TABLE OF CONTENTSCH-1 PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMERY
RESEARCH METHODOLOGY RESEARCH PROBLEM AND OBJECTIVE DATA SOURCES
RESEARCH APPROACH CONTACT METHOD RESEARCH INSTRUMENT SAMPLING PLAN
LIMITATION INTRODUCTION TO AUTOMOBILE HISTORY CLASSIFICATION OF CAR
INDIAN SENARIO IN AUTOMOBILE GLOBAL SENARIO IN AUTOMOBILE
INTRODUCTION TO AUTOMOBILE INDUSTRY SIZE AND STRUCTURE OF
AUTOMOBILE INDUSTRY MAJOR PLAYRS SWOT ANALYSIS PEST ANALYSIS FIVE
FORCE ANALYSIS MARKET SHARE STP ANALYSIS SEGMENTATION TARGETING
POSITIONING ANALYSIS OF PRODUCT STRATEGY PRODUCT MIX PRODUCT LINE,
FILLING, STRETCHING LEVEL OF PRODUCT PRICE STRATEGY TYPES OF
PRICING PRICING METHOD PRICE STRATEGY BY VARIOUS PLAYERS
DISTRIBUTION ANALYSIS DISTRIBUTION CHANNEL DISTRIBUTION LEVEL
DISTRIBUTION METHODS ROLES AND RESPONSIBILITY OF TNTERMEDIARIOS
PROMOTION ADVERTISING STRATEGY PROMOTION STRATEGY PUBLIC RELATION
STRATEGY PRSONAL SELLING AN ANYLITICAL STUDY OF CONSUMER BEHAVIOUR
FOR AUTOMOBILE PURCHASE
CH-2
CH-3
CH-4
CH-5
CH-6
CH-7
CH-8
CH-9
CH10
CONCLUSION AND FINDINGS AND BIBLIOGRAPHY
PREFACE
One of the recurrent things in our report has been the
Automobile industry in the mind of consumers. During the past few
decades we have leaved in culture that is the evidence of changing
consumers preference of automobile and the growing variety of cars
in India. We have chosen to prepare a report on Automobile industry
because of its importance for the consumer and for the Indian
economy, we can never underscore how Automobile industry is
important medium of revenue for our nation. At first when we were
putting down our efforts we have no idea what we would have to say
through our report but however we put aside all doubts and begun to
examine the past of Automobile industry that how with the passage
of the time Automobile industry has grown and became a strength for
our economy as well as the present scenario, and where future lies
of Indian Automobile industry. Every industry has struggled to
achieve its goals. Generations have given their best to make life
better for their offspring. There is nothing mysterious or hidden
about it no alternative to effort. And yet we fail to follow the
winning track. More than the problems outside globalization,
recession, inflation, instability, and so on we are concerned about
the inertia that has gripped the Automobile industry psyche, the
mindset of defeat. e believe that when we believe in our goals that
what we dream of can become reality results will began to follow.
In the eight chapters of our report we have introduced you with our
work and extent of our knowledge regarding different concepts of
marketing and business environment and how we have linked theory
with the practical issues of Indian Automobile Industry.
ACKNOWLEDGEMENT
While we are of course solely responsible for the content in
this report Automobile industyr. We want to thank several people
for their assistance. From the practical study we have got the
experience and improved our knowledge and it provides us guidelines
to perform work in actual situation. We have thankful to director
of our college Prof. Shilpa Shah and Brahmchari Wadi Trust
Institute of Business Administration to providing all the
facilities to make this report and for all encouragement. Firstly
we are thankful to the faculty who reviewed this report and
provided us with rich guidance MR BHAUMIK NAYAK. We are thankful to
all those respondents who actively engaged with our research given
their precious time to us. At home we want to acknowledge the
support and patience of our parents during the many hours we spent
on working on the report. Last but not least we are also thankful
to our classmates for sharing the information with us.
EXECUTIVE SUMMARYToday whole world is of globalization. Even
India is developing. We need extra knowledge, talent, and
managerial skills to make our position strong in this competitive
world.
In present condition we must have some practical knowledge in
business administration. In T.Y.B.B.A Program, we study different
subjects like Advanced Marketing Management, Business Environment,
and Organization Behavior. In first year we had industrial visit in
second year we had industrial visit and financial project. In third
year we have GROUP PROJECT. In this we take particular industry or
company for study. The theme of GROUP PROJECT is to study an
industry or company. If it is Industry than different aspects of
that Industry are surveyed. This is a group project. This project
is based Indian Personal Care Industry. Through this project it was
surveyed that which type of cars people prefer, which are the
different brands in the market, what is the market share of
different brands, why people use Cars, and other determinants of
cars. So, to get that practical knowledge we have surveyed
different brands of Automobile which are also major ones in the
market they are Maruti, Honda, Ford, Nissan, Toyota, etc.
CHAPTER 1: RESEARCH METHODOLOGY1.1 Research Objective:
Research objective can be defined as the purpose or motive
behind the research which the researcher tries to conclude some of
the major and minor findings. There are two types of objective in
research. Primary objective secondary objective(1) PRIMARY
OBJECTIVE:-
Our researchs primary objective is to identify the consumers
preferences and consumption habit of purchase the car.(2) Secondary
objective:-
To analyze the situation of automobile market in India. To
understand competitive framework of Indian automobile industry. To
analyze the marketing mix strategy adopted by various big
automobile marketers. To understand the various internal and
external factors affecting Indian automobile industry.
1.2) RESEARCH DESIGN:Research design is also known as framework
or blue print of the research. There are three types of research
design.(1) EXPLORATORY RESEARCH DESIGN:-
Exploratory research design means to find something new that
help us to collect preliminary information and research hypothesis
consumption.(2) DESCRIPTIVE RESEARCH DESIGN:-
Descriptive research design means to describe any situation or
information in detail.(3) CASUAL RESEARCH DESIGN:-
Casual research design means to study the cause and effect
relationship of situation. Here in the market research we have use
exploratory research design and descriptive research design. We
started with exploratory research for the following reasons and
ended with descriptive research by explaining each by each topic in
detail.
To find out scope for the product. To find out combination in
distribution channel To find out effective media channels.
1.3) DATA SOURCES:The source from which we get the information
or data for research is known as data source. The researcher can
gather primary data, secondary data or both.(1) PRIMARY DATA:
The data that are freshly gathered for a specific purpose or for
a specific research project. The researcher collects the data on
his own without any use of secondary source.(2) SECONDARY
DATA:-
The data which already exists somewhere and it was gathered for
some other purpose in the past. Here we get the information through
internet by using different websites and various related books. We
started our investigation by examining secondary data to see
whether the problem can be partly or wholly solved without
collecting costly primary data. When the required data do not exist
or out dated, inaccurate, incomplete or unreliable then we
collected the primary data through various research approaches.
1.4) RESEARCH APPROACH:After deciding the data source we will
get the information from our respondent that is consumers. Primary
data can be collected in following five ways.(1) OBSERVATIONAL
RESEARCH:-
Fresh data can be collected by observing the consumers when they
shop or consume the products. Important points can be noted down
while analyzing the behavior of consumers.(2) SURVEY APPROACH:-
It refers to face to face or direct communication with the
respondents. In this pre-decided questions are asked to
respondents. It is suited for descriptive research.(3) FOCUSED
GROUP APPROACH:
In this researcher select people who are potential to afford
their products. The trained moderator will ask the questions to the
respondents and he will note the important points regarding his
preferences.(4) EXPERIMENTAL APPROACH:-
In this two mutually exchange groups are selected having similar
characteristics, keeping the same controllable factors and same
variables in both groups but providing them different treatment to
observe the differences in their opinion. Here we have used survey
approach to know about consumers beliefs, preferences and
satisfaction regarding the consumption of likeness or dislikeness
of companies car.
1.5 CONTACT METHODS:In this we decide the methods through which
we can contact the respondents to get the information. Some of them
are as follows.(1) PERSONAL INTERVIEW:
It is a face to face communication with respondents. By this
type of interview we can get the reliable information and
researcher is able to complete all the questions. Explanation is
given for the questions which are not understood by the
respondents.(2) TELEPHONIC INTERVIEW:
In this researcher ask questions to respondents on telephone. It
is the best method for gathering information quickly and is less
costly also. But in this type of method researcher cannot get
reliable, accurate and correct information.(3) MAIL
QUESTIONNAIRE:
A structured questionnaire is prepared and sends to the
respondent. The respondent is supposed to fill up the questionnaire
and back to the researcher. This is very time consuming.(4) ONLINE
INTERVIEW:
In this type of research we ask the questions to respondents
online through chat or Email. Large number of respondents can be
covered and it is less costly. For our research we used personal
interview for getting the reliable information from the consumers.
We met consumers of various age groups to know their consumption
habit and preferences related different companies car.
