EXPORT POTENTIAL OF INDIAN BICYCLES IN THE U.K., FRANCE AND THE U.S.A.
DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION
BY MOHAMMAD IFTIKHAR HUSSAIN
B.Sc. (Hon's), M.B.A. {Final)
UNDER SUPERVISION OF Mr. SYED ASIF HALEEM B.Sc. Engs. (Mech), M.Sc. Engg. {Industrial), M.B.4.,
DEPARTMENT OF BUSINESS ADMINISTRATION FACULTY OF COMMERCE ALIGARH MUSLIM UNIVERSITY ALIGARH 1982 ^^:-^U/ si Vv'f V/
DS381 ACKWDWLEDGEi\gNrS
With depp sense of oratitude, I thank AT* Syed Asif Haleem, Header, Deo'artment of i3usiness Administration for his valuable guidance and encouragernent.
i.iy thanks are Jue to Prof. P.'afizzudin Qureshi, !Ic.jd md Chairnan, Oeptt. of .business 'Vininistration for his valuable suqjestions.
I rocord my thanks to Jr. I^iajamul Hassun, Ilpader, X'ott. of Bjsinoss Administration and M/o -».-i. Ozair vsnd Kali;.> '.ohd. Khan for th^ir valuable sagc;estions.
Lastly 1 thank 3r. i-lohd. Ishaq for his patronage and encouran lent during tho course of ny s+udy in this University,
( J^IOHArvM/^ IFTIKHAR HIBSAIN) To my Parents, CUNTdNTd
PAHT I i. iDHLJ :31CYCIii LVJ'JJTaY - A iVU'S LYJ 7UV1 .... i
2. irDlAN MC/(ZLi liJUjSTHY .... 6
miy II
3. THh U.K. iiCYCI£ >.rti*JIT ...... 19
4. TIU FX:HGH 3ICYCL£ iVuAfKZET ...... 42
5. Tlili U.3.H. BICYCLi: /irt^LiT .... 57
6. .3I3LlOGa^i.l^Y 72
*.*** PART - (I) l^ORLD BICYCLE INDUSTRY ~ A bird's eve view
For millions of peoole the world over, bicycle is an indispensable part of their lives. In India it is oerhaps the only mode of conveyance fp^a vast majority of our populace Based on the recent survey^of,Indian Institute of Public Opioion, the per capita consumption of bicycle will rise to one bicycle forr every ten persons by the year 2000 A.O.
In west people are already well aware of the hazards of air pollution which results from the evergrowing traffic and exhausts from the automobile engines. Accordingly they are taking more and more to cycling particularly for short distance travels. But Indians are unaware_^f the hazards of the air pollution. The Late Dr. Paul Dudley V/hite - a noted American heart specialist opined, "Establishment of cycling as a routine in the daily life of Americans, young and old, can become one of the most vital steps in restoring health and vigour to us all". A vigorous cycling for about half an hour every day is sure to make a person active and agile. It is high time that we heed to the advice.
In America, one factor which has encouraged the people to take to cycling in preference to automobiles is the availa bility of bikeways. About 4000 kms of bikeways are already in use there. l*roviding of bikeways in India will take a long time. - 2 -
It is due to the above mentioned reasons that the demand for bicycles is increasing tremendously. World imports of bicycles have increased more than two fold during 1975-80 from US $ 611 million in 1975 to US $ 1399 million in 1980. Imports have grown at an annual rate of 28 percent during the period 1975-80. The USA accounted for about one fifth of the world imports in 1980, followed by FHG (15/^), the Netherlands (9^), the UK (8%) and France (7^). Among the Middle East Countries Iran is the predominant importer, its imports of bicycles in 1978 were of the order of over US $ 29 million. Saudi Arabia (US $ 4 million) Kuwait (US ii> 0,6 million)^re the other leading importers in that region,
Japan accounts for about one fourth of the world supplies of bicycles and parts, Italy rajnked second in 1980 having a market share of 16,2 percent, FRG is the other leading exporter from among the developed countries, accounting for 12.6^ of the world market, Korea is the leading exporter of bicycles from among the developing countries with a market share of 1*6%, Mexico and India had a market share of 0.8 and 0.6^ respectively in 1980,
Analysis of imports and exports of bicycles of the developed countries reveal that demand exceeds local supply in many of the countries. Thus there are good opportunities for foreign bicycle manufacturers to increase their sales to western - 3 - markets. Parallel with the increased demand for bicycles, there is a sharp increase in imports of components.
The concept of bicycle differs throughout the world. In India, China and USSR heavy bicycles are produced mainly for use as a means of transport. But in Western countries, and to a large extent, in Japan, new desions and styling and flam- buoyant colour scheme as well as promotion and advertisement have transformed the bicycle from a means of transport into a socially acceptable consumer item.
Although all large bicycle manufacturing plants in the developed countries are partly automated, bicycles are still, largely assembled by hand. The threading of spokes, fitting and adjustment of chains, the adjustment of gears, the balancing of wheels, the adjustment of saddles, handle bars and the adjustment of brakes etc. can't be automated and must be done by hand. Manual skill, therefore, plays large role in bicycle assembly.
India ranks as the fifth largest bicycle manufacturer in the world, the first four being the LBA, China, The USSR and Japan. The Indian industry is further glared to manufac turing the conventional Roadster bicycles/ These bicycles constitute about 40% of the total bicycles. Projected total bicycles sales in leading countries like the USA, till about 1990, do not -«**©»r-aTTy^change in the ratio of 40%, _ 4- **
Many innovations and ch^mges have occurred in the bicycle industry in the areas of design, use of now materials for bicycle construction and methods of manufacturing. Shimano of Japan, the largest manufacturer of bicycle components in the world have introduced a complete system concept, where each component is designed to work in complete harmony with the other to produce the best results. These system components include chain wheel, free wheels, "hub, chain etc. Some companies have introduced even 15 and 18 speed bicycles and even bicycles with infinitely comparable speeds^ Another important develop ment in the transmission system is their kik-shift system developed by kik-shift transmigsion Inc. Louisiana, in which the gear shifting is done by kicking the pedal,Considerable efforts have also been made for reducing the weight of bicycles by using light weight material having high tensile. The most commonly used material is 20-30 carbon steel tubing having a high tensile strength. Further search for light weight and high strength material led to the development of chromium molybdenum steel tubing for bicycle frame.
In contrast Indian industry lacks research and develop ment facilities and thus, there has not been much change in the design of bicycles manufactured by it. The industry is not able to cope with demand of even conventional bicycles at home and from other countries in Asia and Africa. No attention has been paid by it to improve the quality, bring out new designs - 5 - or produce light weight model etc. Though some of the units have installed modern equipment for certain operations like electroplating, painting, heat treatment etc» for increasing the production and to improve the finish^ still a lot needs to be done for selection and development of latest designs to capture the export market in the advanced countries. - 6 -
(II) I^DIAN BICYCLE Il^USTRY
India largely depends on bicycles ds a means of conveyance for the common man. Even in industrially advanced countries, the use of bicycle is growing for reasons of health, pollution and congestion. The USA has got today far greater number of bicycles on roads than India, a far bigger country.
The bicycle industry's origin can be traced to the early years of this century. It was m 1910 that two small units were established in Calcutta. In the initial stages the industry did not make much headway and foreign bicycles had a flourishing market in India. It was in 1939 that bicycle industry came into existence in India. But during and after World War Ilnd, imports of bicycles, became very difficult and so the development of this industry started. In 1941, with a large unit in Bombay, a few units started the manufacture of bicycle parts and acce ssories in the Punjab for the replacement market.
Systematic growth began only after independance with the begining of planning ero. Owing to various protection measures and incentives granted to indigenous manufacturers by the Govt, many units were established both in the large and small sectors between 1950 and i960. However til] late i960's the production continued to be meagre for that even quite a large number of components and other inputs were being imported. However with the establishment of industrial townships, construction of roads - 7 - in urban and even remote rural areas, increase in trade between small villages and towns and the rise in the standard of living of the people under the impact of the successive five year plans are the important reasons for the increase in demand for the bicycles.
To give some protection to indigenous bicycle manufac turers, the Govt, adopted a policy of progressive reduction of imports. This helped the indigenous manufacturers to eliminate competition from foreign manufacturers and to meet the demand for bicycles by producing them within the country. The import of bicycles (complete) was allowed till 1957, Thereafter only raw materials and components were allowed and that also on a selective basis. This policy made it possible for small scale industries to assemble complete bicycles at lower capital investment by mafiuT'dclu.Lliig only a few parts in their factories. Gradually the production of goods imported also started.
At the end of 1980, Indiawcis one of the largest producers of bicycles of wcrfld and rankalfifth in the world bicycle production. 90^ of the country's production is concentrated in the north. In 1978-79 India produced 3.6 million bicycles and the production figures for 1979-80 are over 4 million bicycles.
About 20?^ of the total bicycle production in India is accounted for by small industries. The capacity covered by industrial licences, letters of intent and registration with
Directorate General of Trade & Development (DGTD) is of the _ 8 -
order of 4509 lakh complete bicycles per annum. The annual installed capacity of units in production is 57.01 lakh bicycles and it is estimated that there are more than 300 units in the small sector engaged in the assembly of bicycle parts. Small manufacturers manufacture sophisticated parts such as chains, spokes, free wheels, hubs, chain wheels and cranks. Quite a fev large manufacturers buy these components from small units.
Ludhiana happens to be the nucleus for the manufacture ol bicycle parts and components for the cycle industry. The geogr^ phical concentration of the industry in north makes it clear th£ if the cycle industry had to grow, it had to be located in Ludhiana. Besides medium and small units, all big manufacturers lik^-Aties-yHero and Avon are in the north. It is also to be noted that cfycle manufactured in north, whether small, medium or large scale, have thrived far better than their counterparts elsewhere in the country. This is clear from the table given below.
TABLE 2.1 : Statev/ise Distribution of Cycle Units in India.
State Bicycle units Bicycle parts
Mahrashtra 1 7 Tamil Nadu 1 5 Uttar Pradesh 3 5 Punjab 5 22 Haryana 2 4 Andhra Pradesh - 2 West Bengal 1 5 Assam 1 1 Bihar i Gujrat - 1 Ketala - 2 Delbi . 3 - 9 -
Of the total 15 bicycle units and 57 spare part units; 10 bicycle units and 31 spare part's units are located in the northern India.
Hind cycle Ltd., the Bombay firm was an initial supcess but later faceJ bad years and had eventually to oe takcm over by the Govt. Hind's takeover was followed by that of S/n Raleigh's the manufacturing firm that c^cutta's Sen & Pandit established in 1952. Sen Raleigh as the name indicates was set up in colla boration with the famous Raleigh Industries of I^fottinghara, UK, then the largest cycle manufacturer in the world. Desoite its slow decline of rate, Sen Raleigh has remained formost in quality bicycle production in India. The 25,000 odd cycles a month rolling out of its plant near Assansol in the heart of the coal mining and heavy engineering district in eastern India ure oriced at an average of Rs, 600, high by Indian standards but are assuredl of the best quality.
Hivallijig Sen Raleigh is anoth r quality manufacturers, T.I. cycles (India) of Madras. T.I. is again a British assisted company and interestingly its mo+her company in England, Tube Investments, has merged now with Raleigh of Nottingham. But here in India the two associates reTiain rivals and T.I. has recently tightened belts to actually out oerform Sen Raleigh in quality bicycle production. T.I.'s BSA Deluxe, launched with high budget advertisement compaign is light, sleek and attractive and is poised to set records in the Jrban centre sales. "We are already selling more than Raleigh" said M.P. Sharma, .a T.I, executive. - iO -
Sen Raleigh and T.I. may be quality manufacturers, but their production figures ranging from 25,OCX) to 30,000 a month, are no where near those of the North Indian firms, Hero, Atlas and Avon, the top three of the industry. Hero based in Ludhiana, Punjab, markets over one lakh bicycles every month, mostly low priced models. Close second to Hero is Ktlas, 80,000 a month, the top producers for many years. Atlas, its factory at Soneput, 30 miles jiorth of Jelhi, was set up by Janaki Jas Kapoor of Lah-eiSr who rivalled oudhir Kumar '3en, founder of ^en & Pandit, as the leading r-itail^rs of imported bicycles in the pre-indepen- dence days.
