Research Methodology Report On Automobile Sector
Submitted On 11-FEB-2011 Submitted To Prof.T.J.Joseph Submitted By Group-8 Sithara ShriHari Thilak Babu Meghana Bhagavan 1 | Page
Naveen Kumar Reddy Faraz Mohammed Ismail
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Naveen Kumar Reddy Faraz Mohammed Ismail
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Acknowledgement
We are are than thankf kful ul to Prof Prof.T .T.J .J.J .Jos osep eph h for for prov provid idin ing g us the the task task of preparing the report on Automobile Sector in India . We believe in taking challenges and the report provided us the opportunity to tackle Research Methodol Methodology ogy a prac practi tica call chal challe leng ngee in the the subj subjec ectt of Research (Industrial Analysis). This report tested our patience at every step of prepa preparat ration ion but the courag couragee provi provided ded by our teache teachers rs helped helped us to swim against the tide and move against the wind. We are also thankful to our friends and parents for providing us help at every step of preparation of the report.
With Regards
Naveen Kumar Reddy Meghana Bhagavan Thilak Babu ShriHari Sithara Faraz Mohammed Ismail
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Objectives of the Report
- Study of the Indian automobile industry structure. - Analysis of performance of industry sub-segments and their future outlook. - Understanding the Indian auto component market and its growth aspects. - Evaluation of factors fuelling growth in the Indian automobile market. - Discussion of the forces countering the market growth. - Identification of future prospects for the Indian automobile industry
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Contents Introduction ----------------------------------------------------------------------------------------6
Features of Automobile industry---------------------------------------------------------------- 7 Industry Environment
PEST Analysis--------------------------------------------------------------------------------------8 Domestic Automobile Sales Trends------------------------------------------------------------10 Global Comparison of industry-----------------------------------------------------------------12 Industry Structure -------------------------------------------------------------------------------12
Market share of each segment-------------------------------------------------------------------13 Differentiation Practised by various Players--------------------------------------------------15 Barriers in automobile industry-----------------------------------------------------------------18 Industry Concentration --------------------------------------------------------------------------19 Conduct and Practises --------------------------------------------------------------------------20
Industry Conduct----------------------------------------------------------------------------------21 Industry & Firm level Practises------------------------------------------------------------------22 Advertising Intensity------------------------------------------------------------------------------29 Technology Intensity-----------------------------------------------------------------------------30 Foreign Exposure----------------------------------------------------------------------------------33 Leverage of the firm------------------------------------------------------------------------------35 Working Capital Ratio----------------------------------------------------------------------------38 Performance Analysis---------------------------------------------------------------------------38 Analysis of Competition-------------------------------------------------------------------------39
SWOT Analysis-----------------------------------------------------------------------------------40 Conclusion ----------------------------------------------------------------------------------------41 References-----------------------------------------------------------------------------------------42 5 | Page
Abstract: The automobile industry in India is one of the fastest growing sectors along with IT, infrastructure, Telecommunications in the country this growth is due to liberalization in 1991 by Prime Minister P.V Narasimharao this liberalization which allows foreign players to operate in India leads to increase in investment in automobile sector thus provides more jobs in India .The liberalization also allows foreign players to invest in various sectors which lead to increase in jobs thus disposable income increases which in turn increases purchasing power parity that leads to increase in sales of automobiles year-on-year
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Introduction : Indian automobile industry is one of the giant industries in Indian market since 1898, when the cars touched the Indian streets for the first time The automobile industry in India is the 7th largest in the world with an annual production of over 36 million units in 2010.India holds a 10th position in the entire world with being no.1 in two wheelers and no.4 in commercial vehicles. Automobile sector in India increases because of easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry and also with new and fuel efficient models. De-licensing in 1991 has put the Indian automobile industry on a new growth track, attracting foreign auto giants to set up their production facilities in the country to take advantage of various benefits it offers. This took the Indian automobile production from 5.3 Million Units in 2001-02 to 10.8 Million Units in 2007-08. The other reasons attracting global auto manufacturers to India are the country’s large middle class population, growing earning power, strong technological capability and availability of trained manpower at competitive prices The Indian automobile market is currently dominated by two-wheeler segment but in future, the demand for passenger cars and commercial vehicles will increase with industrial development. Also, as India has low vehicle presence (with passenger car stock of only around 11 per 1,000 population in 2008), it possesses substantial potential for growth. In 2006-07, the Indian automotive industry provided direct employment to more than 300,000 people, exported auto component worth around US$ 2.87 Billion, and contributed 5% to the GDP. Due to this large contribution of the industry in the national economy, the Indian government lifted the requirement of forging joint ventures for foreign companies, which attracted global to the Indian market to establish their plants, resulting in heightened automobile production. In 2009-2010 the automobile contribution to G.D.P is 8.4% which is one of the sectors to provide more employment