1.6) SAMPLING PLAN:Researcher uses uses sampling plan to reduce
time and cost of research. Few units from population are selected
known as sample. Sampling plan has following three decisions to be
made.(1) SAMPLING UNIT:
It refers to that who should we survey? Researchers select the
target audience and do the research. For our research our sampling
units are the consumers who are using the cars.(2) SAMPLING
SIZE:
It refers to how many people to be survey? Sample size should be
optimum to do survey to get more reliable results. For our research
sampling size was 300 consumers, of whom 297 are car users and 3
are non car users.(3) SAMPLING PROCEDURE:
It refers to how should we choose the respondents? Sampling
procedure is of two kinds: Probability sampling procedure: It is
used where all the units of population are get known and equal
chance to be selected as samples. Non probability sampling
procedure: It is used where all the units of population do not get
known and equal chance to be selected as samples. In our research
we used non probability sampling procedure by convenience sampling
as all the units of population do not get known and equal chance to
be selected as samples.
1.7) RESEARCH INSTRUMENT:Basically there are 3 main types of
research instrument. They are: questionnaire Qualitative measures
Mechanical devices There are 2 types of questionnaire (1)
STRUCTURED QUESTIONNAIRE: In this type of questionnaire all the
questions are in pre decided format and it is asked in a logical
sequence.(2) UNSTRUCTURED QUESTIONNAIRE:
In this type of questionnaire questions are ready but not asked
in logical sequence. Researcher can ask any question at any time
according to this wish as the format is not pre decided. There are
2 types of questions:(1) Open ended question:
It means where respondents is allowed to answer in his own way
by using own words and sentences. Here freedom is provided to
respondents to answer.(2) Close ended question:
It means where respondents are provided the options and is
supposed to answer from those alternatives only. Here freedom is
not provided to respondents to answer. For our report we have
STRUCTURED QUESTIONNAIRE. That includes both open and close ended
type of questions we have used dichotomous questions, multiple
choice questions and rating scale type of questions.
1.8) ANALYSIS DATA:Analysis of our research is divided into 5
types. They are: (1) (2) (3) (4) SCREENING CODING DECODING
TABULATION GENERAL TABULATION CROSS TABULATION (1) PIE CHARTS A
detailed introduction of automobile aspect is as follows. (1)
SCREENING Screening involves collection of all necessary
information through questionnaire and then identifies the eligible
questionnaires that are useful for research. In this process we
have discriminated the correct questionnaire and conducted our
analysis. On the basis of these error free questionnaires we have
conducted the further analysis. (2) CODING In the second stage of
our analysis we have marked 1 to 300 numbers on the questionnaires.
That means our sample size was 300 respondents. Each and every
question of questionnaire and the options given in each question
was also assigned a code. Example: Why did you purchase this car?
Good brand image Word of mouth communication Better after sales
service 1 2 3
Resale value Other please specify
4 5
In the above example the question is assigned the code as Q-1
and the options given in Q1 are assigned 1 to 5 nos as code.(3)
DECODING:
In this steps of our analysis the same method which we have
applied at the time of coding in the actual questionnaire. In the
computer fist of all we have entered 300 respondents as R1, R2,
R3.R300 and the questions 1 to 29. These 29 questions include
rating type of questions the options were also considered as a
separate question at the time of decoding.(4) TABULATION:
In the tabulation we as a researcher have used 2 types of
tabulation. They are general tabulation and cross tabulation.
General tabulation: In general tabulation we have arranged the data
in forms of table for every question. Likewise income and mode of
purchase. This type of tabulation is being prepared from our side
for each and every question in our questionnaire.Income/LEVEL Cash
0 0 1 3 15 Finance 0 2 5 3 12
less than 30,00031,000 to 45,000
46,000 to 55,00055,000 to 70,000
More than70,000
Cross tabulation: We have also tried to articulate the relation
two different entities. Example:
Income of the respondents and the time at which he/she prefers
to purchase the car.Income Less than 30,000 31,000 to 45,000 46,000
to 55.000 55,000 to 70,000 More than 70,000 Different levels Entery
level 41 31 43 15 17
Executive level 11 25 26 22 23
Premium level 0 2 6 6 27
(5) CHART :
We have also presented the information collected from our side
in the form of pie chart also so that a clear idea about the
respondents and the responses given by them can be obtained.
Example:
1.9) LIMITATION OF THE RESEARCH:There are certain limitations to
be faced while doing these researches.(1) Time:
It is time consuming as it took nearly 6-7 methods months for
data collection primary survey and analysis of it of 300 sample
size.(2) Cost:
It becomes more expensive due to primary survey done to know the
preferences of the consumers because it requires a skilled
people.(3) Area:
The geographic area was limited to Ahmadabad only. Therefore
result may be restrictive
(4) Professional approach:
No technical software is used. So problems and loopholes may
found. For the purpose of analysis we have no used any technical
software.
CHAPTER 2:INTRODUCTION TO AUTOMOBILE INDUSTRY2.1:- History of
automobile industryHorses had dreams of them since time immemorial,
but it was only in the 18th century that the first horseless
carriage actually hit the roads. That's not to say that the idea
never struck anyone. Seeds of the idea, in fact, originated long
before the first contraption was rolled. The history of the
automobile actually began about 4,000 years ago when the first
wheel was used for transportation in India. Several Italians
recorded designs for wind-driven . The first was Guido da Vigevano
in 1335. It was a windmill-type drive to gears and thus to wheels.
Vaturio designed a similar car that was also never built. Later
Leonardo da Vinci designed clockworkdriven tricycle with tiller
steering and a differential mechanism between the rear wheels. In
the early 15th century, the Portuguese arrived in China and the
interaction of the two cultures led to a variety of new
technologies, including the creation of a wheel that turned under
its own power. By the 1600s, small steam-powered engine models were
developed, but it was another century before a full-sized
engine-powered automobile was created. Carl Benz and Gotttlieb
Daimler, both Germans, share the credit of changing the transport
habits of the world, for their efforts laid the foundation of the
great motor industry as we know it today. First, Carl Benz invented
the petrol engine in 1885 and a year later Daimler made a car
driven by motor of his own design and the rest is history.
Daimler's engine proved to be a great success mainly because of its
less weight that could deliver 1000 rpm and needed only very small
and light vehicles to carry them. France too had joined the
motoring scenario by 1890 when two Frenchmen Panhard and Levassor
began producing automobile s powered by Daimler engine, and Daimler
himself, possessed by the automobile spirit, went on adding new
features to his engine. He built the first
V-Twin engine with a glowing platinum tube to explode the
cylinder gas-the very earliest form of sparking plug. The engines
were positioned under the seat in most of the Daimler as well as
Benz car s. However, the French duo of Panhard and Levassor made a
revolutionary contribution when they mounted the engine in the
front of the car under a 'bonnet'. Charles Duryea built a car
carriage in America with petrol engine in 1892, followed by Elwood
Haynes in 1894, thus paving the way for motor car s in that
country.
