successful turnaround of tvs suzuki

THE STORY OF HOW IT WON , LOST AND WON AGAIN!!!!

JITENDRA PAL SINGH 

                                        The Beginning!!!

Mr. Thirukkurungudi Venkata Sundaram  (TVS) Iyengar was an   industrialist,  the  founder  of   TV  Sundaram  Iyengar  and  Sons group of companies.

He established the T. V. Sundaram Iyengar and Sons Limited in 1923 .

The group diversified into 2 wheelers, automotive components , automotive spares , computer peripherals and financial services.

TVS Group was successful in Automotive components and Two wheeler businesses .

TVS Group emerged as India’s Third leading two wheeler manufacturers one among the top ten manufacturers of bikes .

Some of the TVS Group companies are : TVS Motor Company , Sundaram Finance, Sundaram Motors , Sundaram

Brake Linings, TVS Logistics .

TVS Group business philosophy worked with Quality , Service , Reliability , Sense of Ethics.

TVS MOTORS

o TVS Motor Company Ltd. is the flagship company of the TVS Group.

o TVS Motor was founded in 1978 .

o TVS Motor Company is the first two-wheeler manufacturer in the world to be  honoured the Deming Prize for Total Quality Management .

SUZUKI GROUP

Suzuki dates back to 1903 when Michio Suzuki founded Suzuki Loom Work in Hamamatsu in Shizuoka , Japan .

The company focused on the development and production of

complex machines .

In 1937, the company diverified into manufacturing cars for the Japanese market.

In 1952 , it manufactured its first motorized cycle called Power free.

TVS - SUZUKI

• Suzuki entered India through the TVS Suzuki joint venture, originally incorporated as Indian Motorcycles Pvt. Ltd in 1982.

• The company came out with a public issue in 1984 and was named as TVS Suzuki. In the same year, the company launched its first 100-cc motorcycle, Ind Suzuki .

INITIAL SUFFERINGS

• The company failed to turn this initial success of Ind Suzuki into sustainable profits due to the high import content of the vehicle, and it posted losses up to 1986 .

• The merger with Sundaram Clayton’s moped division provided temporary respite to the company .

• In 1987, the company launched TVS-Champ the moped for the urban segment .

• TVS- Suzuki’s products lagged behind in performance and fuel efficiency

INITIAL SUFFERINGS

• TVS Suzuki posted losses consecutively for three years 1989-      1991 .

• In 1990-91, due to labour problems, the company had to declare a lock out for 3 months.

• The company could not meet the new emission norms

   REASONS FOR DECLINE OF TVS SUZUKI

Outdated 2 Stroke engine technology .

High capital cost as compared to Hero Honda and Bajaj Kawasaki 

Lower market penetration and poor distribution and marketing efforts in North India .

High level of market competition from technologically superior products like four stroke engine bikes of Bajaj and Hero Honda .

STRAINED RELATIONS- DANGER PARADISE

PART -1 THE DENIAL ( 1992)

- TVS approaching Suzuki for financial aid but was denied and

obstacles were created by Suzuki Management.

PART -2 COVERTLY AMBITIOUS SUZUKI ( 1990’S)

- Suzuki having 26% stake wanted to increase the equity holding

and more management control .

INTERIM RESOLUTION

( TVS AND SUZUKI)

Both partners decided to resolve the matter.

Suzuki sales in Japan and Europe was on decline and India

appeared to be a emerging market.

TVS needed Suzuki brand name to strenghen its holding in

Indian motorcycle market.

THE BREAK- UP

On September 2001, Sundaram Clayton and Japanese automobile major Suzuki Motor Corporation (SMC), partners in the joint venture TVS Suzuki (TVS Suzuki), announced their decision to break-up .

TVS bought the 25.97% stake of Suzuki for Rs 90 million, increasing its stake to 58.43% .

Suzuki signed an agreement with TVS, according to which the existing licensing arrangement was to continue for 30 months. TVS agreed to pay royalty to Suzuki for this period.

Suzuki realized that it would not be able to get a majority holding in TVS Suzuki and that it had only two options –either remain in the joint venture as a passive partner or move out to explore other .

Suzuki had invested only around Rs 60 million, whereas it had received around Rs 900 million in royalties and dividends over

the years. So, the stake sell off was not a bad move.

AFTER EFFECTS !!

• In the motorcycle segment, TVS was now on its own to compete with the technical and financial might of other Indo-Japanese joint ventures .

• TVS’s over-dependence on two-stroke technology was a definite handicap as the market had almost completely switched over to four-stroke engines .

• it was estimated that TVS would have to spend around Rs 2 billion to convert to four- stroke technology . 

TURNING IT AROUND !!

TVS-Suzuki decided to become a product-led company with strong focus on R&D and production engineering.

In 1991-92, a turnaround strategy was formulated for execution.

Embarked on an exercise of cost cutting , slashed manpower and controlled inventory.”

Total number of employees reduced from 1855 in 1992-93 to 1272 in 1994- 1995.

Efforts paid off as the company launched five new products in 1992-93

The company paid special attention to the skill development of managers, sales officers & service engineers .

• TVS Suzuki interacted closely with the dealers to keep their motivation levels high and also conducted customer-retention program

LAUNCHES THAT MADE THE STRATEGIES A SUCCESS

• Launched India's first fully indigenously designed and manufactured motorcycle (2001)

• Launched the revolutionary VT-I engine for the best in class mileage in TVS Centra (2004)

• Launched TVS Apache - first bike to win 6 awards in a row (2006)

• Apache RTR - first two wheeler in India to have racing inspired engine and feature (2007)

• TVS Flame, TVS Scooty Electric Vehicle and Three wheeler TVS King launched (2008)

• TVS Apache RTR 180 and TVS Streak launched (2009)

RESULTSo Plant capacity enhancement resulted in greater profitability and

market share .

o R&D ensured leadership role.

o Energy management led to savings of Rs 1-3 Crs per year .

o Reduction of excess man power resulted in increased profitability .

o Inventory management led to lower costs and provided an impetus to beating the competition in securing a large market share .

o Product diversification ensured that market requirements were met in all categories of two wheelers

CONCLUSION

• TVS motors has come a long way across the tough terrain of business and is still going strong in the market.

• Core principles of quality, reliability, sense of ethics and service have served as the organization backbone, helping it stand strong in difficult situations .

• An inspirational turnaround story of winning a losing battle with optimistic attitudes striking down all odds.

                            THANK YOU !!