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Case Analysis of Hyundais


Marketing Strategies in India


Executive Summary
Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor Company, South
Korea and is the second largest and the fastest growing car manufacturer in India. HMIL presently
markets 20 variants of passenger cars in six segments. The Santro in the B segment, Getz Prime in the B+
segment, the Accent in the C segment, the Elantra in the D segment, the Sonata in the E segment.

The case describes in detail the entry, product, pricing, distribution and promotional strategies of HMIL.
The case briefs the challenges faced by the company and its marketing plans in future. It also includes a
note on the Indian passenger car industry, the leading player and its marketing strategy.

Challenges Faced
To develop a strategy to regain its leadership status in the B segment
To develop more products in B and other segments in order to give more options to the
customer and compete with MUL
To overcome its limited production capacity

Analysis
STP : Maruti Udyog vs Hyundai Motors India Limited
Segmenting:
Maruti:
The segments which MUL served ranged from A segment to the upper C segment. They had cars ranging
from Maruti 800 to Baleno. MUL had the highest market share in the B segment due to the number of
models that it offered when compared to HMIL.
HMIL:
On the other hand, HMIL served segments starting from B to E. The cars which HMIL sold ranged from
Hyundai Santro to Sonata. In this way, Hyundai catered to the upper class of the society as well. In the B
segment, when compared to MUL, HMIL had only one car Santro whereas MUL had 3 models to serve
the same segment Zen, Alto and Wagon R. Also from the case, it is evident that the B segment was the
highest growing segment in the Indian auto industry and by having only one car to serve this segment,
their overall market share was less when compared to MUL. This was even though Santro was initially
the highest sold car in the segment.
Targeting:
Maruti:
MUL initially targeted the Indian middle class by releasing the Maruti 800. This allowed them to capture
around 85% of the market share. With the liberalization of the Indian economy, many other foreign
companies also came into India. This forced MUL to come up with more models to serve different
segments of the society. Currently MUL targets the Indian middle and upper middle class.
HMIL:
HMIL initially wanted to introduce a C segment car to target the upper middle class. However their
surveys indicated that the B segment (and hence demand for smaller cars) was much more and hence
they launched Santro to serve customers in the B segment. Initially HMIL targeted customers from 35-45
years. With the increase in competition from 2002 onwards, HMIL started targeting consumers in the
age group of 25-30 years as it believed that the average age of car buyers had come down. It also
targeted the luxury segments (D and E) where MUL did not have a presence. Our primary consumer
target is middle to upper income professionals who need true value for their money and comfortable
ride in city conditions.




Positioning:

Maruti:
Initially the Indian market had 2 models Fiat and Ambassador, which were of inferior quality but high
in price. With majority of the Indian population being in the middle class, MUL decided to position its
first model (Maruti 800) as an affordable small car. This helped consumers to graduate from 2 wheelers
to 4 wheelers.
HMIL:
HMIL marketing strategy focused on bring out the differentiating factors when compared to its
competitors. Santro was initially positioned on the design aspect. Later on Santro was positioned itself
as a complete family car. The brand was targeting those users who wanted to upgrade into the B
segment. Hyundai This was when the target group of consumers was between 35-45 years. With the
increase in competition in 2002, Hyundai repositioned Santro as a sunshine car in order to attract
consumers from the 25-30 years segment. Sunshine was communicating two intangibles: Freshness and
youthful attitude. The brand was moving to a " Change your life " positioning.

With regard to the other models, Hyundai Accent was positioned as a next generation car and this was
highlighted by its base line The Next Step. On the other hand, Hyundai positioned Sonata as a
luxury/premium car and emphasized on the same with the base line Dreamt by everyone. Owned by a
few.


