Ford Motor Company in India: Developing the Ford Figo

Abstract: This case study primarily deals with the concept of new product development. The case outlines the research and development behind the Ford Figo- small car. The case unfolds the steps taken by Ford to identify the target customer, decide the features of Ford Figo to meet the needs of target customer. Ford conducted marketing research to understand Indian customer for its new product Figo. However, the challenge before Ford was how to launch and market Figo in the highly competitive Indian small car market. Issues: The case will help the students: Understand issues and challenges in launching a new product. Study the multi-pronged introduction strategy of Figo. Understand various issues and challenges in target marketing. Analyze Figo's marketing strategies and explore ways in which the marketing should be evolved to keep the brand relevant to the target audience. Ford Motor Company (Ford), one of the global leaders in the automotive industry found itself trailing in terms of sales volumes in the Asian region, especially India since its inception. Though it had entered the Indian auto market in 1995 and introduced mid-sized car models that were doing well in respective niche segments, 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 and Ford India was not present in that segment. To capture a significant share of this high-volume, high-growth segment of small cars, many companies - both multinational and Indian - were gearing up with new product launches. Ford realized that a strategic decision was required through its wholly-owned subsidiary Ford India Pvt. Ltd (Ford India) for the Indian market. Ford India undertook marketing and consumer research to understand the Indian customer and to find a potential target customer for its new products. Based on the research findings, Ford India started developing the Ford Figo in partnership with global and regional Product Development teams.. By the end of 2009, the team at Ford had developed its first small car through which Ford sought to gain a foothold in the emerging Asia Pacific and Africa markets. The Figo was targeted at the growing market of young buyers in India. The company felt that it had done a good job of understanding the pulse of the market, the consumer mindset and was ready with a product that would appeal to the target segment. According to the company, Figo offered more features, interior space, technology and durability than other vehicles in the same price range. Ford Motor Company's President and CEO Alan Mulally (Mulally) said, "We are confident the Ford Figo will be

a product that Indian consumers really want and value." However, the challenge before the team was how to launch this new car in the highly competitive Indian small car market and how to market Figo in a way that it would appeal to the target segment. The Small Cars Segment of the Passenger Vehicle Market in India According to the Society of Indian Automobile Manufacturers1 (SIAM), passenger cars were classified on the basis of length into mini (5,000mm). Earlier cars were classified on the basis of price into segments A (< Rs2.300,000), B (Rs. 300,000-500,000), C (Rs. 500,000- Rs. 1 million), D (Rs. 1 million - Rs. 2.5 million) and E (> Rs. 2.5 million). Multi Utility Vehicles (MUVs) were classified on the basis of seating capacity - seven, nine, and 13-seaters. As of 2010, passenger vehicle sales contributed to 16% of the total automobile sales in India. Passenger vehicle sales had shown an increasing trend in the 2000s. India was the seventh largest producer of passenger cars in the world, as of December 2010 with sales of 1.95 million units. Maruti Suzuki, Hyundai Motor India Ltd. (HMIL)3 , and Tata Motors Ltd. (Tata Motors)4were the dominant players with a combined share of more than two-thirds of the total sales of passenger cars. In India small cars accounted for more than 70% of the total cars sold in the country and the country was the largest manufacturer of small cars in the world. Small cars - mini and compact accounted for the sales of around 900,000 cars in India in 2009. With annual sales forecast to grow to 3.0 million units by 2016, global automakers started moving to introduce small cars in the country. Being the largest segment, the small-car segment witnessed the highest new car launches i.e. 11 new launches between the three years 2007 and 2010 (of which five were launched in 2010) with 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), the Etios (from Toyota), the Ford Figo, and the Chevrolet Beat... Ford in India Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan, USA, manufactured or distributed automobiles across six continents. With about 201,000 employees and about 90 plants worldwide, the companys automotive brands included Ford, Lincoln, Mercury and Volvo. The company provided financial services through Ford Motor Credit Company. Established in 1995, Ford India was a wholly owned subsidiary of Ford Motor Company with more than 2,300 employees. Ford started its operations in India in 1995 as a 50/50 joint venture with Mahindra & Mahindra (M&M). New Product Development Process for Figo Generally, the process of new product development involved a series of stages: the generation of new ideas, screening of ideas to identify the one with the most potential success, development of the idea into a concept that could be tested on a small group of potential customers in order to

design a marketing strategy around it, development of the product, test marketing and finally launch it into the market. Ford India followed a unique product development process while developing Ford Figo... Taking it to the Market By the second half of 2009, the Ford Figo was ready for its launch. In September 2009, Ford revealed its Figo model in New Delhi. Alan Mulally claimed that Figo would be a game-changer for Ford India. He said, "The Figo should help us make considerable gains in India, where we have had not much presence in the market till now. We do not operate on the basis of market share but on customer demand and products." Figo was to be launched in early 2010 in the price range of Rs. 349,000 to Rs 442,000 for the petrol version and Rs 447,000 to Rs 529,000 for the diesel version...

