal Indian players is imminent. After this will emerge a period of consolidation marked with mergers and acquisitions, which will change the face of the lubes industry.
Our analysis provides BPCL Lubes SBU to make future strategies as per the projected data for the total market capacity. The data we have acquired & calculated would enable BPCL Lubes SBU to define its marketing, advertising, promotional offers to be provided & how to make the customer think better of MAK lubricant.
This project is a step towards understanding the consumer and mechanic needs that can help MAK4T plus to establish itself as a leading player in the 4-stroke lubricant segment. In this we briefly talk about the industry and its key success, BPCL overview, MAK Base Oils and MAK4T plus. STP analysis for MAK4T plus was carried out and a brief analysis of the competitors was carried out. Then we move to the consumer and mechanic response analysis. These responses were collected with the help of a questionnaire and the analysis was carried out in MS-Excel and SPSS. Finally, recommendations and strategies were formed.
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Introduction
Bharat Petroleum Corporation Limited (BPCL) is a Global fortune 500 company.
On 24 January 1976, the Burmah Shell Group of Companies was taken over by the Government of India to form Bharat Refineries Limited. On 1 August 1977, it was renamed Bharat Petroleum Corporation Limited. It was also the first refinery to process newly found indigenous crude Bombay High, in the country. Today, BPCL with a sales turnover of over Rs. 77,000 crores ($27.873 Billion) is the second largest oil marketing company in the country with a market share of over 22% and 3 refineries under its fold. BPCL has Refineries at Mumbai and Kochi (Kochi Refineries) with a capacity of 12 Million Metric Tonnes (MMT) and 7.5 MMTPA respectively for refining crude oil. BPCL's subsidiary at Numaligarh (Assam) has a capacity of 3 MMTPA. Mahendra Singh Dhoni signed on as the Brand Ambassador for BPCL in 2006. Narain Karthikeyan is another brand ambassador for BPCL. It is headquartered at Ballard Estate, Mumbai.
To bring sharp customer focus and address customer requirements, BPCL has been structured in six Strategic Business Units (SBU‟s) i.e. Retail, Lubricants, Aviation, Industrial and Commercial, LPG and Refinery. It has more than 7300 Retail outlets, over 2000 LPG Distributors, a large number of Kerosene Dealers and over 150 Lubricants Distributors across the length and breadth of the country. It has over 400 grades of lubricants manufactured through four manufacturing units. BPCL has a fully dedicated R&D centre for lubricants and are committed to continuously upgrade the quality of the products marketed by it.
BPCL has been following an innovative and creative approach for marketing petroleum products in India. They have been the pioneers in various initiatives of the petroleum ministry in India such as „World class lubricants under the brand name MAK‟, „Pure for sure‟, premium fuels – „Speed‟, „Hi-Speed Diesel‟, „In and Out‟ convenience stores, „Ghar‟ retail outlets at highways, loyalty programs like „Petrocard‟ and „Smartfleet‟. Bharat Petroleum is considered to be a pioneer in the Indian petroleum industry with various path-breaking campaigns such as „Pure for sure‟, fleet card, petro card etc.
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Lubricants SBU
BPCL manufactures and markets world class lubricants under the brand name of MAK. It has over 30 years of experience in the field of manufacturing and marketing lubricants. BPCL markets over 400 grades of Automotive and Industrial Lubricants, Greases and Specialties. It has recently commissioned state-of-the-art facilities for manufacturing 180 TMT of Group II Base Oil with minimum Viscosity Index of 105 at its Mumbai refinery. This has provided BPCL an opportunity to enhance its offerings to its customers.
BPCL has its blending and filling plants at Mumbai (Wadi Lube), Kolkata (Budge Budge Plant), Mumbai (Tondiarpet) and Delhi, with a total installed capacity of 135000 MT. They meet the highest quality standards and are in fact accredited and certified by NABL. It is the first company in Asia to implement SAP R/3 enterprise vision – Enterprise Resource Planning (ERP) software with over 3000 users. This provides state-of-the-art back bone support to the business processes of the organization. BPCL is the first oil company in India to implement Supply chain Management – Advanced Planning and Optimization (SCM-APO) software in its Lubricants SBU.
Its marketing efforts are backed by a robust network of 80 depot locations and a number of dealers and distributors (apart from the 7300 Retail Outlets) all over the country. BPCL has R&D centres at Mumbai and Greater Noida, which are well equipped with state – of – the – art lubes and fuels development and testing facilities. Both the R&D centres are recognized by the Dept. of Scientific & Industrial Research, Ministry of Science and Technology. This enables BPCL to develop products tailor – made to suit the requirements of its esteemed customers.
BPCL has well trained technical staff deployed all over the country at its various Regional and Territory offices. The technical staff help their customers with prompt value-added services like proper selection and application of products, conditioning, monitoring, troubleshooting, lube rationalizing studies, complaint redressal, etc. Recently it has successfully demonstrated its ability to carry out Total Lubrication Management at one of its valued customer‟s works. To assist its technical staff in providing value-added services to their customers, BPCL has 22 Quality Control Laboratories spread all over the country besides equal number of mobile laboratories.
Despite operating in a highly competitive environment, MAK lubricants have had an impressive growth over the years. Today MAK has its presence in major automotive markets, reseller segment, rural sector and industrial segment. It is patronized by renowned manufacturing units in the country in such major sectors like automotive, automotive ancillaries, power, steel, fertilizers & chemicals, state transport etc. It is one of the major suppliers to Railways, Defence and Coast Guards.
MAK Lubricants have today established very strong brand equity, especially in the field of automotive, earth moving and engineering industries. It has major genuine oil tie–ups with M/s. Hero Honda, M/s. Tata Motors, M/s. TVS Limited, M/s. L&T Komatsu, M/s. Elgi Compressors, M/s. Kirloskar Oil Engines Ltd and M/s. ZF Steering India to name a few.
BPCL has also embarked on another thrust area of enrolling garages across the country in the network of “MAK Garages”, there-by providing standardized service across the network. This initiative not only provides opportunity for the garages to enhance their business opportunity but also provides an assurance to the end-customers that their vehicles are getting the right kind of lubricant.
BPCL exports lubricants to various countries like Nepal, Bangladesh, Afghanistan, UAE, Nigeria, Sudan, Tanzania, Mozambique, Bahrain, Sri lanka and others. BPCL also has tie ups with M/s. ITC Ltd. for marketing MAK Lubricants and Bharat gas through their vast and well-established rural network of e-Choupals.
The following table sums up the entire discussion so far and as the famous quote goes the numbers speak for themselves.
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Particulars
2010-2011
Rs. Million
2009-2010
Rs. Million
Sales Income
166,038.80
133,749.10
Profit After Tax
1,742.06
1,719.98
EPS (Rs)
45.22
45.15
Net Cash flow from Operating activities
4,800.13
(223.50)
Net Cash flow on investment activities
(452.54)
(575.87)
Net Cash flow on financing activities
(1,300.12)
954.58
Current Scenario of BPCL Lubes Business
The Lubricants sector has evolved over the years, from a completely controlled market environment to a completely decontrolled scenario. Although many multinationals operate in the market in this category, public sector oil marketing companies continue to hold the major share of the market. This segment also remains as one of the most competitive. Over time, due to technological developments, significant changes have taken place in consumption patterns. BPCL has a strong presence in the market, which is augmented by its access to its own source of Group II+ base oil from Mumbai Refinery. Also, BPCL‟s flagship brand “MAK” has kept pace with the changing requirements of the consumer. In line with the expected pace of growth of the Indian economy, the Lubricants business offers immense potential for growth. The Lubricants business has posted healthy results during the financial year 2010-11. The overall sales volume for the year 2010-11 was of the order of 274.68 TMT as compared to 231.12 TMT in the previous year. This represents a volume growth of 19% over the previous year as compared to a negative growth of 1.8% of the public sector marketing companies.
The estimated growth in volumes of the industry in 2010-11 was around 5%. BPCL‟s finished lubricants volumes grew by 14% over the previous year. On the retail front, BPCL was able to sustain the sales volumes, although there was an increase in overall revenues. With an increasing shift of the market from retail outlets to the Bazaar segment, the focus was on improving customer service. A series of consumer engagement activities were undertaken. The offerings of value-added services through the creation of authorized Hero Honda service stations under the brand “City Works” was expanded and as on 31st March 2011, there were 186 City Works operating at various locations across the country. The Bazaar segment remained very competitive with multinationals having a dominant position. BPCL continued its strategy of identifying high potential markets and being aggressive in those markets. The stress was on making the product available at the maximum number of points of sales and has ensured deeper penetration and improved visibility and availability.
The MAK brand is available across the country at more than 27,000 retail counters, in addition to small mechanic shops and authorized service stations. In an effort to offer innovative and specific products to customers, BPCL has during the year, launched new products like MAK Zip, MAK Stallion, MAK Platinum, MAK LL3 and MAK TATA PCD. On the industrial front, customized offerings and prompt customer service remained the core elements of the strategy. In a segment characterized by continuous technology upgradation, technical services and Research & Development play a vital role. A strong team of technical sales officers attend to the needs of the Industrial customers, both before and after sales. During the year, BPCL has expanded the customer base across different segments. The product portfolio on offer ranges from normal applications like engine oils to Hydraulic, Cutting, Marine and very specialized products for applications in Defence and Railways.
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During the year, products for specific applications like MAK LLPO, a white oil application and another range of industrial grades for steel mills requirements were launched. Export sale continues to show a healthy growth of 17%. The Indian Lubricants market would continue to be an attractive market for all leading lubes makers. The growth in the automotive and industrial segments is driving the market. Technological improvements in the OEM space would encourage the lubes manufacturers to develop new improved alternate formulations, which would deliver better performance and enhance the life of the lubricants. While the intensity of competition is expected to continue, BPCL remains confident of being successful by meeting the evolving needs of the consumer.
