1. The British Motorcycle Industry at a Crossroad
Group 3
Annie Wong, Anne Ning, Albert Qian, Albert Liang, Huck Wu, Ted Zhao
January 17, 2005
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

2. Outline Case introduction Markets & Products Competitors
Design & Production
Selling & Distribution
Recommendation
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

3. About NVT (Norton Villiers Triumph)
Case Introduction
About NVT (Norton Villiers Triumph)
British motorcycle makers
Competition HONDA and other rivals
Need more suggestion to re-evaluate strategic alternatives
They are last British motorcycle industries.
They face of competition from Honda、other Japanese rivals、BMW、Harley………
NVT’s production had fallen from 130 thousand bikes in 1960 to 20 thousand in 1974,and seemed difficulty to fast recover.
They have tried to transit reorganizations the group to save their position in global motorcycle industry, but they are defeated.
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

4. Selling & Distribution Recommendation
Case introduction
Markets & Products
Competitors
Design & Production
Selling & Distribution
Recommendation
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

5. In the Markets : Market & Products
Sold mostly in North-America and Europe
Mostly buyers used motorcycle for recreation
In 1974,total buyers over 1.4 million
Now, the market demand appeared to be reaching saturation. though some consultants forecast a 4-5% annual growth rate for the coming years.
In U.S., man and younger then 25 age is target customers.
Typical buyer before purchasing will get the product attributes from many ways. Including owners、dealers、monograph、manufacturer’s literature、competition results and test drives.
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

6. Size of U.S. Motorcycle Market
Market & Products
Size of U.S. Motorcycle Market
NVT’s products just seize on total demand about 1.7%
20000/
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

7. Factors Influencing Buyers
Market & Products
Factors Influencing Buyers
Product Attribute
Percent of
Buyers Considered
Quality of workmanship
94.6 %
Availability of parts
91.6 %
Handling / Performance
88.9 %
Power / Acceleration
85.9 %
Styling / Appearance
84.6 %
Warranty coverage
72.1 %
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

8. Premiums price influencing demand
Market & Products
In the Products
Products range
Premiums price influencing demand
Bikes were often classified by engine displacement.
Small bikes for economical commuting
Luxurious super-bikes for cruising
Rugged off-road bikes model
In same displacement class, competitors did set different prices, but the demand would neither rise nor fall much as long as the model’s price was within 10% of retail price.
The price more than 10% would cut demand, and premiums above 40% would wipe out all demand.
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

9. Selling & Distribution Recommendation
Case introduction
Markets & Products
Competitors
Design & Production
Selling & Distribution
Recommendation
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

10. Who are the main Competitors?
Honda (and other Japanese rivals)
Harley Davidson (U.S)
BMW (German)
Market Shares in the U.S. of 1968
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

11. Competitors Honda Model offer in every displacement (125cc~750cc)
Had a succeeded 1st in market for small motor, but expended to larger class.
Modern but cheaper
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

12. Competitors Harley-Davidson
Protected by U.S government for their employment
Maintained a loyal following in U.S.
It’s image is big and tough
The last U.S made option
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

13. Competitors Arno know that
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

14. Competitors Tom know that, too
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

15. Competitors BMW Very high quality.
More expensive than other rivals’ equal displacement model 30%~40%.
All models were variants of a single engine and frame design
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

16. Competitors Market Shares in the U.S. of 1968 &1974
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

17. Selling & Distribution Recommendation
Case introduction
Markets & Products
Competitors
Design & Production
Selling & Distribution
Recommendation
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

18. Design & Production Design Honda NVT
Involved commercial review and production cost analysis before design
Designed by designer only
Followed a precise flow chart. More standardized parts shared
Pure design consideration with non-standard parts
R&D: 1300people,
0.75 people vs 1M
R&D: 100people
2.7 people vs 1M
18months from idea to production
36months from idea to production
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

19. Design & Production Engine and Spare parts Production Honda NVT
Production volume was 2M per year
Low volume
Plants were specialized. Engine and frame parts were in different area
3plants not organized to differentiate parts production locations
Automated production with advanced technologies
Used very outdated machine with labor intensive to produce engine and frame parts
Accumulate extensive experience to reduce 20% cost
No modern production experience accumulated
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

20. Design & Production Assembly Honda NVT
Labor intensive, 16,400employee in assembly plant
Most of 2950people involved in engine and frame parts but minority involved in assembly
Cycle time down to a bare minimum
NVT assembly cycle time was about 1.5 times longer than Honda
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

21. Procurement of raw mtl and compts
Design & Production
Procurement of raw mtl and compts
Honda
NVT
Strategic cooperation with supplier, even in house-build
Big supplier consider NVT as small customer
Share and educate supplier with new technology, growing up with supplier
NVT’s supplier were reluctant to adopt the latest technology in production
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

22. Selling & Distribution Recommendation
Case introduction
Markets & Products
Competitors
Design & Production
Selling & Distribution
Recommendation
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

23. Selling and Distribution
Total costs were 20% of overall retail sales
The distribution subsidiaries of Honda, NVT, and other competitors sold motorcycles to independent dealerships, which in turn sold the machines to riders.
Handled physical distribution
Deployed advertising and promotions to pull consumers into dealerships
Gave dealers incentive and support to push bikes through the channel
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

24. Physical distribution
Selling and Distribution
Physical distribution
It was straightforward
Freight services
Packing materials
Duties (3% for output to U.S.)
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

25. Advertising and promotion
Selling and Distribution
Advertising and promotion
In the U.S. in 1975
Consumer advertising and promoting budgets
Honda $10 million
NVT $800 thousand
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

26. Selling and Distribution
Dealer relations
NVT offered considerably less supply to its dealers than Honda or other competitors
Dealers were willing to accept a dollar markup on each Honda bike that as much as $120 lower than the markup on each British cycle
Honda sold its motorcycles in U.S. through more dealers than NVT
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

27. Selling and Distribution
Data from BCG:
Motorcycle market
In U.S.,1974/75
Retail value
Of Honda
=P(H) *Q(H)
=$477.7mm
Of NVT
=P(N) *Q(N)
=$26.3mm P S H
P(H)
D(Honda) N
P(N)
D(NVT)
Q(N) Q*
Q(H) Q
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

28. Selling and Distribution
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

29. Selling and Distribution
The curve of U.S. Motorcycle Market,1974
by Displacement Class
D1 <750cc
D2 750cc and above
Only at P* is MR = MC
Get maximum profits
So NVT supply at P*
for 750cc and above
maximum profit P
S S=MC P* MC P’ MR D2 D1
Quantity
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

30. Selling & Distribution Findings from the case Recommendation
Case introduction
Markets & Products
Competitors
Design & Production
Selling & Distribution
Findings from the case
Recommendation
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

31. Recommendation
Penetrate into new emerging market in Southeast Asia like China with appropriate advertisement
Move Motorcycle assembly line to Southeast Asia
Outsourcing the engine and frame parts in Asia
Close two factories in England and centralize global R&D function in Meriden factory, but design consideration must be changed to cost oriented and components standardization
Sell low cost Motorcycle back to US and Europe to beat Japanese makers
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator

32. Thank You! Q & A
Picture source: BMW, and HONDA’s web sites; the movies of TOP GUN, and Terminator