Page 29 - DMGT501_OPERATIONS_MANAGEMENT

Unit 1: Introduction to Operations Management

Notes
under ‘TI Cycles’ brand. This proposal enabled AVON to utilize its capacity and TI Cycles
to obtain standard cycles at a lower cost. With a view to further improve its cost
competitiveness and delivery, TI Cycles started a unit in Nasik, Maharashtra in 2000, to
paint and assemble bicycles and cater to the needs of the Western and Northern markets.
Thus has begun an attempt by one of the great companies to make a come back.
Essentially, an organization must address two questions: “Who are we?” and “What do we
want to be?” This is the mission of the organization and it defines its reason for existence.
It might include a definition of products and services it provides, technologies used to
provide these products and services, types of markets, important customer needs, and
distinctive competencies—the expertise that sets the firm apart from others. The mission
guides the development of strategies by different groups within the firm.
1. It determines the value creation logic of the organization;
2. Sets limits on available strategic options;
3. It governs the trade-offs among the various performance measures and between
short-and long-term goals;
4. It establishes the context within which daily operating decisions are made; and
5. It inspires employees to focus their efforts toward the overall purpose of the
organization.
TI Cycles provided value to its customers by producing elegant, high quality bicycles. To
implement this strategy of producing high quality, beautifully designed cycles, TI Cycles
adopted a policy of vertical integration. It produced most of the components in-house, all
the way down to the steel tubes required for the bicycle frame. It created organizational
values and people processes that supported the vision of the organization.
Hero Cycles, on the other hand, had a fundamentally different value creation logic. It
manufactured heavy duty, low cost bicycles. Hero Cycles outsourced most of the
components. It focused on creating a highly efficient assembly operation in-house. Both
organizations were good at what they were trying to provide. Where did TI Cycles go
wrong?
One executive at TI Cycles analyzed the situation as follows, "We have continued to
maintain our position in our market segment. Hero Cycles tapped the price conscious
segment which turned out to be the largest market segment in the industry and is the
leader in that segment. We did not see that market segment becoming so big, nor did we
believe that we could compete on price with Hero Cycles".
A clear understanding of the implications of strategic choices on operational capability is
vital to success. Without the capability to produce low cost products, no amount of dreaming
would have made Hero Cycles capable to provide a product to replace the BSA and
Hercules bicycles. Their ability to design bicycles that met India specific needs at low cost
made it possible for them to provide the right product at the right time and make them
market leaders.
TI Cycles operational strategy of producing elegant, high quality bicycles became the
corporate strategy of the company. This resulted in its inability to compete with Hero
Cycles. It did not develop the capabilities to compete on price, and hence it could not
provide value when there was a shift in the needs of the market.

Questions
1. How did TI cycle loose its way?
2. Analyse the bicycle market in India.

LOVELY PROFESSIONAL UNIVERSITY 23