Lubricants
A lubricant (sometimes referred to as "lube") is a substance (often a liquid) introduced between two moving surfaces to reduce the friction between them, improving efficiency and reducing wear. They may also have the function of dissolving or transporting foreign particles and of distributing heat.
One of the single largest applications for lubricants, in the form of motor oil, is to protect the internal combustion engines in motor vehicles and powered equipment.
Typically lubricants contain 90% base oil (most often petroleum fractions, called mineral oils) and less than 10% additives. Vegetable oils or synthetic liquids such as hydrogenated polyolefin, esters, silicone, fluorocarbons and many others are sometimes used as base oils. Additives deliver reduced friction and wear, increased viscosity, improved viscosity index, resistance to corrosion and oxidation, aging or contamination, etc.
Non-liquid lubricants include grease, powders (dry graphite, PTFE, Molybdenum disulfide, tungsten disulfide,etc.), Teflon tape used in plumbing, air cushion and others. Dry lubricants such as graphite, molybdenum disulfide and tungsten disulfide also offer lubrication at temperatures (up to 350 °C) higher than liquid and oil-based lubricants are able to operate.
In addition to industrial applications, lubricants are used for many other purposes. Other uses include bio-medical applications (e.g. lubricants for artificial joints).
Marketing
The global lubricant market is generally competitive with numerous manufacturers and marketers. Overall the western market may be considered mature with a flat to declining overall volumes while there is a strong growth in the emerging economies. The lubricant marketers generally pursue one or more of the following strategies when pursuing business.
Specification:
The lubricant is said to meet a certain specification. In the consumer market, this is often supported by a logo, symbol or words that inform the consumer that the lubricant marketer has obtained independent verification of conformance to the specification. Examples of these include the API‟s donut logo or the NSF tick mark. The most widely perceived is SAE viscosity specification, like SAE 10W-40. Lubricity specifications are institute and manufacturer-based. In the U.S. institute: API S for petrol engines, API C for diesel engines. For 2007, the current specs are API SM and API CJ. Higher second letter marks better oil properties, like lower engine wear supported by tests. In EU, the ACEA specifications are used. There are classes A, B, C, and E with number following the letter. Japan introduced the JASO specification for motorbike engines. In the industrial market place, the specification may take the form of a legal contract to supply a conforming fluid or purchasers may choose to buy on the basis of a manufacturer‟s self-published specification.
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Original equipment manufacturer (OEM) approval:
Specifications often denote a minimum acceptable performance levels. Thus many equipment manufacturers add their own requirements or tighten the tolerance on a general specification to meet their particular needs (or doing a different set of tests or using different/own tested engine). This gives the lubricant marketer an avenue to differentiate their product by designing it to meet an OEM specification. This is a powerful marketing tool in the lubricant marketplace. Text on the back of the motor oil label usually has a list of conformity to some OEM specifications, such as MB, MAN, Volvo, Cummins, VW, BMW or others.
Performance:
The lubricant marketer claims benefits for the customer based on the superior performance of the lubricant. Such marketing is supported by glamorous advertising, sponsorships of typically sporting events and endorsements. Unfortunately broad performance claims are common in the consumer marketplace, which are difficult or impossible for a typical consumer to verify. In the B2B market place the marketer is normally expected to show data that supports the claims, hence reducing the use of broad claims. Increasing performance, reducing wear and fuel consumption is also aim of the later API, ACEA and car manufacturer oil specifications, so lubricant marketers can back their claims by doing extensive (and expensive) testing.
Longevity:
The marketer claims that their lubricant maintains its performance over a longer period of time. For example in the consumer market, a typical motor oil change interval is around the 3000-6000 miles (7500-15000 km). The lubricant marketer may offer a lubricant that lasts for 12000 (30000km) miles or more to convince a user to pay a premium. Typically, the consumer would need to check or balance the longer life and any warranties offered by the lubricant manufacturer with the possible loss of equipment manufacturer warranties by not following its schedule. Many car and engine manufacturers support extended drain intervals, but request extended drain interval certified oil used in that case; and sometimes a special oil filter. Example: In older Mercedes-Benz engines and in truck engines one can use engine oil MB 228.1 for basic drain interval. When using lower grade fuel or worn engine, the oil change interval has to shorten accordingly. In the industrial market place, the longevity is generally measured in time units and the lubricant marketer can suffer large financial penalties, if their claims are not substantiated.
Operational tolerance:
The lubricant is claimed to cope with specific operational environment needs. Some common environments include dry, wet, cold, hot, fire risk, high load, high or low speed, chemical compatibility, atmospheric compatibility, pressure or vacuum and various combinations. The usual thermal characteristics are outlined with SAE viscosity given for 100°C, like SAE 30, SAE 40. For low temperature viscosity the SAE xxW mark is used. Both markings can be combined together to form a SAE 0W-60 for example. Viscosity index (VI) marks viscosity change with temperature, with higher VI numbers being more temperature stable.
Economy:
The marketer offers a lubricant at a lower cost than rivals either in the same grade or a similar one that will fill the purpose for lesser price. (Stationary installations with short drain intervals.) Alternative may be offering a more expensive lubricant and promise return in lower wear, specific fuel consumption or longer drain intervals.
Environment friendly:
The lubricant is said to be environmentally friendly. Typically this is supported by qualifying statements or conformance to generally accepted approvals. Several organizations, typically government sponsored, exist globally to qualify and approve such lubricants by evaluating their potential for environmental harm. Typically, the lubricant manufacturer is allowed to indicate such approval by showing some special mark. Examples include the German
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“Blue Angel”, European “Daisy” Eco label, Global Eco-Label “GEN mark”, Nordic, “White Swan”, Japanese “Earth friendly mark”; USA “Green Seal”, Canadian “Environmental Choice”, Chinese “Huan”, Singapore “Green Label” and the French “NF Environment mark”.
Composition:
The marketer claims novel composition of the lubricant which improves some tangible performance over its rivals. Typically the technology is protected via formal patents or other intellectual property protection mechanism to prevent rivals from copying. Lot of claims in this area are simple marketing buzzwords, since most of them are related to a manufacturer-specific process naming (which achieves similar results than other ones) but the competition is prohibited from using a trademark.
Quality:
The marketer claims broad superior quality of its lubricant with no factual evidence. The quality is “proven” by references to famous brand, sporting figure, racing team, some professional endorsement or some similar subjective claim. All motor oil labels wear mark similar to "of outstanding quality" or "quality additives," the actual comparative evidence is always lacking.
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BPCL in Lubricants Business
Overview
Bharat Petroleum offers a full range of Automotive Engine Oils, Gear Oils, Transmission oils, Specialty Oils and Greases. The correct usage of these Lubricants of right quality ensures prolonged and trouble free vehicle operation, providing maximum benefits to the users of present day modern vehicles.
In line with the economic liberalization in India, Lubricants was the first downstream Petroleum product to be totally deregulated with effect from 1991. Since then a large number of players - National, MNCs as well as Global Players - have entered the Indian Lubricants market. Despite operating in a totally competitive environment, BPCL's Lubricants SBU has been registering a growth in lubricant sales continuously over the past couple of years. In 2010-11, an overall growth of 10% has been registered, with a healthy turnover of Rs. 1680 crores (approx USD 350 million).
In 1998, BPCL re-launched its Lubricants in new attractive packs, mainly in Automotive category with three major brands depicting each segment- Mak for Diesel Engine oils, Automol for Petrol Engine oils and Glide for Two/Three wheelers(mainly 2T then). In the year 2003, BPCL decided to go for Umbrella Brand-MAK Lubricants, in subsequent years, branded all its industrial grades with MAK.
The 4P‟s for the MAK Lubricants will be discussed as:-
1. Product
2. Price
3. Place
4. Promotion
1st P: - Product
Following variables are considered by BPCL for lubricants:-
 Brand name : MAK lubricant
 Product variety: Large no. of variants is provided within MAK lubricant brand name.
 Quality product: By offering superior performance as against regular lubricant.
 Features : Lubricants with super cleanser
BPCL IN AUTO LUBRICANTS MARKET
OLD BRAND NAME
NEW BRAND NAME GLIDE GOLD FC MAK 2T
GLIDE 2T
MAK 2T GLIDE 4T MAK 4T
AUTOMOL SILVER
MAK CLASSIC AUTOMOL SF MAK CLASSIC
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AUTOMOL GOLD
MAK ELITE AUTOMOL SG MAK ELITE
AUTOMOL DIAMOND
MAK SUPREME AUTOMOL SC 20W-40 MAK MULTIGRADE 20W -40
ACTUMA SUPER SERIES
MAK MIL-B SERIES ACTUMA ULTRA SERIES MAK CD OIL SERIES
ACTUMA ULTRA SUPER SERIES
MAK MIL -C OIL SERIES ACTUMA MULTIGRADE OILS MAK MULTIGRADE OILS
AUTOMATIC TRANSMISSION FLUID A
MAK ATF -A MAK D5 MAK SHPD (D5)
MAK SILVER
MAK MIL B BHARAT MAK T OIL MAK GOLD
BHARAT ULTRA SUPREME 15W -40
MAK ULTRA SUPREME 15W-40 BHARAT SUPER HEAVY DUTY BRAKE MAK HEAVY DUTY BRAKE FLUID
SPIROL EP OILS
MAK SPIROL EP OILS SPIROL HD OILS MAK SPIROL HD OILS
SPIROL XEP OIL
MAK SPIROL XEP OIL SPIROL XHD OIL MAK SPIROL XHD OIL
SPIROL S OIL
MAK SPIROL S OILS SPIROL DIAMOND MAK SPIROL XHD
SUPERKOOL
MAK SUPERKOOL REDIKOOL MAK REDIKOOL
SUPERKOOL AF
MAK SUPERKOOL AF BHARAT TURBO SHPD OIL MAK SHPD (D5)
UNIVEX A
MAK UNIVEX A UNIVEX CD MAK UNIVEX CD
UNIVEX RB
MAK UNIVEX RB BHARAT WB GREASE SPECIAL MAK WB GREASE SPECIAL
2nd P: - Price
Following price variables are considered by BPCL for MAK:-
 Strategies : Premium pricing
 Least price : Rs. 09 to Rs. 14 / Ltr more than regular lubricant
 Discounts: MAK offers the opportunity instantly reading the points, you earn for at participating BPCL retail Outlet. Extra discount are also given to the OEM partner.
 Payment mode and period: On cash/debit card/credit card/petro card i.e. smart card, which can be used by the card holder to make purchase of lubricant at designated retail outlet of BPCL.
The transformation from the administered pricing mechanism to free pricing has increased the importance of providing cost effective product to the users. Thus product costing and competitive pricing are key factors affecting the market.