Avon bicycles with 75,0'W cycles oer month ranks third in the production. Avon too has its factory in Ludhiana and this town has ov^ r the years grown to become the virtual centre of India's cycle manufacturing industry, iesides factories of Avon boasts of several small scale cycle units and hundr^ of ancillary industry workshops. Almost ev^ry household here has a factory of sorts in the backyard;/a-paTt from cycle parts, the little workshops also turn out/serving machines, electric fans and a host of other consumer iVeins*
The level of production achieved in 1978-79 by the bicycle industry is 5 years behind the original 4th plan target set for 1973-74. In case of small scale units, capacity utilization came down from 58?^ to 44p^ from 1975-76 to 1978-79. The small units have taken for granted the protective market. According to the survey conducted by Indian Institute of Public^^inion, the per capita consumption of bicycle will rise to one cycle for every ~ ii - ten persons in the year 2000 A.D. In i950-5i there was only one bicycle for every 36000 persons. At present there is one bicycle for every 250 persons in the country.
There has been a steady rise in the production of the bicycle in the country since 1962, During 1965-70, a period of near complete capacity utiliz TABLE 2.2: Production of Bicycles from 1950-51 to 1979-80. Year Quantity Year Quant ity (Q = ',000 nos ) 1950-51 99 1975-76 2330 1960-61 1071 1976-77 2677 1965-66 1574 1977-78 3184 1970-71 2042 1978-79 3718 and capacity ran almost parallel for the next five years main taining the gap close to 1,50,000 units. In the next two years, installed capacity was stable at 3,701,000 units and production in quantity terms shot up from 2,175,000 units in 1975 to 3,043,000 units in 1977. The unconfortable gap was reduced to 658,000 units later. Until 1968, production in terms of value had a slow but steady increase. The next three years saw heavy fluctuations and - 12 - again the value started soaring till it reached Rs 64,17,00,000. Even though production (quantity) has increased slowly production TABLE 2.3; Capacity and Production targets (Quantity = Million numbers) Year Capacity Production 1977-78 3.7 2.9 1978-79 1979-80 5.0 4.2 1980-81 5.7 4.6 1981-82 6.0 4.9 1982-83 6.5 5.2 1983-84 7.0 5.0 (vdlue) has rockotedl^ thus indicating a^ steeo rise in the costs of bicycle in the market. Production data from 1955 to 1974 (for a period of 4 years) shows that Austria had the highest percentage increase of 18.5/^ followeJ by Italy, France, Japan, FRG, the L6A India, Poland, the USSR and the U.K. In a period of 4 years, India has shown a growth rate of only 5.4:^ and this figure falls well below the world average of 7.8^. From over 1% in 1965 India's share declined to 5.75^ in 1974. As far as the world production is concerned, India stood 4th in the world market (in 1964) produ cing 2464,000 units lead by the USA (10,100,000) Japan (7,688,000) and the LSSR (4,147,000) units. FRG followed India with a produc tion of 2,444,000 units. India produces 5.73)!^ of the world production whereas the USA contributes 23.7$^. Japan contributes 17.87^ and the USSR contributes 9.64^. COCO h-iO 0( CO COCO Ox CM qo^O men00 CM 1^ lQOxS5r^»nvo Sb CM too ON Ox iooxcxJO tf) ^ NOh- too-* NO NO Cxj Ox-^ Ox in t CMNOxO 00 O-l iNOh- B QNO 00 NO ONO t«-Q oxr«-H ooco CO Ox •H CO Ox -4 CxjOx CO CM -ItHOh-O h-«n Tj- If) CO CO -H Ox ON-llOOOOx m Tl I GO I NOVO a •HOCsl Ox ON NO CO 00 5:j NO s ^ •H CO -I CO NO 00 cotfoocMh-^j^'StQoxKf^-^a cNi r- rOOOOOt^H" 00t»-CM'*~«Q'HNOtK.Oh'C0O-l I I I COt^^xSr^^Q^ONCMOxCM 0 CO CM HlO^*f)^^'^l^'<^Ox § ooNHOm OVON©N©00NO-4- (0 mrooOHi^^cMcor^NOcooox mrto in-4 J^NOroQxNO . CO CM CM -^cMn«n r- ?* aSRKSffXF^-^ a ^S^Sinox 8 X TfCMI coin NO r^ Ui NO CO CO r-cMin lox -•«-• oomoo (0 ox NO 00 NO nj CxI cM«n QOO^OOOCMQiO St*-co8oo ^no^•^f OOOCM-KK c -«c^co«M^ -•CMN©NOCMh-NO CM M NOXO CM CO CMCOJ CO I Q o CO (0 m +> (0 I V) i *:; «0 flS <3 10 aHiH •H H c Jfi3 Vl"00 <0 «« g 0">O">»«. <0p « Nigeria has been the largest importer of bicycles and parts from India. Its share of imports in the last decade has been around 25!?^. In 1975-76 with a share of 41% Nigeria touched an all time high when its imports fetched India Rs, 1003.06 lakhs. In 1976-77 its share fell to 25.75^ but still it topped the list of the importers of bicycles and components from India with an import of %. 558 lakhs. Iran and Indonesia follow Nigeria in their share of imports. Iran's share has been around 12>4 on an average and Indonesia has maintained its share of imports at 9/^. Their imports went to Rs. 316.2 lakhs and 192.3 IcOths in 1976-77. Following these toppers are Tanzania, T^aland, Bangladesh, Iraq, Afghanistan, Malaysia and -vlalawi. According to i3ire;ctor General of Central intelligence and Statistics, India's exports to all countries from Nigoria to Greece increased from ?s. 453.11 lakhs in 1969-70 to ^s. 2174.14 lakhs in 1976-77. The gradual increase in export of bicycles since 1966-67 resulted in an increase in the export value also. In 1970-71 there was a fall in exports resulting in a fall in the value also. From 1,27,857 units in the previous year, exports increased to 2,16,384 units in 1972-73. But the value of exports increased from Rs. 166.66 lakhs to Rs. 305.22 lakhs indicating a rising trend in the unit value of bicycles. Hardly 7-91^ of the production is exported from our country, leaving around 20 lakh bicycles for the domestic market. Accord ing to a study condTjcT&d two years ago, two thirds of the families in India do not /poces^ a bicycle. With nearly 40 million bicycles - 14 - now on the roads, more than 27 million are in villages. TABLE 2.5: Target and Export Performance (RS. in Corores). Year Performance .Target Original Revised 1976-77 6.24 1977-78 7.97 7.50 7.50 1978-79 8.48 8.00 1979-80 10.00 1980-81 11.00 According to the current industrial licensing oolicy for the bicycle industry, expansion of existing units will be TA3LE 2.6: Exports of Bicycle and its Shar^ of Total Indian Exoorts from 1969-79 (RS. in Cofores) Year Total exoorts Bicycle exports '/i share of bicycle exports 1969-70 1413 4.55 0.32 1970-71 1535 7.06 0.46 1971-72 1608 7.29 0.45 1972-73 1971 10.38 0.52 1973»74 2523 14.63 0.57 1974-75 3329 21.22 0.60 1975-76 3942 24.31 0.61 1976-77 5143 21.74 0.42 1977-78 5404 30.45 0.52 1978-79 5692 31.50 0.55 1979-80 5850 33.00 0.56 1980-81 5925 34.00 0.58 TABLE 2,7. Showing Govt, of India's Policy on Export, Imports with respect to Bicycles. Export J^Qgiyct* Bicycles Import Replishment; 25^ Materials Jfeitnitted to import; a « Carbon steel sheets/stripes/coils b . Spokes and Nipples (lO%) c * Electroplating salts and brightness d . Nickel/S. Nickel e , Tinplate seconds/secondaries (25%) f , G^P, Sheets/Stripes/coils (iC^) g . Bronze powder (2^ %) h . Sodium cyanide i . Titanium Dioxide 5 . Zinc k , All seconds/secondaries of all grades of carbon steel plates/ sheets/stripes/coils in coated condition {25%). Reflectors for bicycles Bicycles dynamo sets including lamps Stainless Steel sheets/stripes ^25?^) Packing materials viz. lew density polythene moulding pow<»r iX5%), Craft paper, p). Copper 10% Remarks; 1. Additional import replishment at 5/2% of the FOB value of exp orts will be allowed for import of the followinq items against exports of bicycles light Roadster (SLR) and other special models. i) Tyres and tubes ii) multiple speed hubs allay hubs derailleurs, and ace«ssorie$;iii) Hims; iv) High carbon galvanized cord of JL.Qi •tt to 4»& an. This will be subject to the condition that for eacj s^h M«irel« captured R»t n^re than one pair of tyres and tabes mm ptm'-^ xims dUl f^ anltispeed hubs oniir will be alloif^^ TABLE 2,8. Showing Cash, BEP, Duty, Drawback Incentive table for Bicycles for the year 1981-82. 1. Description; Bicycle 2. CCS % of FOB value for 79-80 to 81-82 ,7 -^ unless indicated otherwise '^ 3. Ministry of Commerce Letter No. & Dt. 12(i)79/EAC dt. 10.1.79 and i2<35), 79 EAC Dt. 5.11.79 4. Classification 1981-82 Policy A-.82 8. Allocation CuS-C-Ex 40^ - 6051^ - 15 - considered provided they undertake to export 5(^o of their produc tion. Foreign collaboration in the field of the manufacturing bicycles and parts will not be normally permitted. Bicycles as per the Govt, regulations are covered under compulsory quality control and preshipment inspection scheme. Bicycle industry in India provides nearly 40 lakh bicycles annually. About 907o of these are sold in the domestic market and balance are exported. Though the industry has become absolutely self sufficient and totally independent of any outside aid or assistance whatsoever; but still rather unfortunately it is facing a no. of problems which directly affect the oroduction and much more the cost of the production. These naturally in turn affect the pocket of the common man and the reasonableness of price. The problems mainly pertain to the inadenuate availa bility of inputs such asi- i) r>ower generation almost throughout the country is inadeouate to 'nf^et the needs of the industry and consumption in other sectors. For instance Haryana was till recently meeting only 40% of the / requirement of the industry. Consequently the production of the bicycles had fallen resulting in poor availability of goods to the consumer. 2) Bicycle industry uses thf^ furnance oil and kerosene oil for heating process and HSD/LOO for po^r generation. The non-availa bility of HSD is well known and it has seriously affected the industry which had installied captive power generation units for the use when the power was not available from state electri city board. The availability of other oils has also been erratic - 16 - and independable. The increasing cost of petroleum products due to^drnternational situation is further aggravating the cost of production of bicycle, 3) The inadequate availability of *:Ko steel which is the raw material of the bicycle industry has been largely responsible for low production in the bicycle industry. Certain catagories of steel have not been available for several months. Cold rolled sheets, wire rods, .VI.3. Rods of 25 mm are some of the examples. Suppliers to the bicycle industry for items like cold rolled strips and wires are constantly falling behind schedule only because they are not able to get the right quantity and quality of steel raw material such as skelp. The bicycle industry has consequently to work with fits and starts resulting in severe loss of production. Due to the poor availability of steel from main producers the steel available from mini steel olants has been in great demand, ouch steel was always more costly and has become further costlier as lack of power has affected their product!on. 4) As the supply of raw materials is alwayg' inde lend'able, the bicycle industry has to maintain a large inventory to try to avoid stoppage of production. Maintaining the inventory has become a big problem as it not only blocks heavy working funds but also has become very costly due to the heavy bank rate of interest. In the foreign countries the industry is able to work with a very small inventory of a few days or a week. In Japan, the industry has an inventory of only one day. In India we have to carry several weeks/months inventories which hinder the growth of the - 17 - industry and increas'^s the cost of production. 