A Comparative Analysis of Marketing Strategies of Automobile Companies in India.

A Comparative Analysis of Marketing Strategies of Automobile Companies in India.

Title:A Comparative Analysis of the Marketing Strategies of Automobile Companies in India.The firms namely: Maruti Suzuki Hyundai Mahindra & Mahindra Toyota

Keywords:Marketing Strategy, Strategic Management, Brand Position, Brand Equity, Marketing, Advertising, Product, Price, Distribution, Promotion

Abstract:In todays competitive era the word Strategy is very crucial for all business organizations. Presently organizations started realizing that customer centric and aggressive marketing strategies plays vital role to become successful leaders. Though globalization has opened the doors of opportunities for all, the market is still crowded with some unknown risks and a lot of competition. Because of this competition, a marketing strategy must aim at being unique, differential-creating and advantage-creating.Therefore, at the heart of any business strategy is a marketing strategy. All the marketing strategies are based on the right mix of 4Ps, only those can be ahead which have the right marketing strategies because it increases the chances of better market penetration with proper utilization of resources. Marketing strategies include all basic and long term activities in the field of marketing that deal with the analysis of the strategic initial situation of a company and formulation, evaluation and selection of market-oriented strategies and therefore contribute to the goals of the company and its marketing objectives.

Overview of Indian Automobile Industry:The automobile industry is one of Indias most vibrant and growing industries. This industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP). The auto sector is one of the biggest job creators, both directly and indirectly. It is estimated that every job created in an auto company leads to three to five indirect ancillary jobs. India's domestic market and its growth potential have been a big attraction for many global automakers. India is presently the world's third largest exporter of two-wheelers after China and Japan. According to a report by Standard Chartered Bank, India is likely to overtake Thailand in global auto-export market share by the year 2020. The next few years are projected to show solid but cautious growth due to improved affordability, rising incomes and untapped markets. With the governments backing, and trends in the international scenario such as the decline in prices of natural rubber, the Indian automobile industry is slated to witness some major growth.Market size - The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 August 2014 was recorded at US$ 10,119.68 million, as per data by Department of Industrial Policy and Promotion (DIPP). Data from industry body Society of Indian Automobile Manufacturers (SIAM) showed that 137,873 passenger cars were sold in July 2014 compared to 131,257 units during the corresponding month of 2013. Among the auto makers, Maruti Suzuki, Hyundai Motor India and Honda Cars India emerged the top three gainers with sales growth of 15.45 per cent, 12 per cent and 11 per cent, respectively. The three-wheeler segment posted a 24 per cent growth to 51,461 units on the back of increased demands from the urban market. Total sales across different vehicle segments grew 12 per cent year on year (y-o-y) to 1,586,123 units. Scooter sales have jumped by 29 per cent in the on-going fiscal, and now form 27 per cent of the total two-wheeler market from just 8 per cent a decade back. The ever-rising demand for scooters, which has far outstripped supply, has prompted Honda to set up its first dedicated scooter plant in Ahmedabad. Tractor sales in the country are expected to grow at a compound annual growth rate (CAGR) of 89 per cent in the next five years making India a high-potential market for many international brands.Investments - To match production with demand, many auto makers have started to invest heavily in various segments in the industry in the last few months. Some of the major investments and developments in the automobile sector in India are as follows: Ashok Leyland plans to invest Rs 450500 crore (US$ 73.5481.71 million) in India, by way of capital expenditure (capex) and investment during FY15. The company is required to manage Rs 6,000 crore (US$ 980.56 million) of assets in seven locations across the world, for which maintenance capex is needed. Honda Motors plans to set up the world's largest scooter plant in Gujarat to roll out 1.2 million units annually and achieve leadership position in the Indian two-wheeler market. The company plans to spend around Rs 1,100 crore (US$ 179.76 million) on the new plant in Ahmedabad, and expand its range with a few more offerings. Yamaha Motor Co has restructured its business in India. Now, Yamaha Motor India (YMI) will take care of its India operations. The restructuring is part of Yamahas mid-term plan aimed at improving organisational efficiency, as per Mr Hiroyuki Suzuki, Chief Executive and Managing Director. YMI would be responsible for corporate planning and strategy, business planning and business expansion, quality control, and regional control of Yamaha India Business. Tata Motors plans to use the 'hub-and-spoke' model in which India will be the key manufacturing base while it will have mini-hubs in overseas markets. The company also plans to set up mini hubs in potential markets like Africa, Middle-East and South East Asia. Hero Cycles through its unit OPM Global has acquired a majority stake in German bicycle company Mitteldeutsche Fahrradwerke AG (MIFA) for 15 million (US$ 19.11 million). The company plans to invest an additional 4 million (US$ 5.09 million) as capital expenses in restructuring the acquired company.Government Initiatives - The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route. To boost manufacturing, the government had lowered excise duty on small cars, motorcycles, scooters and commercial vehicles to eight per cent from 12 per cent, on sports utility vehicles to 24 per cent from 30 per cent, on mid-segment cars to 20 per cent from 24 per cent and on large-segment cars to 24 per cent from 27 per cent. The governments decision to resolve VAT disputes has also resulted in the top Indian auto makers namely, Volkswagen, Bajaj Auto, Mahindra & Mahindra and Tata Motors announcing an investment of around Rs 11,500 crore (US$ 1.87 billion) in Maharashtra. The Automobile Mission Plan for the period 20062016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector. The Government of India-appointed SIAM and Automotive Components Manufacturers Association (ACMA) are responsible in working for the development of the Indian automobile industry.Road Ahead - The future of the auto industry depends on the positive sentiments and the demand for vehicles in the market. With the festival season coming up, the Indian auto sector will see a rise in demand which is expected to bring in major growth. An auto dealer survey by firm UBS suggested that the Indian auto industry, riding on trends like the upcoming festival season and decline in fuel price, will observe a 12 per cent y-o-y growth in FY15. Also, keeping up with international trends, there is expected to be a surge in the number of hybrid vehicles in the Indian auto sector in the years to come.