2.2 :- History of Indian automobile industry.The automobile
industry in India is the ninth largest in the world with an annual
production of over 2.3 million units in 2008. In 2009, India
emerged as Asia's fourth largest exporter of automobiles, behind
Japan, South Korea and Thailand. An embryonic automotive industry
emerged in India in the 1940s. Following the independence, in 1953,
the Government of India and the private sector launched efforts to
create an automotive component manufacturing industry to supply to
the automobile industry. However, the growth was relatively slow in
the 1950s and 1960s due to nationalisation and the license raj
which hampered the Indian private sector. After 1970, the
automotive industry started to grow, but the growth was mainly
driven by tractors, commercial vehicles and scooters. Cars were
still a major luxury Japanese manufacturers entered the Indian
market ultimately leading to the establishment of Maruti Udyog. A
number of foreign firms initiated joint ventures with Indian
companies. In the 1980s, a number of Japanese manufacturers
launched joint-ventures for building motorcycles and light
commercial-vehicles. It was at this time that the Indian government
chose Suzuki for its joint-venture to manufacture small cars Indian
automobile industry has grown leaps and bounds since 1898, a time
when a car had touched the Indian streets for the first time. At
present it holds a promising tenth position in the entire world
with being # 2 in two wheelers and # 4 in commercial vehicles
2.3:- Classifications of cars:The classification of the cars are
majorly on 3 bases i.e. it is mainly divided into 3 parts.1)
*CLASSIFICATION OF CAR ON THE BASIS OF INCOME*ENTERY DIFFERENT
LEVELS OF CARS EXECUTIVE PREMIUM
COMPANY
MARUTI SUZUKI LIMITED
HYUNDAI MOTORS
FORD MOTORS NISSAN MOTORS VOLKSVAGON CHVEROLET
MARUTI 800 OMNI ECCO ALTO WAGON-R A-STAR SWIFT RITZ ZEN ESTILO
i-10 i-20 SANTRO GETZ FIGO MICRA POLO SPARK BEAT AVEO UNO NANO
INDICA INDICA VISTA PALIO
SWIFT DEZIRE VERSA SX4
GRAND VITARA KIZASHI
ACCENT VERNA FIEST IKON
SONATA
OPTRA TAVERA SAFARI LINEA LOGAN SCORPIO XYLO CITY JAZZ CIVIC
INNOVA COROLLA ETIOS FABIA OCTIVIA C-CLAS
X-TRAIL JETTA BETTLE CRUEZ
TATA MOTORS FIAT MOTORS MAHINDRA & MAHINDRA LIMTED HONDA
MOTORS LIMITED TOYOTA MOTORS SKODA MOTORS MERCIDES BENZ AUDI
ACCORD CR-V CAMERY FORTUNER LAURA SUPERB E-CLAS S-CLAS Q7 Q5 A4
A8
*CLSSIFICATION OF CAR ON THE BASIS OF LENGTH*SEGMENT A1 - MINI
A2 - COMPACT LENGTH UP TO 3400 mm 3401 TO 4000 mm EXAMPLE M 800
NANO ALTO WAGON-R ZEN i-10 A-STAR SWIFT i-20 PALIO INDICA CITY SX4
DEZIRE LOGAN ACCENT FIESTA VERNA COROLLA CIVIC OPTRA OCTIVIA CAMERY
E-CLASS ACCORD SONATA LAURA SUPERB S-CLASS 5 SERIES OMNI VERSA
MAGIC
A3 - MIDSIZE
4001 TO 4500 mm
A4 EXECUTIVE A5 - PREMIUM
4501 TO 4700 mm
4701 TO 5000 mm
A6 - LUXURY B1 - VAN
ABOVE 5000 mm
2) 3)
*CLASSIFICATION OF CAR ON THE BASIS OF BODY*MODEL OF CARS A7
RENAULT SANDERO RENAULT MEGANE SPARK BEAT PALIO PUNTO OPEL ASTRA
FIGO SANTRO GETZ i-10 i-20 ALTO WAGON-R RITZ ZEN ESTILO A-STAR 800
SWIFT MICRA INDICA INDICA VISTA XETTA NANO FABIA POLO
4) HATCHBACK COMPANY AUDI CARS M & M LIMITED CHVEROLET FIAT
FORD MOTORS HYUNDAI MOTORS
MARUTI SUZUKI INDIA LIMITED
NISSAN MOTORS CO. LIMITED TATA MOTORS
SKODA AUTO INDIA PVT. LTD. VOLKSVAGON
5)
SEDAN COMPANY M & M LIMITED AUDI CARS CHVEROLET
FORD FIAT INDIA PVT.LTD. HONDA MOTORS HYUNDAI MARUTI SUZUKI
INDIA LTD. NISSAN SKODA
TATA MOTORS
TOYOTA MOTORS VOLKSVAGON
MODEL OF CARS RENAULT MEGANE LOGAN XYLO A4 A8 A6 OPTRA MAGNUM
OPTRA CRUEZ AVEO U-VA FOCUS IKON FIESTA LINEA PETRA ACCORD CITY
CIVIC ACCENT VERNA GETZ PRIME ESTEEM BALENO SX4 SWIFT DEZIRE LIVINA
TEANA LAURA OCTIVIA CLASSIC OCTIVIA COMBI SUPERB INDIGO E-CS INDIGO
CS INDIGO MARINA TATA ARIA CAMERY COROLLA PRIUS HYBRIDE PASSAT
JETTA VENTO BETTLE
2.4:- Indian scenario of carsThis situation reflected the India
of yester years. Economic reforms and deregulation have transformed
that scene. Automobile industry has written a new inspirational
tale. It is a tale of exciting multiplicity, unparalleled growth
and amusing consumer experience all within a few years. India has
already become one of the fastest growing automobile markets in the
world. This is a tribute to leaders and managers in the industry
and, equally to policy planners. The automobile industry has the
opportunity to go beyond this remarkable achievement. It is
standing on the doorsteps of a quantum leap. 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 countrys rapid economic and
industrial development. The well-developed Indian automotive
industry skillfully 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 18 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 20002001 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. The production of the
automotive industry is expected to achieve a growth rate of over 20
per cent in 2006-07 and about 15 per cent in 200708. The export
during the same period is expected to grow over 20 per cent. The
automobile sector has been contributing its share to the shining
economic performance of India in the recent years. With the Indian
middle class earning higher per capita income, more people are
ready to own private vehicles including cars and two-wheelers.
Product movements and manned services have boosted in the sales of
medium and sized commercial vehicles for passenger and goods
transport.
2.5:- Global scenario of carsThe passenger car segment has
emerged as a major driving force for upstream industries like
steel, iron, aluminum, rubber, plastics, glass, and electronics and
down stream industries like advertising and marketing, transport
and insurance. The car industry generates large amount of
employment opportunities in the economy. For example in the US,
every sixth worker is involved in the making of an automobile. The
global automotive car market is growing at a rate of only 2 percent
per annum and is not expected to pick up in the near term. Growth
has dropped due to the increasing levels of saturation in the
larger car markets of the world. Worldwide the trend is towards
ensuring that one's products are superior in terms of quality. This
will enhance the useful life of cars and, hence, slow down growth
in sales.The world car production has increased from 44.66 mn in
1996 to an estimated 48.3 mn cars in 1999. Japan, Canada and USA
brought about the major increases, which contribute to 53% of the
world's car production. The largest car market - the US market
expects car sales to decline 8 to 9 per cent to 16 million cars in
2001, as compared to 17.4 million cars sold in 2000. The USA and
Japan are the leaders with around 42% of the total world market.
However, since the last two to three years, the international
passenger car industry has been witnessing an over capacity of more
than 30%. The trend suggests that industry volumes may grow by just
2% or around 10 mn vehicles per year. If this situation continues
for the next few years the world car market may witness shakeout in
the near future. Already signs towards this are being observed as
the phenomenon of mergers catches on. The recent mergers in the
international car market are Ford-Volvo, Renault-Nissan,
Daimler-Chrysler. A few more players are expected to join the fray
in the next few years so as to strengthen their hold in the world
market. Among the top car manufacturing companies General Motors
and Ford Motors group of USA lead with a contribution of 15.8% and
11.6%, of world car production, respectively. Volkswagen and Toyota
stand third and fourth with more than 9% contribution each to the
world car production. The global domination of the larger
automotive manufacturers is slowly on the wane and the
trend in sales is shifting towards more "regio-centric"
products. Automakers that have been enjoying a generally prosperous
spell would have to rethink on the way vehicles are designed,
manufactured, distributed or sold. Already, players like General
Motors Volkswagen and Toyota have begun to re-examine their dealer
relationships and pricing strategies. Car makers would now have to
think in terms of a new customer focus and provide better financing
and servicing. Strategic tie-ups, mergers and acquisitions have
become the talk of the day. A few instances are Daimler Benz's
tie-up with Chrysler of the US, Ford's acquiring of Daewoo and tie
up with Volvo Car Corporation and Renault acquiring a stake in
Nissan. Such deals will certainly lead to economy in terms of costs
but it remains to be seen whether they will also create significant
new opportunities for growth. With global consolidation in the car
industry, it is expected that more international players will work
closely to bring about operational efficiencies. By nature, the car
industry is highly capitalintensive and vast amounts of money are
being spent on R&D. With the players getting together to
produce more technologically superior cars, they can derive greater
benefits from their R&D efforts. Profits, which are under
pressure due to wafer thin margins will be boosted due to greater
economies of scale. The situation could become very difficult for
the purely Indian automakers such as Telco, Mahindra and Hindustan
Motors unless they rethink their strategy. It can easily be seen
why TELCO has been in the news on rumors that it wants to hive off
its car division and bring in an overseas partner. Reports suggest
that HM is thinking of exporting parts from its manufacturing units
and also assembling and distributing other makes of vehicles who
may wish to enter into India, but cannot enter full scale
manufacture due to the small market sizes. Clearly exports will be
the big opportunity for Indian automobile companies if they can
control costs and deliver good quality output. Already Maruti,
Hyundai and Ford as well as Mercedes Benz have started exports in a
small way and this can grow. Majors like TELCO and Ashok Leyland
are already exporting their products in reasonable volumes.
Availability of easy financing options has been a major reason for
the dramatic growth the automobile market has witnessed in recent
times. Maruti has set up a separate financing unit in association
with banks. GM has one of the largest financing companies in the US
and can easily bring them into India should it so decide.
Chapter 3:-
INTRODUCTION TO INDIAN AUTOMOBILE INDUSTRYIntroduced to India in
the late 1890s and the manufacturing industry only took off after
independence in 1947. Introduced to India in the late 1890s and the
manufacturing industry only took off after independence in 1947.
The protectionist economic policies of the government gave rise in
the 1950's to the Hindustan Motors Ambassador. Hindustan Motorsand
a few smaller manufacturers such as Premier Automobiles, Tata
Motors, Bajaj Auto, Ashokand Standard Motorsheld an oligopoly until
India's initial economic opening in the 1980's. The maverick Indian
politician Sanjay Gandhi championed the need for a peoples car; the
project was realized after his death with the launch of "people's
car"; the project was realized after his death with the launch of a
state-owned firm Maruti Udyog which quickly gained over 50% market
share. For forty years since India's independence from the British
in 1947, the Indian car market was dominated by two localized
versions of ancient European designs -- the Morris Oxford, known as
the Ambassador, and a old Fiat. This lack of product activity in
the Indian market was mainly due to the Indian government's complex
regulatory system that effectively banned foreign-owned operations.
