The ford figo case study


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The ford figo case study

  2. 2. ACKNOWLEDGEMENT It was a great learning experience developing this case study under the able guidance of Mr. SANJIT KUMAR ROY. We express our gratitude and sincere thanks to you sir. Without his active support, guidance and encouragement the project would not have been on the lines where it is. We are obliged for all the support, he provided to us and co-ordination in providing the study material which has helped tremendously to make the project informative and comprehensive.
  3. 3. “Our exciting new Ford Figo shows how serious we are about India. It reflects our commitment to compete with great products in all segments of this car market. We are confident the Ford Figo will be a product that Indian consumers really want and value.1” Mr. Alan Mullaly President and CEO, Ford Motors “The Ford story is not about supporting the domestic market, but overseas too. I am excited. In the very near future, we will be sending the first load of Figos to South Africa. That is the first overseas market. In the next 3-4 weeks, we will announce the names of other markets where Figo will be going. They are mainly in the Asia Pacific and Africa region and a couple of other areas as well2”. Michael Boneham, President and MD, Ford India. Introducing the cool factor In the automobile market, the success depends on the ability to get the right product into the market at the right time for the right segment. This is something that FORD, which is one of the world’s largest and most successful auto makers, had failed to do in INDIA, for about a decade, as till now ford was offering mid size sedans and SUVs and nothing in the small car segment which forms nearly 70% of Indian car market3. Realizing the need of hour Ford introduced FIGO, the first hatchback out of the FORD stable in INDIA. It was launched officially on 10 March 2010 4by Michael Boneham, President and MD FORD India. Ford happens to be an American auto major. But surprisingly, the Ford Figo has not premiered in its fatherland. Ford India Executive Director (Marketing, Sales and Service) Nigel Wark said, “For years, we have been seen as offering only premium priced products in India, and that has kept us as a small player operating in only 20 per cent of the market. With Figo our customers will see a
  4. 4. premium product at an affordable price.5” He knew,this may prove to be the golden goose for the company in INDIA, which since its entry in INDIA had been facing average sales. FIGO which in ITALIAN stands for ‘cool’6 was targeted mainly for the youth of the country, with a new contemporary shape and large sized windows and attractive colors. It was first launched in fluorescent green color which symbolizes the youth and freshness. Many feel it comes from the famous “Go Fida” tagline given to the Fiesta. Figo is said to be built specifically to fulfill the needs of small car buyers in India. It is manufactured in Chennai, Tamilnadu, India only. Ford wants to make an entry into the compact car segment, to compete with the likes of Hyundai, Maruti-Suzuki, Tata Motors and General Motors. Ford's introduction of the hatchback has driven company sales to levels never seen before. Riding on the success of the recently introduced Figo, Ford's sales in India have skyrocketed to 32,755 units through the first half of this year compared to just 13,897 units sold in the first six months of last year.7 Background note The Ford group World's fourth largest automaker, Ford Motor Company, was founded by Henry Ford and incorporated on June 16, 19038. Ruling the automobile sector for over a decade, the company had a modest start with a capital of just $28,000 from 12 investors. In the early years, the company produced just a few cars a day at its factory on Mack Avenue in Detroit, Michigan, USA. The year 1913 added further success and increased the productivity of the company. It was in this year that Ford introduced and implemented the use of the ‘moving assembly line’. The new technique gave the workers the liberty to stay in a single place and execute a series of similar tasks repeatedly on a number of cars at the same time. This method improved and made the production process efficient. Also known as Fordism, the method helped the company conquer the market with its range of affordable vehicles. By the advent of the First World War, Ford Motors produced half of the cars sold in the American and English market. Ford also facilitated the production of many cars and trucks for military purpose as well. In 1922, Ford purchased the Lincoln Motor Company which helped the company in the production and introduction of luxury cars. With the increased popularity and productivity, Ford became the largest assembly plant in the world and by the Second World War; it produced not only the standard military vehicles, but also B-24 Liberator bombers and tanks. The World Wars had no negative impact on the company; rather it gave the company an impetus for