HMILs Marketing Strategy (4 Ps )
Hyundai Santro
PRODUCT
Cars were considered as convenience options and compact cars. These enter the Maslows Hierarchy of
Needs at the safety and security level and find a place in every level above that. Relating the Needs
Hierarchy to Demographic classification in India, it was observed that the lower middle and middle
income consumers generally are at this level. Hence, the product was designed to meet the needs of this
segment of consumers. However, keeping in mind the volume of sales needed for breaking even, there
was a need to provide additional features (add-ons) which can transform the car in to a luxury package
to appeal to business class people and the youth. Positioning and promoting the product on the basis of
the factors that motivate the consumers at this level of the hierarchy would prove an effective strategy.

The base model of the all-new Hyundai Santro i.e. Santro LP was fully loaded with a range of exciting
new features. Its unique design provides the car with more head room which allowed for easier entry
and exit. Visibility became better with Santro as the drivers seat was higher. Also seating postures were
improved by proper economic designs of the seats. In addition to these design features, a number of
safety features like rear door locks for child safety, collapsible steerable column, and ultra high strength
steel bars for protection against side collisions were also provided. This provided a look of stability, a
sense that it is packed with energy and ready to deliver a dynamic drive. It had features like heater, air
conditioner and power steering.

The next version of Santro i.e. Santro LE had additional features like central locking, back wipers, power
windows, body colored bumper, remote tail gate release and tinted glass throughout the car. The most
advanced model i.e. Santro GS has features like fog lamps, rear defogger, waistline molding, full size
wheel cover in addition to those provided by Santro LE.

PRICE
Hyundai decided to take Maruti heads on with the pricing of their upcoming Hyundai cars. The reason
being that they believed that customers would not be reluctant to pay a bit more for value add. The
base mode of Santro i.e. Santro LP was priced at Rs 2.89 lakhs whereas the next 2 models i.e. Santro LE
and Santro GS were priced at Rs 3.49 and Rs 3.69 lakhs respectively. The idea was that Hyundai with
their extensive service network and brand reputation for making reliable cars should get the customers
nod over their competition.

PROMOTION
As the strategy would be creating brand awareness, an advertising contract with Saatchi & Saatchi was
made, who then decided to use the Bollywood superstar Shah Rukh Khan. The first phase of the
advertising campaign was an ad that concentrated on introducing the car by using humor to remove the
ignorance. The second phase of the promotion concentrated on clearing any queries that prospective
buyers may have had. This was done once again through an ad featuring Shah Rukh Khan. It mainly
focused on highlighting the cars features. Also Hyundai promoted the car through their existing
customer base by running a customer satisfaction campaign which televised existing customers
experiences through ads. During the latter part of 2002, Santro was repositioned as a sunshine car to
target younger consumers. Once again, new TV commercials were made to promote the repositioned
Santro.
On the other hand, to tap the rural market, Hyundai joined hands with dealers in rural areas and
promoted Santro through road shows. Also to ensure that the rural consumers were aware of the
quality (which was the USP), they also promoted through test drives.
PLACE
Santro was launched across India (both in urban and rural areas).

Hyundai Accent
PRODUCT
The new Hyundai Accent was claimed to be similar to the Japanese Mitsubishi Lancer in terms of
technology and luxury. Areas where the car had the latest technology included remote controlled music
system, engine immobilizer, keyless entry system etc.
Also in October 2002, a diesel variant of Accent was also released which was built using the CRDi
technology. This allowed the car to be quieter and comfortable when compared to other diesel cars in
India and this was attributed to its better engine.
PRICE
Price and Quality were the two most important factors looked upon by middle income consumers
before they made a purchase. To ensure that the car provided a stiff competition, the car was priced at
a lower price when compared to Lancer. It was priced at Rs 5.35 lakhs. This was to provide luxury to
consumers at a more affordable price when compared to their competitors.

PROMOTION
Brand awareness and information about the new car were promoted more using the print media when
compared to the TV which was preferred in the case of Santro. The idea was that as this was a higher
valued product, they intended to focus on a particular part of the consumer segment. The ads were so
developed to highlight the latest technological features being provided. On the other hand, TV ads were
used to promote the diesel variant of the Accent.
PLACE
Accent was launched across India.