Within this system (referred to informally as the "license raj"),
any Indian firm that wanted to import technology or products needed
a license/permit from the government. The difficulty of getting
these licenses stifled automobile and component imports, creating a
low volume high cost car industry that was inefficient,
unprofitable, and technologically obsolete. The two dominant
products Ambassador and Fiat, although customized to the poor road
conditions in India, were based on a stale design concept (with
outdated features), and were also fuel inefficient. In the early
1980's, the Indian government made limited attempts at reforming
the automotive industry, and entered into a joint venture with
Suzuki of Japan. The joint-venture, called Maruti Udyog Limited,
launched a small but fuel efficient model (called "Maruti 100").
Priced at about $5,500, the product became an instant hit. The
joint venture now produces three small-car models, a van, and a
utility vehicle at a rate of more than 250,000 a year. Despite
being a late entrant, Maruti's vehicles are estimated to account
for as much as 70 per cent of India's car population. In 1991, a
newly elected Indian government took over and faced with a
balance-of-payments crisis initiated a series of economic
liberalization measures designed to open the Indian economy to
foreign investment and trade. These new measures effectively
dismantled the license raj which
had made it difficult for Indian firms to import machinery and
know-how, and had disallowed equity ownerships by foreign firms. In
1993, the government followed up its liberalization measures with
significant reductions in the import duty on automobile components.
These measures have spurred the growth of the Indian economy in
general, and the automotive industry in particular. Since 1993, the
automotive industry has been experiencing growth rates of above
25%. Data for the 1995-96 financial year is yet to be released by
all the firms, but estimates indicate that passenger vehicle sales
may reach or exceed 350,000 for the first time. (Passenger vehicles
include cars and vans but not jeeps.) Table 1 presents the
production data of passenger vehicles for the top four Indian
assemblers. Foreign vehicle sales have been insignificant until the
1994-95 year.
3.1:- Size and structure of Indian automobile industryAt present
the industry is enjoying a growth rate of 14-17% per annum, with
domestic sales growth at 12.8%. The growth rate is predicted to
double by 2015. As it is seen, the total sales of passenger
vehicles - cars, utility vehicles and multi-utility vehicles in the
year 2005 reached the mark of 1.06 million. The current growth rate
indicates that by 2012 India will overtake Germany and Japan in
sales volumes. Financing schemes have become an important factor in
the growth of automobile sales. More and more financial schemes are
coming up with easy installment plans to lure the customers. Apart
from domestic production, the industry is consistently focusing on
the automobile exports. The auto component segment is contributing
a lot in the export arena. The liberalized policies of the
government are now making the companies go for more and more
exports. The automobile exports are increasing year by year.
According to the Society of Indian Automobile Manufactures (SIAM)
automobile exports in the last five years are as
: Export trend over the last five years NEW LAUNCHES The Indian
automobile sector is experiencing changes in every arena. Changes
in the looks of the vehicles are taking place; the vehicles are
being made more user-friendly. Each and every firm is competing to
give the customers more customized vehicles with respect to speed,
mileage, and maintenance. At present there are many new models
entering the Indian market. To name a few, Suzuki Heat 125 and
Suzuki Zeus 125X are the two bikes in the motorcycle segment;
Kinetic Blaze and Honda DIO in the scooter segment; Maruti, Zen
Estillo in the car segment, so on and so forth. EMPLOYMENT IN THE
SECTOR Investment is leading to the employment growth in the
sector. With the emergence of new projects and introduction of
technological advancements, the focus is more on the skilled and
experienced human resource. The companies are looking for skilled
and hard working people who can give their best to the
organization. The engineers in the automotive or electrical or
mechanical field are in demand. Some of the firms going for
automation, i.e. planning for CAD (Computer Aided Designs) systems,
are also recruiting people with IT specializations.
3.2:- Major players Tata Mahindra Ashok Leyland Bajaj Hero Honda
Daimler Chrysler
Suzuki Ford Fiat Hyundai General Motors Volvo Yamaha Mazda
3.3:- SWOT analysis of Indian automobile industry
IntroductionThe overall evaluation of companys strength, weakness,
opportunities and treats collectively called as SWOT analysis. The
environment may give many opportunities but the business may not
have strength to cope up with it. Similarly, sometimes a company
will not have strength to meet the environment treats. It is very
necessary for a company to monitor its external environment to know
the opportunities and treats and internal environment to know the
strength and weaknesses. Here the internal factors are controllable
and external factors are not controllable. Now, lets discuss about
the SWOT analysis in detail. Following are the points to be
discussed:-
1)Strength:Strength are the positive areas of the company that
the will help the industry to get strategic advantage over the
competitors. Following are some points to be discussed in
strength:-
(A) Capacity of manufacturing:-
During the recent year many development took place in the Indian
automoboile industry like development of infrastructure facility,
advance machinery, developed human resource, expert enginers.
Domestically, some consolidation or alliances might be expected,
driven by the need for access to better technology, manufacturing
facilities, service and distribution networks. The components
sector is in a strong position to cash-in on Indias
cost-effectiveness, profitability and globally-recognized
engineering capabilities. As benefits of collaborations become more
apparent, super-specialists may emerge in which the automobile is
treated as a system, with each specialist focusing on a sub-system,
akin to the IT industry. Though this approach is radical, it could
prove an important step in reducing complexity and investment
requirements, while promoting standardization and meeting customer
demands. Manufacturers are already planning for the future: early
advocates of technological and distribution alliances have yielded
generally positive results, enabling domestic OEMs to access global
technology and experience, and permitting them to grow their ranges
with fewer financial risks.
(B) Competitive advantage:The Indian automobile industry have
gained the competitive advantage over the other automobile industry
by gaining the good HR power as India is one of the fastest growig
economy of the world and with growing economy population is also
increasing over here. As being one of the fastest growing economy
the standard of living of people over is also incresing which
results into the increasing demand of the luxury product like
cars.
(C) Unique selling:The customer of India are not aware or not
informative about the services of the automobile in the past. But
now the scenario has changed totally the companies of India have
used various majors steps to develop the awareness. They have
adopted the unique selling concept by which the market has
developed fully.
(D) Resources:With the increasing demand of the cars in the
Indian market, the continuous supply of raw material is very
necessary . In India all those resources are available to the
manufacturer so it helps in the development of the Indian
automobile industry. Resources in the sense of Human Resource, raw
material, auto parts & components are available to them
easily.
(E) Financial background:-
The financial background of the Indian automobile industry is
becoming strong. By the entering of the new foreign companies in
the Indian market and establishing of many financial institution in
the market the availability of the finance is becoming continuous
so the production is also becoming continuous. On the other side
from the prospective of the customer also the availability of
finance provides the credit facility to the customer.
(F) Experience:The companies of the Indian automobile market are
gaining the experience over the period of years. New and new
foreign companies are also entering in the Indian market like
skoda, wolksvagon, etc which gives the teach to the Indian
companies also. So by new experence they serving the market with
great expectation.
(G) Distribution:By the passing of time, the distribution
channel of the Indian automobile industry is becoming strong. For
ex:- Ford India when entered the Indian market have weak
distribution channel and does not have any chain of showroom in
Gujarat for the starting 3 years. Bt now overall all company are
focusing on the distribution channel.
(H) Revolution Green Revolution: In a price conscious economy
such as Indias, the shift towards green vehicles will be slow
unless spurred by Government mandates. Although the major players
are already equipped with the necessary capabilities to develop
cleaner vehicles, They do not see much merit in commercializing
these technologies until the green revolution gains momentum most
likely through Changes in political legislation and it achieves the
market scale required for commercial viability. Manufacturers are
placing greater faith in dual-fuel technologies than in battery
powered alternatives because the necessary support infrastructure,
such as recharge stations, is not yet in place for the widespread
adoption of the latter. The launch of electric motorcycles Could
have a significant impact on the market, given that motorcycles
account for the majority of two-wheeler sales in India.
Manufacturers of four-wheelers and commercial vehicles in
particular stress the importance of optimizing conventional
combustion engines before experimenting too radically with costly
new technologies.
(I) Quality comparison:In the market many types of cars are
available so the customer gets the base for comparison. Among all
the major type of cars the customer get the vast base to select the
model of car which best suit to them and they can make the
comparison between them about its quality and various other
parameters.
(j) small cars :In India the lowest expensive & luxurious
cars are available. The Tata nano was the worlds cheap car
available in India. Also the electronic cars are also
available.
2) Weakness:Weakness are the negative area of the company which
arises because of the internal defect of the industry. Weakness are
such factor on which the company have full control. Lets discuss
all the point in detail:-
(A) Dependency on the other countries:Though many innovation
took place in the model but still the product are not up to the
mark. The low quality product are made as the innovation is still
less in this sector. So still India is dependent on other countries
for technological advancement.