5J oince last year the prices of theyfndustrial raw materials had been going up continuously, "fho rnattjrials cost in a bicycle • ranges between 70 to 80;,o of the total cost. Vvith the increasing cost of raw raaterial anJ components, the cost of bicycle has also been increasing. increased orice in turn deoress the sales which result in the production going dovyn. It is in the national interest to maintain the prices. India is emerging as one of the major exporters of the bicycles and bicycle ports. This product makes a significant contribution to the pool of exports of engineering goods for the country. During 1978-79 India exported bicycles Lo the extent of 26 co-fores, exports are now practically to all parts of the world, A sharp rise in demand for Dicycles in the domestic as well as the export markets has been forecast by the Small Indus tries Service Institute (SISl). Drawing from the trend over the past decade the institute has placed the additional annual demand at 9.3 lakhs bicycles, Painting a bright future for the bicycle industry. Small Industries Service Institute expects the annual demand alone to rise from 4.4 million at present, to 5,8 millions by 1996-97. The future of the Indian bicycle industry is bright one because of spiralling prices of oil. The demand is bound to increase all over the world. The demand in India has been low because of low purchasing power of a common man. With the rising prices of the essentials, the need for bicycles for the yommon man is great. Providing credit en easy terms and in a simplified way for the - 18 - purchase of bicycles, it can go a long way to help the situation. India has most of the raw materials and inputs for the production of bicycles. To increase production and exports, to create employment opportunities, to develop ancilliaries and to make the bicycle available at a reasonable price, the industry needs Govt assistance. Haw materials and other inouts should be made available at reasonable prices from producers. Taxes should be reduced to a minimum. It may not be out of state to mention that the Sri Lanka Govt, realising the importaj^ce of this mode of Conveyance comoletely abolished the imoo/t duty on bicycle resulting in the generation of a very good demand for bicycles in that country. Following is the list of major manufacturers of bicycles in India. 1. M/5 Hind Cycle Ltd. 250, Thane VVorli Bombay - Maharashtra. 2. :^/S Hero Cycles ^t. Ltd., G.T. Road, Ludhiana, Jt^unjab. 3. M/3 Avon Cycles -fVt. Ltd., 9-R Industrial ^H^rea, B- Ludhiana. 4. JV!/S Roadmaster Industries of India Ltd., Industrial Area - Rajpura, Punjab. 5. M/S Deepak Industries, Gill Road, Ludhiana - Punjab. 6. M/S Super Cycles and Allied Products Industries,- New Super House, Gill Road, Sahibabad, Ghaziabad, U;P. 7. M/S T.I. Cycles of India Ltd., Ambattur, 11/12, North Beach Road, Madras, . 8. M/S Sen Raleigh Ltd., / P.O., Khanyapur, Assansol, West Bengal # 9. M/S Atlas Cycles Industries Ltd., ^ Industrial Area, G.T. Road, Soneput, Haryana. PART- II - 19 - (III) THE U.K. BICYCLE MARKET The United Kingdom of Great Britain and Northern Ire Land lies in the north western Europe. Its only land boundary is with the Republic of Ireland. Northern Ireland is a constitutionally distinct part of the U..\. Great Britain consistinq of one larqe Island and several small ones, comorises or England, Scotland^^jtp the north and Wales to the west. It is seperated from the coast of western curope*-6y' the English channel to the south and by the North sea to the east. The Northern and Western i^Jhores are washed by the Atlantic ocean. Ireland lies to the west across the Irish sea. The average temperature is i5°C in summer and about 5 C in winter. Average annual rainfall is 9CX) to lO'X) mm (35 to 40"). The language is English but V/elsh is sooken fairly extensively in w'ales. The religion i-s Christianity and tW large christian denominations are Roman Catholis^, Methodism, the United reformed church and the Baptist. The natioricTl flag (Proportions 2 by i) known as the Union Jack is a super imposi tion of the red cross of Saint George of England with white saltire of Saint Andrew of Scotland and the red saitire of Ireland all on a blue back ground. The capital is London. ECQNOiVlIC AFFAIRS; •pm U.K. is one of the world's major industrial and exporting countries. In 1975 over 2,0% of the UK's Gross domes tic product (GDP) came from manufacturing. Among the principal industries are those producing Iron and Steel, engineering, chemical, electronics, motor vehicles, aircraft, textiles, clothes and other consumer goods. T>e coal, gas, electricity, steel, - 20 - ship building, aerospace (50%) and atomic energy industries are nationalized as are the railways and the largest civil aviation group. Petroleum was first discovered under the bed of the North sea in 1970 and production began in 1975. 3y 1978, 12 fields were "on stream" producing in April 1979 over 1,500,000 barrels per day of high quality light crude oil, (75 million metric tons a year) or 80^ of the domestic requirements. The Govt through the British National Oil Corporation, ac<5quired the right to t)y the majority of oil produced and took measures to reduce wastage of gas. Lane deposits of coal were discovered in 1977 under the North sea. Although Britain's agriculture and trawler fishing are highly mechanized, half of the country's food supplies and most of its raw material are imported. Britain maintains a large passanger, cargo and oil fleet. At the end of 1975, Britain's merchant shipoing fleet totalled 50 million dead weight tons, the 4th largest in the world. But by oe^pt-^t^^b^-r 1579, it had delivered to 38 ;nillion dead weight tons, following sales of ships in the face of financial problems. Although Britain achieved steady economic growth from the end of the second world war, this declined steadily in relation to other European countries so that by the early 70's, its per capita G.N. P. was 10% below the European average. Attempts to achieve higher levels of growth by stimulating demand led to repeated crisis, in the balance of payments and consequent squee zes in credit. Pressure on British currency led to the "floating of the Pound in June 1972. - 2i - There was however indications of economic recovery from 1977 onwards. In January 1977, an international "safety net" was announced to support Britain's reserves if they £^11 below U.S. $ 6,750 million and international confidence in the Pound was restored by management of the economy ifi lines recommended by the I.M.F. In July the authorities relaxeJ their intervention in foreign exchange-<^arkets allowing the pound to "flat" upwards against dollar and other currencies. Record numb-^-'r Ojf tourists, ^i+re increasing flow of oil royalities and a recovery on the stock fnarket brought a current surplus of £ 293 million in the balance of payments in 1977 (compared to the deficit of £ 842 million in 1976) and a retjrn to (figure inflation in 1978. The strong inflow of funds from abroad allowed the Govt, to make early repayments on its debts to the I.M.F. in January and .November '78 thus rejucing its anticipated "hump" of payments in the 1980s. Sterling's strength in 1978 against Dollar held down inflation by reiucing certain commodity input prices and though it also undermined the international competitiveness of British Products, an increase in exports and the rising production of North sea oil strengthened the country's external position. Industry responded to the economic upturn of 1977 with increased investment, up 8% on 1976 except in the depressed sector of steel and ship building, where certain areas were adversely affected by unemployment. By mid 1979, industrial production had risen 18^ above its 1975 level, but in the third quarter of 1979 it fell by 25^, largely as a result bf disputes in engineering and allied industries. Inspite of inpreased oil revenues, the - 22 - 1979 balance of payments showed a current deficit of £ 2418 million compared with a surolus of £ 714 million in 1978. Unemployement which had reached a peak of 1636,000 (6.9% of the total labour force) in Auqust 1977, fell gradually helped by Govt's, special employmement subsidies and stood at 1,264,000 in Sentembor 1978. However inflation rose by 17%, TRADE RdGlJLATI0N3: Import Licensing and Bxchanqe .Regulations:- With effect from Octobor 24, 1979, citizens of the United Kingdom for the first time in 40 years - became free to buy and use foreign currency without any restrictions. This was the culmination of various relaxations commencing from June 13,1978. Import licensing was inaugrated in Sept. 1939 but controls were largely eliminated on imports from the U.S. b^ Nov. 9, 1959. Almost all imports from sources other than Japan, the U.3.3.R, and eastern Hurope and the People's Republic of China are free from restrictions and may be made under O.G.L. Individual import licenses are reauired where goods can't be imoorted under the authority of O.G,L, A large number of items are subject to Surveillance Licensing under which inout licenses are issued freely on demand to apolicants. A few articles may be imported under open individual license (u.I.L. ). Specific licenses are valid for 12 months and should be cleared through customs on or before the expiration date of the license. In case of import licenses for goods subject to quantita tive restriction import, licensing branch will consider written - 23 - applications from traders for the validity of a license to be extended for a period not normally exceeding three mc^hs if, for reasons beyond the trader's control. However in these cases where it is agreed to extend the validity of the license, this will be subject to the condition that the goods are shipped on or before the original exoiry date. BICYCLE INJUJTRY; Bicycle sales by the United Kingdom are given in table 3.1 below. The table shows thf decline in the U.K. output that has infact been occuring since 1973, When over 2 million bicycles were produced. There was one halt in the contineous downward trend in 1978 when total home_eii£ort deliveries exceeded two million again, but the downward trend was quickly resumed. Provisional figures for 1981 suggest a fall in manufacturer's deliveries of 33^0 from 1980 levels in unit terms and 28?^ by value. TABLh 3.1; •i.dles of bicycles by U.K. Manufactur^^^rs 1976-80. (Q = 'ooo units; V = £ millions). Year Q Year Q 1976 1849.7 58.1 1979 1762.9 79.4 1977 1732.1 62.8 1980 1696.3 82.1 1978 2073.6 85.2 1981* 1126.0 59.7 *Provisional The decline in sales can be attributed to the three main factors - the disappearance of key export markets, the national engineering strike in 1979 and its aftermath and_iiie - 24 - comp*fetion from imports. The only sectors to experience any significant growth in recent years have been sports cycles with dropoed handlebars and Juvenile, small wheel cycles. The sectors of greatest decline have been adult small wheal cycles which were very pooular in 1970's and conventional juvenile bicycles. MANUFACTURERS; The leading manufacturer is T.I. Raleigh Ltd., a subsidiary of Tube Investments. This company accounted for some 88% of the total UK cycle out out in 1978 but only about lOVo in 1981. T.I. Raleigh Produces about 300 different models or about iOOO inclu ding frames size difference and about 5000 components. The company was once highly self-sufficient Producing some 75^ of its own component needs. This prooortion is now much low^r and buying in to cut costs is more common. The past year or so has b^en a difficult period for Raleiqh. tixport markets have shrunk while the recession and the influx of cheaper bikes from abroad have affected home sales. The bicycle and toys division of Tube Investments (Tl) recorded a loss of £ 7.7 million in the year to ending June,1981 after a £ 319 million profit in 1979-1980."^ Considerable rationa lisation and cost cutting have been undertaken, the work force has reduced by 1800 since 1980. There are 6 other large manufacturers of bicycles. They are: (a) Dawes Cycles - an old established company, now forming part of My Dart Group. (b) HALMANCO - The manufacturers supplying Halfords, also parts of Burmah oil. - 25 - (c ) Holdsworthy - Supplying the well known Claud Butler brand and concentrating on top of the market, the light weight bicycles. (d) Trusty Viscount- a subsidiary of Cope Callam International. (e) Comrade Cycles - With the Malbro brand. (f) VVR DAoHLfcY - Supplier to the Post office, manufacturing viking There are in addition a further eight or so companies largely soecialising in racing bicycles including HLS'i/'/ICK Hopoer. The Bicycle Corporation of Britain represents most of the major manufacturers and together with the National Association of Dealers^^unds the work of British of cycling Bureau. IMRDRTS; Imports for 1981 are estimated to have been 5,20,000 com pared with 5,63,000 in 1980. Nevertheless, this was double the 1978 import total and six times the levels ojf_J.moorts in 1973. The main sources of imports into the UK ^s traditionally been Austria with virtually ^i I +hp m^^trhlpQc; from that country distri buted by steyr, Diamler, Puch. The increase in imports in past few years has been mainly due to greatly increased suoplies .from West Germany and Italy. In 1980, these two countries accounted for almost 60% of the total imports. The leading makes from West Germany are Kalkhoff, Eurobike and Kynast, the last named and marketed as Hawk in this country and distributed through Woolwort.h. From Italy the main brands are Cinzia, Vivi mti CO O 00 h- VO co CO c^ * * » CM m CM lO CM CM r*- H \o •^ ^ S c^ VO h- O CM CO o o II -^ -* -^ H lO CO •« • •> > or GO CO °« 8 H CM "H 8 ^ m ID CO ^ VO in o (A CM CO lO in CO (0 CM CO CM (^ CM o (0 CO >0 «• 00 II or CO C> h- •* r«. CO CO CO h- CO R v t^ -I H \0 Ov VO Q -I 00 O ''f CO CO «k or vO s CD ^83^VO CM CO (A vO h- -I vO ^«. c^ CM ~< CO s in «!»