Channel Strategies: Dell and Eureka Forbes

Abstract: US-based Information Technology company, Dell Inc. (Dell) and India's leading vacuum cleaner and water/air purifier company, Eureka Forbes Ltd. (Eureka Forbes), were regarded as pioneers in direct marketing. The direct marketing strategy helped the companies gain the market leadership position in their respective industries. Though Dell became successful due to its direct selling model in the 1990s till the mid-2000s, it started facing decreasing sales from then on, eventually losing its market leadership to Hewlett Packard Company in 2006. In the mid-2000s, some analysts criticized Dell for sticking to its direct-only business model. According to them, the business model that had made Dell so successful in the past was no longer as effective and the company was losing its competitive edge. In 2007, Dell announced its intention of moving beyond the direct-only model that it had zealously followed until then. Hence, it decided to shift its focus from direct marketing and sell its personal computers through retailer stores such as WalMart and Carrefour. Similar to Dell's strategy of moving beyond the direct selling model, Eureka Forbes also shifted its strategy from direct selling and focused more on its retail business. This was a bid to increase the visibility of its products and push up sales by selling through the retail division. Analysts in general appreciated Dell's new channel strategy as many of them had been saying for a long time that such a change was necessary for the company. They felt that Dell would benefit from its foray into retail as well as its new channel initiative. On the other hand, some analysts felt that Dell was taking a huge risk by straying from what had made it so successful in the PC industry. Similar doubts were raised by analysts when Eureka Forbes shifted its focus from direct selling. They opined that Eureka Forbes, being a new player in the retail business, could face tough times ahead. However, after facing a few initial hitches due to its shift from direct marketing and its entry into water purifiers

Issues: The case will help the students: Study the direct-only business model of Dell and Eureka Forbes and discuss its advantages and disadvantages. Understand the reasons behind Dells and Eureka Forbess decision to move beyond their directonly model. Understand the issues and challenges faced by companies in managing the supply chain and in launching new channel strategies. Introduction In October 2011, IDC1 and Gartner Inc.2reported that US-based information technology company, Dell Inc. (Dell), had recorded a drop in market share to 12 percent for the third quarter of 2011 compared to the 12.6 percent recorded in the same quarter of 2010. According to Dell, the lackluster performance was due to a decrease in demand from consumers and the increasing sales of tablets and smart phones manufactured by competitors such as the Hewlett-Packard (HP) Company and Apple Computers Inc.(Apple). Industry observers opined that the decrease in the sales of Dell's products was contrary to Dell's position from the 1990s to 2003 when the company had stood as the largest producer of Personal Computers (PCs) in the world. Analysts had reported that Dell had earned more than its rivals and was also the only company to consistently report positive margins on PCs. According to Dell, much of its success was attributable to its direct selling model. While a majority of PC makers sold through resellers, retailers, and distributors, Dell was in direct contact with its customers. It took orders from them, built PCs according to their specifications, and directly delivered their PCs to them. Some industry observers noted that all its rivals had copied the direct selling model. However, no other PC maker could equal Dell's performance through the mid-2000s. Though Dell became a market leader in the PC market due to its direct selling model, it started facing decreasing sales from the mid-2000s. Much of the decline was attributable to its direct selling model, according to analysts. Some industry observers felt that Dell's focus on only the direct selling model had led to its fall and given an edge to its competitors who sold through resellers and retailers. Some analysts attributed Dell's decreasing performance due to the change in leadership at the company (Michael Dell (Michael), founder and CEO of Dell, had stepped down from the post of the CEO in July 2004). To arrest the decline in its sales, Dell decided to sell its PCs through retail stores such as Walmart Stores Inc. and Carrefour S A. In addition to this, the company also started a formal channel partner program for value added resellers(VARs). Similar to Dell's strategy of moving beyond the direct selling model, in 1999, Eureka Forbes Ltd. (Eureka Forbes), a direct marketing pioneer and the leading vacuum cleaner and water/air purifier company in India, announced plans to focus more on the retailing business. This was a bid to increase the visibility of its products and increase its sales by selling through the retail division. While some analysts welcomed Dell's decision to move beyond its direct selling model, others felt that the company was taking a huge risk by straying from what had made it so successful in the PC industry. They felt that Dell faced some significant challenges, considering that it was undergoing change at the fundamental level and that many VARs deeply distrusted the company.