(B) Weak research and development:Though develop market is there
thhe financial facility is still not so strong compare to other
country. So the research and development is also not so fledge.
(C) High investment cost:The entry in the market proves to be
very expensive because the market is still not developed well so
the resources are available at a higher cost.
(D) Old technology:The financial need is not well fulfilled so
the companies are sill using the old tecnologies. This old
technologies give less output also the quality differs.
(E) Lack of innovation:In Indian market no such major innovation
had took place. Major companies are making collaboration with the
foreign companies for the technology . thus the Indian automobile
industry lack in the technological sophistication.
3) OpportunitiesThe opportunity is staring in your face. It
comes only once. If you miss it, you will not get it again.
(A) Industrial trend:Car manufacturers in India dominate the
passenger vehicle market by 79%. Maruti Suzuki is the largest car
producer in India and has 52% share in passenger cars and is a
complete monopoly in multi purpose vehicles. In utility vehicles
Mahindra holds 42% share. Hyundai and Tata Motors is the second and
third car producer in India. 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).
(B) Market development: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.
The production of the automotive industry is expected to achieve a
growth rate of over 20 per cent in 2006-07 and about 15 per cent in
200708. The export during the same period is expected to grow over
20 per cent.
(c) Innovations:India is up-and-coming a significant
manufacturer, especially of electrical and electronic equipment,
automobiles and auto-parts. During 2000-2005 of the total FDI
inflow, electrical and electronic (including computer software) and
automobile accounted for 13.7 per cent and 8.4 per cent
respectively.the new 28 models are coming of different companies in
the market.
(E) Global trends:The passenger car segment has emerged as a
major driving force for upstream industries like steel, iron,
aluminum, rubber, plastics, glass, and electronics and down stream
industries like advertising and marketing, transport and insurance.
The car industry generates large amount of employment opportunities
in the economy. For example in the US, every sixth worker is
involved in the making of an automobile.
(F) Developing markets:-
As the automobile industry has matured over the past decade, the
auto components industry has also grown at a rapid pace and is fast
achieving global competitiveness both in terms of cost and quality.
In fact, industry observers believe that while the automobile
market will grow at a measured pace, the components industry is
poised for a take-off. For it is among the handful of industries
where India has a distinct competitive advantage. International
automobile majors, such as Hyundai, Ford, Toyota and GM, which set
up their bases in India in the 1990s, persuaded some of their
overseas component suppliers to set up manufacturing facilities in
India.
(G) Cost of manufacturing:The value of cumulative output of the
auto components industry rose rapidly to Rs 30,640 crore at
end-2003-04 from just Rs 11,475 crore in 1996-97. Foreign companies
such as Delphi, which followed General Motors in 1995, and Visteon,
that followed Ford Motors in 1998, soon realised the substantial
cost advantage of manufacturing components in India. Finding the
cost lower by about 30 per cent, they began exploring the
possibility of exporting back these low-cost, high-quality
components to their global factories and, thus, reducing their
overall costs. Not surprisingly, the industry's exports registered
a more than fourfold jump to Rs 4,800 crore in 2003-04 from just Rs
1,033 crore in 1996-97 Automobile majors such as Maruti Udyog,
Toyota, Hyundai have now finalised their plans to invest in some of
the critical auto components. According to the Automotive Component
Manufacturers Association of India (ACMA) officials, auto component
manufacturers are expected to invest about Rs 10,000 crore over the
next five years at the rate of Rs 2,000 crore per annum.
(H) Increase in the income :The bumper-to-bumper traffic of
global automobile biggies on the passage to India has finally made
government sit up and take notice. In a bid to drive greater
investments into the sector, ministry of heavy industries has
decided to put together a 10-year mission plan to make India a
global hub for automotive industry.
(I) Increasing export level:In fact, industry observers believe
that while the automobile market will grow at a measured pace, the
components industry is poised for a take-off. For it is among the
handful of industries where India has a distinct competitive
advantage. International automobile majors,
such as Hyundai, Ford, Toyota and GM, which set up their bases
in India in the 1990s, persuaded some of their overseas component
suppliers to set up manufacturing facilities in India.
4) ThreatsThreats are the external factors which are effecting
the industry. Threats are the negative factor which effects company
outside environment.
(A) Vulnerable competitors:Evidently, Indian players have learnt
from past mistakes and developed the skills to build cheaper
automobiles using `appropriate' technologies. TVS, for instance,
paid an overseas source $100,000 to fine-tune home-grown engines
rather than $1.5 million to import the entire engine. Similarly,
M&M adapted available systems and off-the-shelf components from
global suppliers to keep costs down and go for aggressive pricing.
True, Indian players are still lacking in scale of operation. While
economies of scale no doubt play an important role in the auto
sector, a few Indian manufacturers relied on innovation rather than
scale of operation for competitive advantage. For instance, Sundram
Fasteners was able to achieve the feat of directly supplying
radiator caps to General Motors purely on the strength of
innovation in product quality. The domestic tooling industry bagged
the order for the Toyota Kirloskar transmission plant in the face
of stiff competition from multinational corporations. The cost of
the entire job turned out to be only a fraction of the original
estimate.
(B)Recession:Unfortunately, during the global meltdown in 2008,
auto companies suffered a double whammy with rapidly rising oil
prices and escalating raw material costs coupled with a drastic
drop in demand of their fuel guzzling SUVs due to changes in
consumer buying habits. As consumers tightened their purse strings,
many looked for more fuel efficient, smaller cars while others
re-evaluated their private vehicle usage, deciding to switch to
public transport and delaying their auto purchases. As a result,
many leading manufacturers, including the American Big Three
(Chrysler, Ford and General Motors) and Japans Toyota suffered
major losses and were forced to seek government assistance, shut
down manufacturing plants, retrench large numbers of workers,
re-organize their line-ups and offer substantial discounts across
their existing ranges.
(C) Import liberalization:-
The Indian economy gives the opportunity for the development of
Automobile industry. There are no restriction on imports on major
of the spare parts. So it becomes favorable condition for the
automobile industry to develop.
(D) Social activation:In spite of this there are opportunities
to exploit lower costs right across the board. Its 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 now.
(E) healthy competitors:Indias 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 skeptical about
sustaining the low-cost base as overheads including labour costs
and complex tax regime are constantly rising.
3.4:- PEST analysis*PEST ANALYSIS OF INDIAN AUTOMOBILE
INDUSTRY*
POLITICAL ENVIRONMENT
Favorable government policy:-
Indian government auto policy aimed at promoting an integrated,
phased and conducive growth of the Indian automotive industry. The
govt. is providing the incentives and the tax benefits to the
manufacturer.
Increasing foreign investment:-
Allowing automatic approval for foreign equity investment up to
100 per cent, with no minimum investment criteria. The FDI had
increased the rate of investment thus sounds to be the favorable
for the development of the automobile industry.
Establish an international hub for manufacturing small,
affordable passenger cars as well as tractors and two wheelers.
The
Affordability:-
Stable economy
Ensure a balanced transition to open trade at minimal risk to
the Indian economy and local industry.
High resources:Assist development of vehicles propelled by
alternate energy sources.
Favorable taxation policy:-
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 activities.
Favorable insurance policy:-
Plan to have a terminal life policy for CV along with incentives
for replacement for such vehicles.
Developing transportation services:-
Promoting multi-modal transportation and the implementation of
mass rapid transport systems.
ECONOMICAL ENVIRONMENT Growing economy:-
The Indian economy has grown at 8.5 per cent per annum. Growing
automobile sector The manufacturing sector has grown at 8-10 per
cent per annum in the last few years.India's robust economic growth
led to the further expansion of its domestic automobile market
which attracted significant India- specific investment by
multinational automobile manufacturers.[3] In February 2009,
monthly sales of passenger cars in India exceeded 100,000
units.
Good credit facility:Finance availability to CV buyers has grown
in scope during the last few years.
Increasing govt. investment:The increased enforcement of
overloading restrictions has also contributed to an increase in the
number of CVs playing on Indian roads. Foreign trade:Several Indian
firms have partnered with global players. While some have formed
joint ventures with equity participation, others have entered into
technology tie-ups. Investment on manufacturing:Establishment of
India as a manufacturing hub, for mini, compact cars, OEMs, and for
auto components.
SOCIAL ENVIRONMENT Urbanization :Growth in urbanization, 4th
largest economy by PPP index. Increasing income:Upward migration of
household income levels. Increasing share of compact car:Increase
in PPP, led to the increase in market share of compact cars. Good
credit facility:85% of Cars are financed in India (15% in China).
Wide variety of passenger car:Vehicles priced between USD 7000
12000 form the largest segment in the passenger car market. Savvy
consumer:-
Indian customers are highly discerning, educated and well
informed. They are price sensitive and put a lot of emphasis on
value for money. Social Value:Preference for small and compact
cars. They are socially acceptable, even amongst the well-off.