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Features of Automobile Industry :
The Indian automobile industry is going through a technological change where each firm is engaged in changing its processes and technologies to maintain the competitive advantage and provide customers with the optimized products and services. Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury vehicles, the Indian automobile industry has achieved splendid achievement in the recent years. “The opportunity is staring in your face. It comes only once. If you miss it, you will not get it again” On the canvas of the Indian economy, auto industry maintains a high-flying place. Due to its deep frontward and rearward linkages with several key segments of the economy, automobile industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays an essential role in the country’s rapid economic and industrial development. The well-developed Indian automotive industry skilfully fulfils this catalytic role by producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc. The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective of the economic resilience of the country. Continuous economic liberalization over the years by the government of India has resulted in making India as one of the prime business destination for many global automotive players. The automotive sector in India is growing at around 20 per cent per annum. “The auto industry is just a multiplier, a driver for employment, for investment, for technology” The Indian automotive industry started its new journey from 1991 with delicensing of the sector and subsequent opening up for 100 per cent FDI through automatic route. Since then almost all the global majors have set up their facilities in India taking the production of vehicle from 2 million in 1991 to 9.7 million in 2006 (nearly 7 per cent of global automobiles production and 2.4 per cent of four wheeler production). The cumulative annual growth rate of production of the automotive industry from the year 2000-2001 to 2005-2006 was 17 per cent. The cumulative annual growth rate of exports during the period 2000-01 to 2005-06 was 32.92 per cent. - Passenger car production in India is projected to cross three million units in 2014-15. - Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of around 10%. - Export of passenger cars is anticipated to rise more than the domestic sales during 2008-09 to 2015-16. - Motorcycle sales will perform positively in future, exceeding 10 Million units by 2012-13.
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- Value of auto component exports is likely to attain a double digit figure in 2012-13. - Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in 2014-15.
Industry Environment : The following tells about the automobile industry environment in which growth is affected PEST ANALYSIS:
This analysis shows how the automobile industry is effected by political, economic, social, technological factors Political Factor:
Indian government auto policy aimed at promoting an integrated, phased and conducive growth of the Indian automotive industry. Allowing automatic approval for foreign equity investment up to 100 per cent. Establish an international hub for manufacturing small, affordable passenger cars as well as tractors and two wheelers. Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. Laying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150 per cent for in-house research and R&D activity. Promoting multi-modal transportation and the implementation of mass rapid transport systems. Andhra Pradesh government reduces vat tax to 50% on tractors, 2-wheeler plants which is expected to generate 20,000 employees & investment of 25,000 cr. The Government is in the final stage of notifying the fuel efficiency standards for automobile sector in the country which will be enforced from 2011.Government initiatives regarding tax rebates has led to global players setting up their R&D centres in India.
Economical Factors: The Indian economy has grown at 8.5 per cent per annum. The manufacturing sector has grown at 8–10 per cent per annum in the last few years. Finance availability to CV buyers has grown in scope during the last few years. Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, others have entered into technology tie ups .Establishment of India as a Manufacturing hub, for mini, compact cars, OEMs, and for auto components. The average per capita income rises to 6.1% in 2009-2010 i.e.,39,900 to 45,500 rupees The fiscal deficit is reducing year-on-year which leads to government spending more on welfare schemes that leads to increase in income with people. The rise in inflation, oil prices now a day’s leads to reduce in sales of automobile’s
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Social Factor: Growth in urbanization, 5th largest economy by PPP index. Upward migration of household income levels. Increase in PPP , led to the increase in market share of compact cars. 85% of Cars are financed in India (15% in China). Cars priced below USD 12000 account for nearly 80% of the market. Vehicles priced between USD 7000 –12000 form the largest segment in the passenger car market. Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money. Preference for small and compact cars. They are socially acceptable, even amongst the well-off. Preference for fuel efficient cars with low running costs. The Tata Indica has the lowest running cost at US 8.5 cents per mile. The younger generation is buying more automobiles than for elder or older generation i.e., Gen Y is purchasing more than any other generation in India it is because of boom in IT sector.
