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assignment on automobile industry assignment on automobile industry Document Transcript

  • JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL KALKAJI NEW DELHI ACKNOWLEDGEMENTI express my sincerest gratitude and thanks to honorable, Ms. SANJEELA for whosekindness I had got the precious opportunity of doing this project. Under her brilliantguidance I could complete the project being undertaken on the “BRIEF STUDY OFAUTOMOBILE INDUSTRURY & MAHINDRA & MAHINDRA” In business strategy. Successfully in time. Her meticulous attention and invaluablesuggestions have helped me in satisfying the problems involved in the work. I wouldalso like to thank the overwhelming support of all the group member whose better effortgave me the opportunity to learn and gain the knowledge about the various aspects ofthe industry. AUTOMOTIVE INDUSTRY IN INDIA INTRODUCTIONThe automotive industry in India is one of the largest in the world and one of thefastest growing globally. Indias passenger car and commercial vehicle manufacturingindustry is the sixth largest in the world, with an annual production of more than 3.9million units in 2011. According to recent reports, India overtook Brazil and becamethe sixth largest passenger vehicle producer in the world (beating such old andnew auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain,France, Brazil), growing 16 to 18 per cent to sell around three million units in the courseof 2011-12.In 2009, India emerged as Asias fourth largest exporter of passenger cars, behindJapan, South Korea, and Thailand. In 2010, India beat Thailand to become Asias thirdlargest exporter of passenger cars.As of 2010, India is home to 40 million passenger vehicles. More than 3.7 millionautomotive vehicles were produced in India in 2010 (an increase of 33.9%), making thecountry the second (after China) fastest growing automobile market in the world.According to the Society of Indian Automobile Manufacturers, annual vehicle sales areprojected to increase to 5 million by 2015 and more than 9 million by 2020. By 2050, the
  • country is expected to top the world in car volumes with approximately 611 millionvehicles on the nations roads.The majority of Indias car manufacturing industry is based around three clusters in thesouth, west and north. The southern cluster consisting of Chennai and Bangalore is thebiggest with 35% of the revenue share. The western hub near Mumbai and Punecontributes to 33% of the market and the northern cluster around the National CapitalRegion contributes 32%. Chennai, is also referred to as the "Detroit of India" with theIndia operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, HindustanMotors, Daimler, Caparo, and PSA Peugeot Citroën is about to begin their operationsby 2014. Chennai accounts for 60% of the countrys automotive exports.Gurgaon andManesar in Haryana form the northern cluster where the countrys largest carmanufacturer, Maruti Suzuki, is based. The Chakan corridor near Pune, Maharashtra isthe western cluster with companies like General Motors, Volkswagen, Skoda, Mahindraand Mahindra, Tata Motors, Mercedes Benz, Land Rover, Fiat and Force Motors havingassembly plants in the area. Aurangabad with Audi, Skoda and Volkswagen also formspart of the western cluster. Another emerging cluster is in the state of Gujarat withmanufacturing facility of General Motors in Halol and further planned for Tata Nano attheir plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also set tocome up in Gujarat.Kolkata with Hindustan Motors, Noida with Honda and Bangalorewith Toyota are some of the other automotive manufacturing regions around thecountry.The Indian Automobile Industry manufactures over 11 million vehicles and exportsabout 1.5 million each year. The dominant products of the industry are two-wheelerswith a market share of over 75% and passenger cars with a market share of about 16%.Commercial vehicles and three-wheelers share about 9% of the market between them.About 91% of the vehicles sold are used by households and only about 9% forcommercial purpose.The industry has a turnover of more than USD $35 billion andprovides direct and indirect employment to over 13 million people.The supply chain is similar to the supply chain of the automotive industry in Europe andAmerica.Currently, Indias increasing per capita disposable income which is expected to rise by106% by 2015 and growth in exports is playing a major role in the rise andcompetitiveness of the industry.Tata Motors is leading the commercial vehicle segment with a market share of about64%.Maruti Suzuki is leading the passenger vehicle segment with a market share of46%. Hyundai Motor India Limited and Mahindra and Mahindra are focusing expandingtheir footprint in the overseas market. Hero Moto Corp is occupying over 41% andsharing 26% of the two-wheeler market in India with Bajaj Auto. Bajaj Auto in itself isoccupying about 58% of the three-wheeler market.