Middle class Preference for fuel efficient cars with low running
costs. The Tata Indica has the lowest running cost at US 8.5 cents
per mile. India has emerged as one of the world's largest
manufacturers of small cars. According to New York Times, India's
strong engineering base and expertise in the manufacturing of
lowcost, fuel-efficient cars has resulted in the expansion of
manufacturing facilities of several automobile companies like
Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki
TECHNOLOGICAL ENVIRONMENT Import Technology:With the entry of
global companies into the Indian market, advanced technologies,
both in product and production processes have developed. New
methodology:With the development or evolution of alternate fuels,
hybrid cars have made entry into the market. Development in R&D
Few global companies have setup their R&D centers in India.
Investment by foreign competitors:Major global players like Audi,
BMW, and Hyundai etc have setup their manufacturing units in India.
Government initiated investment:Government initiatives regarding
tax rebates have led to global players setting up their R&D
centers in India. Government initiated technology:-
Govt. initiatives in establishing NATRIP network across the
country will further lead to enhancing R&D and technological
advancements.
3.5:- Porters 5 force analysisA Porter's Five Forces Analysis
explores five principal industry factors to determine the
attractive of a given industry in a given market. In this P5F
exercise, we look at the automobile industry in India. This is
independent of any manufacturer. As such, it applies to every
Indian car manufacturer.
1) THREAT OF NEW ENTRANTIn most markets, the capital and
expertise needed to setup an auto or parts manufacturing facility
would be a great enough barrier to entry to prevent many new
entrants from setting up.
However, given India's incredible growth forecasts,
infrastructure progress (especially new and better roads), and
ever-expanding financing options to rural residents, the market is
attractive. As such, we expect the threat of new entrants1) GOVT.
POLICY
The Government of India has liberalized the foreign exchange.
Government has liberalized the investment norms for the auto
sector. Local content requirements and export obligations have been
scrapped, and minimum investment requirements also have been
diluted. Import duties on vehicles and parts have been gradually
coming down and are expected to decline further in the next two
years. Several state governments also offer attractive incentives,
such as sales tax relaxations and concessional land, to potential
investors. However, manufacture of certain components continues to
be reserved for the small-scale sector. This reservation is also
expected to lift gradually over the medium term. The Ministry of
Heavy Industries has released the Automotive Plan 2006-2016, with
the motive of making India the most popular manufacturing hub for
automobiles and its components in Asia. The plan focuses on the
removal of all the bottlenecks that are inhibiting its growth in
the domestic as well as international arena. So the entry of any
new firm can enter into the market easily as govt. policy is
moderate towards the automobile industry.2) MONOPOLY
The domestic players as well as the foreign players dominate the
Indian automobile sector. The key players contributing to the
growth of the sector are discussed below. The key players in Indian
automobile industry are: 1) Maruti Udyog Limited 2) Tata Group 3)
Mahindra Group 4) Hyundai Motors India Limited 5) Toyota Kirloskar
Motor Private Limited 6) Honda Siel Cars India Limited 7) Ford
motors private limited 8) Skoda motors private limited From above
we can see that there are many competitors in Indian market for new
entrant so if they plan to enter the Indian market new innovative
idea and proper focus should be design
3) CAPITAL REQUIREMENT As per as the capital requirement is
concern for automobile industry the requirement of capital is very
huge. So to enter in the automobile industry company new to much
difficulty because to establish the plant lay out, machinery, hr is
too much difficult for the company. 4) PRODUCT DIFRENTIATION The
Indian automobile sector is experiencing changes in every arena.
Changes in the looks of the vehicles are taking place; the vehicles
are being made more user-friendly. Each and every firm is competing
to give the customers more customized vehicles with respect to
speed, mileage, and maintenance. At present there are many new
models entering the Indian market. To name a few, Suzuki Heat 125
and Suzuki Zeus 125X are the two bikes in the motorcycle segment;
Kinetic Blaze and Honda DIO in the scooter segment; Marutis Zen
Estillo in the car segment, so on and so forth. Thus, if any new
entrant comes in the market they should emerge with the product
substitutingon. E.g.: Companies are coming with new design of cars
of exterior as well as interior , with great fuel substitute, and
many innovation are developed. 5) ECONOMIES OF SCALE While quite a
few new vehicles launched in the Indian market have been developed
locally, vehicle affordability significant concern. Although the
price of an average motorcycle in India (about USD 900) is
comparable to the average per capita income, the prices of
passenger cars have a long way to go. Although the entry level car
(Nano) is priced at around USD 2,500, the passenger car Market
could grow multi fold if the raise break-through of another price
level in the Years to come. John Flintham, global CEO of Amtek
Auto, believes four-wheelers are particularly well placed to take
advantage of these changing trends. If you look at the Tata Nano,
people. Buying twowheeler bikes who have a bit more disposable
income and can now afford To buy a car instead. I think youre going
to see a doubling of sales over the next three To four years and I
think thats going tobe driven by both domestic demand and by India
becoming a small car export hub. The Indian automobile industry is
going through a phase of rapid change and high growth. With new
projects coming up on a regular basis, the industry is undergoing
technological change. The major players are expanding their plants
and focusing on mass customization, mass production, etc.
2) Bargaining power of buyersBuyers in India have a wide variety
of choice. There are more than 20 foreign manufacturers selling in
India (including ultra high-end such as Rolls-Royce and
Lamborghini). Of course there are also a plethora of incredibly
cheap choices, like the famous Tata Nano. This situation arises
when the buyer gain the power of bargaining. Following are some of
the situations in which bargaining power by side of buyer
arises.
1) Volume of purchaseIf the volume of purchase is high by the
buyers side than the bargaining power of the buyer would increase
substituting. In automobiles substitute mainly the buyers general
customer.
2) Importance of product to buyersIf the product is more
important to the customer than the customer will surely buy the
product, but if the product is not more important to the customer
they can substitute it. In context of automobile the bargaining
power of buyer is less. Cars are one of the luxurious products
whose consumption can be substitute for the future time. Thus if
the economy is in boom period there must be growth in the
automobile substitute & in recession the market goes down. For
ex. In the recession period of 2008 the automobile substitute goes
tremendously down.3)
Switching cost to marketer:The switching cost to the marketer
explain that if one customer also switch to the competitors product
how much the producer is effected. In context of automobile it
doesnt effect much to the producer. Thus switing cost effects is
low.
4) Extent of buyers informationExtent of buyer information shows
that if the co. r more the customer have more bargaining power but
if co hour less than bargaining power is less. In automobiles
industry the bargain in power of customer is high. They are gaining
lots of information.
5) Ability of buyer for backward integration. The backward
integration means the customer have to power n to switch the
backwardness / integration they have more power. In automobile
customer have high backward integration power For eg. Customer can
buy swift than i10 or i20.
3)Bargaining power of suppliersIt is likely that the suppliers
to the manufacturers have considerable bargaining power. They are
not held ransom by one single manufacturer as they can market their
products to any of the others in India.
1)
Importance of product to buyer
If the supplier of raw mat. Or components are less the producer
have to suffer delay in production if the raw mat. Cant be
generated from any other sources. So if supplier of raw material is
not continuous n customer have no other mode than they have less
bargaining power.
2)
Switching cost to supplierIf there are many supplier of raw
material so the bargaining power of manufacturer increases. For
ex:- sonakoyo is supplying the raw material to the maruti but if
maruti switch to the other supplier than it will effect more to the
sonakoyo company. Thus the if company change its source of
rawmaterial company than that company would be effected more.
3)
Potential for forward integrationForward integrating shows that
if the manufacturer have power of providing its own raw
material
4)
Ability of substituting the productIt shows that if manufacturer
have almost of components or raw mat. They have high bargaining
power. In automobile the substituting product is less.
(4) Rivalry amongst existing firmsThe key players in Indian
automobile industry are:
1) Maruti Udyog Limited 2) Hero Motors Limited 3) Tata Group 4)
Bajaj Auto Limited 5) Mahindra Group 6) Ashok Leyland 7) Yamaha
Motor India 8) Hyundai Motors India Limited 9) Toyota Kirloskar
Motor Private Limited 10) Honda Siel Cars India Limited
1)Growth of industryThe automobile industry is one of the
biggest growing industry in Indian country. Since last five years
is a golden year for growth of Indian automobile industry because
the companies like Nissan,volksvagon are coming and launch
different model of car in india. As per the new recent data in
2009-10 there are 88 different cars going to enter in Indian
automobile market.as the government policy is also in the favour of
the growth of automobile industry. Maruti Suzuki- new swift
Hyundai-new verna Toyota-etios liva Tata-nano diseal Mahindra-mini
xylo etc. . Cost structure There are two types of cost which are as
follows fixed cost and variable cost in automobile industry both
goes are high. But the tata nano has introduced new one lacks rs
car which was design specially by emphasizing on cost
structure.
2) Product standardizationAs the passing of time new and new
innovating technology are upcoming in Indian automobile market
which provide better quality of cars and standards product to the
customer for example Nissan, Chevrolet ,bmw, Audi. They are the
company coming out with new diff car design style, fuel efficiency,
n data performance.