• CO O VO CM -I ID ON +> O NO CM -* c^ in CM CO VO ^ ~ Ov O 00 r- O VO CO 00 or m 8•k vO o o CO CO -c4^ (0 lO CO CM t^ ^c^ H - 26 - and Bianci. Vivi is principaly a children's brand and the inclu sion of children's bicycles in imports from Italy in the trade. The number of French made bicycles entering the UK has trebled since 1977, the main supolied being cycles fteugeot Ltd. East huropean countries notably Poland, Yogoslavia and East Germany have sent increasing quantities of bicycles to this country in recent years, consisting largely of unbranded models, and supplies in increasing numbers have been imported from the USA and Japan. Imports by the UK in volume and value terms are given in Table 3.2. An estimated adjusted total is shown elimi nating the pavement cycle imports from Italy and reexoorts of bicycles from the Irish Republic which in effect reduces actual imoorts by L5%, There are basically two categories of imported bicycles available in the UK as viewed by home trade. There are imports from, what could be termed as established supoliers, notably from Austria and France, marketing branded products through dealer networks and supplying services, spares etc. in the same way as the UK industry. Then there are the more recently estab lished imports that are generally retailed through non-specialist outlets and direct response mail order with much less provision of after sales service, spares, etc. The UK industry can cope with the first mentioned competition. Indeed, some of the European companies belong to the Bicycle Association. The industry and overseas suppliers find the newer resour ces of competition more difficult to meet. Prices at retail level are anything from £ 20 to £ 40 below the price of domestically produced machines aimed at a generally comparable market segment. - 27 - Average C.I.F. prices illustrate this, although^_Qnl)^a rough guide as quality considerations are not allowed for. These show that for 1980, a bicycle from Austria arrived in the UK for about £ 52 comoared with £ 32 for a Vfest German bicycles and £ 27 for an Italian bicycle. Nevertheless it has to be faced that while the provision of export after sales service is undoubtedly an important factor in the decision to purchase a bicycle, the price advantage offered by non soecialist outlets carrying one type or a limited range does offset the advantage of specialist service to buyers in some areas of the market, particularly in non-enthusiasts. The drama tic increase in bicycle imports Jias Peen encouraged by the three factors. First the strength of sterling in the late 70s made foreign goods less expensive in this country relative to home produced ones and created a favourable climate for a grovvt-h in bicycle imports. Second the thirteen week national Engineering strike which affected availabilities from the UK bicycle industry, occurred in 1979 during a period of high demand for bicycles and this gave the new importers and outlets a chance to develop a market. Thirdly with consumer'^ discertionary income being cut in the reaction, price became a major consideration in the purchase decision. EXfOHTS; Exports of bicycles from the UK for the period 1976-81 are given in table 3.3 There are considerable differences in the annual totals available from the customs and excise and from the trade; the trade figures exceeding the official figures by - 28 ~ 2,OvO,000 - 3,00,000 cycles a year. The reason for this is the different treatment of bicycles exported as components. So in fact customs and excise figures are understated. Taking customs figures into consideration, exports for 1981 are estimated at 4,50,000, a fall of about 20% from 1980 and it is believed that the UK became a net importer of bicycles for the first time last year. Apart from the general world recession, w^ich made exoort- ing to most markets for the bicycle trade had a oarticularly sharp effect. Nigeria im the UK's largest market taking over 3,00,000 cycles a year^has declined in importance due to economic conditions. At the same time the Iranian market disappeared with the revolution and it is difficult to envisage a resumotion of this trade. In addition sales in North American markets were adversely affected by the strength of sterling and comoet^ion from other countries. Not unnaturally. Tubes Investment Raleigh accounts for a high proportion of the UK exports, suoplying 130 countries. In the adverse trading cohditions that have been prevailing howevor, the proportion of Raleigh's output going for export fell to 50/o in 1981 compare j with 2/3rd in 1978. The export picture is not entirely gloomy, however, exports to other EEC countries are growing steadily. Raleigh has manufac turing facilities in the Netherland and this together with some very beneficial television exposure of the T.I. Raleigh cycle team in the Tour de France has enabled Raleigh to promote successfully its top quality bikes in the European market. Total sales of bicycles in relation to the size of' population are much higher in other countries than in the UK amd are estimated to be - 29 - 80 machines/1000 people each year in the Netherlands, 45 in France and 40 in West Germany compared with 29 in the Great Britain. MARKET SIZE; The bicycle marRet expanded quite sharply in the late 70s. The market is estimated to have increased by over 50/o between 1977 and 1979 with its retail values growing by 86/o over the same period. Cycling grew in Dooularity at that time in a climate of opinion that developed from the energy saving c During 1980, trading conditions deteriorated. Deliveries to the trade, encouraged by the expending sales of earlier years are estimated to have exceeded actual retail sales by some 3,00,000. This not unnaturally lead to destocking by retailers in 1981, adding to the industry's problem in a year of barely maintained demand and increasing foreign competition. In 1977, imported bicycles accounted for 19% of the market. By 1981, this proportion rose to 43% and the IK became a net importer of bicycles for the first time. This growth in imports has had a significant effect on the market. The cheaper imports have helped to open up a new sector, broadening the market with new and varied retail outlets and increasing the number of first "time buyers. The - 30 - effects of the increased competition on the established trade has at times been painful, but counter measures can already be seen with, for example, a recently announced <£ 2 milJion oromotional campaign by Raleigh with great emphasis on the UK market. Due to the combination of recession and rise in imoorts, Raleigh had to close five factories, shed some 180^ jobs and introduced short time working as its market share fell from 55% in 1978 to around 40/^ in 1981. Although comoanies such as Dawes & Holdsworthy are still successfully marketing their top of the range bicycles that sell for around £ 200, the middle range machines have been bearing the brunt of decline in demand. Never theless Oawes has held its market share steady at 4,o as has Halmanco with about 5%, Quantity imported brands have lost some market share with r*uch, for oxamole, taking an estimated 6/o of the market in 1981 comoareJ with 8/j in 1978. TA3LE 3.4: Estimated size of UK 3icycle market, 1976-81. (Units -^ = '000; V = £ million at rsp). Year Year V 1976 1100 59 1979 1450 104 1977 914 56 1980 1250 100 1978 1134 76 1981 1200 95 Within the UK market the growth areas have been the sports cycles and young people's cycles. The sports bicycle, purchased in the main by or for male teenagers, young adults take almost 50% of the market and off take has risen by a third since 1978, Sale - 3i - of juvenile bicycles has risen sharply over the same period and are estimated to account for L5% or more of the market. Adult small wheel bikes probaibly account tor less than 10% while the, remaining 20-25?^-is made up of conventional adult cycles, trade- man' s cycle etc. TABLE 3.5: Forecast of the U.K. Market size period, 1982-87 (Base year 1976). Year Q Cooo) Year Q ('000) 1982 1357 1985 1513 1983 1409 1986 1565 1984 1461 1987 1618 The above market size has been calculated with the help of regression analysis. The formula for which is as under- Y(p) = a ^ hx Where Y is the forecasted value at a point in tipre x, measured in terms of increments such as Y years from a base point, a is the value of Y at the base point and b, the slope of line. Two formulae are employed to determine the value of a and b. The first is obtained by multiplying the straight line equation by coefficient of a and then summing the terms. With the coefficient of a equal to 1 and N as the number of data points, the equation becomes XY = Na + b^x (i) The 2nd equation is developed by multiplying the straight - 32 - line equation by x and summing all the terms, Xxy = a J X + b I x^ .... (iij the two equations above given are called normal equations. The value of b is calculate] with equation (ii) Xxy = a i^x + h ^x I xy = Y" - bx~ ^x + h 1 x^ Ixy = (^-^ - b ^—) ^ x + b:^ x^ 5xy = ^-^- bi^£,,^^2 2 xy = Nx"y" + b ( 2 x^ - ^j^-^ b(ix2) - iif^^ = Ixy - Nx-y- N K - ^xv - N x"y" ^- .2 rrx72 ix Then value of a can de obtained si'noly oy suostitutinq values to formula a = y~ - bx~ Where y" = ly/N and x~ = Ix/N The fomula ^{p, = A ••-bx is given,the respective! values with F as number of years for which the forocast is made, after putting base year Zero^ DISTRIBUTION; There has been what could almost be termed a retailing revolution in the bicycle trade over the past few years. Bicycles are being sold through an increasingly wide range of outlets, - 33 - cycle specialists, departmental stores, and direct mail orders. There are approximately 5000 outlets tor oicycles, of which less than half are now cycle soecialits, compared with an estimated 55;^ five years ago and 60/^ in the early l-^'jfOs' There are about 2400 cycle deaji^I-ers^/Of which half are members of National Association of cycle and Motor cycle traders. These offer the customer a wide range of adult and Juvenile bicycles with oresales inspection and adjustments and after sales servicing facilities, repairs, spare parts orovision and personal service as their strengths. Margins in the soecialist sector are between 27 and 30?o of the retail orice, with discounts rare. Oopartraental stores are infact, auite traditional outlets for bicycles out usually stock a rather more limited range than the specialist and commonly otter aoout 10?o discounts on soecia list's price, cjtalogue mail order outlets have orices in the same range as the deoartmental stores. The largest discount and the cheaoest Prices are found in the direct mail order and discount and rauJtiole stores sectors and it is in +hese outlets that the gr-'atest growth in sales has occurred. Such outlets have been chiefly responsiole for the growth in imports, with other half the imported cycles now sold through these outlets (about 3,50,000 cycles in 1980). Clearly the new asoects of bicycle retailing present a real challange to the specialist dealer who can't comoete on price alone, although there has been an increase in repairs and maintenance business. Both British and foreign dealers tried to avoid their dealer net works facing the comoetition of identical - 34 - brands or models available in their area at £ 20 to £ 30 cheaper. Infact Raleigh went so far as to refuse to sell its bicycles to the cut orice outlets. Raleigh is still able to limit the numoer TABLE 3.6: Distribution of cycles Dy type of Retail outlets, 1981 A of Volume. Outlet ;^ of volume Cycle/''4ot orcycle soecialist 48 Mail order/Direct mail 17 HaLfords 14 Jepartnental stores 3 Variety stores/chain stores 11 Co-operatives 3 Others 4 Total iOO of specialist dealers it supplies in any particular area. PRICES AMD iVlARJlNb; The price of a bicycle is not only governed oy quality of construction, finish and frame size, put Py the extras included in the basic price such as bell, carrier, tool bag, pump etc. Reconmended retail prices begin at around £ 50 (including 15^ VAT) for a cheap imported junior conventional cycle, rising to £ 280 for the top range racing machines. Made to measure frame sets and specialist equipment can take the price upto £ 600. - 35 - Conventional adult cycle ranges trom £ 65 - £ 130 whilest racing bikes begin at between £ 80 - £ 100. There is so much discounting now that it is ditticult to pp^vtde any standard margins or markups. Retailers supplied dir^t are normally allowed a margin of 27.5?