Technological Factor: With the entry of global companies into the Indian market, advanced technologies ,both in product and production processes have developed. With the development or evolution of alternate fuels, hybrid cars have made entry into the market. Few global companies have setup their R&D centres in India. Major global players like Audi, BMW, Hyundai etc have setup their manufacturing units in India. Government giving tax incentives to environment friendly automobiles There is no tax for electric automobiles. Total Sales in 2009-2010: •
Automobiles - Scooters and 3-Wheelers -------------11996.84 cr
•
Automobiles - Tractors -------24080.45 cr
•
Automobiles - passenger cars ---------55785.89 cr
•
Automobiles - Motorcycles / Mopeds --------20301.3 cr
•
Automobiles - LCVs/HCVs ---------- 45155.81 cr
•
Total sales of automobile industry is -----------157,320.29 cr ~31.46 billion USD
This is the trend in automobile sector, the sales from 2001-2010 is increasing year-on-year growth at around 20% annually
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Category
200304
200405
200506
200607
200708
200809
(Numbe r of Vehicle s) 200910
Passenge r Vehicles
9,02,09 6
10,61,5 72
11,43,0 76
13,79,9 79
15,49,8 82
15,52,7 03
19,49,7 76
Commer cial Vehicles
2,60,11 4
3,18,43 0
3,51,04 1
4,67,76 5
4,90,49 4
3,84,19 4
5,31,39 5
Three Wheelers
2,84,07 8
3,07,86 2
3,59,92 0
4,03,91 0
3,64,78 1
3,49,72 7
4,40,36 8
Two Wheelers
53,64,2 49
62,09,7 65
70,52,3 91
78,72,3 34
72,49,2 78
74,37,6 19
93,71,2 31
Grand Total
68,10,5 37
78,97,6 29
89,06,4 28
93,45,5 34
96,54,4 35
97,24,2 43
123,25 50
Automobile Domestic Sales Trends
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Automobile Production growth trends & Environment : Category
200304
200405
200506
200607
200708
200809
200910
Passenger Vehicles
9,89,56 0
12,09,8 76
13,09,3 00
15,45,2 23
17,77,5 83
18,38,5 93
23,51,2 40
Commerc ial Vehicles
2,75,04 0
3,53,70 3
3,91,08 3
5,19,98 2
5,49,00 6
4,16,87 0
5,66,60 8
Three Wheelers
3,56,22 3
3,74,44 5
4,34,42 3
5,56,12 6
5,00,66 0
4,97,02 0
6,19,09 3
Two Wheelers
56,22,7 41
65,29,8 29
76,08,6 97
84,66,6 66
80,26,6 81
84,19,7 92
93,23,1 45
Marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. The marketing environment offers both opportunities and threats. The environment continues to change rapidly. The marketing environment is made up of Microenvironment and Macro-environment. The Micro environment consists of the actors close to the company that affect its ability to serve its customers. These actors are: the company, suppliers, marketing intermediaries, customer markets, competitors and publics.
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The Macro environment consists of the larger societal forces that affect the microenvironment. These forces are: demographic, economic, natural, technological, political and cultural forces which we saw above.
Global Comparison of the industry:
China is second only to United States in automobiles. Chinese own close to 22 million at the end of 2006, which makes China the second largest auto market in the world. At present, there are 30 cars for every thousand people in China, which is far below the world average of 120 cars. India is projected to have the largest number of cars in the world − 611 million to be precise − by 2050. According to Goldman Sachs, this means every sixth car produced in the world will be sold in India. Tata Motors, India's largest four-wheel automaker, launches Nano for Rupees One Lakh. Its sticker price of about $2,500 would make it the world's cheapest car. Only eight Indians out of every thousand own a car. Germany is the world’s largest exporter of automobiles in the world followed by U.S, China and India. U.S
No of cars/1000 Export
Europe 100
2nd
China
87 1st
India 30
3rd
10 4th
Industry Attractiveness’s:
Government Policies, high disposable income of consumers, less Labor costs , availability of raw materials like steel, high skilled auto parts manufacturers, more middle class society around 50m in 1990 to 500m in 2008.
Industry Structure:
Manufacturer Ashok Leyland Asian Motor Works Atul Auto Bajaj Auto BMW India Daimler Chrysler India(Benz) Eicher Motors Electrotherm India Electric Fiat India
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Segments LCVs, M&HCVs, Buses M&HCVs Three wheelers Two and Three Wheelers Cars and MUVs Cars LCVs, M&HCVs, Buses Two Wheelers Cars
Force Motors Ford India General Motors India Hero Honda Motors Hindustan Motors Honda Hyundai Kinetic Motor Mahindra & Mahindra Majestic Auto Maruthi Suzuki Piaggio Reva Electric Car Co. Royal Enfield Motors Scooters India Skoda Auto India Suzuki Motorcycles Swaraj Mazda Ltd. Tata Motors Tatra Vectra Motors Toyota Kirloskar TVS Motor Co. Volvo India Yamaha Motor India
Three Wheelers, MUVs and LCVs Cars and MUVs Cars & MUVs Two Wheelers Cars, MUVs and LCVs Two Wheelers, Cars and MUVs Motors Cars and MUVs Two Wheelers Three Wheelers, Cars, MUVs, LCVs Three Wheelers Cars, MUVs Three Wheelers, LCVs Electric Cars Two Wheelers Three Wheelers Cars Two Wheelers LCVs, M&HCVSs, Buses Cars, MUVs, LCVs, M&HCVs, Buses M&HCVs Cars, MUVs Two Wheelers M&HCVs, Buses Two Wheelers
This shows the number of firms in each segment i.e., 2-wheelers, 3-wheelers, passenger cars, Commercial vehicles which is due to liberalization in 1991. Market Share of each segment :
The following pie chart shows the share of each segment , 2-wheelers has more share compared to other segments followed by passenger cars, followed by commercial vehicles and 3-wheelers.