In the recent past, the Indian lubricant market has witnessed a phase of consolidation. Multinationals with better technology, brand name and finances have the power to launch themselves on their own in the market. However, with increasing number of competitors it is not possible for everyone to carve a niche in the market. This sector has witnessed considerable amount of mergers and acquisitions. The Indian lubes market is a combative market place and lubricant companies find themselves fighting a tough battle for survival. In the OE sector also lubricant manufacturing, companies are entering into collaborations with vehicle
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manufactures. Maruti Udyog, Hyundai Motors, Hindustan Motors, TAFE, Toyota, and Skoda have entered into collaboration with IOC and Castrol for some of their models.
Price List
Category BRAND NAME PRICES(Rs.)
500ml 1 litre 3 litre 5 litre 1. Two Wheeler Oils (Two Stroke)  MAK 2T 116 228
920 2. Two Wheeler Oils (Four Stroke)
 Mak 4T PLUS SL 20W40
263
 MAK 4T STALLION
263
 Mak 4T ZIPP 10W30
235
3. Passenger Car Motor Oils
 MAK ELITE 15 W 40 (SJ) 139 270 793
 MAK CLASSIC 20 W 50 (SG) 132 257 752 1221 4. Passenger Car Genuine Oils
 MAK TATA MOTORS PCD CLASSIC 20W40
243
1165 5. Diesel Engine Oils
 MAK PLATINUM TURBO 15W40
278
1340 6. Gas Engine Oils
 MAK GE 112 202 1015 825 7. Gear Oils
 MAK SPIROL EP 116 225
1075  MAK SPIROL EP 90 112 214
1030 8.Transmission / Front Fork Oil
 MAK ATF A 120 230
1110
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3rd P:-
Lube Distribution Channel
Retail Channel
Its core strength is its retail outlet network across the country, this comprises of about 7530 retail outlets. Its Lubes SBU have undertaken various initiatives in co-ordination with Retail Business to grow its sales volume through this channel. Initiatives undertaken by the SBU are setting up of Hero Honda City Works, Tata Authorized Service Station (TASS) and installation of Quick Oil Change Machines at retail outlets.
Bazaar Channel
With a network of 190 PLDs (Primary Lube Distributorship), 600 MAK Garages and MAK Mobile Vans established to improve reach and penetration in rural and unrepresented areas of MAK Brand, the SBU could reach to the last mile as far as the customers are concerned. BPCL continues to improve its brand visibility across the network and thereby increasing its market share across the segments.
Industrial Channel
Large number of prestigious customers has been added during the year to its already existing prestigious customer list. BPCL is also suppliers of initial engine oil fill to TATA Motors, TVS, and Hero Moto Corporation etc. BPCL also holds respectable share of Railway and Defence business.
Infrastructure
The Lube Plants at Wadilube (Mumbai), Budge Budge (Calcutta), Loni (Delhi) and Tondiarpet (Chennai) have organized themselves as close-knit teams to maximize levels of production and dispatch. The Plant at Wadilube is an ISO 9002 certified plant. As part of the ongoing improvements in packaging, the new series of packages developed entirely in-house have been introduced.
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Other initiatives
To support the business initiatives, a major thrust has been given for improving BPCL‟s product offering and increasing its market presence. The new R&D Centre at Sewree, Mumbai, has developed a number of new products in the automotive and industrial categories. The entire distribution system has been revamped with the formation of Supply Chain Management department to ensure that products are more conveniently available and distinctively visible in the market price. Exclusive branded Lube Shoppe's have been opened all over the country to improve its reach, as well as many innovative & unconventional methods are being used to create brand awareness especially in the diesel oils segments.
Another major initiative has been to reach the products to the rural population through the tie-up with ITC – e-choupal network which has spread the MAK brand across the country in rural areas also. Currently this network is available in Uttar Pradesh, Maharashtra, Rajasthan, and Madhya Pradesh and is likely to extend to other states also shortly.MAK also embarked on another thrust area of enrolling garages across the country in the network of “MAK Garages” there by providing standardized service across the network. This initiative not only provides opportunity for the garages to enhance their business opportunity but also provides an assurance to the end customers that their vehicles are getting the right kind of lubricants.
Brand Ambassador
To promote MAK brand among the youth and improve the brand visibility, MAK signed up M.S.Dhoni as Brand ambassador in the year 2006. The rise of MAK brand in the minds of the consumers as well as market share coincided with the rise of Dhoni also, who today is the Youth icon of the year and also the Captain of the Indian team for all versions of the game – like MAK being the “Champion of All Engines”. BPCL is confident that it will continue to make substantial and sustained efforts with appropriate investments, synergies business between channels, improve quality and quantity standards, invest in R&D for new product development and aggressively build the brands to result in maximising the value addition for both the business and its customers.
MAK Services
Lubes Shop
To facilitate customers an easy accessibility for procurement of their Lubricants requirement and meeting them at their point of need compelled Bharat Petroleum to open Lube shops. These shops are exclusive lubricants reselling points, which cater to customer satisfaction confirming with the 'Quality' and other standards of Bharat Petroleum. With the deregulation and entry of multinationals in the lubricants market, BPCL have experienced a shift of trade to the 'bazaar'. Recognizing the potential and the fact that competitors have utilized this channel segment to their advantage by allowing huge discounts Bharat Petroleum is also determined to address this customer segment and passing the discount to the end customer instead of the channel. These branded lubes shops are available in all major cities.
MAK Garage
MAK lubricants has launched this initiative in the year 2006 to promote MAK lubricants among the mechanic segment by enrolling them in to the umbrella network of MAK Garage. Currently BPCL have approximately 800 MAK garages across the country - exclusively using MAK Lubricants.
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Hero Honda Service Stations
A Joint venture initiative between Hero Honda - the worlds largest bike manufacturer and Bharat Petroleum. This initiative is to utilise the BPCL network across the country to provide value added services to our customers through this City Work network at our retail outlets. Currently we have around 170 HH city works operating in the country.
TASS
TATA Authorized Service Station is another initiative for strengthening our strong relationship with Auto Major TATA. We have a tie-up for marketing co-branded Lubricants/greases/specialty products - MAK TATA products. TASS is an extension of this tie-up - providing TATA vehicle service network across the country through out Dealer network. This service network is of two types - TASS for heavy vehicles and "SUVIDHA" for TATA Ace vehicles.
VCC
Bharat Petroleum launched this new initiative "VEHICLE CARE CENTRE" at our retail outlets mainly to provide state of the art servicing facility to our esteemed customers at an affordable rates. The network is growing and is gaining popularity across the country.
MAK Quik Lube Oil Change
An Initiative to provide the best of service to esteemed customers – keeping in mind the value of time, BPCL have initiated the “MAK Quik Lube oil Change” at many of its Retail outlets. This initiative is mainly to cater to the Bike and Car/SUV customers to change the Engine oil in their vehicle with in short span of time.
The major advantages of this initiative to the customer are:-
Speedy oil change in front of their own eyes.
Mechanized system of Oil change – helps in removing the old oil completely.
Genuine MAK product
Free Oil change facility – Only cost of the product to be paid by the customer.
Quick turnaround time for the customer.
Special offers to the customers.
OEM Tie ups of MAK Lubricants
MAK CAPABILITIES
Keeping pace with changing customer preferences, the vehicle/equipment manufacturers are competing to offer the best Value for Money to customers. Coupled with emerging environmental regulations and new technologies, OEMs of vehicles and equipments are constantly trying to reduce maintenance costs. BPCL is continuously working alongside OEMs to develop and upgrade genuine oils for their vehicles and equipments to address the requirements of ever changing technology. Pioneering the cause of industrial growth over the last 3
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decades, BPCL R&D and marketing teams have provided solutions for efficient and specialized lubricant applications in steel, cement, power, engineering, road construction and other leading industries in India. These applications include various compressor, genset, shock absorber oil manufacturers who provide branded lubricants for use during and after warranty for peak performance. Right from the advent of Maruti-Suzuki in 1984, our R&D team at BPCL state-of-the-art R&D Centre has demonstrated competencies to develop customized solutions for automakers in India. BPCL R&D has developed more than 300 different formulations in the past 10 years, out of which 50 were developed in the last 3 years BPCL commissioned its own LOBS plant at Mumbai, using the latest Chevron Lummus Global patented „All Hydro Processing Technology‟ in June 2006. This has enabled us to manufacture superior quality „MAK Base’ oils exceeding the requirement of API Group II (rated as Group II plus). OEMs have acknowledged BPCL‟s identity of quality base oil producer, best in class R&D capabilities and marketing acumen.
OEM PARTNERSHIPS
In addition to Indian presence with plethora of lubricant options for all cross sections of the industry, BPCL (MAK LUBRICANTS) also has agreements with leading automotive manufacturers having both National & International presence. Original Equipment Manufacturers (OEMs) and Equipment manufacturing industries play a strategic role in our business. BPCL have a long and successful history of partnerships with leading OEMs across all vehicle categories. With strong brands, superior technology and width and depth of distribution, BPCL (MAK LUBRICANTS) is an ideal partner for progressive OEMs seeking to offer their consumers the best products and services.
Hero Moto Corporation Limited
Hero Moto Corporation Ltd. - the single largest two-wheeler manufacturer in the world has an association with BPCL (MAK LUBRICANTS) since the year 2004. MAK Lubricants during the five years of association has become the largest supplier of engine oils for initial fill as well as to HMC dealers, Authorized service stations and spare part stockists. BPCL has been working closely with HMC & its sister concerns to develop speciality products like Engine oils and Shock Absorber Fluids which can meet the stringent HONDA (JAPAN) specifications. Apart from the above BPCL has commissioned Hero Honda City Works exclusive servicing option for HMC customers‟ at BPCL Retail Outlets and numbers are growing by the day.
TVS Motor Company Limited