Introduction:The automobile industry is facing new and pressing challenges. Globalization, individualization, digitalization and increasing competition are pressing the face of the industry. In addition, increasing safety requirements and voluntary environmental commitments by the automotive industry have also contributed to the changes ahead. Size is no longer a guarantee of success. Only those companies that find new ways to create value will prosper in the future. Based on this perspective, some strategic methodology is needed which would enable them to transform themselves for the competition.The global automotive industry is subjected to a range of factors that are increasing complexity and influencing the economic options available to the automobile manufacturers. The majority of these factors interacts with one another and has strong interdependencies. However, some of these factors are market-induced and consequently, cannot be influenced directly by the automobile manufacturers. These factors include: Globalization, regionalization and market convergence Due to the effects of liberalization, national markets are increasingly getting globalized. This gives companies a chance to expand to new markets, but also increases the threat of new entrants or increased competition in traditional markets. Increasingly diversified consumer aggregate patterns of behaviour Consumers are no longer accepting standardized products that satisfy their individual requirements. Target groups thus have to be downsized by companies so customers will be attracted by the products offered. However, because of the increased global competition with a stronger focus on price and not on brand loyalty, consumers generally do not reward companies for their more individualized products. As a result of these factors, automobile manufacturers have new demanding requirements within their field of activity. Accelerated modification and diversification of the product portfolio These companies have to shorten product lifecycles in order to react to the expectations of individuals and fast changing consumer demands with innovative products. In the past, an average product lifecycle in the automotive industry was eight years; today, lifecycles are much shorter, or at least the product design is often modified after just two or three years on the market. With development costs for a new model remaining on the same level or even increasing, this concurrently means a shortening of amortization time for the OEM and potentially lower profits. Pervasion of automobiles with digital technology In 2002, digital technology is cars averaged 22 percent of the total value of a car, with a forecasted increase to 35 percent of the total value in 2010. The integration of hardware and software into automobiles represents the predominant accelerator of increased functionality coupled with increasing complexity. This complexity results in overstrained car development departments, product failures, a cost explosion with respect to guarantee and warranty costs, and an impact on customer satisfaction. Increased pressure for innovation and flexibility in development and manufacturing Development departments are not just overburdened by the complexity of digital technology, but also by the shortening of product lifecycles. Another aspect is the increasing number of parallel development projects since companies develop more and more niche models for special target groups. This certainly requires the use of new development techniques such as virtual reality. For example, this technique enabled BMW to shorten the development of its Z4 model to just 30 months.

Objectives: To review the progress of Indian Automobile sector (Passenger vehicles) To understand the marketing strategies of: Maruti Suzuki Hyundai Mahindra & Mahindra Toyota To assess their competitive strength.