3) Exit Barriers:It show that when company wants to exits out of
the mrket there can be problem.
5] Threat of Substitute:1) Extent of Substitution:If one ve to
buy vehicle then they ve option of purchasing car ,two wheeler etc.
but if they decide to buy car only then less option r available to
them.
2)Importance of Product:The car are gaining importance in Indian
market now a days. Before it was consider as status symbol for the
person but now it was become the basic need product to travel from
one place to another through it has not much gain importance as per
the europian market.
3.6:- Market share:At present major Indian, European, Korean,
Japanese automobile companies are holding significant market
shares. In commercial vehicle, Tata Motors dominates over 60% of
the Indian commercial vehicle market. Tata Motors is the largest
medium and heavy commercial vehicle manufacturer. Among the
two-wheeler segment, including scooters and mopeds- motorcycles
have- major share in the market. Hero Honda contributes 50%
motorcycles to the market in which Honda holds 46% share in scooter
and TVS makes 82% of the mopeds in the country. In the three
wheeler industry in India, Piaggio holds 40% of the market share.
Bajaj is the leader by making 68% of the three-wheelers. Car
manufacturers in India dominate the passenger vehicle market by
79%. Maruti Suzuki is the largest car producer in India and has 52%
share in passenger cars and is a complete monopoly in multi purpose
vehicles. In utility vehicles Mahindra holds 42% share. Hyundai and
Tata Motors is the second and third car producer in India.
Chapter 4:SEGMENTING, TERGETING AND
POSITIONINGSEGMENTATIONSegmentation is the process of grouping
people or organizations within a market according to similar needs,
characteristics, or behaviors which might require separate products
or marketing mix. Segmentation is about identifying and targeting
customer groups through their needs and wants, as well as
determining which customers and needs to address and with what
manner and intensity".
DefinitionProcess of defining and sub-dividing a large
homogenous market into clearly identifiable segments having similar
needs, wants, or demand characteristics. Its objective is to design
a marketing mix that precisely matches the expectations of
customers in the targeted segment. The segmentation of cars is
based on the cost & size of the car. Typically entry level cars
like the Maruti 800, Alto, Omni fall in the A segment. Slightly
expensive hatchbacks like the Indica, Santro, Wagon R, I10 etc.
fall in the A segment. Cars like the GM SRV, Ford Fusion, Skoda
Fabia fall in the premium B segment. The sedan category form the C
segment which comprises entry level cars like the Indigo CS,
Mahindra Renault Logan and Esteem. The higher end C segment is made
up of Honda City, Chevrolet Aveo, and Ford Fiesta etc. Then comes
the D segment which comprises entry level cars like the Skoda
Octavia, Toyota Corolla etc. The higher end of the D segment
comprises of the Toyota Camry, Honda Accord, and Skoda Superb etc.
So its all a game of the price and the features.
The above chart shows how different products in the same
segment/sub segment have been offered by the same company targeting
different needs of the buyers.
For ex: Maruti offers a car, Alto which low on price,
maintenance cost, style but is high on fuel efficiency. When you
compare this with Maruti swift, it is higher in price (in the small
car), technology, style, space and comfort, but lower in fuel
economy. Maruti has a gamut of cars in the small car market, as it
has off late focused on creating new sub-segment or creates deep
segmentation within a segment.
Segment invasion plan Maruti Udyog limited
Dark color indicates competition existed at the time when Maruti
targeted the segment
1.
M-800 had dominated the Indian car market since it was launched
in 1984.
2.
Maruti introduced Maruti Zen into the market (in 1993) which
catered as an entry level car for the people who can afford to
spend more (as compared to M-800), with better features available.
Maruti enjoyed being the only small car manufacturer till year
1996, when Hyundai launched Santro.
3.
In the mean while Tata also launched Indica, and there was a
gradual decrease in sales of M800. The Introduction of new cars by
competitors made the M-800 look obsolete as it had not been changed
in any major way for over a decade. Hence Maruti launched Alto in
the year 2000, trying to recover the lost market. Alto was once
again targeting the entry level low cost segment, but it gave
features of a good car. Within 18 months of the launch, the Maruti
was able to regain its market share and was once again in a
position to hold entry level A-segment in its pocket.
4.
Watching the dominance of Maruti in the A-segment, competitors
focused on other segments, Maruti also followed and launched its
first Duo
car, Wagon R duo in the year 2004. This car could be run on LPG
along with petrol.
5.
In an effort to move beyond the value for money or the basic
utilitarian function of a car, Maruti launched Swift in the year in
2004, to target the high end customers, who are willing to pay more
for a better styled, safe, sporty car.
6.
Maruti strengthened its position in the small car market by
launching Ritz in the year 2009 , which was targeting upper middle
income group ,who were looking for exciting looking globally
renowned car.
TYPES OF SEGMENTATION
1:
GEOGRAPHIC SEGMENTATION
Geographic Segmentation calls for dividing the market into
different geographical units such as nations, states, regions,
countries &cities etc.
A.REGION:
The major regions for small car market in India are north,
south, and west. The most auspicious moths in the south, when
buyers, laterally lap up cars from the showrooms, often turn out to
be the lean season in the north or west. So marketers need to
identify when to market a product according to the region in which
the consumer lies.
B.RURAL/URBAN:
Since more than 60% of the total population is living in
interiors, it becomes all the more important to cater to this
segment. However, so far, the marketers have laid more focus on
Urban/semi urban market and their products are primarily catering
to the needs of the urban segment. But with the recent market hits,
the companies are trying to pay more attention the rural market
segment to gain profits.
Ex: Maruti Suzuki India said that by the end of 2009 calendar
year as much as 8 per cent of sales will come from rural areas, up
from 3.8 per cent last year. Ex: Tata Magic which is priced @
2.6lacs is primarily targeted to the rural India.
2: DEMOGRAPHIC SEGMENTATIONDemographic segmentation consists of
dividing the market into groups based on variables such as age,
gender family size, income, occupation, education, religion, race
and nationality. As you might expect, demographic segmentation
variables are amongst the most popular bases for segmenting
customer groups. This is partly because customer wants are closely
linked to variables such as income and age. Also, for practical
reasons, there is often much more data available to help with the
demographic segmentation process.
The main demographic segmentation variables are summarized
below:
a.Age & life cycle stage:Student, Young Married, Single
working. The average age profile of a car buyer is 25-46 years.
Although the percentage of people buying cars between 31 and 40
years of age has remained stagnant at 31 per cent (1999-03), there
has been a 9 percentage point increase in the number of car buyers
in the 25-30 age groups. The number of older people (51 to 60 plus)
buying cars has gone down. For ex: the car likes swift ,i-20 , beat
are mostly like by the people who are come in the age of 25 to 35
people. The car like verna, optra, city, accord, accent, swift
dezire are mostly like by the executive people who are ranging from
35 to 50 people.
b.Family Size:Average Indian household size is 5 people. Hence
Small cars are the most obvious and affordable choice available for
the Indian middle class. For ex: Maruti had come out with different
cars o the basis of family size like
Class according to family Model size Lower class people Maruti
800 Omni Middle class people Alto Swift Ritz Zen Estillo A-star
Upper class people Grand vitara Maruti kizashi
C.INCOME:
Higher income households tend to be less price-sensitive,
placing a higher value on buying Higher-quality merchandise.
Because of the growth in dualincome households, there has been a
dramatic growth in the proportion of total spending in the economy
coming from such households, implying that the market for high-end
products and services should increase substantially. Thanks to the
easy availability of cheap financing options, there has been an
increase in the number of younger people buying cars in India
during 1999-2003EMI: a factor affecting the most of the buyers. 3
out of the 4 cars sold in the country are funded by a loan. For
ex:
The companies like Maruti Suzuki, Tata motors, Chevrolet. And
Hyundai are mostly targeting the lower income and middle income
class people.
While on other side the companies like BMW, mercedez Benz, and
Skoda are targeting the elite class and upper class people who have
their own business and higher salary.
d. OccupationOccupation of the consumer affects the buying
power. For ex: A Regular salaried employee will easily get finance
done for buying a car , whereas a self employed consumer will opt
for full down payment option. This explains the reason for high
contribution from salaried and self employed people in buying small
cars
For ex: People who have higher position in their occupation and
who have large amount of salary are mostly prefer to purchase BMW,
audi, beentle, nissan, mercidiz benz.
3:Psychographic segmentation
Psychographic segmentation is sometimes also referred to as
behavioral segmentation.
This type of segmentation divides the market into groups
according to customers lifestyles. It considers a number of
potential influences on buying behaviors, including the attitudes,
expectations and activities of consumers. If these are known, then
products and marketing campaigns can be customized so that they
appeal more specifically to customer motivations. The main types of
psychographic segmentation are:
Lifestyle Different people have different lifestyle patterns and
our behavior may change as we pass through different stages of
life. For example, a family with young children is likely to have a
different lifestyle to a much older couple whose children have left
home, and there are, therefore, likely to be significant
differences in consumption patterns between the two groups. One of
the most well-known lifestyle models, the sagacity lifestyle model,
identifies four main stages in a typical lifestyle: Dependent
(e.g., children still living at home with parents); Pre-family
(with their own households but no children); Family (parents with
at least one dependent child); and Late (parents with children who
have left home, or older childless couples). Each group is then
further subdivided according to income and occupation. For ex: life
style are different from person to person a person who have a great
personality they are using the cars like BMW, ROLS ROYAL, AUDI,
BENZ.