  5. 5. growth and development. Ford Motors launched many famous models in the 1950s and the 1960s, like the Thunderbird in 1955 and the Mustang in 1964. One of the most important factors that contributed to the development and expansion of Ford was that it continued to develop and implement the latest technologies in its cars. In 1979, Ford acquired 25% stake of the Japanese carmaker Mazda, while in 1987 it bought Aston Martin. Two years later, in 1989, the company acquired Jaguar. The acquiring spree continued as the company took over Volvo in 1999 and Land Rover in 2000. Ford celebrated a successful 100 th year in the market in 2003 with the release of Ford GT. The event also marked the release of limited centennial editions of some Ford vehicles. Ford is currently the second largest automaker in the U.S.9 and the fourth-largest in the world based on number of vehicles sold annually, directly behind Volkswagen Group. Ford had revenues worth US$ 164.5 billion in 2003 and is spread across 200 countries with over 327,000 employees. Ford was the seventh-ranked overall American-based company in the 2008 Fortune 500 list, based on global revenues. Ford sells vehicles under various brand names such as Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mercury and Volvo. Ford has faced certain financial problems in recent years that led to the selling of certain brands like its former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March 200810. In 2010 Ford sold Volvo to Zhejiang Geely Holding Group. Nonetheless, the company has continued to prosper and hold an important position in the world automobile market. Japanese invasion In a bid to expand its overseas operations and enter the new markets, Ford started exporting some of its car models to Japan. Until 1939, before World War II, the company sold about 10,000 Model A Fords annually in Japan. When Ford reentered the market after the war, in 1953, it imported only a limited number of cars each year. The Japanese market dynamics were not as predicted by ford and various factors like the prices of real estate were so expensive in Japan, most auto dealerships did not resemble American dealerships with their large buildings and massive car lots. The foot hold of local players provided the biggest hurdle in the entry of new foreign player in the market. Evaluating the various options Ford decided to close its operations in Japan then. After a detailed research on Japanese consumers, it analyzed that the typical Japanese consumer was less interested in power car drives than in how it looks. Because Japan had such a well-developed public transportation, many Japanese used that system for day-to-day travel. The Japanese treated their car as an ornament to be polished and cared for but used only occasionally.
  6. 6. Ford in a pursuit to tap this opportunity and to reenter the Japanese market, after learning from its previous mistakes, acquired some stakes in Japanese manufacturer Mazda in 1979; Ford began selling Mazda's Familia and Capella (also known as the 323 and 626) as the Ford Laser and Telstar, replacing the European-sourced Escort and Cortina. The new Mustang represents Ford's flagship model in a new line of cars it introduced in Japan in mid-1994. Although Japanese cars had their steering wheel on the right-hand side of the car, Ford's Mustang was a left-hand-drive model that targeted a high-profile niche market.11 Ford positioned the Mustang squarely against Nissan's Z cars and Toyota's Supra, cars that have dominated the 'muscle car' niche in Japan. Along with the Mustang, however, Ford introduced three right-hand-drive models - Probe, Laser, and Mondeo - that targeted the compact-sedan market long ruled by Honda's Accord. This segment accounted for one-third of the Japanese market. Ford produced these new 'world cars' as part of a 6 billion Dollar development effort. This was the first time any American car company has offered right-hand-drive cars in Japan. Over increasing competition and economic downturns had its impact on the business of Mazda and it struggled to maintain its revenue rolling in. Ford helped its Japanese partner in 1996 by buying more stakes in it, and assisted in a complete restructuring of the business in 2000 in order to counter several years of slow and steady decline, especially in the domestic Japanese market. Effect of Recession The Global economic melt down had major impact on the business around the world and automotive sector was one among the majorly hit sectors. Among the major Autos players Gm, Chrysler etc faced the heat. It was due to well managed and strategically correct business decisions that ford, during the economic recession was the only Automobile manufacturer that did not wait for the bailout, rather churned cash from its own reserves to maintain cash flows and the business. In one such advancement, ford in order to increase its liquidity and maintain its cash reserves it reduced its 33.4% controlling interest in Mazda of Japan, to a 13.4% non-controlling interest in November 2008.12 With economy coming up again the spending power has increased and the first sector to show signs of great recovery was automobiles. December month sales figures for many autos were significantly higher than previous months and companies have geared up with new models and releases to capitalize on the feel good factor in the market.