Literature Review:K.S. Venugopal Rao (1996) [1] had conducted a study of marketing strategies for emerging markets. The world economic order is changing and changing very fast. Emerging markets are characterized by some unique features which can be applied to all situations like mass dispersed markets; penetration is abysmally low in key product categories. Emergence of information technology, high-level of conspicuous consumption, antiquated rules and procedures, shift from a protectionist regime to a free market economy, a young and vibrant services economy are characteristics of the emerging markets in India. Yaseer Maharoff (2000) [2] has illustrated some marketing strategies for firms in emerging markets. Despite the billions of untapped consumers in the worlds emerging markets, multinational firms often flounder in areas such as Eastern Europe, China, India and Latin America. Corporations are quickly realizing that the local consumers do not reciprocate with enthusiasm. While failure is often attributed to market difficulties, more often it can be traced back to the multinationals inability to recognize the fact that emerging markets are different. Marketing i.e., those that rely on product innovation, fine segmentation, high margins and global brands do not necessarily work in emerging economies.According to Ahmadi, R & Yang (2006) [3] marketing strategy encompasses the strategy involved in the management of a given product. A given firm may hold numerous products in the marketplace, spanning numerous and sometimes wholly unrelated industries. Accordingly, a plan is required in order to effectively manage such products. Evidently, a company needs to weigh up and ascertain how to utilize its finite resources. For example, a start-up car manufacturing firm would face little success should it attempt to rival Toyota, Ford, Nissan, Chevrolet, or any other large global car maker. Moreover, a product may be reaching the end of its life-cycle. Thus, the issue of divesting, or a ceasing of production, may be made. Each scenario requires a unique marketing strategy.Multinational companies in India: The beginnings of automotive industry in India can be traced during 1940s. After the nation became independent in the year 1947, the Indian Government and the private sector launched their efforts to establish an automotive component manufacturing industry to meet the needs of the automobile industry. The growth of this segment was however not so encouraging in the initial stage and through the 1950s and 1960s on account of nationalization combined with the license raj that Audi, BMW, Fiat, Ford Motors, General Motors, Honda, Hyundai, Toyota, Skoda, Mitsubishi Motors, Mercedes-Benz, Renault-Nissan entered into the Indian market. Bergen, M, Heide, J.B. (2000) [4].According to Cavusgil, S.T., & Sikora, E (2000) [5] the marketing strategies for small the period that followed 1970s, witnessed a sizeable growth contributed by tractors, scooters and commercial vehicles. Even till those days, cars were something of a sort of a major luxury. Eventually, the country saw the entry of Japanese manufacturers establishing Maruti Udyog.During the period that followed, several foreign-based companies started joint ventures with Indian companies. In 1953, the Indian government initiated manufacturing processes to help develop the automobile industry, which had emerged by the 1940s in a nascent form. Between 1970 to the economic liberalization of 1991, the automobile industry continues to grow at a slow pace due to the many government restrictions. A number of Indian manufacturers appeared from 1970 to 1980. Many manufacturers entered the Indian market ultimately leading to the establishment of new joint venture companies. A number of foreign firms initiated joint ventures with Indian companies. Cespedes, F.V., Corey, R.E., & Rangan, K (1996) [6].According to Kowske, Brenda, J., Herman, Anne E., & Wiley, Jack W. (2010) [7] Indian automobile sector is set to emerge as the global leader by 2020. In the year 2009, India rose to be the fourth largest exporter of automobiles following Japan, South Korea and Thailand. Experts state that in the Indian Automobile Industry at present, about 75 percent of Indias automobile industry is made up by small cars, with the figure ranking the nation on top of any other country on the globe. Over the next two or three years, the country is expecting the arrival of more than a dozen new brands making compact car models.According to Bucklin, L.P. (2008) [8], automotive giants of India including General Motors (GM), Volkswagen, Honda, and Hyundai, have declared significant expansion plans. On account of its huge market potential, a very low base of car ownership in the country estimated at about 25 per 1,000 people, and a rapidly surging economy, the nation is firmly set on its way to become an outsourcing platform for a number of global auto companies.According to Corey, R.E., & Rangan, K (2006) [9], Automobile industry in India is one of the fastest growing automobile industries and has made its position in the world market. The Indian automobile industry is currently growing at a remarkable pace of around 18 percent per annum. The technological changes and progress successfully led to the progress of automobile sector in India. The main reason behind this tremendous progress is the economic liberalization by the Indian government. The Indian Automobile Industry is growing in all respects and it is also serving as an important source of employment. Innovation and new product launches are a major factor driving growth in sales of cars. A wide distribution & service station network is a key to growth in India. The automobile sector is expected to witness strong growth and improve its share in global markets too.According to Clarke III, I. & Owens, M (2002) [10] to cover the high costs of product development and the setting up of production facilities to cater to local demands, many global automobile giant manufacturing strategies is to assemble vehicles at scale economies and offload them to their franchise dealers. To keep agency problems with their franchise dealers in check, manufacturers implement the market-division strategy and the associated penalty system MNCs manufacturing and distribution strategies partly contribute to the existence of regional differences in the pricing and availability of specific models and specifications of vehicles. These necessary conditions allow opportunistic parallel traders to engage in arbitrage.