^ of the rsp, although almost all re iuce this orice Dy some amount. Whole salers normally take a margin of between 10 and 15;^ of the nrice at which they sell to the retailer. AL)V£RTIoEi4ENr AIMD r^FDiOTION; Between 1977 and 1980, the only manufacturer to spend any significant amount on T.V. advertisemf^nt was Raleigh. Juring 1980, it spent almost £ 0.5 million on promoting its orands on TV and in the National press. No other manufacturer can compete with Raleigh on this level. Often because only a limited number of outlets stock their bikes. Conseguently the majority of promotion is either done through s^ec'alists or trade puolications or, on Oelow the line advertisement; such as shop displays. Indeed Raleigh's budget for promotion was £ 1 million for 1981, emphasizing the quality and availaoility of its Dikes generally as well as promoting new products such as the Raleigh&t Bomber. Overall media advertise'nent exoenditure totaled £ 1 million in 1981. Cycling in general is promoted through the Bicycle Association of Great Britain and the National Association of cycle and Motor dealers who encourage thenar memoers to advertise ~ 36 - through regional subgroups and a National 3ike Week is held every July, other promotion comes through cycle racing. The T.I. Raleigh racing team has been particularly successful in oromoting Raleigh Bike in Europe and other manufacturers such as fteugeot, Puch, Holdsworthy and Viking, are also involved in sponsorship to varying degrees. PRSiHIvrr QuNcRSHlP AND FJT.J.-Jd PROSPdCTUS: According to the British cycling Bureau, 78;o of the population can ride a bicycle. But althojgb 93/i of adults under fifty years nave at some time ridden a bike, only 17°^ currently own a bike. When it is realized that 70/'3 of all cycles are sold to under i8s', then it can be seen that only a very small popula tion of adults actually ov/n and use a bike. As the children's market has been relatively stable, the increase in sales in 1978-79 was mainly due to adults returning to cycling. This apoears to be particularly true witn women using bicycles for local mobility. Obviously the average length of journey made by bicycles is fairly low; department of trade figures show that 9/^ of all journeys of under 2 miles and 4% of those between 2 and 5 miles are made by bicycle. The proportion of people using bicycles to get to work ranges from 2?4 in Central areas of major contributors to 7.5°^. Leavls of ownership aren't uniform throughout the country as shown by taole 3,7. It is clear from the given table that geograohical loca- tion is a significant influence on cycle ownership. The region with the highest ownership in the predominently flat one of - 37 - East Anglia, whereas in the relatively hilly areas of south west and North East less than 4 in iO households have a Dicycle. Ownership would also apoear to be linked to socio-economic group. Recent studies found that almost 63% of AB house holds own a cycle compared with around A2% of CI and 3^% of UE households, although the latt^^r grouos are more likely to use their Dikes as transport to work rath3r than as forms of exercise tor health and leisure. IVith so many vehicles on the roads, cycling is not as as safe or as pleasent as once was. Provisional figures for 1980 T/\tJLE 3.7. Regional ownershio of Bicycles 1981. Heqions % of households with one or more cycles London/South East 44 oouth rf(/est 38 Midlands 42 East Anglia 61 North West 41 Yorkshire/North East 35 Wales 45 Scotland 44 reveal that there were over 28,000 casualties on the roads, of which i8ii were cyclists, with 2/3rd of them in no way to be blamed for the accident. Despite pressure from cyclists, environ mentalists and various medical bodies, parliament has only just - 38 - * introduced its first cycling pol;6cy. The policy which represents a significant breakthrough for the cyclist, has 4 main elements; a) Senior engineers, apoointed by the department of transport to look after the cycling from its regional offices. b) Local councils will be encouraged by the department of transport to apply for Govt, grants towards cycling. c) The Govt, wants to convert around 600 miles of disused railways into cycle routes. d) Legislation will bo brought in requirinc] higher standards on braking for bicycles. The new British standard includes leather brake blocks which radically improve braking distances in wet conditions. Currently only British manufacturers can meet the standard, a factor which nay orovide some boost for the British cycle industry The bicycles market is becoming more competitive and less traditional. The trend towards non-s oecialist outlets, new sources of supply and lower margins will continue and orobably intensify competition from foreign supplies is also affecting export market that have always been important to the UK industry. Most pointers for the future are, on the face of it, unfavourable. The future of cycling as a mass outdoor pastime is uncertain. Whilst the public's concern about the guality of life and desirability for exercise has increased significantly, cycling has not been as successful in attracting new recruits as, for example Jogging or squash. One factor iia this is the danger that cyclist faces in motor traffic plus the fumes and noise on the - 39 - roads that makes the reality of cycling less attractive. Special provisions such as town cycle ways and special cycle tracks and lanes on roads, would undoubtedly help, but the absolute riqht of cyclists to use the highway is considered important by keen cyclists and the orovision of special-'lanes etc. could end in the loss of this right. Little erpertJrogement is given to the orospcc- tus for growth in the market by the f ict that the number of children betv^een the ages of five and 15 is exoocteJ to fall by over one million in the next 10 years. On the other side, the Raleigh response to the competition from abroad and tho decline in sales has been rapid and promising. New models to compete with the imported favouri-^cs, such as tho folding bikes, and to attract oarticular sections of people, are already announced plus an extt?nsive promotion and marketing campaigh. I^COi'VliVlh NDAT IONS; The lack of demand of Indian bicycles in the UK is attribu- 1:ed to the following factors J 1, Lack of knowledge about the oerformance demands of the compo nents used in bicycles, lack of importance of design and lack of knov,/ledge regarding the soecifications and toldrances. The owners of Indian bicycle industry should impart the oroduct knowledge and the use of machinery and tools, commonly used in the plants. 2. It is realised that some of the technical defects in the Indian bicycle components result either from the absence of know-how - 40 - of such critical operations as hardening, electroplating, grinding etc. It is suggested that state Govts., Central Govt, and industry should establish common service centres \NhGTQ facility should be create i for electroplating, harden ing and precision Grinding etc. for the industry. 3. The oresent standard of pre-shipment inspection and quality control carried out by expert insoection agencies leaves much to be desired. Pre-shipment inspection must be strengthened and upgraded. 4. Maximum number of manufacturers should be covered by the modernization programme of JCo-»I. 5. The industry should concentrate its efforts for perfecting the oroducts currently being manuf ict arod. The following items need development in their standards for the European standards J a) Mult i speed free wheels b) Handle stems c) -apocial tol-ls for self repair and d) Components for children's bicycles. 6. Government should alJow liberal import of complimentary compo nents for the purpose of testing such components as are not used on Indian bicycles for example, double sprocket chain wheels with cranks and derailleurs. Keeping the above recommendations in view, the Indian bicycle industry can penetrate into the UK market. Besides these, - 41 - they should increase their promotional activities and make the knowledge of Indian bicycles to the various markets in the UK. They should organize trade fairs in different parts of UK and should try to increase its share in the UK's bicycle imports, which stood at 310 bicycles in 1980 as compared to 531 in 1978-79-r - 42 (IV ) THE FRENCH BICYCLE iVlARKET The French Republic is situated in Western Europe and bounded to the north by the English channel, to the east by Belaiun, Luxemburg, the FRG, Switzerland and Italy to the south by the .Me Jiteranean and Spain and to the west by the Atlantic Ocean, The Island of Corsica is part of France, while five overseas departments and 5 overseas territories also form an integral oart of the Republic. Climate is temperate throughout the country, but in south it is of the MeJitersnean type with warm summers and mild winters. The principal language is French which has numerous regional dialects and small minortios soeak Breton or Basoue. About 90^0 of the population a^e Roman catholics. There are also christian Jews and Muslim communities. The National flag (proportion 3 by 2) carries three equal vertical bands of blue v/hite and red. The capital is x^aris, ECONOMIC AFFAII^: The rapid growth of French economy since the Ilnd world war has been directed by a series of plans, the 7th of which came into effect in 1976. Elaborated by Planning commission under the supervision of Commissariat General Du plan, the plans lay down guide lines for economic development in terms both of precise production targets and of genoral social objectives. France is still west Europ's leading aqricultural nation with 32 million ha, nearly 60^ of its area used for farming. Production has risen steadily since the Ilnd world war at about - 43 2^ per annum while the population engaged in agriculture has declined as a proportion of the total labor force from 15^ in 1968 to just over KJA in 1976 as a result of retirement of elderly- small holders and Govt, sponsored rationalization of smalJ olots; 40% of holdings are over 20 hacters. Since the Ilnd world war, French industry has exoanded extremely raoidly. The largest French industries are steel (23 million tons in 1978), motor vehicles (over 4 million oroduc- tion in 1978) air craft, mechanical and electrical 'engineering textiles and chemicals. Depressed denand in the steel industry combined with the failure of 1977 attempts to decrease manning and out out and the strict control of prices le^' to cr^opling losses. In September 1978, Govt, initiated a rescue clan which involved a takeover of a portion of the debts by the public sector an^^ by the banks which in return bee jmc the industry's majority shart^holders and the closing down of un :)rofitable units, France has greatly ircreasod it-s exoorts in recent years, being the world's 4th largest exporter. Since 1972 its orincipal trade partners are me'nbers of dcC^ especially the FHG, Belgium and Italy, France is the world's third largest exporter of arms. Owing to its dependance on imported fuel, france suffered from the energy crisis which began in 1973. Inflation soardd lo 15^ in 1974 af^T^ massive trade deficit*' of 0.6^000 million francs resulted in the strict Govt ere Jit limit andl a slow down in GDP growth which reached only 2,2?