Ford Motor Company in India: Developing the Ford Figo

Ford Motor Company (Ford), though one of the global leaders in the automotive industry, founditself lagging behind competitors in terms of sales volumes in the Asian region, especially in Indiasince its inception. Though it had entered the Indian auto market in 1995 and introduced mid-sizedcar models, its sales growth had not kept pace with the growth in the market.

Unlike the US market, the Indian market for passenger cars was dominated by small cars . Tocapture a significant share of this high-volume, high-growth segment of small cars, manycompanies – both multinational and Indian – were gearing up with new product launches. Fordrealized that a strategic decision had to be taken on the course of action that its wholly-ownedsubsidiary Ford India Pvt. Ltd. (Ford India) had to take for the domestic market. Ford did a lot ofmarketing research to understand the Indian customer and to find a potential target customer for itsnew products. Based on the research findings, Ford India started developing the Figo with the helpof the Australian Ford team.

On September 23, 2009, Ford India unveiled the Figo — its first small car. Through this car, Ford1

sought to gain a foothold in the emerging South Asian car market. The company said that the2

name Figo had been derived from the colloquial Italian for =cool‘. Figo was eventually launched inFebruary 2010.

Figo was priced aggressively to attract buyers, keeping in mind the competitors. Ford priced the3entry level model at Rs 349,900 for the petrol variant and Rs 447, 900 for the diesel variant. Ford

President and CEO Alan Mulally (Mulally) said, We are confident the Ford Figo will be aproduct that Indian consumers really want and value. 4

ABOUT FORD MOTOR COMPANY AND ITS INDIAN SUBSIDIARY

Based in Dearborn, Michigan, US, Ford was the fifth largest automobile company in the world as5

of 2010, with revenues of more than US$128.954 billion and about 164,000 employees. Founded6

in 1903, the century-old company had a global presence with operations in 200 countries. Ford‘sbrands included Ford , Lincoln , Mercury, and Volvo .

Although Ford obtained significant revenues and profits from its financial services subsidiaries,the company‘s core business remained the design and manufacture of automobiles for sale in theconsumer market. Its subsidiary, the Ford Motor Credit Company, extended loans to consumers

It is a four-d oor hatchback, which is a type of automobile design, consisting of a passenger cabin which1

includes an integrated cargo space, accessed from b ehind by a hatch or flip-up wind ow. Hatchbacks are alsooften called three-doors (two entry doors and the hatch) or five-doors (four entry doors and the hatch) cars.2 Nik hi l Gu lat i and San tan u Ch ou d hu ry, Ford Targets India Market with First Small Car,http://online.wsj.com/article/SB125369081200333397.html, September 23, 20093 Rs.= Indian rupees. US$1= Rs. 44.89 as on June 8, 2011.

Ford's Global CEO Reveals New Ford Figo Targeting India Market and Export Sales,4

http://media.ford.com/article_print.cfm?article_ id=31059, September 23, 2009Bertel Schmitt, Hyundai 4th Largest Auto maker, Overtakes Ford,5

http://www.thetruthaboutcars.com/2011/01/hyundai-4th-largest-automaker-overtakes-ford/, January 28,20116 Form-10K. Ford Motor Company,http://www.sec.go v/Archives/edgar/data/3 7996/000115752311001210/a6622311.htmhttp://www.sec.go v/Ar

chives/edgar/data/37996/000115752311001210/a6622311.htm, 2010

1

for purchasing and leasing cars, and business loans to dealers to stock and sell the company‘scars.7

While North America and Europe were the major markets for the company, it had a presence inSouth America, the Asia-Pacific, and Africa too. The company‘s revenues from Asia were onlyaround 5% of its worldwide revenues.

Ford entered the Indian auto market in 1995 through a joint venture with Mahindra & MahindraLimited. In November 1998, it received the necessary government approval and increased its8

stake in the venture to over 90% from 50%, thus forming Ford India Pvt. Ltd. (Ford India). As of2009, Ford India sold three sedans – the Fiesta, theIkon, and the Fusion ; and a sports utilityvehicle, the Endeavour . Ford India manufactured and distributed automobiles made at its modern9

integrated manufacturing facility, at Maraimalai Nagar plant, near Chennai, a South Indian MetroCity.

Ford India did not register any significant growth in the passenger vehicle market in India (Referto Exhibit I for Ford India‘s sales compared to the total passenger vehicle sales in India). In fact,from 36,466 units in FY 2007-08 , its sales dropped to 28,741 units in FY 2008-09; the income10

fell from Rs. 24.88 billion in FY 2007-08 to Rs. 21.20 billion in FY 2008-09, while the lossesincreased from Rs. 510 million to Rs. 1.18 billion. The accumulated losses of Ford India frominception to March 2009 were Rs. 9.38 billion. 1 1

As of 2009, Ford India sold around 2,000 cars a month while the market leader Maruti SuzukiIndia Ltd. ( Maruti Suzuki) sold over 71,000 cars. The main reason for Ford India‘s low sales12 1 3

volume in the country was its lack of presence in the small car segment in a market which wasextremely price-conscious (Refer to Exhibit II for details on classification of passenger vehiclesaccording to SIAM, the Society of Indian Automobile Manufacturers ).14

According to SIAM, passenger cars were classified on the basis of length into mini (</=3,400mm),compact (3,400-4,000mm), mid-size (4,001-4,500mm), executive (4,501-4,700mm), premium(4,701-5,000mm), and luxury (>5,000mm). Earlier, cars had been classified on the basis of priceinto segments A (< `3 lakh), B (`3-5 lakh), C (`5-10 lakh), and E (>`25 lakh). MUVs wereclassified on the basis of seating capacity — seven, nine, and 13-seaters. 1 5

THE SMALL CARS SEGMENT OF THE PASSENGER VEHICLE MARKET ININDIA

7 www.ford.com.

