Strategic Marketing- Indian Automobile Industry

Section C Group 4

Still pondering-Ankit

Muscle Man Gaurav Diamond lawyer-Deepshikha

Seedhe Sadhe-Akshay

Spinner- Guru

Ms. Grp4- Irene

Stu-co-Ishmeet

Cant seeMitika?

Cofee with Namita

Rowdy Guneet

Broom-Wroom Harnek

Happy Harsh

OMG Himanshu

Bouncing Jayanth

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Group 4 Sec C

3 softly defined strategy zones of

1. Product Leadership 2. Ops Excellence

What is Product Leadership?

Product Leadership is characterized by products that are the best in their market and highly valued by customers. Value disciplines model of Michael Treacy and Fred Wiersema describes three generic value disciplines. Any company must choose one of these The dimensions of Product Leadership are: value disciplines and act upon it consistently and vigorously. Capability maturity Treacy and Wiersema argue in their book The Discipline of Market Leaders Intellectual leverage that any company must choose to excel in one value discipline, where it Responsiveness aims to be the Time-to-market best - in the world preferably. This does not mean the other 2 dimensions should be completely High margins in a short time frame. neglected, but rather that the company should aim to be merely 'OK' in these other two disciplines:

The Traditional Waterflow Model VS Concurrent Engineering

The figure on the left here shows the traditional waterfall model wherein the process flow is sequential. Concurrent engineering In concurrent engineering, on the right the process flow occurs simultaneously thereby reducing costly design changes at a later time and improving the time to market.

Why Product Leadership?

The Auto industry needs to b Very strong in innovation and brand One pointer: marketing, operating in dynamic markets. The company should possess the necessary infrastructure and the The principles of management should not be risk are: a product leadership enterprise averse. A classic example is TATAs Nano & Ace. Encouragement of innovation such a conceptfosters experimentation There was no a culture that of 1 tonner and innovation and rewards product or service improvement; vehicle and they found out this opportunity, took some risk launching the Risk-oriented management style they are the market product and now management that allows the enterprise to take risks and reap the rewards of new ventures; leaders in that segment Recognition that the enterprises current success and future prospects lie in its talented design people and those who support them; and Recognition of the need to educate and lead the market in the use and benefits of new products or services.

Competitive Advantage of Countries in Auto Industry

Nations attempt to overcome their inefficiencies relative to other countries, via Japan originally built an automotive industry at home, but modernization, had to seek lower cost production factors in Southeast Asian reduction of excess capacity, nations, Mexico, and Brazil. training, and upgrading human resource skills. Germany had to relocate much of its mass manufacturing They chose their lower production costs. to Eastern Europe, to secureTime to Market accordingly HMC in Turkey -1997, in India 2000 -2007, China - 2002-

Time to Market

Advantages? Availability of inexpensive, high-quality labor and proximity to the Middle East and Western Europe.

Operational Excellence
Early 1900s U.S and other automobile manufacturers were focused on delivering products to customers Henry Ford propounded the concept of mass production leading to cost reductions

1950s

Asian auto manufacturers began to develop and establish their leadership status world over by focussing on process streamlining and supply chain efficiencies Development of JIT and Kaizen Principles of Manufacturing

Manufacturers in other parts of the world realized the significant benefits of building operational efficiencies in order to be able to compete in a globalized Subsequen market tly Maintaining operational efficiencies has become a basic requirement for survival in the automobile industry Increased focus on product in order to be able to differentiate oneself in a highly competitive market

Present Day

Tools of Operational Excellence

Kaizen
Making the work environment more efficient and effective by creating a team atmosphere, improving everyday procedures, ensuring employee satisfaction and making a job more fulfilling, less tiring and safer. Elimination of waste, quality control, standardized work and the use of efficient equipment.

Lean Manufacturing

Lean is the set of "tools" that assist in the identification and steady elimination of waste. As waste is eliminated quality improves while production time and cost are reduced. Tools like Value Stream Mapping, Five S, Kanban, poka-yoke

One-Piece floor Manufacturing

Parts are moved through operations from step-to-step with no WIP in between either one piece at a time or a small batch at a time. Highly capable processes Highly repeatable processes Equipment with very high (near 100%) uptime

Just-in-time production

It requires that equipment, resources and labor are made available at the right amount and at the time.

Customer Intimacy

Maruti Suzuki has differentiated itself with superior aftersales services and continues to be the market leader

Hyundai and other players followed suit by building them over time /piggybacking on established players networks.

