Mini Case – Cracking the Indian M&HCV market

Mini-Case: Marketing Management 

(Names of companies, employees, brands, and other facts & figures are fictitiously created with an objective to bring out certain key concepts in Marketing) 

Author:  Anshu Sharma, MBA (ISB Hyderabad), B.Tech. (IIT Kharagpur), M.Tech. (IIT Kharagpur) 

                                    Cracking the Indian M&HCV market 

   Topic:          Sales Strategy, Differentiation, Value Proposition     

   Characters:  Namit, CEO SAFA HX       

                       Mahesh, Sales Head SAFA HX

                       Rajan, Sales Head, North Zone, SAFA HX 

SAFA one of the leading Indian Light Commercial Vehicle (LCV) manufacturer had launched a new product line of Medium & Heavy Commercial Vehicles (M&HCV), called SAFA HX in the Indian market in collaboration with HX Auto Corp, a leading American M&HCV manufacturer. Driver comfort and better business economics are being claimed as differentiators for transporters. 

It has been one year since the launch, however SAFA HX has only been able to capture a market share of less than 1% (0.5%) in the Indian M&HCV market. Relatively higher pricing for a new brand is being claimed as the key reason by customers for lower adoption. SAFA HX is looking for ways to improve its market share. 

Industry and Background The Indian M&HCV market is a highly competitive market, with Tata Motors Limited (TML) leading with 47% market share in FY17. One of the pioneers of the Indian commercial vehicle industry, TML has established itself as a strong and trusted brand by providing rugged vehicles with high load carrying capability, good fuel efficiency and a vast service network, all of that at very competitive prices. All these factors impact the business economics of any transport business, thus making TML as the most favoured brand of transporters. There are two other major players competing for the top position, namely Ashok Leyland (32% market share) and Eicher (11% market share). 

SAFA HX launched into the market with big fanfare at the start of FY17, opening dealerships in 7 cities to start with and then ramping up to cover 27 cities through the year. States of Maharashtra, Gujarat and Rajasthan were the key focus reach areas in the launch year.  

Following are the key differentiators that SAFA HX is going to market with: 

1. Superior Driver Comfort:  Cabins, seating and the overall drive quality gives a passenger car like feel, thus delivering superior comfort for the driver of the vehicle. 

2. Superior Business Economics: Higher load carrying capability, lower turnaround time due to better drivability, and at par fuel efficiency to deliver higher profit potential for the transporters. 

 However, in spite of all efforts and a strong brand name in the LCV market, customer adoption was low and thus SAFA HX closed with only 0.5% market share in the M&HCV market in FY17. 

Mandate from the Top 

The Board of Directors in their last meeting in February 2018 took stock of the situation, and tasked the top management to devise a strategy to increase market share to a minimum of 5% by end of FY18.  

“Namit, we need to correct this. We grant you that it is early, but we cannot let this slide. We are a leading brand in the LCV market, we cannot be a fringe player in the M&HCV segment” opined the board, with Namit, CEO SAFA HX nodding in agreement. 

“I concur gentlemen. Give me 2 months and I will come back to you with a concrete strategy that works”, said Namit. 

The board agreed and granted Namit the time he had asked to address the situation. 

And the Engine Starts 

Namit was a newly recruited CEO for SAFA HX which was setup as a new business entity. Namit had come with an illustrious career in the commercial vehicle market and was part of the top management at one of the other leading commercial vehicle players. He had the confidence of the board as of now, but for how long was a question. 

Namit immediately summoned Mahesh, Head of Sales with an intent to hit the ground running. Back of his mind he knew that time might be running out for him, and may be for Mahesh as well. 

Mahesh, a SAFA incumbent, was Sales Head for North Zone for their LCV business and was rewarded with the National Sales Head position in this new venture. This damp squib of a launch was one of the rare failures that Mahesh had seen in his long career of 30 years in sales. 

“Mahesh, we are on thin ice here. I want you to come up with a turnaround strategy proposal within one week, then we will pick a pilot market to test run the strategy and then fine tune basis the results.”  

Namit was as crisp as one could be in spelling out the task. Mahesh agreed to the brief and promptly made his way out of Namit’s office. 

As a first step, Mahesh called an immediate tele-conference of his four zonal heads. A long two hour conference call is what ensued, with all four zonal heads sharing their insights on why the customer adoption is low and how it can be improved. There were quite a few valuable inputs, however what stood out for Mahesh was what Rajan, Head of North Zone said, 

“Sir, our sales pitch is around improved driver comfort and superior business economics. However, 

firstly since most of the fleet owners don’t drive the vehicle they don’t care much about driver comfort. Secondly, better business economics is
just a promise which might be realised in future. Why should the customers trust us today? To make things worse, we are priced higher than the market leaders which makes it further difficult for us to convince customers.” 

Rajan was now a pro of 15 years in the CV industry and was Mahesh’s direct subordinate during his SAFA days. Mahesh had a lot of admiration for Rajan’s skills as a salesman and as a leader. This is why Mahesh had pulled a lot of strings to get Rajan transferred into this new venture and into his team. 

“Rajan, I think you have hit the nail on its head. But what do you propose we can do?” said Mahesh trying to see what Rajan is up to. 

“Sir we need a new sales approach, built around business economics like we did for the LCV market at SAFA” said Rajan, clearly hinting towards something he had in mind but was hesitating to spell it out directly in front of Mahesh. 

“I see what you are saying Rajan. Thank you all for your valuable inputs. Let me discuss it here and will update you all on the way forward”, said Mahesh, ending the conference call. 

Just when Mahesh had kept the phone down from the conference call, he receives a call from Rajan. 

“Sir, I can do it like we did for the LCV market. Give me a chance to conduct a pilot execution in Rajasthan. We will demonstrate the superior business economics to the customers. I will come back with a complete plan of implementation and budgetary requirements within two days”, said Rajan making it difficult for Mahesh to say no to his zeal and enthusiasm. 

The Dilemma 

Mahesh had full confidence in Rajan. He knew that Rajan was the right man for the job. However, Rajan was fairly new to the dynamics of the M&HCV segment and Mahesh was not sure if Rajan in his exuberance understood what was at stake.  

Is it the risk worth taking, was the question for Mahesh. 

1. Basis the information in the case, elaborate on the reasons why SAFA HX could not make a significant dent in the M&HCV market in the first year of its launch. 

2. What do you think is Rajan might be hinting at? How would you go about establishing superior business economics to transporters, if you were Rajan? 

3. Do you think Mahesh should allow Rajan to conduct the pilot? State reasons for your choice. 4. What other options does Mahesh have?