Ikarus - NABI success story, an excellent example of 'blue ocean strategy'

Once, Ikarus was one of the biggest bus manufacturer companies in the world, which reached its production peak in 1984, with more than 13 thousand vehicles produced. Ikarus 260 is among the world’s top-selling buses with 75,547 manufactured buses. With its success stories, it set a good example to the corporate sector in how you can compete with real value-profile development that daringly differs from the narrow-minded competition that focuses on rivals and operates with petty modifications.


The beginnings

14351_fu.jpgThe story of Ikarus goes back to the story of the contracted parent companies, until 1895, when Imre Uhry – son of a wheel- and coach-maker – established his firm under the name Blacksmith Workshop and Coach Factory near Városliget in Budapest. Uhry ploughed back a part of the income into the enterprise and spent it on developing investments, thus basing the future successes of the company. By the mid-twenties, one could found graceful chariot-like buses – fabricated in Uhry’s factory individually with wooden frames – in many Hungarian cities. Although the boom of the firm was broken by the Great Depression at the end of the nineteen-twenties, the company was revived by Uhry’s children owing to the family cooperation and the financial support of relatives; and production could go on.

50_e_BV_elso_ikarus30_as.JPGAs of the mid-thirties, the firm gradually employed developments that laid the foundation of switching from retail manufacturing to large-scale machine production. Besides changing wooden-framed to metal-framed vehicles, they also modelled the types produced in large quantities with scale mock-ups as of 1936. During the forties, engineering investments and other developments due to increased vehicle demand in the WW II resulted in company growth. During the war, the predecessor of Ikarus became a large company with an employee headcount of almost one thousand. After the war, the company was nationalized and merged with two other companies.

The milestone

10050076.jpg1947 meant an important milestone in the life of the company: the first Tr-5 model was finished. It was fabricated onto MÁVAG undercarriage, had a mixed metal and wooden car-body, and it had other features like headwall radiator, recessed destination board and pneumatic remotely controlled folding door that was a characteristic part of the city bus transport style until the end of the 1980s.

Although the cheap mass production was not invented by the Ikarus company, as the required conditions were given at Ikarus, it definitely played a key role in the later successes of the company. But how did Ikarus get the money for installing an expensive producing system on a belt system? Simply, it was from the export incomes coming from TR-5; because the first export orders for TR-5 buses arrived by the end of the 1940s; Poland bought 300 pieces among others. The incomes from the sales created enough financial sources for introducing the conveyor-belt production lines in 1950.

Introduction of the belt system

50_eves_bvolan_IK31.JPGThe primary advantage of the belt-system production is rapidity and the increasing labour-efficiency. Each workstations were equipped with the tools required for the certain work phases, thus they did not need to bring different tools to the semi-finished bus, but the bus was moved to the next workstation. Another advantage is that it can be easily combined with the work schedule built on trained labour. These modifications created the conditions of the cheap mass production in the company.

Rushing towards success by type 200

VF_1952.jpgThe production of the best-selling series of Ikarus, which is an extremely popular and successful model on international level, the product family 200 was started in 1971. In its first five years, it received twelve awards at professional fairs. The secret of its success hid in developments related to economical serial production mainly. They standardised the elements (the chassis, the car-body, the driving-chain element) belonging to one product family, which cut down on the costs spent on special tools needed on the production lines. Thus, they created a product family whose vehicles could be assembled according to aspects of both urban and long-distance transport or even in luxurious design. With these developments, Ikarus was able to diminish production-investment costs, so it could appear on the vehicle market with more competitive prices. It would be nice to state that this was the result of a conscious competition strategy, but it was not unfortunately; the real reason was necessity and lack of funds. They did not have enough money for producing several model families with different tool demands at the same time.

Having competitive edge

50_e_BV_IK280_csuklosok_ozdon.JPGTechnologic simplifications also resulted in an important competitive edge. Operators were happy about that, because it made reparability simple and it increased the value-profile and demand of the family 200 just like the built-in automatic gear-change that made driving much easier. Partly, this was the reason why transport companies changed their fleet to type 200 buses relatively soon – compared to their financial possibilities. Besides development, value-profile increase and cost cutting, another competition-strategic element can be noticed in the family 200: the low-cost strategy appeared – which is so typical in today’s Chinese competition strategies -, meaning that they abated certain valuable features of the product deliberately in favour of the price competition. According to plans, the serial 200 had been designed with pneumatic spring suspension but they remained at the leaf-spring solution finally, which meant a backward step for passengers considering comfort, but brought about an advantage in the vehicle market considering the price competition.

Held up as model even at Harvard

wmata_5232_atmThe publisher of Harvard Business School, which deals with publishing books on the business education topic, launched a book in 2005 (by W. Chan Kim). This book analyses in detail the success of NABI (an affiliate of Ikarus) as an example for the value-innovation competition strategy (blue ocean strategy). At the beginning of the 2000s, the Mátyásföld-based North American Bus Industries employed this competition strategy at a modified version of Ikarus model 435 called NABI 436, and swept its rivals off the public vehicle market of the USA successfully. Bus manufacturers rivalled each other in the lowest sales price primarily within the one-billion-dollar industrial sector of American passenger buses – before the appearance of NABI. Instead of standing in the line of the cheap bus makers, NABI chose to persuade the American local governments that it was worth buying Ikarus buses instead of cheaper American buses. NABI’s argument was that the total incurring costs during the lifespan of a bus is a more important element than the price of it.

Reaching the home straight

lead_1024_CAT_NABI_436When deciding about the product developments, the key element of the competition strategy was to focus on buyers’ and users’ demands instead of on the rivals’ behaviour. The traditional sheet-steel car-body was replaced by fibreglass plastic that does not corrode and is easy to mend; the damaged part can be cut off and the replacement can be soldered easily. Thus, they managed to cut maintenance and reparation costs. As the car-body got one-third lighter, the fuel consumption and emission of pollutants diminished significantly, and due to this, the environment-protecting performance of the new bus far exceeded the level of requirements. In the meantime, the user-friendliness of the vehicle also increased: its little weight (less load on the axle) gave way to more seats and larger inner space at lower production costs. An aesthetic design and a lower floor contributed to the popularity of the bus as well. As a result, US citizens liked travelling by it, so local governments could increase their incomes from public transport. In 2002, the company-ranking firm Economist Intelligence Unit listed NABI among the thirty most progressive companies in the world.

Károly Erdélyi

Translated by Zita Aknai



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