TVS Motor Company is the third largest two-wheeler manufacturer in India and one among the top ten in the world, with annual turnover of mo re than USD 1 billion in 2008-2009, and is the flagship company of the USD 4 billion TVS Group. BPCL (MAK LUBRICANT) has an exclusive tie-up with TVS MOTOR COMPANY to supply engine oils for initial service fill as well as TVSM dealers, Authorized service stations and spare part stockists. BPCL is also working to develop, manufacture and supply specially formulated engine oils and speciality products for use in TVSM two wheelers as well as factory requirement. . TVS TRU 4 the first JASO MA 2 specification oils of its kind has been introduced by BPCL for use in TVSM two- wheelers and is distributed through all TVSM authorized dealerships & workshops as well as BPCL‟s extensive reseller network.
Tata Motors - Commercial Vehicles Division
Tata Motors - Commercial Vehicles Division is the largest manufacturer of commercial vehicles in India. We have a long and fruitful relationship with Tata Motors for over 5 years. This includes a strategic alliance for supplying of Engine oils for initial fill as well as Co-branded engine oils and speciality products to Tata Motors dealerships, Authorized Service Network & Tata Motor Spare part dealerships across
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the country. MAK Lubricants has been jointly working with Tata Motors in all areas including joint product development, promotion and customer service. BPCL‟s MAK TATA MOTORS CH4 15 W 40 was specially developed for Tata Motors and is endorsed by Tata Motors for use in all their commercial vehicles fitted with both Tata & Cummins Engine. Apart from the above BPCL has commissioned Tata Authorized Service Stations servicing option for TML customers‟ at BPCL Retail Outlets and many more are expected to get activated over the years.
General Motors India
General Motors India has already completed 12 years if Indian Operations and is the manufacturer of diesel & petrol passenger cars and multi utility vehicles in the country. We have a strategic alliance for supplying Co-branded engine oils and speciality products to the General Motors dealerships and authorized service network across the country. BPCL (MAK LUBRICANTS) is jointly working with General Motors India in all areas including joint product development, promotion and customer service. BPCL GM MAK Genuine 15 W 40 Deisel & Petrol Engine Oils were specially developed for General Motors and is endorsed by General Motor for use in all their passenger cars as well as Utility vehicles. Apart from the above BPCL has commissioned Vehicle Care Centre exclusive servicing option for customers‟ wherein GMI has adopted such VCC‟s at BPCL Retail Outlets and more such VCCs are expected to get activated over the years.
L&T KOMATSU
L&T Komatsu is the market leader in the excavator segment & commands more than 50% of the market share. BPCL (MAK LUBRICANT) has a tie-up with L&T Komatsu for the past 5 years to supply oils for supply to L&T Komatsu dealerships & users. BPCL is also working to develop manufacture and supply specially formulated hydraulic transmission oils and speciality products for use in L&T Komatsu excavators.
4th P: - Promotion Strategies for MAK Lubricant
Following promotion variables are considered by BPCL for MAK lubricant:-
 Brand ambassador: M.S. Dhoni, Captain of Indian Cricket Team
 Brand line : „MAK makes it possible‟
 Advertising : TV, News paper, Magazines, Internet
 Sales Promotion: Various schemes are available in the market where customer has to SMS bill no to the central data base to stand a chance to win lucrative offers.
MAK MALAMAAL DAILY - "JEET KI KHUSHI"
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SCRATCH & WIN - Chance to win upto to Rs. 30 on MAK 4T plus - 900 ml & 1 ltr pack and chance to win upto Rs. 100 on selected MAK Petrol & Diesel Engine oil packs from 3 ltrs to 5 ltrs. Please contact the nearest BPCL Retail outlet or Lubricants shops for further details.
GADI MEIN DHAMAK HASI MEIN DHAMAK!
Promise Tooth Paste and Bianca Toothbrush free with every pack of MAK GE 20W-50: 1 litre pack & MAK PUMP - 3.5 litre pack
MAK MALAMAAL DAILY - "KISMAT KI BALTI KHOLO"
Chance to win up to Rs. 500 on purchase of MAK Lubricants Engine/gear oils - packs from 7.5 litres to 20 litres packs. Double offer - An unbreakable LED torch light free with every pack of 15 & 20 litres. Offer available on selected grade packs of MAK lubricants - please contact the nearest BPCL retail outlet or Lubricant shops for further details.
Competitors of Bharat Petroleum Corporation Limited (BPCL) Lubricants
1. Hindustan Petroleum Corporation Ltd (HPCL)
2. Indian Oil Corporation (IOCL).
3. Castrol India Ltd
4. Gulf Oil Corporation Ltd (Lubricant Division)
5. Valvoline Cummins Ltd (VCL)
6. Tide Water Oil Co (India) Ltd
7. Savita Group
8. Total Group, India
9. Balmer Lawrie & Co Ltd
10. Apar Industries Ltd
11. IPOL
12. Fuchs Lubricants (India) Pvt Ltd
13. Gagan Gases Ltd
14. Ganesh Benzoplast Ltd
15. The Andrew Yule Group
16. Cenlub Industries Ltd
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STP ANALYSIS
Segmentation
It is the process of dividing total market of a particular product or product category in to relatively homogeneous segments or groups.
Following are the variables for market segmentation in consumer market:-
1. Geographic segmentation: BPCL rolled out its lubricants under the brand name MAK in all states of India. The variable includes:-
 Region : All states of India
 Cities : All most all cities in India
 Density : Urban, Suburban and rural area
2. Demographic segmentation: MAK lubricant is focused on all commercial residential and public usage in automobile vehicle including following variable.
 Age : 18+
 Family size : All
 Family life cycle : All
 Gender : Male, Female
 Income : All
 Occupation : All area including unemployment
 Education : All
 Religion : All
 Generation: All
3. Psychographic segmentation: MAK lubricant is focused on affluent and educated buyer.
4. Behavioral segmentation: MAK has focused mainly on following behavioral segmentation.
 Benefits : Quality products by offering superior performance
 User status: Regular
Main driving factor in the lubricant market is quality. Based on quality we can divide lubricant market into two segments:
 Premium Segment
 Economy Segment
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Targeting
BPCL targets economy segment with MAK4T plus which is available in 900ml and 1 ltr packs at a price of Rs. 192 and Rs. 212 respectively. Good quality and reasonably priced has helped it to establish itself as economy product.
BPCL has targeted market, adapting a product specialization approach for MAK lubricants by
1. High quality lubricant for all automobiles
2. Old and new auto vehicles: MAK is designed not only to optimize performance of new generation vehicle but also rejuvenate old vehicles to perform better.
Positioning
Brand that offers value for money is how MAK4T plus positions itself and is continuously able to inline itself with its value proposition. Also its image has been as smooth oil.
BPCL has position MAK by adapting following positioning approach:-
1. Benefit and quality : The clean and keep clean function of super cleanser activity in MAK lubricants reduces deposit at the fuel port injector and controls combustion chamber deposit to maintain new life performance of vehicle. Regular use of MAK gives the vehicle as superior pick up, smooth drive, better mileage and lower emission.
Analysis:
However it is available only in API SL 20W-40 grade that is widely used in 100-150 cc bikes. However, with the entry of higher cc bikes and Indian consumers switching to higher cc bikes is a matter of concern. Being considered smooth oil will hamper its usage in higher cc bikes leaving a big segment of premium consumers untouched in times to come.
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PORTERS FIVE FORCES ANALYSIS
This model is evaluated on 5 forces of competition: -
 Threat of New Entry
 Suppliers Bargaining Power
 Buyer‟s Bargaining Power
 Threat of Substitutes
 Rivalry among Existing Firms
As seen from Porter‟s 5 forces diagram we have concluded the following about the lubricant market: -
Threat of New Entry – Threat of any new entrant in this market is very low. Market got deregulated in 1993 & many new players entered the market. Market is well set at this point of time & there is not much space for a new player to enter. There lies economies of scale & huge capitals are required to enter in this market. Most of the large volume buyers are brand loyal so it is very difficult to target those customers.
Suppliers Bargaining Power – Suppliers have low bargaining power as far as lubricating market is concerned. As this business consists of large economies of scales, there are very less chances of forward integration by suppliers. Also, lubricant companies possess option to switch across suppliers because there are too many suppliers for this industry.
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Buyer’s Bargaining Power – Buyers have high bargaining power because they have large no. of choice to choose the product from. Their switching cost is very low. Industrial lubricants buyers have more bargaining power than automotive lubricants buyers because their buying capacity is more.
Threat of Substitutes – Threat of substitutes for lubricant market is NIL as there are no substitutes for lubricants as a product. This is the same case as with that of Pharmaceutical Industry.
Rivalry among Existing Firms – This is the most important force as far as Porter‟s 5 forces model is considered. Existing lubricant companies maintain rivalry over several parameters like to increase market share, to increase sales volume, to improve distribution network & to provide Distributors,Retailers/Dealers & Mechanics with more profitable schemes. These are the parameters on which BPCL has to concentrate upon so that it can
stand in the category of market leadership.
SWOT ANALYSIS OF BPCL
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Product Life Cycle
"Life Cycle Analysis methodology is used for identifying and reducing the impact of our lubricants on the environment. With this approach, respect for the environment may be built into the design of new consumer products, right from the start."
From initial design to disposal of a lubricant
In Total's Lubricants division, sustainable development finds its application through product life cycle analysis. This means examining and monitoring environmental impacts arising from our products using ISO 14040 standard procedures. In a concrete, methodical and quantitative manner, we assess environmental impacts and power consumption of each stage in the life cycle of our products: production, utilization and end-of-life (see flowchart).
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Reasons for Study
Strategies for MAK 4T plus based on the customer needs, Mechanic needs, Channel needs. Also, an effort to answer the following two questions that have come up during various discussions:
Is there a need to launch MAK 4T plus in various categories?
We need to find out whether the customer is aware of the lubes specifications in various categories 20W-40, 20W-50 and 10W-30.If not, then who drives the purchase decision of the customer for a particular category of lubricant
Is there a need to focus our marketing efforts toward various segments of consumers?
In this we need to find out the perception of lubes in the consumer mind and how this perception varies w.r.t. demographics and psychographics of the consumer. It will help us to know if there is need to launch our product for premium/normal segment of consumers.
Scope of the Study
The detailed Interviews have been conducted with consumers, mechanics and retailers. However, the interviews were limited to the following areas: Noida (sector 12, 1, 16, 18, 35, 9, BP 35, GIP mall) and New Ashok Nagar.
Methodology of the study
Research design: A descriptive research focused to examine the consumer, mechanic and retailers perception and their needs towards MAK 4T plus.