  7. 7. The small car segments is heading for a stiff competition due to new models planned by FORD, Nissan and Volkswagen the models include Figo from FORD , MICRA from Nissan Renault and much awaited POLO from Volkswagen. FORD in INDIA Ford started its innings with the Mahindra-Ford joint venture formed in 1994, which produced the Escort out of M&M Nashik plant.13After meeting initial success, sales of the Escort was finally replaced by the Ikon in 1999. The Ikon marked a new beginning for Ford in India. It rolled out of the Marajmalaingar plant near Chennai and by now, the company had parted ways with M&M and was renamed Ford India Ltd in 1998. The Ikon was the first model by a multinational to be developed specifically for India. Though it was based on the Fiesta, it was a unique body style and was offered and was offered with an option of three engines, including a diesel. The car was a big hit. The Ikon underwent several face-lifts and price cuts to keep demand high. However, fresher competition and a reputation for high-maintenance saw sales gradually decline. After the arrival of the modern and highly-capable Fiesta, another made-for-India car, with state-of-the-art engines, the Ikon has been marginalized. The Fiesta has picked up where the Ikon left and is selling well. Though the Ikon and Fiesta have been the mainstays of Ford’s production in India, the company has had limited success with other models. The Mondeo, launched in 2001, was a very talented car but was simply not suited to Indian conditions and earned a reputation for being exorbitant to maintain. The Endeavour SUV was launched in early 2004 and has sold well for its niche. In 2004, Ford launched the Fusion, which has received a lukewarm response though the recent diesel variant has perked up sales. . The Endeavour has recently been upgraded in 2007 and this has boosted the appeal of the big SUV. Presently offering five different models, Ford India Limited (FIL) is catching up fast with the Indian consumer. During all these years Ford wasn’t able to dominate the Indian car market as it was only catering to upper middle class and rich urban population with its offerings and the Indian customer was very reluctant to upgrade his car resulting in no repurchase. This segment only constituted 25-30 % of total Indian car market segment. Moreover the uncertainties and fluctuation in the Indian car market also played a major role in their slow growth. The major key players in Indian market were Hyundai, Maruti-Suzuki, and Tata Motors which were catering to almost 50% of the entire market here. The main reason being the major
  8. 8. population chunk was middle class which will generally go for hatchbacks as that fits well in their budget and is considered as best value for money. Ford envisioned major scope for growth in Indian car market looking at India’s growing economy and induction of more and more urbanization. They were here to stay for they had invested 12 good years in understanding the market here and growth opportunities. This gave birth to idea of getting a hatchback specially made for Indian market and hence FIGO was introduced. Introduction of Figo in India Ford unveiled its small car for India, called the Figo, which means “cool” in Italian, on 10 March 2010 in florescent green color positioning itself for young urban working population. The Ford Figo has a new contemporary shape & large side windows that makes it distinctly different from other brands in this segment.14 It will be powered by 1.2 liter petrol or 1.5 liter diesel engines. Figo is said to be a redesign of the 5th generation Fiesta that has been on sale for a decade. It has been built specifically to fulfill the needs of small car buyers in India. It is manufactured in Chennai, Tamilnadu, India only. Ford Figo is designed and engineered by Ford Australia.15 The slim upper grille and large lower grille, body colored bumpers with fog lamps create a magical view that pleases the eyes. Figo was very much in sync with the Ford vision of “One Ford” and the famous Ford tagline “Make everyday exciting”. The Figo has got great big-car feel. The ride is one of the best in class, good at both low and high speeds. It’s very stable at three digit speeds and you can see Ford’s ‘driver’s car’ DNA in it. The steering is light and nicely weighted for city use. The Figo is one of the biggest B-segment cars in India. It’s longer than the Swift, has a longer wheelbase than the Fusion. Interior space is good, the seats make up by being very supportive, and seat height and back support are good as well. It has an aesthetic design and interiors are magnetizing to eye. After the florescent green colored Figo made waves, customer was given an option to choose Figo in 7 more colors. The various colors are: Diamond White, Panther Black, Moon Dust Silver, Squeeze, Colorado Red, Sea Grey and Metallic Chill.16 The central console houses a music system with Bluetooth compatibility and auxiliary in coupled with four speakers on the titanium, the low and mid range sound quality and the bass is quite good. The Bluetooth can pair up to five phones at a time; however, only one can be operational at a given time. The user can access his phonebook, call logs and even the redial