  • Analysis of automotive Industry.1.SWOT Analysis2.PESTEL Analysis3. Porter’s 5 forces model analysis4. Comparative theory analysis.5. Mahindra & Mahindra & TATA analysis SWOT ANALYSIS OF AN INDUSTRY • Strength • Low costs with good technology base. • Easy access to raw materials • Upcoming base for Research and Development (R&D). • Ability to cater to low volumes proficiency in understanding technical drawings and well conversant in all global automotive standards: American, Japanese, Korean, European Standards etc. • Appropriate automation leading to economic production costs • Flexibility in small-batch production • Growing IT capability for design, development & simulation • Respect for intellectual property (IPR) • High-skilled manpower • Adoption of high quality & productivity initiatives (TQM, TPM, Six Sigma, etc.) • Proximity to markets
  • • Weakness • Multiple tax components in the cost of the vehicle. • Inadequate R&D facilities. • Lack of economies of scale Supply chain infrastructure bottlenecks. • Opportunities• MNCs focusing on low cost outsourcing opportunity• Viewed as a global manufacturing hub for small cars• Exports projected to grow at over 30% p.a.• India‘s share in world Auto Components is expected to grow over 2.5% by 2015• National Automotive Testing and R&D Infrastructure Project (NATRIP), a US$ 400 million initiative, aims to create the state-of-art dedicated Testing, Validation and R&D infrastructure across the country.• Opportunity to set up R&D centre in India• High level of sourcing of auto components from low cost countries (LCC) to act as a growth driver. • Threats • Increase in the fuel prices may lead to slowdown in the sales • Import of components from ASEAN and China will have adverse impact on GDP and employment • Increased cost of raw materials (steel, etc)
  • PESTEL ANALYSIS• Political Political climate in a different countries producing an buying automobiles regarding policies on import, export and manufacture of automobiles and automobile components. This will also include policies on allowing setting up of manufacturing plants by foreign companies. • Stability of governments. This may affect the future conditions in a country. • Taxation policy • 6th largest passenger vehicle in the world. • Growing 16 to 18 % to sell around three million units in the course of 2011-12. • In 2010, India beat Thailand to become Asias third largest exporter of passenger cars. • As of 2010, India is home to 40 million passenger vehicles. • Annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020.• Economic • Level of economic activity that affects need for commercial use of automobiles. • Weighted tax deduction. • Manufacturing sector 8-10% • Indian economy growth by 8.5%• Social • Lifestyle and preferences of people, that impact their choice of types of automobiles. • Social norms that impact the decision to own and use automobiles versus other means of transport. • Price sensitive Indian customer • Customer base service • Growth in urbanization• Technology • Technology relating to automobile designs • Technology of automobile manufacture
  • • Technological developments that may increase use of automobiles. • R&D • Renewable energy development.• Environmental Physical conditions effecting ability to use automobiles of different types. This will also include state infrastructure such as roads for driving vehicles. • Infrastructural development • Acquisition of land. • Global warming • Roof of a car • Hybrid & electric car.• Legal • Legal provision relating to environmental population by automobiles. • Legal provisions relating to safety measures. • Open trade with minimum risk • Govt. tax on import decrease by 60% PORTER’S FIVE FORCES MODEL ANALYSIS OF INDUSTRY1.The threat of new entrantsIn the auto manufacturing industry, this is generally a very low threat. Factors toexamine for this threat include allRomeo has been out of the US since the early 90s largely due to the inability to re-establish a dealer network. But if you are looking at Singapore, for example, only oneAlfa barriers to entry such as:-1.Upfront capital requirements (it costs a lot to set up a car manufacturing facility), brand equity (a new firm may have none),2.Legislation and government policy (think safety, EPA and emissions),3.Ability to distribute the product (Alfa Romeo dealer is needed!).
  • 2. The bargaining power of buyers/customersWho in the US has ever bought a car without bargaining? Anybody? In 2009 especially,US dealers were giving great deals to buyers to get the industry moving. While quantity a buyer purchases is usually a good factor in determining this force,even in the automotive industry when buyers only usually purchase one car at a time,they still wield considerable power.However, this may be different in other markets. In Singapore it sure is lower than in theUS, creating a more favorable situation for the industry but not the buyers.Generally, however, its safe to say the customers have some buying power, but itdepends on the market.3. The threat of substitute productsIf buyers can look to the competition or other comparable products, and switch easily(they have low switching costs) there may be a high threat of this force. With new cars,the switching cost is high because you cant sell a brand new car for the same price youpaid for it. A P5F analysis of the car industry covers the new market, not used orsecond-hand.But what about the threat of substitute products before the buyer makes the purchase?You need to know whether the market you are analyzing has many good alternatives tonew cars. A vibrant used car market perhaps? Used cars threaten the new market. Howabout a very good mass-transportation system?Product differentiation is important too. In the car industry, typically there are many carsthat are similar - just look at any mid-range Toyota and you can easily find a very similarNissan, Honda, or Mazda. However, if you are looking at amphibious cars, there may belittle threat of substitute products (this is an extreme example!).4. The amount of bargaining power suppliers haveIn the car industry this refers to all the suppliers of parts, tires, components, electronics,and even the assembly line workers (auto unions!). We know in the US the auto unionsare tremendously powerful. But we also know that some suppliers are small firms whorely on the carmakers, and may only have one carmaker as a client. So this force canbe tricky to evaluate.5. The intensity of the competitive rivalryWe know that in most countries all carmakers are engaged in fierce competition. • Tit-for-tat price slashes, • Add campaigns, • product developments keep them on the edge of innovation and profitability.