Unit of Analysis: Three categories will be analyzed: Retailer, Mechanic, and Consumer
Descriptive research: A survey was being carried out to understand the consumers, retailer and mechanics minds.
Data Collection Method
We have collected following types of data during our survey: -
Nominal Data – In this type of data consumer is asked to give response to direct questions where he can choose his preferences or simply answer Yes/No
Ordinal Data – In this type of data consumer is asked to give rating to certain parameters according to his preferences.
Interval Level Data – In this type of data a particular person is asked to give some numerical data in response. This type of data we have collected in form of monthly sales volume from various Distributors & Retailers/Dealers.
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Analysis of the data
Coding: Coding of the dataset was carried for the analysis in SPSS.
Data reduction: Data from the filled up questionnaires for consumers, retailers and mechanic was taken and filled up in excel sheet and was reduced as per the requirement
Data extraction: Data was then extracted from excel sheet and filled up in SPSS data editor for analysis
Data analysis: Data analysis was carried out in excel (for percentage calculations) and in SPSS for Frequency distribution and Cross tabulation.
Tools used for analysis of data: The basic tools used for the analysis of data were:
MS-EXCEL: Microsoft Excel is a spreadsheet application written and distributed by Microsoft. Microsoft Excel has the basic features of all spreadsheets, using a grid of cells arranged in numbered rows and letter-named columns to organize data manipulations like arithmetic operations.
SPSS: SPSS is a computer program used for statistical analysis. It is used by market researchers, health researchers, survey companies, government, education researchers, marketing organizations and others.
Limitations of Study:
Primary research was carried out in Noida (BP 35 Noida, GIP mall Noida, Spice Mall Sector 25, Noida sector 12, 9, 21, 31).Hence there can be certain region bound requirements among the consumers. This research was mainly conducted in the form of a survey carried out with the help of a questionnaire designed especially for consumers. Around 73 responses were collected.
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Profiles of Customers Surveyed
Age Group of Respondents:
As one can see from the diagram that majority of the respondents belonged to the age group 25 -34 years followed by 18-24 years. This shows how majority of the bike market is skewed towards the people of age less than 35 years.
Occupation:
One can see from the figure that majority of the respondents belonged as salaried employees followed by student and then involved in their own business.
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Questionnaire Responses from Consumers
Average Run after which Bike goes for Service:
Around 68% of customers get their bike serviced after an average run of 2000km and less.
Where do customers get their Bike serviced?
Majority of the customers (62.5%) get their bike serviced at authorised service stations followed by mechanics and other local service stations.
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Engine Oil Change Frequency of the Customer:
It can be easily ascertained from the above figure that majority of the respondents get their engine oil change at the time of service only, hence one needs to target various service centres to increase the engine oil sales.
Various ways in which customers get engine oil change:
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More than 55% of customers gets their engine oil change by authorised service stations and mechanics, followed by 26% who purchase the engine oil on their own but get it changed by mechanic/service station.
Are customers aware of engine oil used in their bike:
Almost 60% of respondents were not aware of lubricants used in their bike.
Various Attributes on which customers purchase particular engine oil:
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Based on the rankings given by respondents to various attributes on the scale of 1 to 5 where 5 being the highest and 1 the lowest, one can say that customers look for performance and quality of the lubricant as a major factor while buying engine oil. It is then followed by the brand name or the current market leader. One needs to take notice of the fact that customers do not care much about the price of lubricant.
Most preferred customer lubricant:
Based on the current analysis Castrol is the most preferred brand followed by Servo and MAK lubricants. However, one needs to take notice of the fact that around 64% percent people prefer Castrol compared to around 10% for MAK lubricants.
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Do consumers act on others advice while purchasing engine oil?
Based on the figure above it can be see that around 55% of customers use engine oil recommended by mechanics or service centres, around 19% purchase on their own without acting on anybody‟s advice and around 15% are recommended by their friends and families.
Are customers satisfied with the usage of MAK lubricant?
From the survey taken around 71% of people were satisfied with the usage of MAK Lubricants and 29% were not. Customers mainly complained about the performance and quality of lubricant with respect to its competitors.
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Are Customers aware of oil changing machine at BP Retail Outlets?
Of the people surveyed at BP 35 most of them were aware of the oil change machine but people surveyed in other adjoining areas such as sector 18,9,12, 21 and 25 were not aware of this facility. Overall 21% of people knew about this machine and rest did not.
Are customers getting oil change at BP Retail Outlets?
Majority of the people have not used this service as of now, only 30% of people aware of the service have actually get the engine oil change done at Retail Outlets. Thus one needs to target this large segment.
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Are customers satisfied with the oil change at BP Retail Outlets?
Based on above data one can see a high satisfaction index among the customers who have availed this service. Thus one needs to market this service so that large number of customers can be targeted. Once customers start using this service in large number it will be a big success due to high satisfaction levels among the customers.
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Mechanic Response Analysis and Recommendations
Study limitations
Primary research carried out in Noida sector 12, 10, 9 and 31.This research was mainly conducted in the form of a survey carried out with the help of a questionnaire designed especially for mechanics. Around 33 responses were collected.
Profile of Mechanics
Based on number of years in this profession
Based on the survey it can be seen that 45% of the mechanics are in the profession for more than 15 years and 27% have been doing this job between 10and 15 years. Thus one can see that the survey population was well experienced.
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Based on number of bikes serviced per day
A big chunk consist of mechanics who service up to 10 bikes per day. However, it was a general trend that most of them were associated with retailers, garages and were using the oil that retailer recommends but they act as a link between consumer and the retailer. They recommend and the consumer purchases the oil from retailers and gets it changed through mechanic.
Based on average usage of lubricant per day
Almost 72% of mechanics use between 8-12 litres of lubricants every day and 18% use more than 15 litres a day. Thus one can see on an average there is sale of almost 300 litres of lubricant at every mechanic shop.
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Questionnaire Responses from Mechanics
How many of them are aware of the specification of lubricants they use?
82.8% of the mechanics were aware of the specifications of the lubricants they use.
What all specifications of lubricants are they aware of?
Above bar graph shows that awareness of 20W-40 is the highest; this can also be due to the high availability of this specification. This is followed by the SL specification among the lubricants.
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Who recommends customers what lubricants to use?
As seen in the bar graph most of the sale is made on recommendation of mechanics, almost
72% of it. 64% of the sale is made on demand by customers and 18% of sale is influenced by advertisement and brand promotion.
Which is the most preferred brand among the mechanics?
90% of mechanics prefer Castrol Active 4T, this is due to the high demand of this product among the customers. 64% prefer servo which is followed by MAK 4T.
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What are the various attributes based on which mechanics rank the lubricant?
The above graph shows that mechanics rank quality as the number one parameter for the sale of lubricants; this is followed by brand name and advertising. Thus one needs to spend more on advertising and brand building of MAK lubricants.
What all schemes would mechanics like in order to sell MAK lubricants?
Bar graph shows schemes that mechanics would prefer scratch cards followed by gift vouchers. 36% of the mechanics prefer free lubricants and 18% cash discounts on the sale.
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What are the problems with sale of MAK lubricants faced by mechanics?
Most of the mechanics have mentioned low demand from the customers as the main problem with the sale of MAK lubricants.
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Perceptual Mapping by FISHBEIN’S Analysis
This is one of the methods to get a picture of the how the product is perceived by the customers. We test customers on various parameters related to our product (like in our case the parameters are price, appearance, performance & flexi-packing). Questionnaire was designed in such a way that one could know about the attitude & behaviour of the customer towards the purchase of the product (as lubricant in our case). On the attributes that have been identified, we get scores of the correlation between attitudes and beliefs of customers. Through this, one can compare how these attributes fare as far as the scores are concerned.
After performing Fishbein‟s Analysis, we get Perpetual Mapping diagrams as shown below. We have compared customer‟s perception about MAK with other companies‟ products like Castrol, Servo, ELF, and GULF.
Perceptual Map shown below is the comparison between MAK & Servo. According to this map we can say that in customer‟s perspective Flexi-packing & Appearance are almost same in case of the products offered by these two companies. But on the contrary customers think that Servo is little bit better than MAK as far as performance is considered & they are more satisfied with price of MAK in comparison with that of Servo.
Perceptual Map shown below is the comparison between MAK & Gulf. We can see clearly that customers perceive MAK & Gulf almost similarly. MAK is slightly better in customer‟s perspective on the parameters of Price & packing. This is because MAK has lower price than Gulf & their products come in very attractive packing.
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Perceptual Map shown below is the comparison between MAK & ELF. It can clearly be seen that these two companies‟ products are similar in customer‟s perspective. MAK has a slight advantage over ELF over the price parameter.