  9. 9. numbers through the system itself. The speed sensing volume comes at a standard, which means the sound automatically increases with speed.17 In order to change the perception for ford cars being expensive to maintain FORD used long lasting parts. In testing phase, it was ensured that the components must pass a minimum of 100,000 kms during durability runs .FORD reduced its costs by achieving economies of scope by manufacturing the parts locally rather than being imported and as a result FIGO has 75% localized content . In case of accident FORD has ensured that it is possible to change smaller parts rather than the entire body structure moreover, a special care has been taken to ensure that cost of parts (bumpers)which are more prone to get damaged in an accident are kept low. Mileage, Average and Fuel Economy Ford Figo is available in the Indian auto market in both petrol and diesel trims. The petrol variants of Ford Figo are packed with the all new 1.2L, 1196cc, SEFI engine with five speed manual transmissions. The vehicle gives a standard mileage of around 12.5 kmpl mileage in the city while on the highway it offers mileage around 15.5kmpl. The engine also meets with BS-IV (Bharat Stage - IV) emission norms. On the other hand, diesel variants of Ford Figo are powered by Ford’s popular 1.4L, 1399cc, Duratorq diesel engine which has gained popularity since it delivers excellent drivability and fuel economy. This engine too, satisfies the BS-IV emission norms and delivers excellent power, performance and mileage. The 1.4L diesel engine offers a mileage of around 14.5 to 15kmpl in the city while on the highway it delivers a mileage of 18.5 kmpl. A very interesting feature that has been added to Ford Figo is the 'Distance to Empty' feature that informs you how many kilometers you can go with the available petrol in the tank. Market Research Ford was doing good business till now in India but it wasn’t catering to the major segment of the market. Since the launch of the Ford Ikon way back in 1999 speculations were on as to when Ford would introduce a small hatch. It's not that Ford cars were not selling, and indeed the success of the Ikon and 1 lac sales of the Fiesta are proof to the contrary, but Ford were playing with a mere 20% market. A majority of Indians, when looking for a new car will be thinking of getting a 'Small Car'. Many government regulations were doing good to encourage consumers for B segment cars. As a result, this is the segment most manufacturers have to have a presence in, in order to have an overall healthy market share.
  10. 10. Moreover Pricing plays another big factor whether a car will sell in numbers (just take for instance the Swift or the i10) or will get stuck at modest or even small numbers (the Fabia and the Jazz for example). Indian mentality is set at comparing how cheap the car is to its competitors, and at times providing more features for a premium can really backfire. Ford took note of these two points (especially after the Fusion did not do too well) as once Michael Boneham, President and MD, Ford India said in an interview, “If you aren’t catering to more than 70 % of the market, you are not present in the market” 18and finally Ford launched the Figo in March 2010 at a base price of 3.6 Lakh. Ford have kept only the most necessary features and used smart and innovative designs like the distinctive human-eye shaped headlights, to enhance the design appeal and reduce the cost of the Figo, but fortunately as cheap quality was not what Ford had in mind while planning the Figo. The quality of the Car’s Parts and the fit and finish are right up there. The company’s proclaimed aim was to offer a Quality Product at an Affordable price, and with 25,000 cars sold in just 100 days19 it indeed seems that Ford has got it just right with the Figo. The company has taken the price of the base variant of Hyundai i10 as its benchmark for the petrol variants of