  • • Margins are low and pressure between rivals is high. • AnalysisOver view of the company.• Industry - Automotive• Founded - 1945 (Ludhiana)• Headquarters - Mumbai, Maharashtra, India• Area served - Worldwide• Key people - Anand Mahindra (MD)• Products - Automobiles, commercial vehicles, two-wheelers• Revenue - 37,026 crore (US$6.7 billion)(2011)[• Net income - 3,079 crore (US$557.3 million)(2011)• Total assets - 36,926 crore (US$6.68 billion)(2011)• Employees - 15,147 (2011)• Parent - Mahindra Group• Website - Products • Commercial Vehicles Alfa Gio Mahindra Navistar Trucks Bolero Maxi Truck
  • Genio Mahindra is also into Tractor manufacturing • Personal Vehicles Bolero REVA Electric Cars Scorpio Kyron Rexton II Rodius XUV 500 Competitors1.Honda2.Toyota3.Nissan4.Hyunda5.Mitsubishi6.Maruti Udyog7.Tata Motors8. Skoda9. Toyota10. Volkswagen11. Ford PESTEL ANALYSIS OF MAHINDRAPolitical • Government laid stress on mechanization of agriculture to boost the food grain production. • Reduction in the tariff imposed on car exports, a removal of the minimum capital investment required from new investors, 100% foreign equity investment allowed. • Weighted tax deduction of 150% on R&D helping in innovation.
  • Economic • Economic pressure leading to reorganization of traditional sales process. • Lending norms stringent. • National Economic growth increases the demand of automotive products. • Inflation increases the prices of supplies and also company productsTechnological • Use of internet as a medium to trade using e-strategies bolster the marketing strategy of company. • Can affect costs, quality, and lead to innovation (customised cars). • More hybrid cars like REVA.Social • Preference of small & compact cars. • Growth in urbanization, more demand. • Improvement of living standards of middle class. • Seeking ´Value for money behaviour of customers. • Rising customer emphasis on aesthetics, luxury and comfort. Environmental • Technological solutions help in integrating the supply chain hence reduce loss and increase profitability. Legal • Legal provisions relating to safety measures.
  • • Confirms the government’s intention on harmonizing the regulatory standards with the rest of the world. • Indian government auto policy aimed at promoting an integrated, phased and conducive growth of the Indian automobile industry. • Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry. SWOT ANALYSISStrength• Mahindra has been one of the strongest brands in the Indian automobile market.• Mahindra group give employment to over 110,000 employees.• Innovation and advanced technology applications.• Excellent branding and advertising, and low after sales service cost.• Sturdy SUV’s good for Indian roads and off-road terrain.Weakness Mahindra’s partnership with Renault did not live up to international quality standards through their brand Logan.Opportunity • Developing hybrid cars and fuel efficient cars for the future. • Tapping emerging markets across the world and building a global brand. • Fast growing automobile market. • Growing in the market through electric car Reva (controlling stake) and entry into two-wheeler segments.Threats • Ever increasing fuel prices. • Intense competition from global automobile brands. • Substitute modes of public transport like buses, metro trains etc. •
  • PORTER’S MODEL OF MAHINDRAPorters strategy for Mahindra SCORPIO:- • Threat from new entrant:- • High and unfavorable. • Govt. has approved 100% FDI & minimum capital investment for new Entrant has been removed. • Threats from buyers:- • Low & favorable • Getting SUV at such a affordable price. • Threat from supplier:- • High & unfavorable. • Car is manufactured through global alliance of companies each company handling different sets of areas. • Threat from substitution:- • Moderate/ moderately favorable. • Presence of MUV sports bike etc. • Threats from competitors:- • Low & favorable. • No presence of SUV at this price.
  • Marketing strategy of Mahindra • First & foremost they tries to provide a status of Pajero in Scorpio at affordable price. • Shadow endorsement was done which doesn’t shout Mahindra. • Advertising, public relation, mass media, nothing was left to make the brand popular. • Scorpio adopted penetrating pricing strategy positioned between 5-7 lakh. • As they were targeting urban area, stronger distribution channel were needed. • Scorpio was launched in phase manner, i.e. first in metros and then covered in another cities so as to ensure the attention towards main market. ConclusionThis report is all about the automobile industry & Mahindra & Mahindra. This reportbriefly explain about the overall strategy adopted by an automobile industry and itsplayers, which give us the detail knowledge about the internal & external environment ofthe industry. Through applying different analysis we come to know about the companiesproduct, companies promotions strategy, companies market positions, their nearcompetitors.. And we also come to know about the political, social, technological,environmental, legal aspects which affect the companies strategy. And how a companymanage all this to acquire a no. 1 position in the market amongst their all theircompetitors.