Perceptual Map shown below is the comparison between MAK & Castrol. It can be seen clearly from the map that MAK has a good advantage over Castrol as far as price is concerned. Castrol has higher price than MAK on all the similar products offered in market.
But Castrol has remarkable edge over the performance parameter. People perceive Castrol as prime performance provide when used as a lubricant. This can be seen from previous data used for analyses. Castrol is market leader at all the locations surveyed & this might be because people think that Castrol‟s performance is incomparable.
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Suggestions & Recommendations
Suggestions
 BPCL should work to improve its distribution system in the regions covered for project.
 Company should concentrate on doing meaningful advertising in electronic & print media.
 More advertisements in electronic media with clear vision & target.
 Weekly & monthly advertisements about MAK in local & national NEWS papers.
 Banners & Print advertisements should be increased.
 More schemes should be given to Distributors, Retailers/Dealers, and Mechanics & Consumers.
Retailers / Dealers
 More cash discounts on the purchase of large volume
 More margin should be given along with the credit
 Yearly points schemes should be introduced
 Scratch cards schemes should be there for whole year
 Some company official should visit Retailers/Dealers regularly
Mechanics
 Camp should be organized for mechanics to promote MAK as a brand & make them learn about MAK & its advantages.
 Free gifts should be given at the time of camps to make them interested to attend it.
 This will instill a feeling of promoting MAK as a brand.
Customers
 Scratch card schemes for the customers should be continued.
 Free pamphlets should be distributed to make them aware of all the products by the company.
Bharat Petroleum Corporation Limited
 Company should increase the production of small packs of 40ml & 60ml pouches; it will increase sales at the petrol pumps.
 Speed products like MAK 4T plus should be continuously supplied in the market to make consumers remain brand loyal. We have observed in the regions surveyed that sometimes consumers ask for MAK 4T plus & it is not there in Retailers/Dealers shelf due to either distribution channel flaws or absence of the product in company depots.
 Distributors should also be rewarded for the completion of targets. This will instil a feeling in distributor to work more efficiently in the market.
 Tie ups with vehicle‟s manufacturer should be advertised a bit more, as we have observed that people tend to buy the lubricant that their vehicles‟ manufacturer recommends
Recommendations Exclusively for Business Development
 Castrol is increasing prices of all of its products on regular basis. We have observed that because of this, there is some ire in people for Castrol. This is the time when BPCL should act aggressively to increase its customer base in the markets that we have surveyed.
 Retailers/Dealers should be given top priority & should be provided with good promotional schemes. Advertisements in Local newspaper should also be taken care of.
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 Sales force should be improved to cover market in a better way. We suggest BPCL to use Adhoc Sales force for this purpose. Adhoc sales force would have people who work exclusively in sales only. This will help company to capture market in more efficient way.
 Some new & innovative advertising methods should be pursued like: -
 Put a MAK sticker on cycle rickshaws in the regions covered under project.
 MAK watermark on Railway tickets & Reservation charts.
 Advertising on Radio channels.
Threats
Market survey revealed great potential for MAK lubricants in the region. As far as truck segment goes, market is highly in favour of MAK having almost 80 percent share, MAK Diamond and Multigrade being the major products in demand.
Still, there is a negative feeling regarding distribution ship of MAK lubricants because of following reasons:
 Earlier two authorised dealer for MAK Lubricants namely Jai Hind and Balaji have opened closed down within a short period incurring huge loss.
 The margin of distributor gets affected by the aggressive sale of lubricants at retail outlets in the region, Janta RO being one of them who sold 20litre Multigrade pale at a margin of Rs. 10-30. Thus small shop owners or mechanic prefer to buy from RO‟s rather than authorised distributor.
 Another problem faced in the region is by the operation of traders working in the nearby region, most active of them being Goel Trader from Rudrapur region. He gets his supply from distributors operating in Ghaziabad regions and offers very attractive prices to the dealers, sometimes as competitive as offered by the company to its distributor.
 One more serious problem in the region is that of duplicate products of MAK being sold. Most of the duplicate products come from a factory operating near Agra region and sell them to the dealers at half the price offering large margins. These fake products are devoid of any batch numbers and also do not contain coupons or torch present in the genuine product.
Recommendations
 In order to be competitive in this region BPCL has to allay fears of margin and other apprehensions related to selling of MAK lubricants. This can be done either by going and talking to big players over there or through one of our ILD located in the region.
 BPCL also has to support potential distributor in the region and make sure that retail outlets (RO‟s) do not mar the margins and sale of the distributors.
 One also needs to reduce the amount of unbilled lubricants entering into the market through Goel trader; this can be done by installing software solution at the distributor place so that none of the lubricants goes unbilled.
 BPCL can also try and educate end consumers in the region by asking them to look for batch number on the box or pale containing the lubricating. This way one can limit the sale of duplicate products in the market.
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SPSS Analysis
The null hypothesis states that there is no significant impact of Independent Variable (Price, Brand Name, Advertisement, Quality, and Performance & Mechanic Recommendation) on the Dependent Variable (Purchase Behaviour). The null hypothesis will be rejected when the significance value will be greater than 0.05 for a confidence interval of 95%.
 Price:
ANOVA Purchase behaviour
Sum of Squares df Mean Square F Sig. Between Groups .991 1 .991 .831 .366 Within Groups 60.821 51 1.193 Total 61.811 52
There is significant impact of Price on purchase behaviour.
 Brand name :
ANOVA Purchase behaviour
Sum of Squares df Mean Square F Sig. Between Groups .424 2 .212 .173 .842 Within Groups 61.387 50 1.228 Total 61.811 52
There is significant impact of Brand name on purchase behaviour.
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 Advertisement:
ANOVA Purchase behaviour
Sum of Squares df Mean Square F Sig. Between Groups 1.261 3 .420 .340 .796 Within Groups 60.550 49 1.236 Total 61.811 52
There is significant impact of Advertisement on purchase behaviour.
 Quality:
ANOVA Purchase behaviour
Sum of Squares df Mean Square F Sig. Between Groups .863 2 .432 .354 .704 Within Groups 60.948 50 1.219 Total 61.811 52
There is significant impact of Quality on purchase behaviour.
 Performance:
ANOVA Purchase behaviour
Sum of Squares df Mean Square F Sig. Between Groups 1.326 3 .442 .358 .783 Within Groups 60.485 49 1.234 Total 61.811 52
There is significant impact of Performance on purchase behaviour.
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 Mechanic recommendation:
ANOVA Purchase behaviour
Sum of Squares df Mean Square F Sig. Between Groups 2.884 3 .961 .799 .500 Within Groups 58.927 49 1.203 Total 61.811 52
There is significant impact of Mechanic recommendation on purchase behaviour.
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Findings
 MAK is the market leader; it is used in more number of authorized service stations in two wheeler segment.
 OEM tie-ups play prominent role in selection and buying of lubricants in authorized service stations segment.
 If a automobile company has more OEM tie-ups, then price, quality, gifts and incentives are deciding factors in selection of lubricant brand in authorized service stations segment.
 The authorized service stations which don‟t follow OEM tie-up lubricants brand follow based on customer demand and management preference.
 If a lubricant company offers a scheme to customers at authorized service stations shows a positive impact. It increases the number of customers coming to authorized service stations for the service of their automobile.
 The authorized service stations of the company who don‟t have OEM tie-ups with the MAK lubricant are not ready shift to MAK brand.
 MAK is the market leader in sales of lubricant to authorized service stations which is known by their consumption at authorized service stations.
 The consumption of lubricants at authorized service stations can be increased by offering schemes to the customers coming to their service stations which inturn will increase the sales of lubricants to authorized service stations.
 The consumption of lubricants will be more at authorized service stations in the months of rainy season, October due to Dussera festival, June, December, January.
Conclusions
 In order to increase more market share the company has to increase its OEM tie-ups.
 Another to way to increase its market share, in the case of company having more than one OEM tie-ups, they can be made to switch MAK brand by offering price lower than the competitor, offering gifts and incentives.
 Quality is also a major factor during selection and buying of the lubricants, it should be continuously improved and its grades also must be improved depending on the technology growth, as the technology in the automobile sector is continuously changing, so its quality and grades should improved dynamically according to the technology.
 The market share can also be increased by setting up MAK Garage, Hero Honda Service Stations (A Joint venture initiative between Hero Honda - the world‟s largest bike manufacturer and Bharat Petroleum vehicle care centre), and MAK Quik Lube Oil Change in Hyderabad market. Their presence is available in other major cities and by implementing the same in this market the market share can be increased. According to my knowledge
 MAK Quik Lube Oil Change will be easier to set up and also increases the consumption of MAK lubricants.
 The company should offer schemes to the customers coming to authorized service stations using MAK lubricant in order to increase the consumption of lubricant at authorized service stations in turn it will increase its sales to authorized service stations. These schemes should be implemented in the months of rainy season, October due to Dussera festival, June, December, January, and March.
Page | 49
Bibliography
1. Kotler Philip, 2006, Pearson Education 12th Edition, “Marketing Management”
2. Malhotra N. K., 2007, Prentice Hall India 5th Edition, “Marketing Research”
3. “The MAK Handbook”, BPCL
4. www.bharatpetroleum.in
5. www.castrolindia.com
6. http://simsr.somaiya.edu/simsr/Melange2008/Case.pdf
7. http://www.bharatpetroleum.com/General/CR_Journey.aspx?id=4
8. http://www.bharatpetroleum.com/EnergisingBusiness/In_Financial.aspx?id=1
9. http://www.maklubes.com
10. http://www.maklubes.com/Services.aspx#lubes
11. http://www.researchandmarkets.com/reportinfo.asp?report_id=597487
12. http://wapedia.mobi/en/Lubricant?t=9
13. http://www.researchandmarkets.com/reports/364392/automotive_lubricants_markets_in_india.htm
14. http://www.yamaha-motor.com/Yamalube/2010_Yamalube_Catalog.pdf
15. http://www.honda2wheelersindia.com/heo.html
16. http://www.castrol.com
17. http://www.slideshare.net
18. http://www.scribd.com
19. http://www.stumbleupon.com