^ in 1977 coi^jftared with b.3% in 1973. Targets outlined in the 7th plan were abondoned in 1978. - 44 - Unemployment is becoming an increasingly sensitive social and political issue in France. A total of 1,400,000 members of work force were enemployed in iieptemb^r 1979 despite various schemes to overcome the problem. TRADE REGULATIONS; No licence is required for import of bicycle and bicycle parts into France, iicycles attract an import, duty of IT/o on C.I.F. Value. Further a customs stamp duty of ll/o on C.I.F. value is levied from the imoorter for all imports. No import duty is levied for import.s from HB-.C cojntries such as Italy, Bolgium, W. Germany, Luxemburg and Holland. The U.K., Jenmdrk and Ireland who have joined the Hi-.C group recently are required + o pay QO/o of t>fe i7/o import duty for bicycles from 1973 v/ith progressive reJuction of 20/^ for subsequent years. From July 1977, they stjrtod enjoying the same status as the other EEC countries. Following is the Generalised System of Preferences (GSP) quota;- GSP customs code No. 87 - 10 value 1,154,493 Francs for complete bicycles. The quota is revised at the beginning of every year. Imports beyond the GSP quota will attract customs duty as per tariff indicated earlier. IMHDRTS: Imports for 1980 are estimated to have been 6,995,000 of bicycles as compared with 1979 figure of 5/,093,000 units. There has been an increase in the imports of bicycles into France from - 45 - 1978. In 1978 the total bicycle imports of France were 4,847,000 units while as the 1980 figures show an increase of 40% over 1978 figures. But the imports into France in 1976 have been at oar with the imports in 1980. France irnporte J 6,975,0'X) units in 1976. The parity of the figures and a stagnancy in imports is due to the large scale production of bicycles in France. The :)roduction of cycles in 1980 was of 2,183,0^0 units in 197b it was only 1,807,000 uni ts. Tho cycle exporting countries to France mainly are Italy, Austria, Spain and Jaoan. Italy accounts for about 84/'o of the total cycle imports of France. The imports from Italy have been increasing. The imports from Italy in 1980 have been of the value of 1,22,088 million Francs; Spain, Japan^n/ d Austria almost account for rest of the imports. The table 4.1 shows the imports of bicycles into France. eXTORTS.: The table 4.2 shov^/s the total exports of French bicycles. The total exports for 1980 had been 8,853,0^X3 units valuing 3,70,903 million Frances. Since 1976, there is an increase in exports. But 1979 showed a decline in the bicycle exoort. In 1976 France exported about 5,226,OCX) cycles. The figures rose to 6,388,000 units in 1977 showing an increase of 14.5>o. Exports again came down in 1978, when it was only 6,193,000 units. The fall in exports was due to the increasing costs of production and tougher competition in foreign markets, mainly from the UK and Italy. Canada is the main market for the French bicycles. - 46 - The figures for 1977 show that France exported about 2,15,000 units of bicycles to Canada, which was 3,61,000 units in 1965. It has been on a decroasing trend since 1978 and the total bicycle exoorts -^o can^da for yoar 1980 have been only 18,000 units. The Fr'''nch bjcycle oxooris to +hc uK h'^c increas^^d ""hrice in L977 jnd tho m^iin su i^^llo^ \j.s *i/3 Cycles "CJ^TOL L^i. Pr^nc:. exported about 41,480 cycles to the JK in 19S0 v/hile as exports to Uk in 1976 has boen 12,163 cyclos only. Though France imoorts bicycles from Italy, yet the It.ily has Provided u good market for French bicycles. The other main markets of Fr*-nch bicycles include Fin J and, Switzerland, Austria and Iran. The exports to Iran showed d decrease. The figures for 1980 show a decrease of aboJt 70 o dae to the crisis orevailing in that country after the overthrow of -jhdh's Govt. Anyhow there are better prospectus for entry of French bicycles into Iran's market once the crisis is over. MARKHT SIZu; The following table gives the market size of the bicycles in France. TABLE 4.3: Size of French Bicycle Market 1968-80. (dnits '(pOO). Year Q Year Q 1968 1192 1978 837 1976 3 664 1979 2492 1977 1386 1980 487 - 47 - The market size of cycles in France has expanded from 790,000 in 1965 to 1.19 million in 1968 at an average of annual grov/th rate of 14.5/^. Oomestic production during the same period has risen from 890,000 to 1.13 million or at an average annual rate of 8.5% while exports have ranged between 105,000 to 136,0>1. Import^ have shown a phenomenal growth from 5,000 to 1,98,000 during 1965-68. The above ch.irt shows that since 1968, the market size has incrt-asoi three fold and the trend in ^he increase came down in 1977 when it reached to 1,396,000 cycles. But ^gain in 1979, the m.^rket of bicycles in Frjoce saw a hike and it reached to 2,492,000 bicycles, ^-vgain in 1980, the market of bicycles declined to a remarkable figures of 4,37,0iX) bicycles. There has been constant increase and decrease in the bicycle market in France. CHANNHLS OF Jl3TR13aTI0N: There is a tvjo tier system of distribution of bicycles in France, They are main agents and sub-agents. Main agents have exclusive contact with a particular manufacturer for the sale of one product, oubagents are yie i to the main agents normally by a contract. This however, doesn't preclude them from marketing cycles of other brands. -%ugeot and Motobecene have nearly 3000 agents, 50!;'o of which are exclusive and rest sub agents . The total net work of main agents and subagents between all the manufacturers is estimated to be 8,000. The main agents are in effect wholesalers of a particular brand and the subagents, - 48 - the retailers. Thus it can be seen that the net work marketing arranqements by the French manufacturers is vory effective in sales and after sales service. The break up of distribution channels is qivon below: Larqor deal-'r (.'.'idin dOf.'nt ) 45 oprcent ona^l'.T dejlf^r (oub aqent ) 40 x>rcent Oep-^rti lental stores 12 pf'rcent Super markets 2.5 oorcont Mail order 0.5 oorcont 10 J.O As can bo seen from the above, 85/j of the bicycles oro- duced are iistributeJ throuoh the dealers whil^ he ojtl'^t throuqh tho depart nf^-nta 1 stores account for only i2/o and super market 2.b>o. Mail orderinq is little known as its share is only 0.5,j. The exports are cv^n-rally handlrd by the manufacturing units thpmselves. Ho'-vever, in rosnoct of exnort of ^arts, they / are qenerally handled through tvo major export houses who co ordinate export activities of tho individii^l rnor.ibcrs, they are M/S Fll^A and GZFAC. Bicycle injorts inlo Fr'-nc? cxd mainly from Italy and Spain. Italian oicycles are distributed through wholes-Jl^rs on contractual marketing tie up and also through departmental stores These bicycles are low cost ones of Juvenile models and are not backed by guarantees in respect of quality. Due to geographical - 49 - proximity of Italy, they offer better delivery terms to large importers so that they are not required to carry huge stocks and deliveries are made at custom-'^rs schedules. In resp^-ct of Soanish bicycles import, it has shown sudden increase. It is mainl y due to JVI/3 Peugeot having a manufacturing unit in ->oain. PACKIN3; licycl^'s ar; indivlljully oacked in dttrac"*ive aaper cartoons in tht> semi iSGombied coniji+ion. Those cartoons are generally move 1 to the dealer point by road transoort. France has v«>ry good roais connoc+ing almost all ci'^les and '^owns, big and small. Similarly France has fast moving railway sy^* orn connecting every important destination and bul'c of the cycles are transported oy both the media. 3y ^nJ lartie, road transoort is more accepted by dealers in vivvj of delivery at deal-^^r ooints. oALf.S PiU./iOTlON; The main medium of oromotional activities in bicycles is through participation in trade fairs whereall the manufacturers participate effectively. Daily nevjs oapers are rarely used as a medium of advertisement. Individual dealers advertise in pooular magzines such as Equipe (Sports daily) cycle (monthly) and the expenses towards this sales compaign is subsidized by the manu facturers . In Paris every alternate year, cycle exhibition is organized in which all manufacturers put up stalls exhibiting various ranges of bicycles. They distribute leaflets and price - 50 - lists to the oublic. Apart from this, the oth^r significant mode of promotional canpaign undert-ilcon is apoointmont of i-^rofossionals for cycl"? racinc-j who particioata at the company's oxponses in ^"^11 the sports m-^-^-ts in Eurooean and American coan'ries. Thus they ir3 able to orojpc"'- an ina]'^ of their brand in the minds of the millions . Additionally tho manufact^jr rs orovide necessary tech nical advice and train personnel at deilr^r points -^ o carry out r'^pairs ani after Silas sprv'ce to consum-rs. This has created a manufact Jr3r-doalor-consumer relationship. Tho hea]"*-h doparl- ment of French Govt comes out P'riodically with r idio jnd television Programmes emphasizing use of bicycles as "^ m^ans of maintaining and improving health. Children uro the jge af ten use bicycles chiefly for playposjibly for short trips, ouch activiries necessarily are restricted in their own immeJiate surroundings of their home, though on holidays their range of ac"''i In the ddult group, the usage is largely found among agriculturalists and industrial v.;orking class grouos duo to low cost of transportation, i^arking problem in the urban area and atmospheric pollution caus*:!d by automobiles has influ^^nced use of bicycles to covar short Jistances. The other notivating factors in the use of bicycles art; found to be: (i ) t^leasure; (ii ) Sports; (iii) Short distance travel and shoooinq and (iv) Health. The F'^ench usr>rs are highly conscious of local brands such as Peugeot, Motobecans, j^erciar etc. The bicycles of o+hnr origins are considered to be heavier and c 1 Jmsy and honce -the customer considers them inforior to their own brands. Italian bicycles v/hich are currently oeing imported are primarily of the junior models and they are normally sold through the department stores where customers are not given any guarantee on n-la lity once the Droduct is sold. It is gathered -»hat out of every 10 ^ Fef^ch familiGs, 39 h ive oicyc^es. Jistriojtion of c^tagories of these 39 families is given as under: 1. Farmers - 4.5/o 2. Salaried agricultural labourer - 4.2/4 3. Small enterpreneurs 2.3/^; 4. Industrialist & Imoortant merchant - 2.2/!^; 5. Liberal Professionals 2.4/o; 6. High income group - 2.9/o 7. i^iddle class ~ 2.5/^ 8. Employees - 2.9/o 9. Ski lie J labor - 3.1/4 10, Specialized labor - 3.5^4 11. Service i^rsonn^l _. i.9?a 12. Workers belonging to other catagories - 2,8/4 13. Students; - 0.9?^ 14. Unemployed - 1.9^ Total - 39% - 52 - The above table gives an insight into the cross sections of society using bicycles. Frinch bicycles are considered to be the best quality bjcycif's ani is widely accljiiTiei for its aales appeal and perfor mance, Consoqjr^n-^ ly thor(>tore the French bicycles -ilways fetch a be-^ter realization comoared to •* he imoorted bicycles rhat qo into fir^nco a+ oresent . A tarrif if donos'-ic silos of "l/J %^ogeot who arc the largest manufacturers in Franco is niven below: Hom'^r (Gents.) i.lodel Price, _(Fr» )_ Routiere Luxe ^L-22 382 Tourisme Luxe-3 speed PL-40 403 Randonneur - 4 speed PL 50 423 Porteur ^arisien PHP 50 433 •JMAtS (Ladies) Ho Jtiore Luxe PL 25 391 Tourisme Luxe PL 45 413 pffi-HTS •(Rpuesde 700 C) Sport - 4 speed P 8 401 Meme- Mode1-8 speed P 8- 8 V 434 Luxe - 5 soeed PL 8-bV 463 Memo model - 10 speed PL 8-10 495 Grand Luxe - 10 speed Px 8 471 PROFESdlONALS Cadre et Fourche Tubes Reynolds Px-lO 1166 - 10 speed Version Luxe Px-iOL 1416 - 53 To make an entry into the French markets, Indian manufac turers have to adopt a short term and long term s^ratoqy as given below:- a) Short Toip : i. There is a fairly good ae'iiand tor Indian ^^oadsters of Raleiqh pattern tor export to third countries where Fr-^nch manufac turers/importers have estaDlished manufact.urino/wjrphousing activities. The expected volume of sJCh exports o^-r annum will pe doout lOjOfX) cycles, to Jahomey and Ca-r^ron and anoth--5r 40,000 cycles to other ^forican countsrries . I'A/S Velacldir who are the largest importers have offered to import our bicycles and have called lor sanols, 2. The soorts light Roadsters whicn nave oeen develooed in India for export to American market could DG modified and supplied with a mixed specification, on a short term oasis, to French market. Mixed s "^eciticati on means tnat all the requirements of reolaceaole parts such as free wheel, pedals,- bottom bracket axle, cups etc. should be of Fr'^nch specifi cation Doth in dimension and thread standard for easy replaceability. Those which don't require periodic replace ment such as Fork, Frame wheels, mudguards, chain wheels etc. could be of existing Indian si'^ecification. This approach would involve lesser investment on tolls and could be implemented. However, the finish, both in respect of ename lling and plating, should be comparable to the existing French specification. - 54 - 3, Import type decorate decals/transter snould oe developed and affixed on these models to make them very attractive. 