Maruti Suzuki was the first to provide financial assistance, offering the convenience of a one-stop solution to the customer

Today, most manufacturers offer this service via tie-ups with financial institutions

Ford was the first manufacturer to start sale of cars on the Internet

Manufacturers are constantly coming up with novel ways to simplify the buying process, which isn't much of a deterrent anyway

Companies that sell popular cars bank on quick delivery times

People can be indifferent to waiting times as well, as seen in the case of Royal Enfield

Customer Intimacy

Maruti Suzuki started providing test drives in India

Every manufacturer provides Test drives, today some even offer free cars to lucky test drivers

Manufacturers like Maruti Suzuki pioneered pre-owned car sales

Other players like Toyota followed suit, now even new players like Volkswagen is also planning to start one

The price that the customer will incur for high customer intimacy is a deterrent for most potential customers.

There is however a small segment willing to pay this price, Rolls Royce and Maybach.

Hold Up
The hold up problem in automobile industry results from many situations where one party can hold up the other for the value of the commitment between the two. Take an historic example where Fisher body(supplier) had an
exclusive contract to supply body parts for the cars of General Motors. In the 1920s there was a sharp increase in demand that exceeded all expectations that were held at the time and Fisher Body used this unforeseen development to hold up General Motors, amongst others, by increasing the price for the additional parts produced.

Hold Up

Hold Up

In the past few years, large hikes in petrol in India has dampened the sales of petrol cars, which has pushed companies to introduce diesel engines and spend more on R&D. Laws of land, taxation and government regulations sometimes subvert the value to be delivered. For example: Singur land case resulted in huge delays and the loss of investment in establishing and moving to Gujarat. Also The Maharashtra government's decision to withdraw VAT has put a question mark on ChakanTalegaon auto hub. JIT is a hold up by the auto industry on the auto ancillary industry. Under investment in R&D, cartelization etc are reverse hold up techniques of the auto suppliers

Threat of Slack

Slack has been found to be more common with bigger companies with some being Market leaders in their industry. Eg: The classic case of Maruti Suzuki in India whose market share has fallen to 37.76% now as against 44.64% in 2010 Bureaucratization, culture, complexity, size, poor information gathering have been found to contribute to slack

Threat of Slack
In the case of Maruti, slack can be attributed to:
(HR, work culture issue)

The infamous labor unrest at its Manesar plant in 2012 forcing the plant lockout for a month

(poor information gathering)

Caught unaware with growing consumer inclination towards diesel cars with its entry level petrol cars not performing.
Eg: Estilo, Ritz, Alto 800 proving to be a dud

Complacency, narrow view given its market leadership

Tetra Threat Model Imitation: Threat second to Substitution

Honda Civic entered the sedan segment in 1988 and since then has been very similar to Toyota Corolla; from engine, power and dimensions to interiors, price and safety. Both have been neck to neck competitors on the best sellers list for long. They Keep coming up with minor changes/improvements which other imitates soon. Had one of them not been there it is obvious the other would have enjoyed higher sales. THEN (1988) NOW (2012)

How Companies dealt with Imitation in Auto Industry

Bajaj (DTSI patent) Though it lost case to TVS, it stopped TVS from using the technology for 4 years Pulsar Keeps upgrading its models frequently and enjoys dominance in Indian two wheeler market Maruti went for scale with Omni and captured the Indian market but could not fight back when Tata entered the segment with a similar model Magic. Marutis retaliation with series of small cars like Wagon R, Alto, Swift, A-Star & Ritz as competition increases for its 800 model.

Strategies to sustain in global markets

Aggregation
Global car makers target many countries similar in demographics and markets like North American, South American and European markets. They launch the same models in all the countries belonging to the same market simultaneously

Adaptation
Many car companies expand their markets by the means of acquisition and joint ventures. Examples Renault and Mahindra, Renault and Nissan, Suzuki adapted to Indian market by the means of JV with Maruti Udyog Ltd. which is one of the most successful automobile companies in India.

Arbitrage
Car companies till recent times launched their new cars in western markets and later in the Indian market. However times have changed and now many model launches coincide with the global launches. Many companies manufacture cars in low cost centers like India, China and export these cars to other markets.

Strategies for Declining/Stagnant Industries

Green Cars Nissan Leaf & Chevys Bolt highly being pushed to create new Image, same being supported in markets like US China seeing new markets for large SUVs to reflect social status. Daimler & Mitsubishi clearly leading to meet the needs.

Toyota and Audi came up with autonomous vehicles, in the wake of the push by Google on its driverless car. Toyota envisaged their safety tag by bringing features like adaptive headlights, precollision system and continues to work on improvement of safety features.

Land Rover have a strategy of producing only large SUVs for which they are know and they stick to these market. Rolls Royce only targets rich businessmen and top executives and their selling strategy is still the same for their market

Ford- With one of the worst Fuel efficiency records trying to go green predicting the future. Volvo slowly changing its tagline from Luxury cars to Value cars to continue demanding premium.

We have been trying to avoid these since long Its High time we ANSWER!

What? We Sure could have done that.