Wednesday, October 19, 2011

ISKO PRESENTS DENIM TRENDS FOR SUMMER 2012 - www.sportswearnet.com

ISKO PRESENTS DENIM TRENDS FOR SUMMER 2012 - www.sportswearnet.com:

'via Blog this'

DENIM WASHES & FINISHING PROCESS

The ultimate display of detail is found in true vintage denim. The story of each wearer has been indelibly recorded on each pair- each abrasion pattern, area of wear and whiskering, each grease stain are tell tale signs of what each pair has lived through. To achieve this effect naturally takes years of wearing in dry denim without washing- the patinas created through wear are completely personal to you and tell a very special story.

This also takes a great deal of patience. A lot of blood sweat and tears has gone into discovering techniques to speed up denim aging and wear processes that produce a naturally vintage look. The majority of this very skilled work is done by hand and the process is very time consuming.

A

ABRASION

Process of making garments look worn and aged by scraping or rubbing the surface of the fabric causing abrasion. Pumice stones are most frequently used by industrial laundries.

ACID WASH

(Marble/ Moon Wash/ Snow Wash)- This finish gives indigo jeans sharp contrasts. The process is achieved by soaking pumice stones in chlorine and letting these stones create contrast. The process was created in Italy and patented in 1986.

ATARI

Japanese term describing the selective fading of the ridges of creases. The most common areas for ‘Atari’ are along side seams, on the front and back of the knees, the upper thigh, along the hem, on belt loops and along pocket seams.

Atari effect on belt loops - Martin Margiela Blue Jeans pictured

B

BLEACH

A chemical used to make denim fade. Liquid bleach is usually an aqueous solution of sodium hypochlorite, and dry powdered bleaches contain chloride of lime (calcium hypochlorite).

C

CAST

A term that describes shading. Depending on the method and type of dye used, indigo denim can have a black, brown, gray, green, red, or yellow cast to it.

CELLULOSE ENZYME WASH

Enzymes which are like yeast , are used to physically eat away the cellulose in cotton. Since the colour in denim fabric is actually on the outside of the yard, when the denim is washed in a cellulose enzyme bath the indigo is removed along with the fiber. When the desired colour has been achieved, either changing the alkalinity of the bath or heating the water stops the enzymes from reacting. A rinsing and softening cycle follows. This process is more environmentally friendly than stone washing because strip-mined pumice stones are not used.

D

DESIZING

An amylase enzyme rinse (desize) used to soften denim. A type of size such as cornstarch is added to the warp yarns prior to weaving in a process called slashing, which adds stiffness to the yarns. During the desizing step, the amylase enzyme attacks the starch and removes it from the fabric. Although this process reduces colour slightly, it is primarily used to give a softness and drapability to denim.

DIPS

Used to describe fabric or yarn when they are immersed in dye. Indigo yarns are usually dipped in an indigo bath six times.

E

ENZYMES

Enzymes, which are proteins present in all living cells, speed up chemical processes that would run very slowly if at all. They are non-toxic and readily broken down. Enzymes are used in textile processing, mainly in the finishing of fabrics and garments.

ENZYME WASH

Considered a more efficient and environmentally sound way to stone wash jeans. Rather than using pumice stones, organic enzymes (proteins) are used that eat away at the indigo. Jeans finished using enzymes tend to be stronger than those broken down by traditional stone washing, as the fabric is not subjected to the same level of abuse.

F

FINISHING

The techniques or processes performed on a garment, which give it it’s unique look.

G

GARMENT DYE

A dyeing process performed on finished garments, as opposed to a yarn dye, which takes place prior to the weaving of yarn. If you see pocket linings or labels that look the same colour as the self-fabric, the garment was likely garment dyed.

H

HAND

A description of the way a fabric feels. A subjective judgement of the feel or handle of a fabric used to help decide if a fabric is suitable for a specific end use. The hand can be described as crisp, soft, drapable, smooth, springy, stiff, cool, warm, rough, hard, limp, soapy etc. Finishing and garment wash will affect the final hand of a fabric.

HANK DYEING

This is a very special dyeing process that very few people use. The yarns are loosely arranged in skeins or hanks. These are then hung over a rung and immersed in a dye bath being dipped in and out and left to oxidize in the air between each dip giving the yarns a natural irregularity of patina and caste. In this method, the colour penetration is the best and the yarns retain a softer, loftier feel.

I

INDIGO

The dye used for denim, initially taken from the indigofera tinctoria plant. It was synthesized 14 years after it’s chemical structure was identified by Adolf Bayer in 1897. Indigo’s inherent features are good colour fastness to water and light, a continual fading and it’s inability to penetrate fibers completely. This allows the blue colour in jeans made dyed with indigo to always look irregular and individual. Pre-1920’s jeans were generally dyed with natural indigo and were- as far as one can tell by comparing vintage examples- paler in colour, with a green cast. Later jeans were a darker blue, particularly used in combination with sulphur dyes. The majority of indigo used today is synthetically made. Natural indigo has a slightly red cast.

IRO-OCHI

Japanese term referring to the fading of indigo dye in denim. The term specifically relates to fading in exposed areas and not across the entire garment.

L

LAUNDRY

In the ‘Denim Industry’, a Laundry is a manufacturing company that takes unwashed jeans and processes them. This processing includes washing, stone washing, sandblasting, garment dyeing , finishing, use of ‘Tonello’ machine with abrasive bristles, applying enzymes to simulate a ‘whisker’ effect and sandpapering by hand. Laundries today are critical in making jeans look commercial and wash development has become as important as fabric development in the denim industry. The best Laundries and wash developments come from the U.S, Japan and Italy.

LOOP DYED

One of the three major industrial methods of dyeing indigo yarns. In the loop dyeing process, the yarn is dyed in a single bath instead of several. The desired depth of colour is attained by passing the yarn through the vat several times. Subsequently as part of the same process, the yarn is sized.

M

MERCERIZATION

An industrial process used on yarn or fabrics to increase it’s lustre and dye affinity. For fabrics used in the denim industry, mercerization can be used for keeping dye on the surface of the yarns or fabrics and to prevent dyes from fully penetrating the fibres.

Mercerised cotton yarn reels

MICROSANDING

In this fabric treatment process, a series of cylindrical rolls in a horizontal arrangement, either wrapped with an abrasive paper or chemically coated with an abrasive , are used to create a soft, sueded hand. The denim is pulled over the face of the sand rollers creating a raised surface finishinig. Some colour reduction is experienced.

O

OVERDYE

A fabric dyeing process in which additional colour is applied to the fabric or garment to create a different shade or cast. ‘Dirty Denim’ is often created by applying a yellow overdye to denim. By localising the application of the tint, you can create specific areas that look dirtier than the surrounding areas.

