The Loka Carvaka was not just another sedan, three boxes on four wheels. It was, as Loka Automobiles saw it, the definitive 'Indian family car'. It was an Indian product by conception, designed with the Indian consumer in mind, to be sold under an Indian marque. More importantly, the base model was priced just low enough-at Rs 4.5 lakh-to attract a wave of upgradations from subcompact cars (such as its earlier offering, the Loka Anubhav). Plus, there were four other variants of the sedan as well, to suit assorted needs and budgets.

Having started operations only five years ago, and that too with single-minded attention to the Indian market, Loka was moving in close synchrony with the evolving needs of the domestic consumer.

"The story of this decade will be the shift in common perception of a 'car' in India from subcompact hatchbacks to proper three-box sedans, and the good news is that we've got that spectrum covered," said Rakesh Prajapati, Chief Marketing Officer, with satisfaction, as he surveyed a six-foot-across poster suspended across his white-board, detailing every Loka car. From subcompacts to sedans, with diesel and petrol engines, frill-free and fully-loaded, along a price graph from Rs 3 lakh to Rs 7 lakh, Loka had spanned the so-called B and C segments of the market. As the Indian market had started ascending the upgradation curve (from the entry-level A to subcompact B and from B to sedan C and so on), these two had become the hot segments, selling good volumes at good margins.

Range. In a word, this was the market weapon that Loka's rivals couldn't hope to match in a hurry. At least not when it came to the crunch-delivering value-for-money in an extremely value-conscious market. The Indian consumer primarily wanted his rupee stretched to provide the best transportation possible on earth (if the brand was also evocative, then all the better). Most cars designed overseas, in contrast, were created with a differently motivated 'global' consumer in mind. And consumer orientation, Loka believed, could only work if the company had a clear demographic and psychographic understanding of this person, right from the drawing board stage.

"Retro-fitted diesel technology won't get them far," said Prajapati of his rivals, aware that their diesel products, while saving customers equivalently on fuel bills, would not be priced low enough to trouble Loka.

"That's the beauty of how well integrated we are in manufacturing," said Prakash Raman, Executive Director, sinking his large frame into an armchair, "and that, dear fellow, is the real market buster."

Indeed. While Loka's products spanned the b and c segments, the manufacturing base was a single platform. This was the heart of the business, and the less visible weapon in the company's war-chest. The core engine for all variants of Anubhav and Carvaka, for example, was modeled on a basic 1,450-cc design (which needed some minor re-engineering to power the sedans). This meant that all it took was a single dose of heavy investment (in R&D, vendor network, moulds, presses and assembly lines) for the company to address a variety of needs, and thus aim for an 80 per cent plus utilisation of its 1,20,000-units-per-annum capacity. Manufacturing concentration, after all, was the key to achieving economies of scale on volume growth. And this, in turn, spelt cost competitiveness.

"The fixed costs were low to start with," continued Raman, "and now as we scale up, we attack variable costs." Loka's cost structure was already the envy of the industry, and now with more Loka cars rolling out on to Indian roads, the cost picture would look better still.

In a sense, it worked so well because of the divergence in the two departments' motivations. Manufacturing was forever in consolidation mode, eliminating the variation in parts and processes, and ensuring that inputs could be kept as common as possible, to crunch costs. Marketing, on the other hand, was forever in diversification mode-striving to map as broad a section of the market as possible, and nudging people up the aspiration curve through its brand communication. Together, they made Loka a winner.

The company, really, had nothing to worry about. Except the threat of being beaten at its own game. Rivals, it knew, were not sitting idle. They were consolidating their manufacturing, and a trio of three big foreign-backed players was even talking about sharing a plethora of resources. Loka had brand power, but without its cost edge, it could be in serious trouble.

"So," said Prajapati, coming round to the main reason for the discussion, "I want to stretch the brand in both directions. We're mid-zone players, but I can think of two good reasons why the A and D segments make sense."

Raman nodded, and pursed his lower lip-waiting for Prajapati to elaborate.

"You see," explained Prajapati, "it now appears to be a mistaken assumption that A segment cars would get phased out and the B segment cars would serve as entry-point products. And for range to work comprehensively, we need to be present at the entry point as well-even if we have a loss-leader in this segment to start with. Anubhav has to be the first four-wheel vehicular experience for the Indian, if the brand is to appropriate the basic notion of a 'car' as understood in the remotest of villages."

"Hmmmm," responded Raman, "loss leadership I'm not sure, but hitting a price point of Rs 2.2 lakh without compromising on quality is a tough order. And what about the D segment?"

"Ah, that's a question of making Loka a brand worthy of satisfying the highest order of needs in the market," said Prajapati, "It's the rub-off that I need to convince the sophisticated globally-exposed customer of my quality credentials. Even a D segment luxury car would only be the level of a mass seller in the US-and if we establish our technical competence here, we've got top-end perceptions in our favour. Besides, it's a matter of five years that significant numbers reach that point of the upgradation curve."

Raman took a deep sigh, and then replied: "I see your point, Rakesh. But let me tell you, no car maker anywhere in the world has used a common platform to span segments from A to D. So we're talking about a basic rethink on our operational economics here-and I'm not sure if the returns justify A and D segment plays."

The question: Should Loka widen its range to cover the A and D segments?

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