It is the automotive division of one of the leading business conglomerates in India, the Mahindra Group. It8

manufactures multipurpose vehicles, light commercial vehicles, tractors for agriculture, and three wheelers.

www.india.ford.com.9

10 Financial year from April 2007 to March 2008

N. Ramakrishnan, Ford India Slips Deeper into Red; Hyundai‘s Profits Dented, www.blonnet.co m,11

October 11, 200912 Based in Gurgaon, it is one of the leading automo bile companies in India and manufactures passenger

cars, minivans, and sports utility vehicles. It earned annual revenues o f US$ 3.5 b illion for the financialyear April 2008- March 2009. Source: www.marutisuzuki.com.

13 www.marutisuzuki.com.14 SIAM, New Delhi, is a representative body of the automotive industry in India.15 http://www.dhanbank.com/pd f/reports/Auto%20 -%20Nov%201.pdf

As of 2010, passenger vehicle sales contributed to 16% of the total automobile sales in India 1 6

Passenger vehicle sales had shown an increasing trend in the 2000s. India was the seventh largestproducer of passenger cars in the world as of December 2010 with sales of 1.95 million units. 1 7

Maruti Suzuki, Hyundai Motor India Ltd. (HMIL) , and Tata Motors Ltd. (Tata Motors) were1 8 1 9

the dominant players with a combined share of more than two-thirds of the total sales of passengercars (Refer to Exhibit III for details on various manufacturers of passenger vehicles in India).20

In India, small cars accounted for 78% of the total cars sold and the country was the largestmanufacturer of small cars in the world. Small cars with an engine capacity of 0.8 liters to 1.6—21

liters – accounted for the sales of around 900,000 cars in India (?) in 2009. With annual salesforecast to grow to 3.0 million units by 2016, global automakers started moving to introduce smallcars in the country. (Refer to Exhibit IV for market shares of various segments in annual sales of22

passenger cars in India; Refer to Exhibit V for details on features of small cars from leadingproducers).

Being the largest segment, the small-car segment witnessed the highest number of new carlaunches i.e. 11 new launches between the three years 2007 and 2010 (of which five were launchedin 2010) with the major ones being the Ritz, the A-Star, and the Zen Estilo (from Maruti Suzuki),the i10 and the i20 (from Hyundai), the Indica Vista (from Tata Motors), the Polo (from VW), theEtios (from Toyota), the Ford Figo, and the Chevrolet Beat.

As of 2010, Maruti Suzuki was the market leader in the small cars segment, followed by HMILand Tata Motors . Maruti Suzuki had been selling small cars since the 1980s; HMIL started2 3

selling them in the mid-1990s and Tata Motors in the early 2000s.

Understanding the potential of small cars in India, GM India entered this segment in 2007. As of2009, it sold two models of small cars – the Spark and the Aveo U-VA . Other players in the smallcar segment at that time included Fiat India Pvt. Ltd , Skoda Auto India Private Ltd , and Honda2 4 2 5

http://www.automobileindustryindia.com/resources/overview-of-indian-automobile-industry.html16

17 Indian Passenger Vehicle Industry: Growth Momentum to Continue, www.icra.in, March, 2011.18 It is the Indian subsidiary of Hyundai Motor Company, Seoul, South Korea. It manufact ures passengercars for the domestic market in India and also exports cars to other countries from India. Source:www.hyundai.co.in.

Headquartered at Mumbai, Tata Motors is one of the leading auto makers of India. It man ufactures19

passenger cars, multipurpose vehicles, utility vehicles, and trucks. It also provides financial services towardpurchase of its vehicles. For the financial year ending March 2009, it had Rs 741 billion in revenues. Source:www.tatamotors.co m.

www.team-bhp.com.20

21 India is the Seco nd Largest Small Car Maker, www.siliconindia.com, September 25, 2009.

Nik h il Gul ati and San ta nu Ch o ud h ury, Ford Targets India Market with First Small Car,22

http://online.wsj.com/article/SB125369081200333397.html, September 23, 2009September 2009 Indian Car Sales Figures & Analysis, www.team -bhp.com. October 7 , 2009.23

24 It is an auto mobile company formed by a 50:50 joint venture between Italy -based Fiat Group Auto mobilesS. p. A., (Fiat) and India-based Tata Motors. Its manufacturing plant at Ranjan gaon has the capacity to

produce 100,000 cars annually. Source: www.fiat-india.com (Accessed on October 26, 2009).

Based at Aurangabad, it is a wholly-owned subsidiary of Skoda Auto of the Czech Republic, which25

manufactures passenger cars fo r the Indian market. Source: www.skoda-auto.co.in.

Siel Cars India Pvt. Ltd. Toyota Motor Corp., Volkswagen AG, and Nissan Motor Co. planned to26

step into the arena in the near future. 2 7

Figo (New Product) Development Process @ Ford

It was against such a competitive and complex backdrop that Ford decided to prepare Ford Indiafor the challenges ahead to put the company ahead of the competition.

As part of a strategic plan for the future called Ford 2000 , Ford India started implementing a28

customer orientation into every aspect of Ford‘s business operations so that every product andservice delivered by the company would be designed around the specific needs and wants of itscustomers.

As customers‘ tastes and needs were continuously changing, automobile companies including Fordwere forced to invest huge sums of money to ensure their products remained relevant andattractive to their target market while updating their products and developing new ones to satisfytheir customers‘ needs.