OXIDATION

Occurs when oxygen and another substance chemically join. This occurs when indigo yarn comes out of the bath between dips.

P

PIGMENT DYES

Dyes that do not have an affinity for fibre and must therefore be held to the fabric with resins. They are available in almost any colour and are used extensively in the denim industry by fabric dyers who want to create fabrics that fade more easily.

PUMICE STONES

Volcanic stone used for stone washing garments. Pumice is popular because of it’s strength and light weight. Before the use of pumice, rocks, plastic, shoes and just about every other material was used to wear down and soften denim during the laundry process.

Pumice stones

R

RING DYEING

Describes a characteristic unique to indigo dye in which only the outer ring of the fibres in the yarn is dyed while the inner core remains white.

RIVER WASHING

A washing process using a combination of pumice stones and cellulose enzymes to give denim a vintage, worn hand. The washer is loaded only with stones and fabric for the first cycle. Enzymes are introduced for the second stage in combination with the stones and they are tumbled until a naturally aged look is produced.

ROPE DYEING

Considered the best possible method to dye indigo yarns. The threads of denim yarn are twisted into a rope, which is then fed through sequence of being dipped into a bath of indigo dye, followed by exposure to air, multiple times. The frequency determines the ultimate shade of blue.

Rope dyeing machine at Shandong Wantai

S

SANDING/EMERSING

A fabric finishing process where fabrics are sanded with real sandpaper to make the surface soft without hair. It can be performed before or after dying.

SANFORIZATION

A pre-shrinking fabric process that limits residual fabric shrinkage to under 1%. The process includes the stretching and manipulation of the denim cloth before it is washed. Raw, un-sanforized jeans will shrink 7-10% after the first wash, and continue to shrink slightly up to the third wash. Developed in the late 1920s by the Sanforize Co. and patented in 1928, the process was reportedly first used by Erwin Mills in 1936 to make denim for overalls marketed under JC Penney’s Big Mac label. Lee jeans were made from Sanforized fabric soon afterwards, Lady Levi’s introduced around 1935 were also Sanforized although most other Levi’s jeans remained shrink-to-fit for another three de

Friday, October 14, 2011

Duty free benifits for textile and apparel imports into US

The lawmakers in the US Congress introduced a legislation in July to provide provide duty-free treatment to textile and apparel imports from the 13 least-developed countries that are not currently beneficiaries under any U.S. trade preference programme. These countries are Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Maldives, Nepal, Samoa, Solomon Islands, East Timor, Tuvalu and Vanuatu. Called the the Asia-South Pacific Trade Preferences Act (S. 1443) , this act , once enacted , would provide effective from 1 January 2012 duty-free treatment to garments and other products similar to those afforded to beneficiary countries under the African Growth and Opportunity Act (AGOA) from African and Sub Saharan region. To be eligible for preferential duty treatment:
A beneficiary country would have to demonstrate that it is making continual progress toward establishing the rule of law, political pluralism, the right to due process and a market-based economy that protects private property rights.
Preferential treatment would be available for ten years and would be limited each year to no more than the applicable percentage (beginning at 11 percent and gradually increasing to 14 percent) of the aggregate square metre equivalents of all textile and apparel articles imported into the United States in the most recent 12-month period for which data are available.
A third-country fabric provision would grant preferential treatment through 31 December 2019 for textile and apparel articles made with yarn or fabric originating in any country.
US textile industry and even the lawmakers have been historically vary of giving duty benefits to Bangladesh , Cambodia etc because of two reasons. One reason is that providing this benefit to these countries would have an adverse impact on the countries in the AGOA region The AGOA region mainly comprises of the following countries
Angola,Benin,Botswana,Burkina Faso,Burundi,Cameroon, Cape Verde, Chad, Comoros,Congo (DROC),Congo (ROC), Djibouti , Ethiopia,Gabon, Gambia ,Ghana ,Guinea ,Guinea-Bissau , Kenya ,Lesotho, Liberia,Madagascar,Malawi, Mali, Mauritius ,Mozambique , Namibia,Niger ,Nigeria ,Rwanda ,Sao Tome & Prin ,Senegal, Seychelles , Sierra Leone, South Africa, Swaziland,Tanzania ,Togo , Uganda and Zambia.
The second reason has been that US has been aware that China would benefit in terms of yarn and fabric shipments to Bangladesh and Cambodia once the duty benefit is given as imports of yarn and fabric from third countries would be allowed under the treaty..
However, if enacted, the treaty would also chip into the already reduced pie of Chinese exports which are reeling under the increased cost pressures.
But it would help in creating alternative medium sized apparel manufacturing hubs to slowly replace the large Chinese apparel hubs over a period of time and reduce the dependence of US on China.
Which country would benefit the most ?

Apparently it looks like Bangladesh , Cambodia and Laos would be the main winners from this treaty. Bangladesh is already enjoying the huge benefits of duty free imports to EU and if it also gets the same benefit from US, it would be party time in Bangladesh !
However, one thing to consider is that in 2011 Bangladesh has exported about $2.5 billion worth of goods under chapter 52 and and 62 out of the total exports of about $27 billion. This is about 9% of the imports of these items into US. So Bangladesh is very close to the 11% limit that the treaty may initially impose and will restrict the amounts to which Bangladesh can increase its exports. On the other hand Cambodia and Laos would have substantial scope of increase in exports . For denim fabric exports, these countries would become an important destination as apparel exports increases from these countries.
Congress Approves Biggest U.S. Free-Trade Agreement Since 1994

On another note , a treaty for duty free trade with Colombia , Panama and South Korea has been passed by the Congress yesterday . A number of products would be covered and US is seeking to increase its chemical, pharmaceutical and farm exports to these countries. Duties on almost 95% industrial and consumer would be phased out within 5 years ..
More details on this treaty would be provided in a separate report.

Sunday, October 9, 2011

Li & Fung - Operation, Emerging supply chain changes and More....

All of us in the apparel / textile industry surely know about Li & Fung Limited - the global trading group supplying high-volume, time-sensitive consumer goods. Garments make up a large part of the Li & Fung business which also covers the sourcing of hard goods such as fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandise, toys, sporting goods and travel goods. But do we know enough about this company ?

Let’s see !!

Li & Fung is a $15 billion company.
It is headquartered in Hong Kong and orchestrates some 14,000 factories in China and around the world.
It has around 15,000 employees, and operates a sourcing network of over 80 offices covering over 40 economies across North America, Europe and Asia.
It is targeting a profit of over $1.5 billion by 2013 and a return on equity in double digits.
Li & Fung’s recently acquired of Loyaltex Apparel, Collection 2000 and Exim Designs among five new companies .Turnover and profit before tax of the five newly acquired companies were approximately US$660 million and US$80 million respectively .
Walmart is set to become its biggest client
Liz Claiborne recently decided to sell its sourcing operations—which handle all aspects of production, from finding materials to manufacturing garments—to Li & Fung Group for $83 million. Liz Claiborne still does the design and marketing for brands such as Juicy Couture, Kate Spade, and Lucky Brand jeans.
Talbots announced its intention to make Li & Fung its main global sourcing agent.
It has also taken over production for Toys ‘R’ Us, Timberland, and Sanrio, the Japanese merchandiser of Hello Kitty. Customer list is
Actually if we want to put it another way , Li & Fung is involved in the production of 40-50% of the clothes that you find in any US shopping mall – as mentioned by Forbes.com . It supplies to over 2000 customers including Kohl’s, Abercrombie & Fitch and others…

Inspite of the recession , it still gets 62% of its revenue from the American market.
How Li & Fung manages the relations with such a huge number of suppliers ?
Li & Fung tries to foster a long term win-win relation with the factories it works with. It follows the 30:30 rule . They guarantee that they will take at least 30% of the production but never more than 70% !. This is unique because they do not want the factory to be overdependent on them and works with other clients too .. Thus it tries to maintain a very organic and strong yet not overwhelming relation with its suppliers.

Is the Supply Chain Model going to undergo a change ?
Li & Fung has been following , like most others, the traditional supply chain model .The supply chain model to date goes like this:

Asia makes stuff and provides cheap labor;
Developed nations buy it all.
That supply chain pecking order, which took decades to set down , is going to change in a big way, according to Victor Fung, group chairman of Li & Fung.

“For the first time, demand is coming from countries that were traditional producers,” explained Fung. “That means it’s a much more nuanced world. It’s a total shift in how the supply chain operates. You’ll be sourcing everywhere and selling everywhere.”

At the recent IBM’s Think conference in New York, he said economies and their associated supply chains will have to adjust to one key reality: Demand won’t be onshore in the U.S. and other developed economies.

As per the Chairman Fung :

China won’t be the cheapest place to manufacture goods in the world.
A supply chain restructuring will distribute work more evenly around the world.
The supply chain is at an inflection point where costs take a back seat to speed and a fast order cycle.
Referring to the US he said, “The supply chain will move closer to you and pull jobs back into the country…”.

He is probably right . Sales in China grew to $526 million, or 6 percent of Li & Fung revenue, in the first half of the current year from less than 1 percent the year before !! This clearly shows that global supply chain is going to undergo a radical change and countries like China would become important consumers themselves forcing supply chain masters like Li & Fung to source as well supply to these places. The next two countries where their activities may be focused in the future could be India , Brazil and Russia – ie all the BRIC countries . These are the countries which are showing the fastest increase in demand growth