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Market Share of individual firms in passenger vehicle segment :
Market Share of individual firms in commercial vehicle segment :
Market Share of 2-wheele rs firm wise :
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Market share of 2-wheelers as segment:
Nature of Competition :
The nature of competition is oligopoly i.e., there are less firms than the potential market. In passenger car segment Maruthi Suzuki is the market leader because all other firms won’t increase the prices unless increased by Maruthi Suzuki. In 2-wheeler segment Hero-Honda is the market leader but now the joint venture between Honda& Hero is broken down. In 3wheeler i.e., in auto rickshaw segment Bajaj is leader & in tractor segment M&M is the leader. In commercial vehicles Tata is the market leader.
Differentiation practised by various players:
Marketers see to produce products for different segments one cannot create segments but one should identify segments to cater to their needs so that to be competitive in the world which a company wants to be innovative, to be profitable to attract new investors. So company must fix up a price by keeping segment in mind accordingly they can design ads, promotional campaigns etc.
Differentiation can be any of the following:
THE PRICE OF THE CAR
THE LENGTH OF THE CAR
THE USER SEGMENT
BASED ON THE PRICE OF THE CAR On the basis of price of car we can segment the car in following ways-:
Economy Segment ○
The economy segment of car ranges up to Rs. 2.5 Lakh. The products in this segment are Maruthi 800, Alto and the newly launched product of TATA motors i.e. NANO.
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Mid- Size Segment
The mid-size segment of car ranges from 2.5 Lakh to 4.5 Lakh. It includes the
○
products like Hyundai Santro, Maruthi Zen and Tata Indica etc.
Luxury car segment
The luxury segment of car ranges from 4.5 Lakh to 10 Lakh. It includes the
○
products like Honda city, Hyundai Verna, Mahindra Scorpio etc. Super luxury car segment ○
The super luxury segment of car ranges above 10 Lakh. This segment satisfies the elite class of the society. It includes the products like Skoda Laura, Honda Accord, BMW, Mercedes and Audi etc.
BASED ON THE LENGTH OF THE CAR
A segment- Cars that are less than 3.5 meters long (800, Omni)
B segment- Cars between 3.5 meters to 4 meters long( Zen, SX4, Santro)
C Segment- Cars between 4 meters to 4.5 meters long (Verna, Honda city, ford fiesta)
D segment- Cars that are more than 4.5 meters long( Mercedes, Sonata, Accord, Skoda)
BASED ON THE USER
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Segmentation of automotive sector is also based on the user of the products. Like the example of TATA Motors, when it observed that their product ‘INDICA’ is used extensively by the taxi operators, it came up with a new model of the car having Round Tail Lights to distinguish it from the car having vertical tail lights used by the individual buyers. The buyers are:
Individual Buyers
Taxi operators -:
Government /non-government institutions
VOLVO MOTORS
Volvo Motors develops its cars for buyer to whom automobile safety is a major concern. Volvo therefore positions it’s as a safest a customer can buy.
HYUNDAI MOTORS
Hyundai marketing strategy is differentiated marketing. Its primary consumer target is middle to upper income professionals who need true value for their money and comfortable ride in city conditions. Its secondary consumer target is college students who need style and speed. Its primary business target is midsized to large sized corporate that want to help their managers and employees by providing them a car for ease of transport. Its secondary business target is entrepreneurs and small business owners who want to provide discounts to managers buying a new car.
Hyundai Santro is targeting middle professionals Accent was launched to target corporate clients
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NICHE MARKET A niche is a more narrowly defined group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments.
BMW is targeting high class people but it is mainly targeting the young people who earn a lot of money up to the age of 35-40 years
Mercedes is also targeting high class people but it is mainly targeting the CEO’s, chairmen, etc of age group of 50-60 years.
Maruthi Suzuki targeting the upper middle class people who are earning 6 Lakh per annum
Barriers in the automobile industry:
The above graph shows the conditions of post liberalization and pre-liberalization. The other barriers are: Entry Barrier:
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Non-Tariff Barriers (NTBs) are extensively used to restrict trade and investment opportunities in the automotive industry today. They include an extensive range of measures to protect domestic auto industries and restrict market access.
Exit Barrier:
As more investment is needed to start but it is easy to exit but with losses, if mergers & acquisitions are not possible .
