Professional Documents
Culture Documents
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
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Naveen Kumar Reddy
Faraz Mohammed Ismail
2| Page
Acknowledgement
With Regards
Meghana Bhagavan
Thilak Babu
ShriHari
Sithara
3| Page
Objectives of the Report
4| Page
Contents
Introduction----------------------------------------------------------------------------------------6
Industry Environment
PEST Analysis--------------------------------------------------------------------------------------8
Industry Structure-------------------------------------------------------------------------------12
Industry Conduct----------------------------------------------------------------------------------21
Advertising Intensity------------------------------------------------------------------------------29
Technology Intensity-----------------------------------------------------------------------------30
Foreign Exposure----------------------------------------------------------------------------------33
Performance Analysis---------------------------------------------------------------------------38
Analysis of Competition-------------------------------------------------------------------------39
SWOT Analysis-----------------------------------------------------------------------------------40
Conclusion ----------------------------------------------------------------------------------------41
References-----------------------------------------------------------------------------------------42
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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
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Features of Automobile Industry:
- 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:
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.
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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Automobile Domestic Sales Trends (Numbe
r
of
Vehicle
s)
2003- 2004- 2005- 2006- 2007- 2008- 2009-
Category 04 05 06 07 08 09 10
Passenge
r 9,02,09 10,61,5 11,43,0 13,79,9 15,49,8 15,52,7 19,49,7
Vehicles 6 72 76 79 82 03 76
Commer
cial 2,60,11 3,18,43 3,51,04 4,67,76 4,90,49 3,84,19 5,31,39
Vehicles 4 0 1 5 4 4 5
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Automobile Production growth trends & Environment:
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 Micro-
environment 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.
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.
No of cars/1000 100 87 30 10
Industry Attractiveness’s:
Industry Structure:
Manufacturer Segments
Ashok Leyland LCVs, M&HCVs, Buses
Asian Motor Works M&HCVs
Atul Auto Three wheelers
Bajaj Auto Two and Three Wheelers
BMW India Cars and MUVs
Daimler Chrysler India(Benz) Cars
Eicher Motors LCVs, M&HCVs, Buses
Electrotherm India Electric Two Wheelers
Fiat India Cars
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Force Motors Three Wheelers, MUVs and LCVs
Ford India Cars and MUVs
General Motors India Cars & MUVs
Hero Honda Motors Two Wheelers
Hindustan Motors Cars, MUVs and LCVs
Honda Two Wheelers, Cars and MUVs
Hyundai Motors Cars and MUVs
Kinetic Motor Two Wheelers
Mahindra & Mahindra Three Wheelers, Cars, MUVs, LCVs
Majestic Auto Three Wheelers
Maruthi Suzuki Cars, MUVs
Piaggio Three Wheelers, LCVs
Reva Electric Car Co. Electric Cars
Royal Enfield Motors Two Wheelers
Scooters India Three Wheelers
Skoda Auto India Cars
Suzuki Motorcycles Two Wheelers
Swaraj Mazda Ltd. LCVs, M&HCVSs, Buses
Tata Motors Cars, MUVs, LCVs, M&HCVs, Buses
Tatra Vectra Motors M&HCVs
Toyota Kirloskar Cars, MUVs
TVS Motor Co. Two Wheelers
Volvo India M&HCVs, Buses
Yamaha Motor India 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.
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:
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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 3-
wheeler 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.
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.
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.
○ 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.
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)
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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
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NICHE MARKET
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
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H= (0.7623)2+(0.0432)2+(0.0358)2+(0.1586)2
=0.6124
=61.24%
Concentration level is between 50% to 80% i.e., index is between 1000 to 1800
The following shows the imports & exports of the automobile sector
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Industry Conduct:
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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:
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
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DEALERS
BOOKING
STOCKIST
SUB AGENTS
DEALERS
27 | P a g e
variant carrying a retail tag of Rs 3.85 Lakh , ex-showroom, New Delhi, and this aggressive
pricing only reinforced this feeling.
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.
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
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.
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
Advertising:
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.
Car/jeep—50%
Motor cycles—35%
Commercial vehicles—4%
Scooters—7%
Tractors—2%
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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
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R & D for 2-wheelers
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
35 | P a g e
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.
=24.6%
Foreign/International Exposure:
a) Export Intensity
=4361.136/55785.89
=0.078=>7.8%
b) Import Intensity
=6380.875/55785.89
=0.1143=>11.4%
a) Export Intensity
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Export Intensity (%)=422.838/20301.3
=0.0208
=2.08%
b)Import Intensity
=0.0423=>4.23%
Export Intensity
=0.0460=>4.6%
Import Intensity
=0.0420=>4.2%
Export Intensity
=0.0566
= 5.66%
Import Intensity
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=0.0753=>7.53%
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
38 | P a g e
Debt-Equity ratio for passenger car:
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:
=0.085
=8.5%
R.O.A=PBIDT/Assets
9.886/11516.165
=0.45=>45%
R.O.S=PBIDT/Sales
9.886/55785.49
0.01=>10%
Potential
entrants
Threat of
new
Entrants
Industry
Supplier degree of Buyers
Bargainin Bargainin
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g power g power
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
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 low-
cost 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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References:
http://www.acmainfo.com/
http://www.siamindia.com/
http://www.ibef.org/industry/automobiles.aspx
http://www.autoindiaforum.com/
http://living.oneindia.in/automobiles/auto-news/2010/2010-car-market-year-
211210.html
http://auto.indiamart.com/
http://www.indiancarsbikes.in/auto-news/auto-industry-india-car-motorcycle-
sales-report-month-april-9396/
http://www.indiancarsbikes.in/auto-news/auto-industry-india-car-motorcycle-
sales-report-month-april-9396/
http://automotivehorizon.sulekha.com/automotive-logistics-india-2010-
conference-held-in_newsitem_1048
http://www.automobileindustry.co.cc/automobile-industry/fast-track-automobile-
industry-of-india.html
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