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Strategic Marketing Management
INTRODUCTION:
Automobile sector is one of the important sectors for any economy. The auto industry is
linked with several other sectors in the economy, due to this reason; it is indirectly
contributing much higher than its actual contribution. Around the globe, the sector of
automobile has been treated as a leading economic sector because of its extensive
economic linkages.
Similarly, India is one of the growing markets around the world. The Automobile
industry in India is the seventh largest in the world with an annual production of over 2.6
million units in 2009. In 2009, India emerged as Asia's fourth largest exporter of
automobiles, behind Japan, South Korea and Thailand. Indian automobile market
comprises of different segments which are: commercial vehicles, passenger vehicles, two
wheelers, three wheelers and auto components. The contribution of each segment
according to SIAM’s figure during 1998-99 and 2004-05 are shown in the figure below:
Using the information of SIAM’s source for information about Indian automobile
industry, India’s manufacture of 7.9 million vehicles, including 1.3 million passenger
cars, amounted to 2.4 per cent and 7 per cent, respectively, of global production in
number. The auto-components manufacturing sector is another key player in the Indian
automotive industry. Exports from India in this sector rose from US$1.0 billion in 2003-
Strategic Marketing Management
04 to US$1.8 billion in 2005-06, contributing 1 per cent to the world trade in auto
components in current USD.
In Commercial Vehicles, India is the fourth-largest global market. Tata Motors, M&M,
Ashok Leyland and Eicher Motors are the major players, sharing 90% of the total market
between them. International players like Volvo are also planning to enter the market by
forming Joint Ventures with local companies to cater to the Indian market as well as
export markets. Due to the economic recession around the globe, market is comparably
slow; the Commercial Vehicle market is expected to grow again in infrastructure-led
growth.
Until the late 1990s, scooters dominated two-wheeler sales in India, with motorcycles
accounting for less than 40% share. With the competitive advantage of better fuel
efficiency and faster mobility, there has been a structural shift, with motorcycles holding
80% of the segment. However, with the launch of the fuel-efficient gearless scooters with
contemporary technology, which target young women, teenagers and the elderly, scooter
sales have been rising. The following chart shows the market share of each segment of
two wheeler of fiscal year 2009.
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According to Indian research firms, the key players of market for the motorcycles and
scooters are as follows:
TVS Motors
Bajaj Auto
56.90%
13.3%
7.1%
A Porter's Five Forces Analysis explores five principal industry factors to determine the
attractiveness of a given industry in a given market. In this Porter’s five force model
exercise, we look at the automobile industry in India. This is independent of any
manufacturer. As such, it applies to every Indian car manufacturer.
In most markets, the capital and expertise needed to setup an auto or parts manufacturing
facility would be a great enough barrier to entry to prevent many new entrants from
setting up.
Result: favorable.
X Large investment
Capital Low High in every level of
Required value chain
activity e.i.
in research and
development etc
After
Expected Low X High liberalization there
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Buyers in India have a wide variety of choice. There are many foreign manufacturers
selling in India. Of course there is also an excess of incredibly cheap choices, so access to
many choice can be a threat to the industry.
Result: Unfavorable
When we talk about the two wheeler segment, it means all the other segments are substitute for two wheeler segments,
where three wheeler, commercial vehicles, or passenger vehicles are prominent threat to two wheeler industries. These
are very real and obvious threats to auto manufacturers.
Result: Unfavorable
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It is likely that the suppliers to the manufacturers have considerable bargaining power. They are not held ransom by one
single manufacturer as they can market their products to any of the others in India.
Result: favorable
Several substitute
produts are
available in market.
Supplier
product an Less X
important Important Highl Very important to
input to y buyers industry for
buyers’ Impor making a quality
business tant product.
High. The industry is not yet in its shake-out phase and is still struggling to find the up-and-coming stars and possibly
topple the leaders.
Result: Unfavorable
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Hero Honda is a joint Venture that began in 1984 between the Hero Group of India and
Honda From Japan. Honda is the world's largest manufacturer of 100-cc motorcycles as
well as the world's largest manufacturer of internal combustion engines measured by
volume, producing more than 14 million internal combustion engines each year. It
specializes in dual use motorcycles that are low powered but very fuel efficient. Honda is
the sixth largest automobile manufacturer in the world. Honda also manufactures garden
equipment, marine engines, personal watercraft and power generators, amongst others.