Industry Concentration:
Herfindahl Index
Herfindahl Index is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. It is defined as the sum of the squares of the market shares of each individual firm in the industry. H=∑i=1n (Si )2 Where, H = Herfindahl Index. Si = Contribution of each individual firm to Industry sales. n = Number of firms. Herfindahl Index – Decision Criteria
As 2-wheeeler share is 76.23%, commercial vehicles 4.32%, 3-wheelers is 3.58%, passenger vehicle is 15.86% so ‘H’ is as …
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H= (0.7623)2+(0.0432)2+(0.0358)2+(0.1586)2 =0.6124 =61.24% So here to withstand investment should be more Concentration level is between 50% to 80% i.e., index is between 1000 to 1800
Conduct & Practises:
The following shows the imports & exports of the automobile sector Exports of automobile sector :
Imports of Automobile sector
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Industry Conduct:
Vehicle Production in India
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Industry & Firm level Practises: Pricing of Automobiles: MARUTHI SWIFT After launching cars for the masses since so many years, India’s largest automobile manufacturer is now targeting the premium segment with their latest model from the Suzuki’s stable. Pricing of this premium hatchback is start from Rs.4 Lakh. This price range would
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practically rip apart Hyundai’s offering in Getz, which is priced at a much higher tag of Rs. 4.5 Lakh. Both the companies are known for their value based offerings and Maruthi with their extensive service network and brand reputation for making reliable cars should get the customer’s nod over their competition.
Maruthi Kazashi: It is the new version of luxury sedan car from Maruthi they are now concentrating on this luxury car segment it costs around 18 Lakh targeting business class people
TATA INDICA Tata Motors adopted a competitive pricing strategy for Indica in the global market. Prices were fixed on the basis of the norms prevailing in the international market. Also the prices offered by their competitors like Toyota, Ford, Fiat, were kept in mind while deciding the prices.
SCORPIO Pricing Strategy: to be a premium brand yet having universal appeal .Scorpio was to compete with the midsize cars like Hyundai Accent, Ford Icon, Opel Corse, Maruthi Suzuki Esteem on the one side and UVs like Toyota Quails, Tata Safari and the Tata Sumo on the other. Scorpio adopted the penetrative pricing strategy positioned in the psychological price barrier of Rs. 5 -7 Lakh.
Pricing in 2-wheelers : Faced with an uncomfortable scenario of Bajaj Auto closing in on Hero Honda Motors in monthly unit sales, managing director Munjal said the company has put in place a strategy to retain its leadership in the Rs 33,000 cr two-wheeler markets. That includes developing new high-performance engines in 100cc, expanding capacity to beyond 5 million units and reducing the price of 100cc bikes, if needed. “As confident as they are of upstaging us, we are confident of retaining our leadership and growing our lead,” Munjal told FE in an exclusive interview.
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Reiterating that unlike Bajaj, which is exiting the 100cc segment, Munjal said Hero Honda intends to strengthen its offerings in the segment. He said the company is developing new engines that will deliver superior performance in the 100cc bikes in future. To counter Bajaj’s move to offer 125cc bikes at the price of 100cc bikes, Munjal said Hero Honda could reduce prices of its 100cc bikes to nullify Bajaj’s strategy. “We have dominated the 100cc segment for many years and will continue to dominate. Possibly it may be the reason for Bajaj Auto leaving the segment,” Munjal told FE. The gap between Hero Honda and Bajaj Auto has narrowed from 92,206 in September, 2005 to 37,833 in September, 2010
Distribution: For 2-wheelers:
At Hero essentially they have a completely customer-driven approach. A nation-wide dealer network comprising of over 3,500 bicycle dealers, 350 dealers for mopeds and 225 franchise holders for motorcycles, ensures convenient access to the Group's products across the country. Strong dealer company relationship with a deep sense of belonging to the Hero fraternity, the Group's dealer network has catalyzed growth and acted as a strong bridge between the customers and the Group. There are more than 1000 committed dealers & service outlets spread across the country. The authorized workshop have well laid out standards for motorcycle servicing supported by fully equipped infrastructure in terms of quality precision instruments, pneumatic tools & a team of highly trained service technicians. Having your motorcycle serviced at an authorized workshop ensures highest standards of service quality and reliability
For Cars: SCORPIO Since the Scorpio was targeted at an urban The Scorpio was launched in a phased manner first in Metros Mumbai, Delhi, Bangalore, Chennai. Twenty cities were included over a period of 4 months and within a year 50 cities were covered. This ensured attention to main
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markets and to ensure that initial production of the vehicle could match demand.
Manufacturer-TKM ToyotaConsumer FlagshipIndia, Dealer Bangalore
DISTRIBUTION CHANNEL OF HYUNDAI
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DEALERS BOOKING STOCKIST SUB AGENTS DEALERS
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variant carrying a retail tag of Rs 3.85 Lakh , ex-showroom, New Delhi, and this aggressive pricing only reinforced this feeling.
Event Organized By Maruthi to Promote Swift ch 24, 2009
In a co-operative marketing initiative, Fever FM and Maruthi Suzuki Swift came together to organize a Night Rally in Delhi. The Swift Night Life Rally was organized for the Swift Life Club. The brand tied up with the station to extend the experience to the people who were unable to participate in the activity.