Similar doubts were raised by analysts when Eureka Forbes shifted its focus from direct selling. They opined that Eureka Forbes was a new player in retail business and could face tough times ahead. Though Dell's new channel strategy helped it increase its sales, it continued to lose market share to HP. However, Dell remained confident about its growth since the company recorded a 16 percent increase in revenues for the FY 2011. The company reported revenues of US$ 61.5 billion for fiscal 2011 compared to revenues of US$ 52.9 in fiscal 2010.9 On the other hand, after facing a few initial hitches due to its shift from direct marketing and its entry into water purifiers, Eureka Forbes continued to retain its market leadership position in the vacuum cleaner and water purifier markets. About Dell In May 1984, Michael Dell (Michael), a student at the University of Texas, Austin, incorporated PC Ltd. with an investment of less than US$ 1000.10 The company focused on building IBM11compatible computers from stock components and selling them at low prices. The gross revenues of PC Ltd. amounted to US$ 6 million in the first year of its business. 12 In 1985, the company's gross revenues reached US$ 40 million.13 In 1987, the company started its first international operations in the UK. In 1988, the company's name was changed to Dell Computer Corporation. The rapid increase in revenues at the company prompted Michael to recruit professionals from several domains. By 1990, the company had international operations in 12 countries. In 1992, Fortune14 listed Dell in its Fortune 500 list of largest companies in the world. In the early 1990s, Dell ventured into the markets through other distribution channels, like retail arrangements with leading retailers but did not find any better distribution network than direct selling. Since its profits were growing at a healthy rate, the company concentrated only on the direct selling model. It found that to be the biggest profit-making channel. By the end of 1995, Dell's sales revenues had crossed the US$ 3.5 billion mark and by this time, its customers had begun to place orders through mails, toll-free calls, etc. About Eureka Forbes The history of Eureka Forbes dates back to 1909, when a Detroit-Michigan-based businessman, Fred Wardell launched vacuum cleaners under the Eureka brand name. The company's vacuum cleaners were sleek, versatile, and lightweight, compared to other vacuum cleaners that were clumsy and difficult to use... Dell's Direct Selling Model Dell made its foray into the PC market during the 1990s. The exclusivity of Dell's PCs was its direct selling model, which revolutionized the global IT industry. Earlier, PC makers had sold their PCs through middlemen like wholesalers and retailers. Hence, there was little possibility of customizing the PCs. But the direct model provided by Dell offered customers customized products along with appended products and services such as PC replacement, maintenance, technical support, and upgrades...

Direct Marketing at Eureka Eureka Forbes followed the direct selling route like Dell for marketing its products in India, thus becoming one of the first direct selling companies in India. Vacuum cleaners and water purifiers were rather new concepts for the consumers in India, who had till then followed only the traditional methods of cleaning and filtering... The Competition Though Dell enjoyed a market leadership position in the 1990s through the mid-2000s due to its direct selling model, it soon started facing problems when its competitors tried to replicate the direct selling model. In the 1990s, IBM took some initiatives to reproduce some aspects of direct distribution by coordinating better with resellers and distributors... Dell and Eureka: Moving Beyond Direct Selling Model Dell's innovative sales model had made it the favorite in the industry and the company was also regarded as a high technology initiator. However, with the decline in Dell's profits and share prices in the mid-2000s, many industry observers began questioning the efficacy of the direct model. Dell was also being flooded with complaints about the companys failure to provide support services, particularly in its consumer business... Looking Ahead Analysts in general appreciated Dell's new channel strategy as many of them had been saying for a long time that such a change was necessary for the company. They felt that Dell would benefit from its foray into retail as well as its new channel initiative. Industry experts observed that partnering with retailers like Wal-Mart was a win-win for both the retailer and Dell...