Tuesday, December 7, 2010
Will Mahindra and Mahindra's foray in bikes segment lead to the dilution of its brand equity?
“Will Mahindra and Mahindra's foray in bikes segment lead to the dilution of its brand equity?”
The same question was raised when the company decided to invest heavily in its SUV/MUV manufacturing business. Mahindra & Mahindra was always more known for its farm equipment and tractors but with the advent of Mahindra in SUV/MUV, perceptions have changed. They lead this category with 55% market share with brands like Scorpio, Bolero & Xylo. This success has given enough confidence to the company that the consumers appreciate the products of Mahindra.
The company has acquired all the competence to enter this category and has a good control of the value chain. Talking about the brand equity, I don’t think that this move can dilute the brand equity because they have not only succeeded in the SUV/MUV category but have also been doing good in the scooterette category for last two years. Theoretically also, consumer imagery extends beyond the perceived price and the store image to the producers themselves. Manufacturers who enjoy a favorable image generally find that their new products are more readily acceptable. Mahindra & Mahindra has a very strong brand equity in rural India because of its success in farm equipment and SUV’s like Bolero which are extensively used in rural areas. Hence Mahindra already has an advantage in entering the rural markets.
M&M entered the two-wheeler segment by acquiring Firodias-promoted Kinetic Motors two years ago and currently sells three models of scooterettes. It has sold 1.5-million scooters in the 12 months. The company was not present in the bikes segment so far which has been witnessing good growth. Since the image of the parent brand is one of quality and bikes can be logically linked to the brand, consumers are more likely to have positive associations to the new offerings introduced.
Since all the synergies are favorable for Mahindra, I believe that their entry into the bike segment won’t affect the brand equity of the company.
Ragini Iyer, IIM S
Mahindra & Mahindra has forayed into the motorcycle segments with two of its products, the 110 cc Stallio and the 300cc Mojo. While Stallio in the entry level segment is being positioned as stylish and reliable, Mojo is all set to carry the tag of being the fastest bike. Being a new entrant in one of the most competitive markets, the onus is on Mahindra to prove its competency and not let its brand equity dilute. Unless the product is highly innovative, it is too risky to venture into a new market. The same seems to be happening in the case of Stallio and Mojo. Both the products are not really differentiated from the existing brands and do not possess any of the ‘extraordinary features’ required to crack the market share. It is also a well-known fact that 80% of the motorcycle market is captured by giants like Bajaj and Hero Honda and TVS.
Talking about the company’s brand equity, it has never been a very big name in the two-wheeler sector and it is trying to leverage the brand image of the parent group. The failure of these brand extensions is bound to jeopardize the overall brand image. Though it has been the largest tractor producer in the rural market, one should not forget the stronghold of Hero Honda in rural India. It already has almost 50% market share in the motorcycle segment, 40% of which is from sales in rural India. Every other motorcycle producer has been eyeing for its share of pie in the rural market. Also, the well-established brands have an edge over Mahindra to influence a potential customer’s purchase decision. Being a late entrant, the scenario would be even more competitive for Mahindra to boost up its top line.
Mahindra’s core competency in tractors and expertise in the utility vehicles have resulted from a continuous learning process over a period of time. The same may not be true for the new 2- wheeler vertical of the company which started just two years ago. Mahindra has seen failures in joint venture operations with Ford and Renault. Despite the synergies like market growth being robust, sales promotion being aggressive, one cannot be absolutely sure about the success of these newcomers. Another product failure may either project a negative or a new image, thereby diluting its brand equity.