Honda Road Shows
The company plans to stage road shows, to display vehicles in the pavilions during various college festivals and exhibition.
Hyundai Television advertisements
Advertisements to promote and market our product are shown on leading television channels. Major music and sports channels promote and they reach out to the youth will be promoted through Star, Zee, Sony and doordarshan etc as it has more viewers. Radio
Radio is the medium with the widest coverage. Studies have recently shown high levels of exposure to radio broadcasting both within urban and rural areas, whether or not listeners actually own a set. Many people listen to other people's radios or hear them in public places. So radio announcements are made and advertisements are announced on the radio about the product features and price, qualities, etc.
Print Ads
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Daily advertisements in leading newspapers and magazines are used to promote the product. Leaflets at the initial stage are distributed at railway stations, malls, college areas and various other locations. Workshops and Seminars
Workshops and seminars are held in colleges and big corporate to make people aware about the companies past performance and product features, its affordability and usage, vast distribution network. Banners, neon signs
Hoardings, banners, neon signs are displayed at clubs, discs, outside theatres, highways and shops to promote its brand car. Booklets and pamphlets
Booklets are kept at car showrooms, retail battery outlets, etc for the customer to read. These booklets provide information about its company; the products offered which suits the customers need accordingly.
TOYOTA COROLLA The Promotion for Toyota Corolla consists of a blend of activities making its Promotion Mix. Its Promotion Mix consists of almost all the possible techniques of Promotion used for any other product. Some of the major elements of Promotion Mix of Toyota Corolla are listed as under: One of the major sources of Sales Promotion is Trade Fairs like AUTO EXPO, MOTOR SHOW etc. The company used to take part in these types of fairs and used it for its Sales
Promotion. But now the trend is shifting because the company thinks that if they want to launch a product on a National Level, then there is no need for such kind of shows as now there are various other powerful sources of media available to them. Moreover the cost spent on these kinds of fairs was not justified. So therefore the company is now keeping away from fairs. In 1999 Toyota last time participant at the RAC rally in Britain. Some other Sales Promotion technique used by the company is the Festival Season Offers it introduces in the market at the time of Diwali, New Year, Christmas, Navratri etc to boost short term sales.
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Public Relations and Community Building Exercise
•
Contribution to Tsunami
•
Toyota Kirloskar Motor wins Best Ornamental Garden award for its landscape
•
Toyota Kirloskar signs MoU with Bangalore University for promotion of Japanese Language
•
Toyota observes earth day by supporting local schools
•
Organizing Drawing/Painting Competition on ‘Me and my Environment’ for kids from Govt. Schools.
PERSONAL SELLING
Personal Selling largely takes place at the Dealers’ End. The way the customer is attended depends mainly on the Dealer as he acts as an interface between the company and the Consumer. The various cases in which Personal Selling takes place is Individual Sales, Corporate Sales, Sales Presentations, Fair and trade Shows. Mostly in case of Individual Sales the Customer goes to the showroom and takes a look at the product. There he is attended to by the Sales Personnel of the Dealership. Sometimes the Senior Sales Executive has to make Sales Presentation to Corporate Buyers. Personal Selling is also practiced at Trade Fairs and Auto Shows wherein the Company appointed Sales Personnel attend prospective customers and also book their orders. DIRECT MARKETING
In the case of Direct Marketing the Company Officials directly contact the Prospective buyers with the information available through various sources. For example in case of Road Shows, Trade Fairs, Auto shows etc. Sometimes the existing customers also provide references of prospective buyers such as their friends or relatives.
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GM STUXX GMI has launched several industry first programs such as Opel Club Card facility, Opel Carnivals, Opel Autobahn newsletter, chauffeur training programmes, mobile road-show caravan, car exchange programme for Opel customers, OK 5-Star used car programme, There is two-year and four-year warranty schemes, 2 year service holiday etc. Such programmes have helped GM in building its brand equity and developing a loyal customer base.
SCORPIO Brand Promise: ‘Luxury of a car. Thrill of an SUV’ this brand positioning addresses the key consumer Insight and the product delivers the promise. The position is also a unique proposition, which will help the brand have a distinct image in the consumers’ mind. The baseline captures the essence of the brand, which is superiority and uncompromising attitude. It also summarises the spirit behind the making of the Scorpio. Media Strategy
*Dramatic and high impact launch * High visibility * Push brand image even by the media vehicle Building impact through multiple-media
* PR, Mass Media, Direct Marketing, Events Public Relations
Pre-launch excitement and buzz was created by a full blown PR program. Media coverage on the IDAM process, the people behind the Scorpio, the obsession, the world class technology, etc set the tone for the hyped up launch. PR was also the first tool used for launching the Scorpio. The coverage of the launch was massive. It got four cover stories Mass Media
‘While the media targets would be achieved through the right selection of the media mix, the Scorpio media posture was to ensure that Scorpio was present on the decided media but ‘with
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a difference.’ Scorpio would use media innovations to create differentiation on the traditional media and do things in a ‘bigger and better’ manner. Customer Relationship Management (CRM )
CRM as a tool was used to create positive word-of-mouth, to monitor customer experiences and generate referrals. A series of CRM activities were implemented with regular direct communication, events and customer research. The CRM plan included a welcome Pack on filling up Scorpio Club (Top Gear) form, satisfaction surveys, Events, Festive offers, Rewards Program, etc.