According to experts, product innovation would give companies an edge over their competitorsand help them gain market share. Car manufacturers spent billions of dollars every yearresearching and developing new products and making improvements to existing ones. In thisindustry, experts considered innovation a minimum requirement for survival. 2 9

Understanding Customers

As consumers‘ wants and needs were constantly evolving, Ford wanted to keep track of them toremain competitive. It monitored market trends, shifting consumer interests, and social andpolitical developments to identify issues that would affect consumers, the industry, and thecompany. Ford had a network of internal and external experts – from around the world – to get adiverse, comprehensive perspective on consumer trends and how they would affect consumers'future choices on vehicles and mobility. Ford used these data and analysis throughout itsmarketing, product development, and research and design organizations to guide future productand technology developments. 3 0

Ford ensured its marketing experts used an intensive research and analysis process to understandits potential customers and their needs. It had a =brand DNA‘ and hypothetical target customer foreach of its new brands. Each individual product was also assigned its own specific DNA and target

Headquartered at Mumbai, it is a joint venture between Japan-based Honda Motor Company, and Siel26

Limited, a group company of the Siddarth Shriram Group, Gurgaon. This joint venture was formed tomanufacture and market Honda passenger cars in India. Source: www.hondacarindia.com.27 Nik h il Gul ati and San ta nu Ch o ud h ury, Ford Targets India Market with First Small Car,http://online.wsj.com/article/SB125369081200333397.html, September 23, 200928 Previously, in 1995, Ford had embarked on an ambitious restructuring plan called Ford 2000, whichincluded merging its North American, European, and intern atio nal automotive operations into a single global

organization. Ford 2000 called for dramatic cost reductions to be obtained by reengineering and globalizingcorporate o rganizations and processes. Product development activities were consolidated into five Vehicle

Centers (VCs), each responsible for the development of vehicles in a particular consumer market segment(one VC was in Euro pe). By making the processes and products globally common, Ford intended to

eliminate organizational and process redundancies and realize huge economies of scale in manufacturing andpurchasing.29 The Ford Focus – a Car for the Millennium, www.business2000.ie/pdf/pdf_3/ford_3rd_ed.pdf

Understanding Changing Customer Needs, http://corporate.ford.com/microsites/sustainability -report-30

2009-10/economy-recovery-p roducts-needs

customer. Apart from containing simple demographic information such as age, gender, andincome, Ford‘s target customer profiles had other details such as what they liked to do, what musicthey listened to, and where they shopped. This complete approach helped the product developmentteam focus on designing a vehicle that would meet customers' needs and desires. 31

In addition to product- and brand-specific market research, Ford had a team specifically dedicatedto tracking shifts in the social, technological, economic, environmental, and political arenas. ThisGlobal Consumer Trends and Futuring team identified trends that would impact the future ofconsumers' values, attitudes, and beliefs. 32

The team found that the trends of consumers‘ needs included :33

Increasing demand for more fuel-efficient vehiclesAn increasing focus on "careful consumption," in which consumers had to balance theirvalues, passions, and preferences with practical purchases as the global economicrecession continuedExpanding interest in vehicles that helped consumers meet their increasing desire forinformation and connectivity and make the most of their time

Ford conducted market research online and in person, refining and creating new data-gatheringprocesses that influenced product development and marketing campaigns. Christine Stasiw -Lazarchuk, Ford director of Global Market Research, said Ford executives were truly interested incustomer feedback that would help in New Product Development decisions. Gordon Platto(Platto), Ford chief designer,said, We‘re heavily influenced by market research. We go tocustomer immersion events and spend time with customers in their homes to understand how theyuse their vehicles. It enables us to better meet the customer needs. You can see the influence in ournew vehicles. 34

Platto added, As vehicle segments get smaller and more diverse, Ford uses market research tounderstand how far to push design concepts and unique features. This is done by extractinginformation from consumer questionnaires and by inviting customers to have open discussionswith researchers in focus groups. You go to market research with an open mind to understand whatthe customers are looking for. 35

In order to refine a future niche vehicle, Market Research took a few exterior and interior designsto a customer focus group to ask specific questions about participants' likes and dislikes. In thenext stage of the product‘s development, the design team analyzed and interpreted the consumerfeedback. By taking a disciplined approach to gathering consumer feedback, Ford gained a36

better understanding of consumer expectations. 3 7

Understanding Changing Customer Needs, http://corporate.ford.co m/microsites/sustainability-report-31

2009-10/economy-recovery-p roducts-needsUnderstanding Changing Custo mer Needs, http://corporate.ford.com/microsites/sustainability -report-32

2009-10/economy-recovery-p roducts-needsUnderstanding Changing Custo mer Needs, http://corporate.ford .com/microsites/sustainability -report-33

2009-10/economy-recovery-p roducts-needsMarket Research Drives Product Development at Ford,34

http://www.reliableplant.com/Read/3802/market-research-d rives-product-development-at-fordMarket Research Drives Product Development at Ford,35

http://www.reliableplant.com/Read/3802/market-research-d rives-product-development-at-fordMarket Research Drives Product Development at Ford,36

http://www.reliableplant.com/Read/3802/market-research-d rives-product-development-at-fordMarket Research Drives Product Development at Ford,37

http://www.reliableplant.com/Read/3802/market-research-d rives-product-development-at-ford

Generally, the process of new product development involved a series of stages: the generation ofnew ideas, screening of ideas to identify the one with the most potential success, development ofthe idea into a concept that could be tested on a small group of potential customers in order todesign a marketing strategy around it, development of the product, test marketing, and finallylaunching it into the market. Ford India followed a unique product development process while3 8

developing Ford Figo (Refer to Exhibit VI and Exhibit VII for Road Map and Market Plan forFord Figo)

The Idea behind Ford Figo

The idea for the Ford Figo came about from Ford India‘s strategic plan for the future and themarket research which was carried out as part of that plan.