4. As far as export of parts is concerned, items like chains, head liqhts could find an immeJiate accepi-.ance into the French market witho'J+ any 'lodl fication. b) Long TeimJ i. Out exoorts to France as well as '^-iC countries would deoend on Indian manufact JT'^rs' ibility to manufacture a range of shorts and raC'r moJels to m^^et the desnands of advanced countries. 2. All pooular French models such as s'nall wheel 0icycl3S (both junior ^nd adults) sports and racers (conventional and professional) can oe attempted only with French technical as^-istdnce anJ with caaital invasLmv^nt. 3. Ja'Tol-.'s of pooular lodel olcycles ooth ssaall wh'-^el and racer tyaes, oe obtained for detailed inves^.igation. 4. oelf^cted Indian manufacturers can bo entrusted with the task of assessing the feasibility of developing these models in their existing range of production with collaporation, if necessary, 5. Once the Indian manufacturers/entrepreneurs are identified, the French collaooraters oe invited to India for negotiations and finalization of such collaboration agreement. 6. Distribution through departmental stores is possible but this should be as second alternative as their markup is as high as iOO,^ and they do not offer after sales services. This may - 55 - proDably affect the effective sales and quality impact in the minds of French consumers. 7. Frencn importers are enjoyinq ere ait tacility tor imports from GEC and other countries vyith a viev; •*'o increasing our share of exports to Franco, Indian manufacturers/export houses may also have to fall in lino with others offering credi+ terms. 8. At present v!>ry little is knov/n to the French public about the Indian capacity to produce nuality bicycles. Indian manufactur>'rs should therefore actively take part in the bi-annual exhibitions v/hich are conducted in Paris to oromote + he image of their oroducts to the French puplic. 9. Japanese bicycles guide has made a ^ood i^ojct on the Fr^'nch manufacturers and inoort^ers in selecting parts and specific it ion. The cycle -manufacturer's Associa+ion of India or any oth T collective oody of cycle manufacturers should, brina out a guide oivinn details of Products and its spi^citications as taanuf ac^ ured in the country. This guide should be widely circulated.Above all, a joint aporoach by the Indian manufacturers in exporting bicycleg^could go a longway in avoiding comoetition among themselves and make exports effective. Following is a list of important manufacturers and exporters : 1. Etablissements Duquait & CIE, SARL Abbraetz, Lor-Altan 44, France. 56 - 2. LE PALAIS DE L' AUTOMOblLE, SA, RUE ANUl^ dOILLOT, ET, AVTTENRI Barbusse, Agen-Lot-Er-GAR-47, France. 3. SOCIETE CYRi\1A, S.A. Residence Coastal Vecchio, Ajaccio-Corse, 70 France 4. CUENIN RDBEHT 26, RUE JE dELFURT, Audiencourt Doubs, 25 France, Following is the list of major importers i. M/S VEUiCLAIii: 16, Rue je Moronval, 28109, Jroux-Fr :nce, 2. iVi/J YVn.iS Huodu Grand .U^ure, 75011, J-'aris - France. 3. M/S Jertin, Rijo Seorgos Clemonceam, 3-"'' NO. 4 Salt Laurent 31ancy, 62006, Arras, France. 4. M/S CYJOS 4, Rijo Jonnuoy, 75014, Paris, France, - 57 - (V) THE USA BICYCLE JvlARKET The united states of Amorica comprises mainly of the North ;Vn'^rican Continent botvvoon Canada and i/lexico. Alaska to the North West of Canada and 'Hawaii in Lhe Cpntrol Pacific ocean, are two of the 50 states of the USA. The climate varies consi derably. Mean annjal average +o T oorat ure ran'^es between 29°C in Florida and -i3.3°C in Alaska, /-innual rainfall av"ra-:3es 29"- ranging from 5.5 - 6" in Louis land to 8.6" in Nevada, ivluch of Texas, New luexico and Ar^izona is Jesert . The lannuaqe is English and Christianity is the predoninanL religion. The national flaq (proportion 19 by 10) has 13 ili >rp .ting stri )os (sov^n red ^nd six white) v/ith a dirk blue rect.jn'-'uljr canton containing 50 whi+e five Dointos stars, in the upi^r hoist. The caoital is V/ashinqton iJ.C. ECUNUi.iIC AFFAIRS ; The USA is the world's loading economic oower. Its chief imports are .l^Lroleurp, che ii cais,::ietals and manufactures, machinery, vehicles and newsprint, In most other materials the country mmmimaf is self supporting. This is reflocxed in the extreme diversification of the economy. Leading industries include steel, motor, vehicles, aerospace industries, teleco mmunications, chemicals, electronics and all kinds of consum^^r goods. The chief agricultural products are cereals, cotton and tobbaco. The principal mineral deposits are of petroleum, natural gas, coal, copper, iron, uranium and silver. American Business corporation have built up substantial interests abroad. The value of US Dollar fixed in 1934 was reduced twice in December - 58 - 1971 and in February, 1973. During 1974 and early 1975 in common with other industria lized countries, the U3A suffered an economic re(S'ssion. oubstan- tiol personal and corporate tax cuts were introduced to help stimulate the economy and as a result inflation and uni^moloymont docreas'^d in the second half of the yo .r. During 1976, economy showed an overall imorovomcnt. In early 1977, the now president introduced a two year proqr^rame to stimulate the economy and replace une T 3] jynent bo^h of which declined durinn 1977. The r.ii e of infla-^^ion fluctjated beiwoen 6 jnd 6.8,3 while unenploynent rcsn at about 1,3 for most of the ye .r. During the Ilnd half of the y^ar tht> iolJar deore- ciatod against 'nost major curr-encies. In January 1978, oartly owing to foreign oressuro, the US nonetary authorities in*.f'rvened activirely on foreign exchange markets to bolster the iollar against sJ'culjtion, iX'ev'rthe loss throughout Janu'ry ond February the dollar continu^^J to fiill v/ith consunc^r Jrices rising steeply. The trade deficH narrowed from a r-^cord ^ 34,20^ iLlJion in 1978 to "-^ 30,600 ^nillion in 1979. A lov/er level of unemployment was maintained in early L979 although inflation had risen to almost 10/^. Although economic growth slowed, the expected recession did not materialize in 1979. The restraint of infla tion waij" a paramount objective of the 1980-81 budget which while increasing milit.ory s'aending aimed to achieve a surplus of $ 2,000 million. TRADE REGULATIONS; Bicycles are entitled to GSP facility and there is no bar - 59 - on imports of bicyqles. 3ut the bicycle imports into USA" require^ the fulfilment of the specifications and the safety regulations, which are at present in force in the JSA. The rates of duty on bicycles are as follows i (i) 3icycle having both wheels not over 19 inches in diameter. a) Valued not over 4' 6.25 each 30/o ad val. b) Values over w 6.25 but under -»> 0.33 1/3 each 30/J ad val. c) Valued over 8.33-1/3 -ach 30,0 ad val. (2) Having both wheels over 19 inches but not OVCT 25 inches in diameter. a ) Vdlued not over # 10 each 30j ad val. b) Above v 10 bolow$i3,33-1/3 each 30/J ad val. (3} Having both wheels over 25 inches in dio^et;^^ if weir->hing less than 36 pounds comolete with occesories -jnd not desig nated for use v/ith tires having cross section diameter excluding 1,625 inches a) Valued belov; ^f 8.33-1/3 each 30/-'o ad val, b) Valued over -.? 8.33-1/3 but les~> than _,p, . ^ , ,, , ^ 16.66-2/3 ^°'^ ad val. c) Valued over -w 16.66-2/3 each 30,3 ad val. 31 CYCLE INDUSTRY; The US bicycle industr^^^J-s-the largest in the world. There are between 82-89 millaon bikes in use in America and more than 100 million users. 3ased on total population figure of 216 million persons, there are 140 millions who donot own bicycles. It is estimated that there are 20 millions who are too young to be part of potential market and another 40-45 millions who are too old or physically handicapped and are incapable of driving - 60 - a bicycle. The bicycle manufacturers association of America feels there is a potential of about "^O-SO million nevj customers. These days when there is stress on conservation of energy, increased gasoline prices and the increased costs of new and used automobiles, alongwith rapidly growing network of bikeways the bicycle industry is of the opinion that there is a tremendous ootential for con vincing additional machines of Amoricans that the bicycles is not only an ^_3JS££jJ.qd.^iii;id_JLn£L^oensive meana of transportation for the corautatJrt5n use. The UoA bicycle m.rk'^t consists of: (1) Li^ht weight 26" x 27" wheel 54>o (2) 20" bicycle 43/o (3) Others O/O .Manufacturers of bicycle in the US and their shares in the market is asi- Huffman 33/0 .'/lurray 32/0 AMF 12/0 ochwinn 12/0 Columbia 5% Chainbike 5/0 otelbir hard iO/o share in the market but discounti nued in spring 1977. IMRDHTS: Bicycle sales rose from 6.9 milJion units in 1969 to 15,2 million units in 1975. The dorrrestic manufacturers could not take advantage of catering the increasing demand. Their capacity was too small and their product mix consisted mainly of juvenile bicycles, whereas demand was for multispeed (mainly iO 8 8 8 8 8 o•» o* om o• o«b s t^ NO -4 -< in « oCM CO 8^ h- I0D} m m * « •1 f*- NO CM ^ CM NO r^ ^ h. h. <0 in (0 00 lO CO Q 00 vO >0 CO Q CM H «rt Q CM CO O o ^ c^ CM C-=O« 00 in r^ Q 00 m CM O 00 CM It CM D VO IT NO rt m CO ^ § Ov «k •> « • c^ «k c^ 00 ^ c^ m 8 CM :4 00 CM CM CO § 00 NO 3 CM 8 8 NO D +» o +> CM h- CM NO NO o 3 00 m m s * «k «« M • c^ 00 H ^ 0H0 CM ON u CM s o 5^ •> •k «k «• 9> CO CM NO •H •H NO 00 •H CM CO CO «H O 00 (0 ti g. c •H H m ui speed) liqht weight models for adults. This resulted in an increasing demand for foreign bicycles. Imoort of bicycles rose by 20/0 between 1970 and 1971 from 1.9 million units to 2.34 m 11 lion units. In 1972, imports of 10 speed liqht weight bicycles mo re than doubled to 5.16 million units, accounting for 37/o of the market bicycle sdlos as a whole rose by just over 5 -nillion units b^ivicen 1971 and 1972, inoorts accounting for most of the increase. In 1973, donesi ic oroduction of 10 speed light weight mo dels increase J and imports reijined it j Jst over 5 ^nilJion un its. In L974 sales of foreign bicycles decline i +o 3,98 million units accounting for 28/o of the Tcirket. Imports grow+h was even more impressive in value than in ouant ity,From some ^P 40 million in 1970, imports rose +o -^ 63.3 million in 1971, ^ 196.8 million in 1972 and 218.1 million in 1973. 3ut the^e was a Jeclino in 1974 to •n'i9^^ million. Imports of bicycles in 1975 were 2.6 million uni-^s or 23^3 of +ho market. Imoorts in 1976 decline i to ^ 87.78 million and again rose to 4 116.32 million in 1977 and to ^ 98.53 millions in 1978 and again to ^ 166.78 million in 1980. Imports from develooing countries and areas ^rew rapidly from 75,OX) units (value ^ 1.3 million) in 1969 to 884,000 units (value $ 29.7 million) in 1974 or 22.o of total United States imports that year. Imports from Brazil, India, Hong Kong, Mexico are usually small. EXRJHFS; The exports of bicycle from the l^A re negligible. Some - 62 - 6,000 units were exported in 1969 (v.ilue ^i? 167,000) and 17,000 units (value # 537,000) in 1973. The tabic below ciives the exports of bicyclos from the USA, TABLE 5.2. Exports from the USA, 1976-79. (V = Uol]^rs). 