Hyundai Sonata
PRODUCT
The new Hyundai Sonata was technologically compared to the Japanese Honda Accord. The aim was to
target higher income consumers and hence the strategy focused on the higher end technology that was
used.
PRICE
To ensure that the consumers were attracted towards the car, Hyundai priced the car at a lower price
(Rs 16,00,000) when compared to Honda Accord (Rs 17,00,000).


PROMOTION
Brand awareness and information about the new car were promoted using TV advertisements.
PLACE
Accent was launched across India.

HMILs Strategy
Entry Strategy
Prior to the presence of Hyundai Motors in India, the country had its own share of car providers ranging
from Indian companies like Maruti Udyog Limited, Fiat to foreign players like Ford Motors, Toyota
Motors, Honda Motors etc. So rather than just entering the market and then deciding on which
segments to serve, Hyundai Motors did a careful analysis of the Indian automobile industry. This was
done through discussions and surveys with dealers, consumers and vendors. It was only after analyzing
these results did HMIL release its first car. This analysis helped them as prior to this, they had planned to
release a car in the C segment but the analysis told them that the most profitable and growing segment
was the B segment due to which they went ahead and released a car in the B segment.
Operation Strategy
To ensure that they have maximum profits, HMIL focused on creating a low cost strategy. For this
reason, they set up their own manufacturing plant in India to take advantage of the low labor and
manufacturing costs. This was opposite to what the competitors were doing as they only had assembly
units in India. Also in comparison to other car companies, HMIL entered India by starting its own
subsidiary whereas other companies had entered through joint ventures with Indian companies. HMIL
was able to provide higher quality cars at lower prices when compared to its competitors. This was as
they were able to use better and the latest technology while at the same time were able to use the low
cost labor and other manufacturing facilities available in India.
Product Strategy
While competitors imported their existing successful models from abroad for the Indian market, HMIL
went against the trend by developing models especially for the Indian market. This allowed it to design
cars suitable more for the Indian environment and hence Indian tastes.
Also HMIL launched products in the segments where there was lesser completion from MUL (who at the
time was one of the biggest competitor) i.e. in the D and E segment. This was through proper
understanding of the Indian consumer requirements.


Distribution Strategy
To ensure that Hyundai was able to react quickly to changing market needs, HMIL followed a formal and
meticulous procedure for choosing dealers. The main criteria was to select dealers who would react
quickly to changing market needs. The procedure included dealers having to give their educational
background, financial background, notes on current future trends in the automobile industry etc. This
elaborate procedure allowed choosing those dealers through a scientific procedure that were best
suitable for a location.
On the whole, HMIL followed innovative marketing strategies as they focused more on understanding
what the consumers wanted and then promoting and placing their products accordingly.

Opportunities in the early 1980s for Car Industry
Since independence till the early 1980s the car industry in India was tightly protected by the
government. The licensing system did not allow any Indian or foreign new entrants in the market.
Thought the middle class was growing the lack of options and the high prices of cars stunted the growth
of car industry. In the absence of competition the Indian car industry was lagging technologically.
For India, the early-1980s brought a fresh breeze into the auto sector mainly with the entry of Suzuki
motors into car manufacturing. Maruti Udyog Limited (MUL) a joint venture between Government of
India and Suzuki Motors of Japan was formed with GOI holding 74% stake. Maruti 800, popularly known
as the people's car, was a watershed in India's auto industry, registering a sales figure of more than
2,00,000 by 1999 from a mere 1,200 units in 1984.
This marked the beginning of the reforms in the car industry. Maruti made cars affordable and hence
the industry started witnessing unprecedented growth rates (18.6% CAGR). Partnering with a Japanese
firm resulted in technological advancement in the field. This exposure equipped the Indian industry to
handle the liberalization which happened in 1990s.
The increase in demand for cars fuelled the derived demand for spare parts and ancillaries. This resulted
in Indian component manufacturers entering into joint-venture agreements, with European and US
firms.