This research highlighted a number of changes occurring in the marketplace. For example, it foundthat:

Globally in the next five years, small cars would make up about 60% of all cars sold. Tobe successful in its business, Ford wanted to become one of the major players in thatsegmentThe potential customer would be a young individual, just married – probably within thelast 12 months – and more ambitious. He lived at home with his parents, culturallyconsidered quite acceptable in India. He had an income of 300,000 to 400,000 rupees($6,750 to $9,000) a year.The car buyer had started becoming increasingly upwardly mobile, aspirational, probablyreasonably well educated – at university level, with an MBA or beyond – and he waslooking to move from a motorbike to a four-wheeler. He took quality and value for3 9

money for granted, and expected more security, less stress, and more personality in his car.The Ford brand appealed more to the older age group and the company was in danger oflosing younger customers.

Ford used these changes in the marketplace to its advantage. It set about researching anddeveloping a car that would harness the true potential of the changing market. It wished tochange the attitude of consumers toward the Ford brand and also to capture a youngergeneration of customers. It was against this background that the idea for the Ford Figo wasborn.

The research had shown that there was a growing market of young buyers, particularly amongwomen. After listening to research, Ford decided to develop a small car specifically for India andsimilar markets. The company believed that the small car segment was where all the action wasrequired and, hence, would account for the bulk of its new launches – one every 12 to 18 months –over the next few years. Ford decided to position the Figo in the high volume small-car segment.4 0

Figo would meet the changing customer needs with its attributes – pricing, fun to drive, cost ofownership, interior space, technology, and safety.

The Figo offered a fantastic platform for Ford to enter the vehicle market affordably withoutsacrificing style and comfort. According to Ford, while affordability and practicality were of great

38 The Ford Focus – a Car for the Millennium, www.business2000.ie/pdf/pdf_3/ford_3rd_ed.pdfJulian Lorkin, Marketing in India: How the Rubber Hit the Road for Ford's Figo,39

http://knowledge.asb.unsw.edu.au/printer_friendly.cfm?articleid=1278, November 29, 2010N. Ramakrishnan, Small Car Segment is Where All the Action is: Ford India Chief,40

http://www.thehindubusinessline.in/bline/2010/02/03/stories/2010020352110200.htm, February 3, 2 010

importance in this segment, buyers were not willing to sacrifice style and performance. The Figowas expected to be a perfect combination of style and affordability. 41

The design team focused on listening to customers prior to the initial design process, thus ensuringthat the final design of the Figo was representative of the desires of the market. Ford designers setout to create an attractive exterior coupled with a stylized and exquisitely crafted interior that gavegenerous proportions and exceptional value for money. Creating appeal and communicatingvalue to the customer starts with good design, said Emily Lai, color and materials DesignManager for Figo. You want a car that reflects and makes a statement about you. 4 2

Michael Boneham, President and Managing Director, Ford India Pvt Ltd, said, It is a clear shift instrategy and thinking. =Finally we listened to the customer.‘ The company had maintained that themid-size and entry-level sedans, represented by its first launch, the Ikon, and the subsequentFiesta, were the segments to be present in the country, what with a growing affluent middle class.

Ford argued that the size of the vehicle did not matter as long as the price was right.4 3

Turning the Idea into Reality

The Ford Figo was designed to capture the younger generation of customers and to cater to theneeds of a wider range of buyers. As such. it was specifically targeted at the mid-20s age groupand the emerging needs of this group. Extensive Indian market research was undertaken to identifythe core needs of this target market.

Ford India‘s marketing team gathered 15 young men from the capital city, New Delhi, and fromLucknow, a smaller, second-tier city. Each of the men represented the very core of the customertarget of the new car, based on Ford‘s extensive research into the Indian small-car market. Fordbelieved that newly married young men, in their mid-20s, represented the prime target for Figo(Refer to Box I for details about Target Customer for Figo).

Box ITarget Customer

SandeepYoung, 26-27 years old, Ambitious, with aspirations of moving up both socially andprofessionally; Newly married with no children, living with parentsLikes international, established, trusted brands; Stylish and cool in his circleTechnologically savvy – part of online social networks / blogsFirst time – value seeking and status driven – buyer looking for

o Attractive Designo Interior Spaciousnesso Substantial Packageo Cost of Ownership

Adapted from Ford India Internal Documents

To help designers, engineers, and marketers understand this target, the potential customer wasgiven a typical name. For the new Ford Figo, that target customer was named Sandeep . Fordwanted to understand what made them tick, what their lives were about, and what they wanted in a

http://www.yworld.co.za/social/ford-figo-goes-entry-level/41

42 http://www.yworld.co.za/social/ford-figo-goes-entry-level/N. Ramakrishnan, Small Car Segment is Where All the Action is: Ford Ind ia Chief,43

http://www.thehindubusinessline.in/bline/2010/02/03/stories/2010020352110200.htm, February 3, 2 010

car. Rahul Gautam, Ford India brand manager, described the potential target customer, Sandeep isthe quintessential middle class youth. He is coming up in life and he is ambitious. He has justgotten married and he is starting to earn more, getting recognition in his job, and being promoted.He wants to give attention to his family, he respects his parents, and he wants to spend time withhis wife, plus he aspires to do well in his job. Interestingly, he has kept his bachelor mindset. So allthis leads to some stress and tension because he feels pulled in different directions and short oftime.

He added, He‘s looking for a product that offers his own, exclusive space. A place he can use togroove to his music while going to and from work, a place he can use to take his wife out safely atnight, pick up relatives or friends or take the family on a weekend trip. He worries about twowheelers and accidents so the right car relieves tension for him.

Ford‘s learning from the research was rich in detail, and it drove the product, marketing, andcommunication decisions. This research found that the target customers:

were looking for =a break from the routine‘liked to buy the latest vehicle but were cautious and tended not to spend beyond theirmeanswere looking for a distinctive design in a car and new styles which would help them,express their individuality.