Ford Figo that is priced at Rs 3.5 to Rs 3.6 lacs. While the diesel variants of Ford Figo are priced in the range of Rs 4.5 to Rs 5.45 lacs. These exceptional price ranges for such a large and stylish premium hatchback model has given it a good start. Marketing: Ford entered the arena of B segment car line when the competition was at its peak with major players like G.M, Volkswagen, Maruti and Tata already getting into the consideration set of target audience which FORD was planning. Now the major challenge for FORD was how it grabs the eyeballs. The main target audience for FIGO was the young working people and urban INDIAN middle class families and moreover to tap the emotional chord of INDIAN consumer the green color which marks growth, prosperity and creativity in INDIAN culture, the FIGO was launched in fluorescent green color which also showcased its youth and fresh appeal. Print media, television and internet were the major source of advertisement. FORD tied up with big advertising market players like JWT20 to make sure that there positioning is communicated effectively.The viral marketing campaign such as the one done on the facebook and orkut to attract the young users were very effective. Moreover, advertisements like the ones done in times of India in which users were asked to sms ‘FIGO’ to a number wherefrom they could download an application for free which enabled them to view animated figo once there cameras were focused on the print ad,this was a new kind of ad campaign which attracted many readers. (exhibit 3)To attract the creative class within the young working INDIANS some advertisements were showcased in which peacock was shown get envious of FIGO’S vibrant color and hitting it with its beak.
  11. 11. As a part of its promotional strategy FORD made bookings for test drives available on the internet at many famous automobiles websites and social networking sites as facebook and orkut. It also used these sites as an advertising channel with the official communities of FIGO and various discussion pages abuzz with reviews from bloggers, auto experts and customers. FORD also started competitions on these sites like best reviewer of the week and a contest between auto bloggers wherein the best one gets FORD FIGO as the prize. They also displayed pictures and videos of FIGO in serene locations and couples sitting besides a FIGO near the sea. The communities also gave a driving or maintenance tip every three –four days giving a message that FORD cares for its customers. A good example being a tip given that gave information about how to keep the windows frost free in rainy seasons while the a/c is on. Sales: Figo turned out to be the trump card for ford for it gave Ford the much needed grip in Indian market. Though the other cars from ford stable were doing average business but it was unable to make it mark. Figo did a U turn of fortunes for Ford in India.21 The sales figures for Ford started rising exponentially and Figo was the major contributor. Ford Motors India posted a remarkable sales figure of 22,858 units in the first quarter of 2010(April-June) as against 6,184 units sold in the same period in the previous year largely attributed to FIGO. Figo has set records of a sort, with over 10,000 orders booked in the very first month after it went on sale. Over 25,000 units of the Ford Figo were already booked within 100 days. For the month of June 2010 the sales went up by whopping 267%, where the company clocked total sales of 7,269 units, compared to 1,982 units sold in June'2009. As on 1st September 2010, ford has approximately sold 40000 units of Figo and is selling for the already booked orders. It tapped the right cord of Indian consumer and consumers didn’t mind waiting for more than a month also for its delivery. Currently the waiting period of Ford Figo is four to six weeks and it intends to reduce the period to less than four weeks. Ford had also announced that it will be increasing Figo’s price in coming few weeks. Ford is also adding new dealerships in its network to increase the count up to 200 from its current 166 dealerships. 22 Figo not only won the hearts of Indians but also was praised by critics as well. FIGO got the best diesel car award from ziggwheels.23It indeed had a great run in such a short span of time. Next Step After the overwhelming response of Figo in its initial phase, now it is time for ford to analyze and decide how it continue its present aura and how it capitalizes on the impetus provided by Figo. So they needed to devise a clear roadmap of future course of actions and their sequence.