Research Methodology:This comprehensive project shall be purely based on secondary data and through that, it will try to study the different strategies of four major players in the Indian Automobile Industry (Passenger vehicles), namely Maruti Suzuki, Hyundai, Mahindra & Mahindra and Toyota which have over 75 percent of the entire market share of Indian passenger vehicles market. The purpose of the project is to study their network of dealers and service centres, their effective promotional techniques and their customer relationship management which is the mainstay of their product line-up as well. The secondary research shall be based upon data collected from sources such as magazines, news articles, journals, blogs and others. They shall be effectively studied to draw conclusions about the objectives & to frame results and also to understand it as an industry as a whole.

References:1. K.S. Venugopal Rao (1996). Product and Brand Building Strategies A study of marketing strategies for emerging markets. IOSR journals.2. Yaseer Maharoff (2000). Product and Brand Building Strategies A Study of marketing strategies for emerging markets. IOSR journals.3. Ahmadi, R & Yang (2006). Parallel imports: Challenges from unauthorized distribution channels. Handbook of Research on Strategy and Foresight. Google Books.4. Bergen, M, Heide, J.B. (2000). Implications of switching or replacing products or suppliers. IJRM Volume-30 #4 (2013)5. Cavusgil, S.T. & Sikora, E. (2000). Factors that affect pricing strategies for international firms. papers.ssrn.com/SSRN_ID19228676. Cespedes, F.V., Corey, R.E., & Rangan, K. (1996). Going to Market: Distribution systems for Industrial Products. Harvard Business School Press.7. Kowske, Brenda, J., Herman, Anne E., & Wiley, Jack W. (2010). Exploring Leadership and Organizational Effectiveness. Kenexa Research Institute WorkTrends Report.8. Bucklin, L.P. (2008). Competition and Evolution in the Distributive trades. Prentice Hall Publication.9. Corey, R.E., & Rangan, K. (2006). Business Marketing Strategy: Cases, Concepts and Applications. McGraw Hill/Irwin Professional. Irwin Professional Publishing.10. Clarke III, I. & Owens, M. (2002). Research in Consumer Behaviour. Volume 12. Google Books.11.

Bibliography: Aaker, David and Joachimsthaler, E. (1999). The Lure of Global branding strategy. Harvard Business Review (November-December): 137-144. Agarwal, Madhu (1994). Review of a 40-year debate in international advertising strategy: Practitioner and Academician perspectives to the standardization/adaptation issue. International Marketing Review 12(1): 26-48. Boddewyn, Joan J., Soehl, R. and Picard, J. (1986). Standardization of International Marketing. Business Horizons 29(November-December): 69-75. Ettlie, John (2001). Three takes on NPD. Automotive Manufacturing and Production (June). Mercer Management Consulting/ Marco Ehmer (2002). Automobiltechnologie (2010) Global production summary by country. CSM Worldwide (2004). Nag Biswajit, Saikat Banerjee & Rittwik Chatterjee (2007). An Analysis of Automobile Industry in Select Asian Countries: Comparison of Production, Trade and Market Structure. IIFT, New Delhi. SIAM (2004). The Thailand & ASEAN India Free Trade Agreements Implications for the Indian Automotive Industry. February. Ramaswamy, V.S & Namakumari, S. (2009). Marketing Management: Global Perspective. Indian Context (4th edition), Macmillan Publishers India Ltd. Neelamegham, S (2012). Marketing India (4th edition), Vikash Publication, New Delhi.

Tentative Chapter Plan:

Title Abstract Introduction Literature Review Industry Overview Objectives Market Description SWOT Analysis SWOT Explanation Marketing Strategy(Maruti Suzuki, Hyundai, Mahindra & Mahindra, Toyota) Positioning Product Strategy Pricing Strategy Distribution Strategy Marketing Communication Strategy Media Selection Analysis of strategies Results Discussions Conclusion References Bibliography

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