TATA INDICA ‘More car per car’ is the famous tagline of this product. The Indica’s positioning has
remained consistent with the brand's offering in an increasingly competitive market. The Indica is now synonymous with the word ‘More, by encapsulating the inherent product strengths and marrying them with the customer trait of desiring ‘More’. A promotion strategy for Indica v2 in international market is more or less same as that of the Indian market. Media innovations have been a key to the success of the Indica.
MARKETING/ADVERTISING INTENSITY The Marketing/Advertising Intensity analysis provides an insight regarding the focus of the firm on the marketing and promotion activities. Marketing/Advertising Intensity = Total Marketing Expenses / Net Sales
Advertising: Promotion is a pushing strategy where as advertising is a selling strategy promotion is a short term where as advertising is a long term impact on the consumers to buy the product so companies spend more on advertising than on promotional campaigns There are many different techniques of Advertisement as a part of its Advertising Strategy. Most of the Print Ads of Toyota Corolla are individually targeted at one of these factors such as Comfort, Performance, Styling, Power, Leg Room, Design, and Driving Pleasure. One most common feature of almost all the Ads is that in every Advertisement, the fact that it is
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the World’s Largest Selling Car and its presence across 160 countries is present. This is done to because the company wants to differentiate the product in terms of its Reliability that it is an entrusted brand of 30 Million people across the globe. The fact that it is present in 160 countries proves that it is a Global Car. There are 3 TV Commercials of this Car in India. The Commercials show that this Car is targeted mainly at the Indian youth and young Executive. It has been positioned as a little sportier which is the main reason that it is for young people and is also like by them too. The Brochures, Posters/Leaflets are such designed that shows that Corolla is a car for people who demand Performance, Style, Power and Sheer Driving Pleasure. The car being a perfect combination of these factors makes it a huge success across its segment. The Other Sources of Advertisement include Bill Boards, Display Signs, POP, Displays, Symbol/Logo. The company does the Advertising of Corolla by displaying Bill Boards and Display Signs at various target places where it feels that prospective buyer will come across it. At the showroom also, there are huge amount of Point Of Purchase Displays and also Symbols/Logo which add to it. Percentage of ads on T.V in 2005-2010:
Car/jeep—50% Motor cycles—35% Commercial vehicles—4% Scooters—7% Tractors—2% Passenger Car segmentà Tata Motors Commercial Vehiclesà Tata Motors Motor Cycleà Hero Honda
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Technology Intensity/orientation: In-house R&D:
The absence of competitive pressure and the perpetuation of sellers markets may lead to low R & D activity in firms belonging to a developing country. Limited use of in-house efforts, either for adaptation of imported technology or in locating technology imports could also explain low R & D activity. With a more open policy environment, increasing competition and higher costs of technology imports, firms may realise that to catch up with technological frontier, they need to direct their efforts to build capabilities for technology generation, rather than depend on imports. As a result expenditure on in-house R & D would increase in a liberalized environment. on the basis of a survey of 32 R & D units of transnational corporations in India, found evidence suggesting an increasing trend of investments on R & D seeking to develop new products and processes Technology exchange : As stated earlier, firms operating in a restrictive regime directed their
in-house R & D efforts either to complement imported technology to facilitate technological trajectory shifts or to locate their technology imports. Some firms in the process of diffusion of imported technology, as a result, could have used the interaction between technological imports and in- house efforts. With the entry of leading multinationals and transfer of design and drawings, the technological search activity during the post Liberalisation period may have resulted in bringing about cost reduction and technological up gradation of vehicles to face global challenges R & D for commercial vehicles:
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R & D for 2-wheelers
R & D for passenger vehicles :
R & D for whole automobile industry:
Technology Imports: Gives an insight into the company's interest to acquire and adopt new
technology which it is not able to develop on its own A firm use imported components and parts either as a part of a 'package' in the transfer of technology or due to certain costs and quality advantages. In an era of domestic Liberalisation, restricted trade and strict exchange rate control, imports of components were used by some firms as a source of technological up gradation of their product. Higher imports could also be because firms would choose the quicker option of importing the parts and
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components rather than encouraging parallel technology transfer to component manufacturers as well. With an across the board change in trade policy, devaluation of the currency, move towards tariff controls and more realistic exchange rate, however, dependency on imports of components may actually decline. This is because of the choice between importing at a higher price and domestic procurement. To stay put in competition, firms may use the latter option. Technology Imports (%) = Forex Spending on Technology Imports / Net Sales =24.6%