HMILs use of Opportunities in the Indian Car Market
The Indian economy was liberalized in 1991. The industry became more investor friendly with the de-
licensing of automobile industry in 1993. This opened an arena of opportunities for foreign car
manufacturers.
Hyundai entered Indian market in 1996. Before entering the company conducted an in depth research of
the existing situation of the industry. According to their research the following opportunities existed in
the Indian market:
The small car segment was neglected though a strong demand existed.
Similarly, the economic segmentation showed that no product existed in the lower B segment.
Existing products were technologically inferior.
A large pool of cheap and educated labour was underutilized.
The government policies in certain states were pro-investment and were doling out incentives
to attract foreign investments.
HMIL took a number of steps to exploit these opportunities.
HMIL targeted the small car segment in the lower B division. As the demand already existed for
this segment, HMILs flagship product SANTRO was an instant hit.
HMIL captured a major share of the market by rolling out SANTRO in a record time of 17
months.
Indian cars were technologically inferior. HMIL came up with a superior product with a lower
cost. To manage lower costs Hyundai set up its manufacturing plant in Chennai, India instead of
assembly units.
They also utilized the abundant cheap and educated labor in the process.
Tamil Nadu was extending concessions on land rates. HMIL chose a strategic location in this
state. It gave them access to both sea (port) and land (national highway) transportation routes.
The proximity to ports facilitated exports.
By 1999 the competition in the small car segment increased. To mitigate the risk of operating with a
single product, since 1999 HMIL has come up with newer car models and also with variants of the
existing models. HMIL also stretched the length of its product portfolio from lower B to E segment.
In 1999, HMIL introduced Accent in the C segment. It was positioned as a technologically
advanced car. A diesel variant was introduced in 2002, with path breaking CRDi technology.
HMIL entered the luxury car segment Segment D with Sonata in 2002. It was positioned as a
premium car.
HMIL realized that the average age of the first time car buyers had come down. To attract this
segment, HMIL targeted newer segments for Santro by positioning it as the youth car the
sunshine car in 2002. They came up with variants like Santro Zing.
To tap the growing rural market, HMIL came up with innovative marketing strategies and
involved dealers in the rural area in the effort to ensure higher visibility and awareness about
the products.
In 2004 another segment D car Elantra was introduced.
Getz introduced in higher B segment filled the only existing gap in HMILs product portfolio from
segment lower B to D.
Alternate Solutions for HMIL

The major challenges that HMIL currently faces is how to regain its leader status and market share. We
believe that HMIL needs to take multiple measures to achieve their target. These measures are:
Continue to innovate
Emerging markets are a fertile ground for innovation. The challenge of reaching dispersed, low-income
consumers in emerging markets often spurs significant innovation. These innovations will become the
basis for 'attacker' strategies that can be used to challenge the competitors. Innovations and
improvements in technology, design can help to manufacture higher quality cars at a lower cost. This
will help to attract more consumers. HMIL should focus on its strengths of delivering excellent quality
and performance.
Diversify
To ensure that it has its presence across multiple segments, HMIL should look to manufacture and
releases new models to compete with Maruti etc. They should add new cars to their product line and
get more into and within segments like the B and C segment which are one of the fastest growing
segments in the Indian auto industry. HMIL should leverage on its ability to launch technologically
superior products and its innovative marketing strategies to come up with new models in the existing
product segments. This might cannibalize on the market share of their existing cars like Santro and
Accent but the effects of the same can be advantageous to HMIL as it can attract competitors
customers. They should look to exploit the customer value perceptions concept that they have used till
now.
Penetrate more into the rural markets
The rural markets are one of the largest untapped markets in India. HMIL should look to target these
segments by introducing lower cost cars. This will help them to increase their market share and thereby
to retain their leadership status.
Expansion of production capacity
HMIL should expand its production capacity in order to produce the required number of cars to be
released into the market. HMIL had a production capacity of 2,00,000 cars per year as against 5,00,000
cars churned by MUL in a year. It should make sure that the production crunch that happened in 2004
due to the release of its new model Getz should not repeat again. The lack of enough production
capacity is expected to affect the companys market share as it would not be able to fulfill increased
demand.
Strategy for Tata Nano
The great wonder car by Tatas has stunned the entire world. Critics who often said that it was not
possible to make a car at a price below $3000 were taken to a back sit when Ratan Tata the chairman of
Tata Motors unveiled this car in New Delhi at a price of $2500. Much of India's low-cost production edge
comes from cheap labor and a large part of the low-cost assembly in factories and plants is done
through manual operations. However this situation is changing fast with companies wanting to increase
productivity by automating their lines. Tata cut costs by minimizing components, particularly steel, and
taking advantage of Indias low production costs. Because of its size, it requires less metal, has a smaller
and lighter engine than other cars, smaller tube-less tyres and a basic interior. Tata divided the
components into two types proprietary designs and Tata Motors design. For proprietary design
components, Tata went with established suppliers who then worked on the development from Indian
technology centers hence saving further cost. The cost associated with employing engineers in
international development centers was a costly affair which made Tatas use local design capabilities.