Designing a Car Matching the Needs of Customers

Mulally stated the new Ford Figo had been designed and engineered to compete in the heart of thedomestic India car market. 4 4

The new Ford Figo was designed to appeal to those who were more open to change, moreindependent minded, and more willing to embrace new things. It was designed to changecustomers‘ expectations of what a car in this segment should offer in terms of design, package, anddriving dynamics. 4 5

Sharing key elements of Ford's kinetic design language with vehicles like the globally renownedFord Focus, Ford Mondeo, and the Ford Fiesta, Ford Figo featured a fresh, contemporary shapethat offered a distinctive alternative to traditional brands in this segment. The design languageconveyed a dynamic spirit of energy in motion.

The Figo was actually designed in Australia. Development work was done by Ford‘s Asia Pacific4 6

& Africa product development team in Broadmeadows, Australia, near the northern outskirts ofMelbourne. The team was led by Scott Strong. Broadmeadows was the headquarters of FordAustralia while Ford's Asia Pacific & Africa product development's head office was located inBangkok, Thailand. The Figo was based on the Mk5 Europe's Ford Fiesta .4 7 4 8 4 9

44 Nik h il Gul ati and San ta nu Ch o ud h ury, Ford Targets India Market with First Small Car,http://online.wsj.com/article/SB125369081200333397.html, September 23, 200945 The Ford Focus – a Car for the Millennium, www.business2000.ie/pdf/pd f_3/ford_3rd_ed.pdf

Ford Figo - Built in India, Developed in Australia. And 2012 Ford Ranger,46

http://www.theautoindustrieblog.com/2009/09/ford-figo -built-in-india-developed-in.html, September 30,200947 Ford Figo - Built in India, Developed in Australia. And 2012 Ford Ranger,http://www.theautoindustrieblog.com/2009/09/ford-figo -built-in-india-developed-in.html, September 30,

2009

When the design team for the new Figo met with the marketing team from India, the directiongiven to them was: ''We Want More''. After deciding on packaging objectives that needed to bemet, such as reducing the overall length of the car to suit the Indian market, the designers weregiven the go-ahead to apply a near-clean sheet approach to both the interior and exterior. 5 0

The Figo was tiny: 3.8 meters by 1.7 meters. According to experts, this size was just right to easeits passage through the tide of bullock carts, angry taxis, handcarts, motorbikes, and cows that clog(India's) city roads. Moreover, Ford used easy-to-replace components, like bumpers, to handle theunavoidable dents and dings. 51

Designers ensured that despite its youthful spirit, Figo was mature and smart. Although it wassmall in size, it was designed to have solidness and safety. With the backing of the Ford52

management and the Indian marketing team, the design team went to work adding morepersonality to the Figo and strategically taking elements of the global Ford kinetic designphilosophy and adding them to the new interior and exterior designs.

Quality, substance, and generous proportions were given importance in the design of the new FordFigo, which featured a solid stance, an invitingly large interior, and a vibrant, youthful character.Its package was right-sized for the market, which was predominated by congested urban drivingconditions.From its modern headlamps, grille shapes, and the sculpted bonnet of its distinctive face to thesubtle integrated spoiler and chamfered window shape at the rear, the Ford Figo was filled withkinetic design touches. These also included sculpted shapes to the body side – chiseled frontfenders, a "comet tail" undercut in the doors, and additional light-catching sculpting in the lowerbodyside – which combined to communicate the solidity, substance, and protective safety of itsdesign. 53

The bold graphic of Ford Figo's large side window shape was another key kinetic design featurehinting at the comfort and spaciousness. The side window graphic was executed with a blacked-out B-pillar, an elegant design touch that unified the side windows into one shape visually. With itswheels positioned at the four corners of the vehicle with minimal overhang, Ford Figo's bold wheelarches self-assuredly signaled its agility and solidity.

Beyond design, Figo had lifestyle features like CD with MP3 compatibility and =Aux-in‘ port foriPod connectivity. The new Ford thus instantly connected with the energy and vitality of the buyer.

Developing the Prototype

48 Ford Figo - Built in India, Developed in Australia. And 2012 Ford Ranger,http://www.theautoindustrieblog.com/2009/09/ford-figo -built-in-india-developed-in.html, September 30,

2009This should not be confused with another Ford model sold in India, also under the name Fiesta. The Indian49

Fiesta was also rumored to have received significant engineering inp ut fro m Ford Australia.New Ford Figo Brings Kinetic Design for Economy & Small Cars in India,50

http://www.zimbio.com/Luis+Figo/articles/T1SgcCPDEra/New+Ford+Figo+Brings+Kinetic+Design+Econom, March 11 , 201051 http://www.theglobeandmail.com/globe-drive/driving-it-home/ford-figo -takes-on-india/article1494927/print/52 http://www.yworld.co.za/social/ford-figo-goes-entry-level/

Ford's Global CEO Reveals New Ford Figo Targeting India Market and Export Sales,53

www.india.ford .co m, September 23, 2009

The prototype development process started with a thorough understanding of the needs andrequirements of the target market. Ford used advanced technology and paid attention to the mostminute detail to ensure the car reflected the needs of its target market. A highly advanced three-dimensional imaging computer system was used to ensure that everything in the car was withinreach.

Variations in torso, limb size, and comfort values were calculated for all human joints. As a resultof this, items like seats, seat belts, mirrors and so on, were made adjustable to suit different cardrivers. In addition, Ford researched every other aspect of the car from its physical shape, color,the texture of the interior surfaces, the sound of the car, and even the interior smells.

The car was made with a 1.19-litre petrol engine and a 1.4-litre diesel engine, with70 bhp 68 bhpfour variants – LXI, EXI, ZXI, and Titanium (Refer to Exhibit VIII for Specifications of FordFigo). Both these engines were manufactured at the company's new 2.5-lakh capacity engine plantnear Chennai. 5 4

Ford used the Three-Wet High-Solids paint technology, which gave an exceptional high-glossfinish with excellent depth of color, while providing durability and increased resistance toscratches and stone chips.