The Hero Group through the Hero Cycles Division was the first to introduce the concept
of just-in-time inventory. The motorcycle segment of the Indian two wheeler industry has
been witnessing strong demand, primarily from semi urban and rural markets. HHL, with
its fuel-efficient motorcycles, has capitalized on this demand which has resulted in the
company gaining market share. The company's wide distribution reach has given it a
competitive advantage over several of its competitors.
• The kind of vehicles suitable to Indian condition and requirement (low price, low
maintenance and good mileage). Hero Honda generally introduce a vehicle every
2-3 months and with different specification( for mileage, speed, Youngsters etc)
TVS is the holding company for the TVS Group of companies engaged in the
manufacturing of various automotive components, two wheelers and a few other
industrial products. The core competency of TVS is, it owns library of tools more then
0.4 million, which allows them to quote lower prices and use them for innovations.
HISTORY OF BAJAJ:
Bajaj Auto Limited is India's largest manufacturer of scooters and motorcycles. The
company generally has lagged behind its Japanese rivals in technology, but has invested
heavily to catch up. Its strong suit is high-volume production; it is the lowest-cost scooter
maker in the world. Bajaj Auto Ltd. is the largest exporter of two and three wheelers.
Bajaj now produces in three product groups: scooters, motorcycles, and three wheelers.
The company is competitive in all three product categories; however, the strongest
market position is in three wheelers. Bajaj produces motorized rickshaw and has almost
the entire market share in India for this Product. The motorized rickshaw is a popular
transportation vehicle in India and is often used in lieu of a taxi. Bajaj still retains the
dominant market position in Scooters in India, however, market share eroded with the
introduction of foreign competitors. The company has a strong market position in the
entry and premium markets and the Japanese dominate in the executive market. Bajaj
faces stiff competition in the motorcycle market from Japan. Honda, Suzuki, Kawasaki,
and Yamaha as all have established themselves in India.
Satum automobile is one of the competitors, with the core competencies of having highly
skilled and trained workforce which recently established a network of dealer.
Strategic Marketing Management
Answer 3:
The resource-based view (RBV) is a business management tool used to determine the
strategic resources available to a company. The fundamental principle of the RBV is that
the basis for a competitive advantage of a firm lies primarily in the application of the
bundle of valuable resources at the firm's disposal. To transform a short-run competitive
advantage into a sustained competitive advantage requires that these resources are
heterogeneous in nature and not perfectly mobile. Effectively, this translates into valuable
resources that are neither perfectly imitable nor substitutable without great effort. If these
conditions hold, the firm’s bundle of resources can assist the firm sustaining above
average returns. The resource-based view (RBV) is used to determine the strategic
resources available to a firm. The fundamental principle of the RBV is that the basis for a
competitive advantage of a firm lies primarily in the application of the bundle of valuable
resources at the firm's disposal. Whereas resources’ can be defined as
Examples:
2. Brand-name reputation
3. Organizational culture
Resource categories:
• Financial capital
• Physical capital
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• Human capital
• Organizational Capital
Example of RBV:
The resource-based view (RBV) argues that firms possess resources, a subset of which
enable them to achieve competitive advantage, and a subset of those that lead to superior
long-term performance. Resources that are valuable and rare can lead to the creation of
competitive advantage. That advantage can be sustained over longer time periods to the
extent that the firm is able to protect against resource imitation, transfer, or substitution.
HOW TO COMPETE:
With emphases on resource-based view the domestic company should go for economies
of scale and make their product more effective to deal with the less resources and the
capabilities which they do not posses. To meet the growing demand of competition, many
companies has already redesigned works, jobs and business processes in their
organization. They should come up with strategic alliances and outsourcing those
activities and which are not cost effective and which can be done efficiently by the other
firms. Brand image is also an important way to build competitive advantage. Domestic
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firms should apply marketing strategies and customer services which can increase their
brand image in the eyes on customers.