  12. 12. Indian market strategy: New Model Variants: As said by Ford CEO Alan Mullaly “The Figo shows how committed we are about Indian market”, continuing on that ford plans to launch more variants for B- segment cars in India so as to increase its market share and leverage on the success of Figo. New regional markets: Looking at the present web of dealership what Ford currently have, it is very low as compared to their competitors. They will have to increase their dealership network and try focusing on areas which they haven’t touched till now. Export market strategy: After receiving the applause in India, Ford believed that it could generate similar response in export markets as well. In order to take this opportunity ford classified the Nepal and South Africa as emerging and hence as potential markets. Though the entire production will be done in India and then will be exported to South Africa and Nepal. There won’t be any changes in the Figo as such as of now. Future Looking at the kind of response Figo is getting and the demand from the market, Ford is planning to double its manufacturing capacity at its Chennai facility to 200,000 units per annum by 2010 and is doing an investment of $500 mn, 24 to take on its competitors in India as well as in other markets as Ford plans to export the Figo to 50 new markets including Mexico, North Africa and middle east from 2011.25 Ford can Leverage on the elements which contributed to Figo’s success here in India and can develop its coming models on similar lines and hence generate the same hysteria. As said by Alan Mullaly, Group president and ceo ,”India is a really important market for us. We love being here. We have got great operations here. We can continue bringing more and more of our Ford products to the Indian customers. If you look at the overall market in the Asia Pacific, India and China will be the fastest growing market for us going forward. Adding to it John Hinrichs, President Ford, Asia pacific and Africa, said, “Ford motor company will launch 8 new vehicles in the middle of the decade”. As for India, it has a tremendous operations force. It will be one of our hubs. We have got tremendous manufacturing capability here. All the units of the business are pretty welldesigned and integrated with our entire global production system. So, India will continue to take on more importance in Ford worldwide.
  13. 13. Exhibits: Exhibit1: Ford Figo
  14. 14. EXHIBIT 2 pricing (ex-shoroom Delhi prices) MODEL Price (INR) 1.2L Petrol LXi 3,49,900 1.2L Petrol EXi 3,81,900 1.2L Petrol ZXi 3,99,900 1.2L Petrol Titanium 4,42,900 1.4L Diesel LXi 4,47,900 1.4L Diesel EXi 4,72,900 1.4L Diesel ZXi 4,96,900 1.4L Diesel Titanium 5,29,900 Ford Figo Petrol LXI It is the base variant of Ford Figo which is equipped with 1.2L petrol engine and it carries basic features that any B segment car offers. Ford Figo Petrol EXI It offers some additional features that are Passenger side ORVM (Out Side Rear View Mirrors), Full Wheel Covers, Front Power Windows, Remote Trunk Open, Fabric Insert on Door Trims, Passenger Vanity Mirror on Sun Visor, Removable Parcel Tray, Music System, Central Locking, Keyless Entry and Engine Immobilizer. Ford Figo Petrol ZXI Additional functionalities which will be available with this variant are Body Colored ORVM and Door Handles, Chrome Finished Front Grille, Side Repeaters and Tailgate Opener, Height Adjustable Driver Seat, Automatic Adjustable ORVM, Cargo Area Lamp, Phone Interface through Bluetooth, Tachometer, Rear Wash/Wipe and Defogger.
  15. 15. Ford Figo Titanium Petrol It is the top end variant of Ford Figo which is loaded with few more features that are Six Speed Variable Intermittent Front Wipers, Anti Drip Wiping, ABS with EBD and Dual Front Airbags. Ford Figo Diesel LXI It is the base diesel variant of the car. It offers same features as like “Ford Figo Petrol LXI” only the difference is engine. It is loaded with 1.4L, Duratorq diesel engine to offer excellent mileage and engine performance. Ford Figo Diesel EXI It offers same features as like “Ford Figo Petrol EXI” only the difference is its 1.4l Duratorq diesel engine. Ford Figo Diesel ZXI It offers same features as like “Ford Figo Petrol ZXI” only the difference is its 1.4l Duratorq diesel engine. Ford Figo Titanium Diesel It offers same features as like “Ford Figo Petrol Titanium” only the difference is its 1.4l Duratorq diesel engine. EXHIBIT 3: Advertisements of FIGO ON INTERNET and in the print media
  16. 16. REFERENCES 1 - 2- 3 3.html 4- 5- 6- 7- 8- 9- 10- 11- 12- 13 60yrs.htm 14 - 15 - 16 - 17 - 18-’s-boneham-talks-about-launchingsmall-carindia_477026.html 19 -
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