Business Strategy Audi India Amit

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Luxury Car Market !!

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Business Strategy Audi India Amit

  1. 1. Executive Summary ( marketing strategy Audi India) • Positioning in the luxury not as broad , but micro segment of luxury entry which will be having highest growth among all luxury micro segments. • Standard Product from Audi Portfolio as Indian market standards for luxury will be matching with global standards. • Focus on High WOM & Life Style events, IMC targeting post purchase influence on customer behavior for high WOM. • Distribution for special zones with high HNI & affluent people. • Branding for inspirational & aspirational attributes. • Meeting High requirement of working capital through sustained market share & service bundling. • Total cash flow generated 697 Cr without terminal flow. 1
  2. 2. Indian Luxury Car Market Mkt Size 12000• Indian Luxury car market is growing at 10000 10000 rate of 25% per annum. 8700 8000 6800 6000 5800• Rise of disposable income & increase of 4000 3900 3000 number of affluent middle class people. 2000 1000 0 2004 2005 2006 2007 2008 2009 2010• India has 83000 millionaires & every years 16000 adding to it. HNI Growth 140000 120000 100000 80000• Affluent Indian class has exposure of 60000 HNI Growth global luxury life style, they want to flaunt. 40000 20000 0 2005 2006 2007 2008 2009 2010 2
  3. 3. Market Share Growth Rate Market Concentration Chart Title80604020 0 2007 2008 2009 2010 BMW Mbenz Audi • Market concentration is high for star marked models, blue highlights are next largest selling models, concentration is more at entry to luxury segments because growing HNI’S are potential customers. • Audi is having high growth , because base numbers are small, future challenge is positioning in MICRO segments of luxury, Merc is more towards ultra luxury. 3
  4. 4. Market & Environmental AnalysisAudi Resources , Core Competencies mapping with Environment• Audi strength is style , performance & luxury , Indian people are more influenced by western culture, Audi can leverage same.• Growth of luxury SUV segment. Audi has launched Q5 in this segment.• Cyclic nature of industry & slow global economy is having impact on immediate sales, Audi can use current assembly plant at Aurangabad & Chakan for meeting market requirements through CKD facility. 4
  5. 5. Competitor Analysis Industry Attractiveness Audi Focus Area • Differentiation as Corp Strategy • Premium Compact to executive segment. • Global Standardization of product. • Increase brand caunciousness , not only awareness. • Reach/ Penetration in Tier 2 Cities 5
  6. 6. Customer Segment with Price DifferentialCustomer profile: Average Age 30-45• Traditionally wealthy families ( Kids Ultra educated abroad) Luxury• Corporate Executives High end Luxury• Medium Size enterprise owners Segment• Young professionals, expatriates, politicians & bureaucrats. Executive SegmentMotivating factors:• High Quality Compact Executive Segment• Heritage• Longevity• High Brand Awareness Premium Compact Segment• Low Brand Consciousness• Propensity to spendDecision Criteria:• Newness, Safety, Comfort, Superior Performance, Taste of Richness 6
  7. 7. Perceptual Map Strategic Focus of Companies Perceptual Map Indian Context 7
  8. 8. Defining Audi Brand Attributes• Positioning Audi as exclusive club ofsuccessful extraordinary stylish people.•Communicate Audi asstyle, Performance & flaunt. 8
  9. 9. Balance of Rational & Emotional Needs Through Brand Pyramid. Manage Customers for high wom , customers are Why luxury Car is focusing on interest rate message? Will it lead to trendy tech savvy , they like to interact dilute the brand ? on social media platforms. Stimulate Maintain Feeling of superior success, h quality of igh social service & status customer delights Emotional Benefits Functional style, sportiness, Benefits safety positive , comfort ,quality feeling, arousal via creative add through sponsorship Brand Awareness through, Auto Shows Business Channels, Luxury Resorts, Hotels , Life style• Need for assertion Parties, WOM, Blog, Social Media.• Stimuli with arousal• Considering post purchase influence for high WOM, Focus on Customer Mgmt WOM, through Auto Shows, Journals & life style shows.• Inherent Drama Like The Hire Campaign BMW. ( Recent Nokia smart phones adds)• Manage Information brokers. 9
  10. 10. Customer Expressiveness to be supported by Marketing/promotional campaign Are my customers personality is matching with celebrity endorsed ? • IMC targeting customer profile, aspirations & brand positioning attributes. • Omega celebrity George Cloony Visually Arresting Print Adds from BMW & Merc 10