For components and systems designed in-house, Tata Motors chose suppliers with strong process
capabilities who could give valuable suggestions and improvements in the designs. Nearly everything
has been sourced locally and the Nano boasts of greater than 95% of content sourced locally since day 1.
Tatas suppliers were an integral part of the design and development process. Tata not only worked on
its own processes but also helped its vendors innovate. Instead of annual contracts, Tata went with long
term volume contracts with its suppliers, driving down the costs even further.


Segmentation and Targeting
The low-cost car is clearly intended for the masses. It should be aimed for the first-time car buyer in
India - a huge market despite the increasing number of cars in the urban and semi-urban areas. It also
attracts the buyers of other small cars like Maruti 800.

As the product is newly launched in the most competitive segment of the market, a substantial
promotion budget to sell the product to the customers is needed. Geographical analysis of Indian
population indicates that the consuming population is concentrated generally in bigger cities. As Nano is
designed for both middle and lower income groups, they need to target cities where there is a good mix
of the working middle class and lower working class population. Further, they can target the single
working class, the newly married couples without kids & married couples with 2 kids categories of
Lifecycle segmenting. Also due to the low price of the car, the rural market should also be targeted.

Positioning

Using product differentiation Nano should be positioned as the most convenient, value added car model
for the above target market used. The marketing strategy will be focused on promoting the car as
economic car for the next generation.

Pricing strategy

Tata initially targeted the vehicle as "the least expensive production car in the world" aiming for a
starting price of 100,000 rupees or approximately $2300 US despite rapidly rising material prices.
Promotion Strategy
Road Shows
The company should look to stage road shows, to display vehicles in the pavilions during various college
festivals and exhibition. This car will appeal to youngsters more.
Television advertisements
Advertisements to promote and market the product should be shown on leading television channels.
Major channels should be used to promote and to reach out to the target segments.
Radio
Radio is the medium with the widest coverage. Studies have recently shown high levels of exposure to
radio broadcasting both within urban and rural areas, whether or not listeners actually own a set. Many
people listen to other people's radios or hear them in public places. So radio announcements should be
made and advertisements should be announced on the radio about the product features and price,
qualities, etc. This is especially important to reach out to rural areas which comprise part of the target
segment.
Print Ads
Daily advertisements in leading newspapers and magazines should be used to promote the product.
Hoardings, banners, neon signs can also be displayed outside theatres and shops to promote the new
brand.
Online Community based marketing
This will help to create a pre launch buzz about the car. This can use tools like blogs to allow discussions
among members.

Place
As the car is a compact car available at a very low cost, Tata should target all major urban cities and rural
areas. They should use a multi tier network of dealers to reach the rural areas.