Opinions, interests and hobbies This covers a huge area and
includes consumers political opinions, views on the environment,
sporting and recreational activities and arts and cultural issues.
The opinions that consumers hold and the activities they engage in
will have a huge impact on the products they buy and marketers need
to be aware of any changes. Good recent examples include the growth
of demand for organic foods or products that are (or are perceived
to be) environmentally friendly
Degree of loyalty
Customers who buy one brand either all or most of the time are
valuable to firms. By segmenting markets in this way, firms can
adapt their marketing in order to retain loyal customers, rather
than having to focus constantly on recruiting new customers. It is
often said that it is ten times more profitable selling to existing
customers than trying to find new ones. So the moral is work hard
at keeping your customers. In this now days no one person are loyal
for any one company because now a days different company are coming
out with different car they are purchasing the car according to
their capability, income , comfort and other variables.
Occasions This segments on the basis of when a product is
purchased or consumed. Weekly basis. Marketers often try to change
customer perception of the best time to consumer a product by
promoting alternative uses for a product. In India people are
mostly like to purchase the car on some occasions like diwali ,
rakshbandhan, dashera etc.
Benefits sought This requires marketers to identify and
understand the main benefits consumers look for in a product. For
ex: now a day there is a great problem occurred in securities of
royal class car the people are expecting different facility like
air bags, power window, gps system, music system,nion lights
facility in their cars.
3 Behavioral segmentationBehavioural segmentation divides
customers into groups based on the way they respond to, use or know
of a product. Behavioural segments can group consumers in terms
of:
a.Decision Roles:When it comes to car, where huge investment is
involved, people generally tend to take reference from other users.
They go for
test rides, get it checked from some experienced people who are
much more comfortable about cars. For that reason noe a days
companies are providing test drives so that customer are easily
take the decision regarding purchase any car.
b.Occasions:In India, people do buy cars in the festival season,
and during the marriage seasons.
c.Benefits:Consumer looks for the following benefits from a car.
I. Power:
People do look for power from power.According to their need they
look for cars intheir respective power basket (i.e. 600cc 1300cc) A
higher power is related to give higher speed, acceleration by the
consumers. Distribution of households (owning a car) by income
Distribution of household (owning a car) by literacy% For ex:
maruti Suzuki come out swift which has a 1300cc engine with four
cylinders.
Ii .Technology:
With all sort of products available in the small cars market,
technology can act as A differentiator for consumer. New
technologies such as MPFI (multi point fuel injection), turbo
charging, electronic traction control, anti locking braking
systems, and catalytically converters. Iii.Fuel Economy: People do
look for better fuel economy in terms of mileage given by the car.
Preferred Fuel: With the rise in petrol prices, people have been
looking for alternatives such as diesel, CNG, LPG. Many car buyers
in India prefer the diesel variant whatever may be the choice of
car, because of the favourable cost differential diesel For ex:
Hyundai come out with kappa engine then maruti fit k series engine
in their all cars.
Market targetingA specific group of consumers at which a company
aims its products and services Target Marketing involves breaking a
market into segments and then concentrating your marketing efforts
on one or a few key segments.
Target marketing can be the key to a small businesss success.
The beauty of target marketing is that it makes the promotion,
pricing and distribution of your products and/or services easier
and more cost-effective. Target marketing provides a focus to all
of your marketing activities
Maruti is now planning to enter the D segment of cars with its
new offering Kizashi. Expected to be launched in the early 2011.
The multi-utility vehicle (MUV) category is growing fast in India.
It has made many car makers in the country plan production of the
same. Maruti Suzuki, Tata Motors and Skoda Auto are planning to
enter the growing segment of MUVs. Tata Motors has plans to launch
Tata Aria. The vehicle is develop." "Skoda Auto has advanced its
small car launch by more than a year and is now targeting a rollout
in 2011.Skoda Auto India operations head and board member (sales
& marketing) Thomas Kuehl said the decision to advance the
small car launch by 2011. " Auto maker Volvo is planning to launch
two new models in India within a year. The cars will be targeted at
the premium segment of the market. The company is likely to launch
its sports utility vehicle Volvo XC60 in next 6-7 months. Volvo S60
is also expected to be launched this year.
Different targeting pattern1) PRODUCT SPECIALISATION M1 M2
M3
P1
P2
P3
HERE FIRM SPECIALISE IN A PARTICULAR PRODCUCT CATEGORIES IN ALL
MARKET. HERE FIRMS ARE PRODUCING THE PRODUCT FOR THE DIFFERENT
CLASS OF CONSUMER. FOR EX: MARUTI IS SPECIALISE IN 4 WHEELER CARS.
MARUTI HAVE A CARS FOR ALL KIND SEGEMENT OF CONSUMERS like they
have maruti 800, omni are made for lower class of consumers. The
cars like alto, Wagno-r, swift,a-star,ritz are made for middle
class of consumers. The cars like grand vitara, newly launched
kizashi are made for upper class of consumers. 2)market
specialization
m1
m2
m3
P1
P2
P3
Here marketer are targeting one class of consumers. They have a
product for only one segment of consumers. For ex: The companies
like mercedez benz,audi,BMW,bentle,rols royal are targeting to the
higher level of consumers.
POSITIONINGWhen the list of target markets is made, a company
might want to start on deciding on a good marketing mix directly.
But an important step before developing the marketing mix is
deciding on how to create an identity or image of the product in
the mind of the customer. Every segment is different from the
others, so different customers with different ideas of what they
expect from the product. In the process of positioning the company:
Small cars have been positioned in India as city cars, which are
easy to drive, give high mileage, with low operational cost and low
price. Because of the tremendous growth in the small car market,
various global car manufacturers are entering this market and thus
leading to growing competition. This has further led to each
manufacturer positioning it, better than the rest; by upgrading
products, several versions, new technology giving discounts &
offers, better financing options.
Positioning Hyundai Santro Case
Hyundai Motors shows that a company has repositioned its product
about 5 times in past ten years. The main factors were either
competitors activities or changes in the mindset of consumers. Each
time the company has repositioned itself, they have changed their
Target customers and has done a deeper penetration in segmenting
its market.
The average age of a car owner had declined from around 35-40
three years ago, at that time, to 25-30, primarily because of
changing lifestyles, cheap and easily available finance, etc Age
group of 25-30 years and First time buyers.
Positioning maruti Suzuki case Earlier maruti have no more car
in the middle class segment for that maruti come out with different
cars like ritz, a-star, swift etc to get a maximum market share in
the market.
Different strategies. 1)product differentiation you design your
product in different way in terms of technology, features etc. for
ex: Hyundai first come out with kappa technology in the Indian
automobile market. Now a days companies are likely to provide the
air bag in the cars which provide safety to the consumers.
2)service specialization
you should provide service in different manner than your
competitors. For ex: As per as the service differentiation is
concern Maruti Suzuki provide extremely good after sales service
than the competitors. They have a largest service network in the
Indian automobile sector. 3)people differentiation differentiation
in knowledgeable employees. As per as the people differentiation is
concern all the automobile companies have good and knowledgeable
EMPOYEES TO COMMUNICATE WITH THE PEOPLE. 4)channel differentiation
as per as the channel differentiation is concern there is no
differentiation has been seen in the automobile sector. 5)image
differentiation certain brand customer can identify product easily,
colure shine, symbol. As per as the image differentiation is
concern all the companies have different symbol so that customer
can easily identified the companies. For ex:
4.4:- Differentiation Strategies:1)Product differentiation
strategiesBrand can be differentiated on the basis of a number of
different products. Product different in colour, size, packing,
features, performance, quality, style and design as well as such
service. In automobile industry major car model are different from
each other in sense of their design, interior look, mileage,
performance, etc Ex:- Some cars are MUV, SUV, hatchback, notchback
and sedan are different type of cars which are based on different
type of body, performance, miledge, etc.
2)Personnel differentiation strategiesBetter trained personnel
exhibit six characteristics: They possess the required skill and
knowledge They are friendly, respectful and considerate
creditability. They perform the service. They respond quickly to
customers. They easily understand to the customer. In automobile
industry the companies people are different. Employees are
effective tool for the customer satisfaction. So the people or
employee must be trained, skilled and effective much to provide the
better service to consumer. Ex:- the employee of maruti company are
well trained and they are providing better service to the customer
than other companies in the market.
3)Channel differentiation strategiesCompanies can achieve
competitive advantage through the way they design their
distribution channels, coverage, expertise, and performance. In
automobile industry also the all companies are using the different
ways for distribution. The d