Throughout the assembly process, error-proofing technology helped measure precision. The plantwas equipped with precise part checking fixtures that allowed engineers and manufacturingtechnicians to verify build precision very accurately.

Created with a best of the best approach, it had been benchmarked against other competitivefacilities globally, as well as the existing manufacturers in the Indian market, for quality andproduction efficiency. We're confident that the new Ford Figo will be extremely attractive to55

Indian car buyers, said Boneham. 5 6

Product Development

The Figo was developed by engineers of the Asia-Pacific in consultation with Indian Engineers. 5 7

The Ford Figo was designed with a unique personality to appeal to target buyer groups.

As India was a price sensitive market, to keep the cost price under control, Ford decided to sourceup to 80-85% of the parts for Figo from suppliers in India. Boneham said, This is about where58

you need to be in this segment to be really competitive from the material cost point of view whichthen gives you the opportunity to price aggressively. One of the other things that we are going tofocus and which is very critical in this segment is cost of ownership. Total lifecycle cost – thepurchase price, which obviously people are very sensitive about, fuel economy, scheduledmaintenance, parts pricing, overall competitiveness. We are going to be really aggressive in this.We have done a lot of work benchmarking against the key competitors on component pricing, on

http://www.thehindubusinessline.com/todays-paper/tp-corporate/article987911.ece?ref=archive54

55 Ford Introduces New Figo Hatchback for India‘s Burgeoning B-segment,http://www.mazdas247.com/forum/showthread.php?12375522356 Ford -introduces-new-Figo-hatchback-for-India-s-burgeoning-B-segment,http://www.mazdas247.com/forum/showthread.php?12375522357 Murali Gopalan, Ford to Use Figo Inputs fo r Global Car Plans,http://www.thehindubusinessline.com/todays-paper/tp-corporate/article988070.ece?ref=archive, April 1,

2010Nik h il Gul ati and San ta nu Ch o ud h ury, Ford Targets India Market with First Small Car,58

http://online.wsj.com/article/SB125369081200333397.html, September 23, 2009

scheduled maintenance, fuel economy, and people are going to be pleased with what they see fromthat perspective. That is going to be a key part of the story as we move forward. 5 9

According to the company, Figo was designed to give a fuel economy of around 15.6 km a literand 20 km a liter for the petrol and diesel versions, respectively. 60

At Ford, purchasing was organizationally independent of product development and had alwaysbeen a powerful force within the company. Because of the sheer volume of materials and servicesFord purchased, a very slim reduction in purchasing cost could result in very significant savings.Consequently, purchasing was involved closely in nearly every product decision.

Test Marketing

Before the car was launched, it was necessary to put it through a thorough test market program.Boneham said, We are running at about 160 vehicles off the line for various trials. We are doing alot of kilometers all over India at the moment. We have gone through huge testing regimes all overthe world. The objective of this was to test the car rigorously prior to launch and provide6 1

feedback to the company. A 3.2 kilometer testing facility was designed to provide engineers withvehicle feedback under real world conditions to evaluate vehicles for squeaks and rattles, brakingperformance, steering maneuvers, and wheel alignment. Straight roads, twisty roads, pavementwith a variety of smooth and rough surfaces and even simulated village streets were built into thecourse.

Once the vehicles were in regular production, they were randomly pulled from the assembly lineand tested to determine if all functions were operating correctly. Designed with safety in mind, thenew test facility allowed engineers to test multiple vehicles at one time and helped reduce thenumber of tests on public highways.

The company engaged consumers through moderated clinics and through one-on-one interviewsbefore the vehicles reached market. It also used the Internet for consumer comments on auto sites,chat rooms, and blogs. 6 2

Launching of Figo

On September 23, 2009 Alan Mulally, Ford‘s president and CEO, revealed two Figo models, onein bright Squeeze green and the other silver, in Delhi. In the reveal sequence, the Ford Figoemerged in a lightning surround of colors, lights, Bollywood-inspired music, smoke, and cameraflashes.

The launch of the Ford Figo was the biggest and most important ever for the Ford Company. Notsurprising then that industry experts, dealers, employees, customers, and the competition wereeagerly awaiting its launch. The car was launched in February/March 2010. Ford executives Joe

N. Ramakrishnan, Small Car Segment is Where All the Action is: Ford India Chief,59

http://www.thehindubusinessline.in/bline/2010/02/03/stories/2010020352110200.htm, February 3, 2 010Ford Gets Aggressively with Figo Pricing, http://www.thehindubusinessline.com/todays -paper/tp-60

corporate/article987911.ece?ref=archive, March 9 , 2010N. Ramakrishnan, Small Car Segment is Where All the Action is: Ford India Chief,61

http://www.thehindubusinessline.in/bline/2010/02/03/stories/2010020352110200.htm, February 3, 2010Market research drives product development at Ford, http://www.reliableplant.com/Read/3802/market-62

research-drives-product-development-at-ford

Hinrichs, president of Ford Asia Pacific and Africa (APA) , and Boneham explained the features63

of the newly launched Figo car in New Delhi.

Ford launched the Figo in the price range of Rs 3,49,000 to Rs 4, 42,000 for the petrol version6 4

and Rs 4, 47,000 to Rs 5, 29, 000 for the diesel version. (Refer to Box III for the price details of65

competitors of Ford)Box III

Figo’s Competition in Terms of PriceChevrolet Beat – Rs.3,41,000 for PS variant and Rs.3,62,000 for LS variant, 1.2-litre petrol engine.

Chevrolet Spark – Rs.3,46,000 for 1-litre petrol engine.Hyundai Xantro Xing – Rs.3,38,000 to Rs.3 ,58,000 for 1.1-litre petrol engine variants.

Hyundai I10 – Rs.3,41,000 and Rs.3,44,000 for IRDE variant.Maruti Suzuki A Star – Rs.3,51,000 for LXI variant, 1-litre petrol engine.