1976 1977 1978 1979 Cdnada 1244381 m 308875 119000 I'lexico 427698 Nrt 163935 1250 ^0 Vonezula 101058 NA 118642 1620 V) Ot h 0 rs 396376 NA, 551248 587000 Total 2169513 Nn. 1142700 993000 It is cle 3r from tho table that the exports in 1976 wore only of ^he value of ,f 2.16 milJion whrroas it declined to - 1.14 milJion in 197S and furthor declined to •<*> 0.99 million. MAFKET SIZE; Decades before bicycle boom in 70s, bicycle sales in the USA had advanced steadily but dnfortunately. The record was set in 1968 with sales, of 7.5 million units. In 1970, total sales amounte i to 6,9 million units. Th-^reafter sales rose it unprecden- ted rates 8.8 million in 1971, 13.9 million in 1972 and 15,2 million in 1973. There was a slight decline in 1974 owing to the recession and inflationary pressure, but sales again reached 14.1 million units. It is noteworthy that in 1972-74 period mm» - 63 - more bicycles were sold than ajtomobiles. In 1975 total sales reachod some 11. L millions units of which 8.5 million were domostically Produced and osily 2.6 tiiiilions wore imoortGd. In 1979 tot il sales raachod 20.5 nillion. TA3LH 5.3: J .dr'cct size for bicycles 1960-80. {}= «000} nos. Year d6 ^^roiuction Imports ixoort.s • larkot size 19 60 2584 1188 3 3769 1970 4951 1947 7 6891 1971 6518 2339 9 8848 1972 8751 5156 10 13897 1974 10100 3979 34 14045 1976 12800 3900 70 16630 1977 14000 4100 40 18060 1978 16500 3975 43 20432 1980 180 1 '1 5130 35 23095 TABLE 5.4: Showing forecisted market size period 1981-86 (Base year 1976; Q = '000 nos.) Year Q Year Q 1981 24994 1984 31522 1982 27170 1985 33698 1983 29346 1986 35874 - 64 - CHAT'INdLo OF i3ISTRIBUTIQN; Bicycles are marketed in the USA throuqh various distri- bu+ion channels. The ^aiu chann'^ls in order of importance are mass rotoiLT'j, so-^elaiizei bicycle Jeal2r3 and soortino ooods sho,:)s, iicycl'^s -.re iis+ribu^t (^d by don^^stic ninaf ictur^rs and in JO + ^rs "•• o 'iias-^ r'-'+.jil r,, ^'I'^ci :liz''i Joil -^s -^nd sporting Toodg sho :)3 lirjc+. '-"^ional wholo s ilors sj;jiy the sfn-Tller T^'-'tiil^rs. i.dso retailors h.inil'^ ^boat 65/a of tho total annuTl •^il^s. ^"he lon'^st r^-^ail-^r in -^-he VJOH, ooirs iioobjc'< L Go. is .Iso +h3 l:irg-ist i-^tailor of bicycl-^s, iccoantinj for aboJt i5,j of tho -i^rkat. ^•* s js'iv--" ! annual s^l's in 1974 anoanff^i +o 2.1 "million bicycles. 0-* b r o^s . ratailars in orier of siz3 are on-^ognory vv^rd; J.^. bnn.'y^s ->.-J. i-.ro3qG &> the i:s+"m Auto Go r JO rat ion. In adiition "^ o 'nass r''^tdil rs, bicycle sho JS ..ni SiJorting ooods shoos, there are a nunbf-^r of other iistribation channels, for examole, supermarkets an i cash and carry shojs. Some oetro- leum companies eg. Sunoil have oooned oicycle service stations in their Petrol stations, where bicycles are sold and serviced. The market share for tho different distribution channels is as I'lass retailers of which - 65 X> (a) Sears, Roebuck - i55'3 (b) Montogmery Ward - 8A (c) J.C. ftenney - 7% id) S.S. Kresge - TA (e) Western Auto Corporation - 6^ (f) Firestone chain stores - 4^ Specialised bicvcle dealers - 23% la /Spprting Goods shops - 5^ Others - 7% - 65 - Distribution channels for Bicycles in the ISA U.S. Manufacturer J Importer 1 Deprtt. stores, Wholesaler, J Oistributors/V/hodesalers chain stores, dealers I '-^Discount Houses Bicycle shops Bicycles are imoortod into the Uon by imoortors/v\/hole- Scilors and nass retailors (de Dartmsntal s'"-o"^es), mail order houses, chain stores, liscount stores etc. .^aCKAJINu .iNJ TRAILSAJti,\TluKi ^•'ackaging practices and rcnuiretnents in +he UOM in res pect of bicycles is similar to those in other fxi'Tlc^ts. 'bicycles are iniividually paclod in cartoons, knocked down i.e. with some of their orincioal comoon'^nts dismounted. If container services is available, several cartoons are r>3cked in one container. The number of bicycles backed a container varies considerably depending upon the type and model. The usual number of bicycles in a container is 280-300 (wheel size 26 x 3/8"). The cost per container from Asian ports is abadt ,*- 2000, IMroHTAI^ TRADE SHQl^ ; (i) Ohio Bicycle Dealers show at Columbus, Ohio. (2) National Bicycle Dealers show at Chicago. {3) International Cycle show at New York, (4) Midwest Bicycle Dealers show at Illionois (5) National Bicycle Dealers show at California. - 66 - CONSUMER PROJUCT SAFETY QQ.WiISSIQN REGULATIONS; Bicycles have been declared number one on the consumer product safety com'-nission ha/.ard Index. The 3icycles oafety Regulations Act was oro-nulgated on iOth May 1973 and finalized in 1974. The final bicycle regulation with some awnendments in the original w^s ^Promulgated on June, 28th 1976. /\ny bicycle subject to the regulation shall meet its renuirements in the condition in which it is offered for sale to the consumer. Any bicycle offered for sale to the consumer in dis-asseiibled or oartially assembled condition shall meet these renuirements after assembly according to the manufacturers instructions. The requla+ions are:- 1. Sotting up of a National 'Research and Jevelooment Institute for Bicycles. 2. Jiscouraging inp>ffici'^^nt exporters and evolving a system for imme iiate compensation for rejected goJds and discouraging exoort houses to bo )k orders for all tyoes of items. 3. Improvements in packaging technigues, 4. Setting up of specialized trading organizations/ export consorties. 5. Stream lining and strengthening of export insoection agency. 6. Supply of raw materials at International orices to manufac turers . 7. Standardization of bicycles and components. 8. The introduction of inprocess and final inspection by manufacturers to imorove quality and give some attention to the minutest details. - 67 - The main items covered under the regulations are braking system, stearing system, pedals, drive chains, chain qaurds, tyres, tubes etc. The Bureau of x^noinoorinq oci?nces, consumers Products oafoty Coraroission of the USA have oublishej a complete test manual for the bicycle "Jicycle Compliance Test Manual"', This manual describes in detail all the tests to be carried out on the bicycles and components alonqwith the equipments reouired. fiXx-^:^ .<3T£I^IAL FRJAI lUJln; The major supoliers of bicycles to the UoAare Jao<^n, Taiwan and Europe. The industry being labor intensive the cost of manufacturing in those countries is als^ going up. The U3A importers feel that developing countries like India, Korea and Mexico can be tho .ootential suppliers of bicycles and components because of availability of the cheap labor. There fore + hay want to establish a long term business relations. To keep themselves ahead of othors, the industrially advanced countries like the USA, Japan, Italy, France, ;JC, Indian manufacturers should bring out many new changes in bicycles every year. Shimano of Japan, the largest manufacturers of bicycle parts in the world have about 10;^ of their personnel working on Research and Development and if we want to enter the sophisticated market in a very big waj will also^have to establish a Research and Develo'pment Centre for'^e bicycle -^^ industry. Since the market for light "W^^^j^jy|^^3lVte>^ constitutes - 68 - about &yfo of the total sales, we must, take effective steps to capture a share of this market also, '^t present India is not manufacturing the comoonents for these bicycles. iNfow India has developed technology and raw materials. If Indian manu facturers/exporters take urgent steps to set up R & J centre as suggested earlier, they should be in a position to set uo some -production ca Jicity b^' 1982-83. unco India starts nanu- f icturinq the 11 iht v/cight bicycl'^s, there will also be demand for these cycles in India. ^m JLdi'lS ON LVi ?0?S: T(XTf !^ dJA F1IO..I INJIA; ^. The Uirt imoort'rs have Pointed out tho follov/ing oroblems which thoy face in the course of their business deals with the Indian exoortors: 1. Lack of understanding of the -nar.'cet structure; The Indian exoor'^'^rs visi+ing ,\m'.'rica ion't ha"v3 the ^rop'r knowledge about the Hcirk't structure. There are very large importors, small importers, wholesalers, iislributors and s lall rei ailers on the One hand and the large manuf act Jr^rsand js:>'^'qol'»rs of bicycles and catalogue dealers on th« oth-^r hand. At every stage there is a price mark up ranging from 5,J to even 50/^. Therefore, the Indian exporters should be well versed with the market structure and while quoting oridT-'Co different category of buyers, there must be a price differential. The exporters don't have oroper knowledge about the export procedure .Some of the American importers report that some Indian exporters don't have full knowledge about export - 69 - procedure i.e. calculation of GIF value, etc. which qives a poor impression about the country. 2. Lack of knov;le iqe of nark@table_ proiucts' The normal practice vvi-^h exporters is that thoy carry "dth them samples of items boino nanuf actur •• i by tho-n without havinq :: x;clfic knowlejge about tho ;.y 30 of ii e'.is ronuire J in '.he 1->A marlcet. The samples tal'Gn by the oxoortors n -iince bicycles ,>r'-? cov' rod unier th:; cuns jn'>r )roiJcts Jafoty Com-nission r-'pulj^ ions, the Hm^^rican iiruor^ers \/ojld like to ensure th-it the )roJucts supplied by tho Indian exporters strictly confoir. to the CPSC regulations and if any oroduct fails and the im:x)rtors/assombler is renuired to with draw +hese products fiPOwthe market, the Indian exoorters will have to bear all the costs in this regard. It is recommended that the manu facturers/exporters having inorocess and final quality control facilities should be encouraged to export so that later complica tions do not arise. — 1 3. Packaaino: This is one single factor which is haTipering exports to +he maximum extent. The Indian exporters are nor'nally using conventional card board/wooden cases v/hich ore not at all acceotable in the 'Jo narket because it is ilf-^lcult Lo handle this iyoe of oac'oqes and involves +00 much labor cost. Thus all th' fe:if"ur<^s of ]ooi lac^ "^V'-n] sy-.t^n s-ich uur 5ack,iqinn system re'^uir'^s a lot of in ^rov'^'''^ nts. /otil cjnc* )-^ of ^ackdjin- ^as to bj change J and tho ser/ices of a sJ-^clilizod insritute lik? the iniian Ins"ituto of -yc''aqino ^onbay shoulJ be utillzoi. Car'' should be taken in >'C'' ling th-> noods in acf'orimce with the s-t c + as of the iRi:)ortor. The ^yst^'r.^ "ost comnonl/ use i in the ht\ for bicycle ii.iaorts from uuroie, Jaijn, Taiwan 0+c is thf^ ^' 4. Export InsJoction; 'Whatever little^ exoorts have been made to the USA the importers are not much satisfied ivi~:h the quality, In-consist oncy in quality is the normal complaint, lixoort inspection system reouires streamlining and strengthening so that goods of proper quality only can leave the country. There should be strict control over the export worthy units with more frequent visits of the aancl to judge the adeauacy of quality control methods and equipments used for the same^. The agency should also advise the units on quality contpzd systems and on the methods to achieve improcess quality controls and final - 71 - inspection at the shop floor. The assistance of othpr technical organizations like the Snail Scale Service Institute may be obtained in this regard. Some of the importers obs<^rvc th it I he Inilan exporters increa'^-.e the trices nuito jften, nlscrojres "nny ^roblons and many ti-nes the ori'irs TO cjncellei. The )ricc rise Ccin be d''triouto] for ti"o 'ui'i r^^inons, (i) fr""~ Follo\'in) ;s th'^ list of i.iport^rs of byi^'cl^^s into the U.S. \. : 1. .Uli-'J Scores In-* "niional Inc. ( iG) 11?0, nh HV n>ji, /o'v Vjr:-., i..Y. iOUlC. 2. ,-«TTia J j'vu L-* 1. ( ,;. 135, -x^re^s 1 iln view, .../., 11-^03. 3. An3l3 Lal.ri >ycl-ry Sjorts Inc. v *) 20S40, ^^oci-^ic i-'i-h./c^y bO, Seatle, .H-98iS0. 4. Chain 3ik(^ Corporation ( >>/ 350, 3edch, 69th rlockway Jejch, I-J.Y. 11693. 5. Joannon Cycle Co. C". (,/) (al). 151, Ludlow rtvenue, Iforthvale, il.J. 07647 6. l^aleioh (USA) Inc. T.I. (./) 1170, Commonwealth Avenue, 3oston, i.i\ 02134. 7. '/estern States Importing Co. Inc. 7805, Oeering Avenue, Canon a ^^ark, GA 91304. 8. Northwest Bicycle 8. Supply Co. 437, Harding Street, North 3dst, ^.iinneapolis MN-55412. 9. Cycle x^jgeot, U3A Inc (M), 18805, Laurel Park Road, Compton - GA 90220 10. Princeton Sports CflC) 6239, Falls Road, Baltimore JO 21209. - 72 - BIBLIOGIV^iJHY i. Ambassador - A "ionthly Bicycle Journal, 2. Cycle Times - A monthly bicycle journal, 3. Retail Business - A British monthly Journal. 4. Hxoort Incentives - anita kunari, 5. The Europa Yo sr 3o )k - A U . ^I. x\iblication. 1980 6. Jirectory of o'J - H U.O. -Ajblication. Importers 7. Imoort ixoort - An ±n'il.in Ciovt. -^ublic 3"* ion oolicy 1982-83 8. lUnd look of otitis ics - an inJion Jovt, i-'ublic-'tion. ^- ''TV-the i-or->inI f n^'^^'-''•--\ Tr^de " -°^ - nn Indian iovt. .Publication. -xports - .ieexports 10. T.O.A. report on bicycles , June 1978.