Foreign/International Exposure: For passenger cars :
a) Export Intensity Export Intensity (%) = Total Forex Earnings / Net Sales =4361.136/55785.89 =0.078=>7.8% b) Import Intensity
Import Intensity (%) = Total Forex Spending / Net Sales =6380.875/55785.89 =0.1143=>11.4% For Motor Cycle:
a) Export Intensity
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Export Intensity (%)=422.838/20301.3 =0.0208 =2.08% b)Import Intensity Import Intensity (%) =859.9926/20301.3 =0.0423=>4.23%
For Commercial Vehicles: Export Intensity
Export Intensity (%)=2078.765/45155.81 =0.0460=>4.6%
Import Intensity
Import Intensity (%)=1898.891/45155.81 =0.0420=>4.2% For Automobile Sector: Export Intensity
Export Intensity (%)=2287.57/40414.34 =0.0566 = 5.66% Import Intensity
Import Intensity (%)=3046.5862/40414.34
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=0.0753=>7.53%
Leverage of the firm: It is the ratio of debt to equity if it is more than one then the firm is not working properly if it is below one the firm is performing properly The following debt-equity ratio shows the leverage of the firm and the industry as a whole
Debt-Equity Ratio of Commercial vehicles :
Debt-Equity of motor cycle :
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Debt-Equity ratio for passenger car :
Debt-Equity ratio for automobile sector:
Working capital Ratio:
This ratio indicates that firms ability to pay their borrowings if it is negative firm is unable to pay borrowing if it is positive firm is able to pay lender money i.e. they have assets to pay if a company have more positive working capital ratio it has huge inventory.
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Performance analysis: PROFITABILITY TREND
Profitability gives us the earnings available to the investors and owners of the company after taking into account all the expenses incurred during the business operations. Profitability is calculated as: Profitability (%) = Profit after Tax (PAT) / Net Sales =0.085 =8.5%
Accounting based measures: R.O.A=PBIDT/Assets 9.886/11516.165 =0.45=>45%
R.O.S=PBIDT/Sales 9.886/55785.49 0.01=>10%
Analysis of Competition: Porter’s Model of Industry Structure Analysis
Potential entrants Threat of new
Su
lier
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Bargainin g power
Industry degree of rivalry
Bargainin g power
Buyers
Threat of substitutes
Substitu
Degree of rivalry: despite the high concentration ration in the automotive sector the Indian automotive sector is intense due to entry of foreign companies into the market Threat of substitutes: 2-wheelers, sports bikes. Barriers to entry: The barriers to enter automotive industry is substantial. Suppliers power : the power axis is tipped in the industry favor. The industry has powerful buyers who are able to dictate their terms to the suppliers. Buyers power : the power axis is tipped in favor of the consumers favor. This is due to standardization and low switching costs associated with selecting from competing brands.
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SWOT Analysis:
Key terms: Closed Market: This is a market where there is no potential buyers , no OEM manufacturers
no proper supply of materials etc and also no incentives to do a businesses Liberalization: India liberalize on its policies towards entry of foreign players and in some
sectors government allowed 100% FDI like automobile, infrastructure, education etc previously firms has to do according to government i.e. government is the monopoly but after liberalization it changed.
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Fuel-emission standards: These standards include Bharat Stage IV, BS III, etc which
automobile manufacturers have to follow to reduce carbon emissions
Conclusion: India’s expedition to become a global auto manufacturing hub could be seriously challenged by its inability to uphold its low-cost production base. A survey conducted by the research, KMPMG firm reveals that the Indian auto component manufacturers are increasingly becoming sceptical about sustaining the low-cost base as overheads including labour costs and complex tax regime are constantly rising. The survey said many executives believe that India’s cost advantage is grinding down fast as labour costs are constantly increasing and retaining employees is becoming more and more difficult. Increased presence of global automotive companies in the country was cited as one of the reasons for the high erosion rate. Indian auto businesses will only flourish if they boost investments in automation. In the longer term, cost advantage will only be retained if Indian capital can be used to develop lowcost automation in manufacturing. This is the way to preserve our low cost. Global auto majors are also cynical about India’s low cost manufacturing base. India taxation remains a big disadvantage. This is not about tax rates it is just about unnecessary complexity. But some companies also believe there is scope for reducing the cost of doing business. In spite of this there are opportunities to exploit lower costs right across the board. It’s true that labour costs are definitely increasing but they are still five per cent of the total operational costs. The labour costs can be further reduced if companies are successful in bringing down other costs like reducing power costs. Low-cost base can never last long. The company said Indian industry has till now relied on very labour intensive model but it would have to switch to a more capital intensive model. The percentage of automobile sector contributing to GDP is 2.5% in 2002-2003 to 5% in 2008-2009. This indicated that it is one of the major contributing factor to employment etc.
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