Maruti Suzuki Estilo – Rs.3,48,000 fo r LXI variant, 1-litre petrol engine.Tata Indica Vista (Quadrajet) – Rs.4,35,000 (Aqua) and Rs.4,58,000 (Terra), 1.2-litre diesel.

Tata Indica Vista (Safire) – Rs.3,52,0 00 (Terra), 1.2-litre petrol.Source: Ford Gets Ag gressively with Figo Pricing, http://www.thehindubusinessline.com/todays-paper/tp-

corporate/article987911.ece?ref=archive, March 9 , 2010

Boneham admitted that the Figo was targeted at the upwardly mobile mature youth market. Ourmarket research indicated and largely confirmed to us the complexity of the Indian market. Inother parts of the world people look at the features of the cars first and then the price, it is the otherway around in India. Aspirational youth still live in a joint family system and seek advice fromtheir elders on major decisions, he said. 66

Boneham explained how the change in Ford‘s approach would be attractive to a first time carbuyer, “ We focused on parts and keeping their cost down. The way we did that was with hugelocalization – 85% of the Figo is localized. The components are built in India. This was asignificant strategy to get the cost down first, so we could price-position the car right. 6 7

Experts said that Figo featured a premium experience at a budget price. However, they questionedwhether Ford India would be able to find a gap in the small car segment to position and price theFigo effectively. Boneham said, We have kept our promise and priced all four Ford Figo modelsvery competitively to emphasize Ford‘s commitment to this huge segment of the growing Indianautomobile market. We are committed to setting new benchmarks with Figo in this segment. Figooffers more features, interior space, technology, and durability than other vehicles at this price inthe segment. 68

Mulally claimed Figo would be a game-changer for Ford India. He said, We hope to makereasonable returns on investment in the new car project. The Figo should help us make

Ford‘s APA region enco mpasses markets in three continents, including Australia, China, India, Thailand63

and South Africa. Industry sales in the region will increase from 16 million units in 2009, to an estimated 35millio n units by 2018. The region is expected to account for nearly 70 percent of Ford‘s world wide g ro wth

in the next decade.Rs.= Indian rupees. US$1= Rs. 44.89 as on June 8, 201164

65 Ford Gets Aggressively with Figo Pricing, http://www.thehindubusinessline.com/todays -paper/tp-corporate/article987911.ece?ref=archive, March 9 , 201066 Pawan Luthra, How to Market in India: Ford India MD, http://www.indianlink.com.au/

Julian Lorkin, Marketing in India: How the Rubber Hit the Road for Ford's Figo,67

http://knowledge.asb.unsw.edu.au/printer_friendly.cfm?articleid=1278, November 29, 2010Ford Rolls Out Figo at Rs 3.49 lakh, http://www.newsgaze.com/auto/ford -rolls-figo-rs-349-lakh/, March68

13, 2010

considerable gains in India, where we have had not much presence in the market till now. We donot operate on the basis of market share but on customer demand and products. 6 9

In the highly price-conscious and competitive Indian small car market faced with the impendinglaunch of new models of small cars from various global automakers, what should Ford India do tomarket its Figo?

69 Bhattacharya Sindhu, Figo will b e a game changer for Ford in India, http://findarticles.com/p/news-articles/dna-daily-news-analysis-mumbai/mi_811 1/is_20090924/figo-game-changer-ford-

india/ai_n50946827/, September 24, 2009

Exhibit IComparison of Ford India’s Sales to Total Passenger Vehicle Sales in India

Adapted from www.automonitor.co.inExhibit II

Classification of Passenger Vehicles as per SIAMSegment Length Example

A1 - Mini Up to 3400 mm M800, Nano

A2 - Compact 3401 to 4000 mm Alto, Wagon R, Zen, i10, A-Star, Swift, i20, Palio, Indica

A3 - Midsize 4001 to 4500 mm City, Sx4, Dzire, Logan, Accent, Fiesta, VernaA4 - Executive 4501 to 4700 mm Corolla, Civic, Optra, Octavia

A5 – Premium 4701 to 5000 mm Camry, E class, Accord, Sonata, Laura, SuperbA6 - Luxury Above 5000 mm S class, 5 series

B1 - Van Omni, Versa, Magic

B2 – MUV - Multi Utility Vehicle / Innova, Tavera, SumoMPV - Multi Purpose VehicleSUV –Sport Utility Vehicle CRV, Vitara

Adapted from www.siamindia.com

14

Exhibit IIIAn Overview of Manufacturers of Passenger Vehicles in India - As of September 2009

Year of Vehicles Models Small Car Models and their Prices (in Rs.)Company Establishment ManufacturedNameHindustan 1942 Passenger cars, Ambassador, Pajero, Lancer,Motors Ltd, Sports Utility Lancer Cedia, Outlander, Montero. NoneNew Delhi. Vehicles(Collaboration (SUVs)with MitsubishiMotors, Japan)Maruti Suzuki 1981 Passenger cars, Maruti 800, Maruti Omni, Alto, Maruti 800 Rs 185,000 - Rs 222,000India Ltd, New SUVs. Gypsy, Versa, Wagon-R, Esteem, Alto Rs 225,000 - Rs 290,000Delhi. Zen Estilo, Baleno, Vitara, Swift, Wagon-R Rs 330,000 - Rs 426,000

A-Star, SX4, Ritz. Zen Estilo Rs 312,000 - Rs 398,000A-Star Rs 345,000 - Rs 410,000Swift Rs 400,000 - Rs 520,000Ritz Rs 390,000 - Rs 517,000

DaimlerChrysler 1994 Passenger cars Benz C-Class, Benz E-Class, BenzIndia Private S-Class, Benz SL-Class NoneLtd, PuneFiat India 1997 Passenger cars Sienna, Palio Stile, Palio Stile Palio Stile Rs 336,000 - Rs 444,000Private Ltd, Multijet. Petra, Uno, Linea, Fiat 500 Rs 1,482,500Pune. Grande Punto, Fiat 500

Palio Stile Multijet Rs 431,000 - Rs 470,000

Grande Punto Rs 400,000 - Rs 612,000

General Motors 1994 Passenger cars Optra Magnum, Tavera, Vectra, Spark Rs 320,000 - Rs 423,000India Private and Multi Spark, Aveo, Aveo U-VA,Ltd, Vadodara. Purpose Captiva.