  11. 11. Challenges of Channel & Distribution Mgmt• Low Market Volume, with too many dealers with high capital cost for their site & their inventory , selling too few cars & thus operating with very low operating margins.• Only an economically viable channel can generate Brand Loyalty & Satisfied Customers.• Customer experience at point of purchase. Alternatives for improving Channel efficiency• Common store for VW, Skoda & Audi with distinction, Risk of Mixing or diluting luxury experience .• Bundling of financing, insurance & service for margin improvement.• Virtual Show room & dealer pooling for inventory. Information/ negotiation virtually & settlement in physical world.• Centralized logistics for VW, Skoda & Audi. Economics of scale & control.• Concept of Auto Malls, Risk not prevalent in India. Focused Distribution for supporting the brand image & backward integration with VW India. 11
  12. 12. Financial Modeling Income Statement14,00,00,00,000.00 • Average volume 3500 with growth rate same as market(Assumption Sales growth rate 25%) Forecast growth rate 25%. 2011 2012E 2013E 2014E 2015E 2016E 2017ESales ( 3500 Number* Average Selling price 40L) 1,400.0 1,750.0 2,187.5 2,734.4 3,418.0 4,272.5 5,340.6 • Industry Average Cost StructureCost of sales 1,008.0 1,260.0 1,575.0 1,968.8 2,460.9 3,076.2 3,845.2Other operating Income 14.0 17.5 21.9 27.3 34.2 42.7 53.4 Taken.Gross operating Income 406.0 507.5 634.4 793.0 991.2 1,239.0 1,548.8 • Average selling price 40L throughSelling, general & adminstrative expenses 210.0 262.5 328.1 410.2 512.7 640.9 801.1 model mixDepreciation 7.2 7.9 8.7 9.6 10.5 11.6 12.8EBIT 188.8 237.1 297.5 373.2 468.0 586.5 734.9 • Assumptions in separate sheetInterest Income 1.7 2.1 2.6 3.3 4.1 5.1 6.4Interest expenses 2.0 2.3 2.7 3.1 3.7 4.4 5.3Pre Tax Income 185.1 232.7 292.2 366.8 460.2 577.0 723.2Income taxes 64.8 81.4 102.3 128.4 161.1 201.9 253.1Net Income 120.3 151.2 190.0 238.4 299.1 375.0 470.1 CA/CL=1.75 for projected financial years, Detailed Break up in Excel sheet. 12
  13. 13. Financial Modeling Free Cash Flow Analysis ( Terminal Value Not Included) • Gross fixed asset 160 Cr ( 30Net Operating Income 188.8 237.1 297.5 373.2 468.0 586.5 734.9X(1-Tax Rate) 0.7 0.7 0.7 0.7 0.7 0.7 0.7 mn euro) invested in 2006 byNOPAT 122.7 154.1 193.4 242.6 304.2 381.3 477.7 Audi considered.Gross Cash Flow 129.9 162.0 202.1 252.2 314.7 392.9 490.5 • Capex 20 Cr/ Year for expanding service & dealerGross Fixed Asset 90.0 99.0 108.9 119.8 131.8 144.9 159.4 network.Accumulated Depreciation 60.0 67.9 76.6 86.2 96.8 108.4 121.1 • Assuming entire workingNet Fixed Asset 30.0 31.1 32.3 33.6 35.0 36.6 38.3Capex 20.0 21.0 22.1 23.2 24.3 25.5 26.8 capital is funded through cashIncrease in Working Capital 134.8 34.5 43.1 53.9 67.4 84.3 105.4 generated from first year ofGross Investment 154.8 55.5 65.2 77.1 91.7 109.8 132.2 operations.Free cash Flow -24.9 106.5 136.9 175.1 223.0 283.0 358.2 • Terminal cash flow is notFactor 1.0 0.9 0.7 0.6 0.6 0.5 0.4 taken.Net cash Flow -24.9 92.2 102.7 113.6 125.3 137.7 150.9NPV ( WACC=15%) 697.5 Net cash Flow 200.0 150.0 16% 100.0 14% 50.0 12% 6,000.0 0.0 Operating 5,000.0 EBIT 10% -50.0 profit 4,000.0 8% Margin 3,000.0 6% 4% ROS 2,000.0 2% 1,000.0 Sales ( 3500 0.0 Number* 0% Average Selling 2011 2012E 2013E 2014E 2015E 2016E 2017E price 40L) 13
  14. 14. Feasibility Analysis & Final RecommendationsParameters RemarksOrganizational Learnings from VW & Skoda for managing India operations.Technical Global standardization as product strategy for communizing platformsFinancial Self sustained business model through service bundling , Skim price & volume.Position VW as mass market, Skoda superb for executive / premium & Audi as luxury. Differentiation as corpstrategy for Audi INDIA.Positioning Audi as successful league of young executives, artists & athletes.Focus on brand personality & behavioral benefits of customers for post purchase satisfaction/ WOM. High ClassFinish, Model Mix & Fresh Look for keeping agility with brand.Economies of scale through common platform for operation behind line of interaction like distribution, IT &Infrastructure with VW & Skoda. CKD assembly sharing with group companies .Global Standardization of products while keeping global sourcing from china for South East Asia Market.Exclusive distribution & service for tier 1 & tier 2 cities . Manage information brokers & virtual platforms as trendyimage .Revenue generation & retained earnings for managing working capital with rise in market share. 14

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