Aveo U-V A Rs 400,000 - Rs 497,000Vehicles(MPVs)

Year of Vehicles Models Small Car Models and their Prices (in Rs.)Company Establishment ManufacturedNameHonda Siel Cars 1995 Passenger cars Honda Accord, Honda CR-V,India Pvt. Ltd, and MPVs Honda City, Civic, Honda Jazz. Honda Jazz Rs 698,000Greater Noida.Hyundai Motors 1996 Passenger cars Santro Xing, Getz, Accent, Verna, Santro Xing Rs 264,000 - Rs 373,000India Ltd, and SUVs Sonata, Terracan, Tucson, i10, i20. Getz Rs 360,000 - Rs 500,000Chennai. i10 Rs 332,000 - Rs 540,000

i20 Rs 480,500 - Rs 773,000Toyota 1997 Passenger cars, Innova, Corolla, Camry, Prado,Kirloskar SUVs, and Land Cruiser, Fortuner NoneMotors Private MPVsLtd, Bangalore.Skoda Auto 2001 Passenger cars Superb, Laura , Octavia, FabiaIndia Private Fabia Rs 490,093Ltd,Aurangabad.Audi AG, 2004 Passenger cars Audi A4, Audi A6, Audi A8, Audi

and SUVs TT, Audi Q5 and Audi Q7, Audi NoneR8.

BMW India 2007 Passenger cars BMW 3 Series, BMW 5 Series,Private Ltd, and MPVs BMW 6 Series, BMW 7 Series NoneGurgaon.Nissan Motor 2008 Passenger cars X-Trail, Maxima.Company Ltd. and MPVs NonePorsche AG 2003 Passenger cars Boxster, Cayman, 911, Panamera, None

and MPVs Cayenne.Tata Motors 1945 Passenger cars, Nano, Indica, Indica Vista, Indica Nano Rs 115,000 - Rs 172,000Limited, MPVs, Trucks. Xeta, Indigo, Sumo Grande, Safari

Year of Vehicles Models Small Car Models and their Prices (in Rs.)Company Establishment ManufacturedNameMumbai. Indica V2 Rs 338,500

Indica Xeta (petrol) Rs 314,250

Indica Vista Rs 447,400

Compiled from various sources

Ford India in 2009 (A): Need for a Strategy Change?

Exhibit IVMarket Share of Various Segments in the Annual Sales of Passenger Cars in India

Adapted from “Indian Passenger Vehicle Industry: Long Term Demand Outlook RemainsRobust,” www.icra.in, January 2010.

18

Ford India in 2009 (A): Need for a Strategy Change?

Exhibit VFeatures of Various Small Cars in India

Maruti Alto Hyundai i10 Maruti Swift Tata Indica V2 Hyundai i20 GM Spark

Model Petrol Petrol Petrol/Diesel Petrol/Diesel Petrol/Diesel Petrol

46 bhp 66 bhp 87 bhp (petrol) 64-70 bhp (petrol) 79-100 bhp (petrol) 63 bhpEngine power(in bhp ) 75 bhp (diesel) 53-69 bhp (diesel) 89 bhp (diesel)70

Seating 5 5 5 5 5 5capacityVariants 3 4 5 5 8 6

3495 mm 3565 mm 3760 mm 3675 mm 3940 mm 3495 mmLength

62 Nm @ 3000 99 Nm @ 113 Nm @ 4500 rpm 140 Nm @ 220 Nm @ 1750 rpm 90.3 Nm @Torque(in Nm ) rpm 2800 rpm 3000 rpm 4200 rpm7 1

17.6 12-16.3 14-18 (diesel) 12.2-16.6 (diesel) 19-22.6 (diesel) 12.3-16.9Fuel efficiency(in kmpl) 12-17 (petrol) 10.5-14.5 (petrol) 11.3-16.1 (petrol)

137 kmph 149 kmph 160 kmph 135 kmph 156 kmph 164 kmphMaximumspeed

5 5 5 5 4 5Doors

Compiled from various sources.

Brake horse power7 0

7 1 Newton meter

19

Exhibit VIFord Figo – Key Milestones to Success

September 2007 – Target Customer Identification

October 2007 – Identify the variants and featuresMa rch 20 09 – Consumer Immersion – an ethnographic wo rkshop with target customers for top management and marketing

September 2009 – Global Reveal by Ford Mo tor Co. CEO Alan Mulally in DelhiJanuary 2010 – Early Reveal to Media

February 2010 onward – Pre launch and launch campaigns and high digital focus

Exhibit VIIFord Figo: Take To Market Plan

Exhibit VIIISpecifications of Ford Figo

VEHICLE SUMMARY

Name: Figo Lxi

Car Body Type: Hatchback

Top Speed: 160

Fuel Consumption:

Highway 15.00 kmpl.

Fuel Consumption:

City 12.00 kmpl.

ENGINE SPECIFICATIONS

Engine Type: Petrol

Maximum Power: 70 Bhp @ 6250 rpm

Maximum Torque: 102 Nm @ 4000 rpm

DIMENSIONS

Length: 3795 mm

Width: 1680 mm

Height: 1427 mm

OTHER SPECIFICATIONS

Seating Capacity: 5

Steering: Power

Brakes: Front Disk, Rear Drum

Gears: 5 Manual

Fuel Tank: 45.00

Adopted from various sources