Strategic Insight into the Commercial Vehicle Sector in India.

Submitted By Ashwin Menon, Section B, MBA 2008.

Industry Background
The industry has grown at a CAGR of 14% p.a over the last 5 years,
with sales of 9 million vehicles in 2005-06

With the potential to emerge as one of the largest in the world. Presently, India is 2nd largest two wheeler market in the world 4th largest commercial vehicle market in the world 11th largest passenger car in the world and is expected to be the 7th largest
market by 2016

The industry has emerged as a key contributor to the Indian economy

7.05
8 7 6 5 4 3 2 1 0 Cars Commercial Vehicles Two wheelers Three Wheelers

4 year CAGR

11.30%

1.14 23.50% 0.35 14.30% 14% 0.36

Vehicle Sales in India 2005 - 06 in million

INDIAs Commercial Vehicle Industry

Firm Strategy, Structure and Rivalry

HIGH

HIGH

Factor Conditions (Skilled labor)

Role of Govt.
HIGH

Home Demand Conditions

HIGH

Related and Supporting Industries

HIGH

Glistening Diamond

PEST Analysis

Company Background
Ashok Leyland has been the technology leader in India's commercial vehicle industry, molding the country's commercial vehicle profile by introducing technologies and product ideas that have gone on to become industry norms. From 18 seater to 82 seater double-decker buses, from 7.5 tonne to 49 tons in haulage vehicles, from numerous special application vehicles to diesel engines for industrial, marine and genset applications, Ashok Leyland offers a wide range of products. Eight out of ten metro state transport buses in India are from Ashok Leyland. With over 60 million passengers a day, Ashok Leyland buses carry more people than the entire Indian rail network!
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History

1948: Ashok Motors took birth in Chennai, India. 1954: Ashok Motors rechristened as Ashok Leyland through equity stake of British Leyland. 1987: The overseas holding by Land Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group & the Non-Resident Indian transnational group and IVECO FIAT SpA, part of the Fiat Group and Europe's leading truck manufacturer. 2002: ISO 14001 certified. Largest Private Sector Employers in India - with about 12,000 employees plus working in 6 factories spread over the length and breadth of India. The company recently announced the takeover of the Avia Truck Business Unit in Czech Republic to have a foothold in the highly competitive European Truck market. The Hinduja Group recently bought out IVECO's indirect stake in Ashok Leyland for an undisclosed amount. Thus Ashok Leyland is now purely a Hinduja Group Company.

Mission and Core Values

Mission: Enhancement of shareholder value 1. Through sound business decisions, prudent financial management and high standards of ethics throughout the organization . 2. By ensuring transparency and professionalism in all decisions and transactions and achieving excellence in Corporate Governance by conforming to, and exceeding wherever possible, the prevalent mandatory guidelines on Corporate Governance. Core Values: 1. International 2. Speedy 3. Value creator 4. Innovative 5. Ethical
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Products

Commercial Vehicles

ENGINES

DEFENCE & SPECIAL VEHICLES

Light Commercial Vehicles

Medium and Heavy commercial Vehicles

Target Market
Every type of requirement of motordriven vehicle used for commercial purposes on the highways, such as the transportation of goods, wares and merchandise and motor coaches carrying passengers in automotive sector.
Market under Microscope : Commercial vehicles in Indian Automotive Sector

Porters Five Forces

Threat of New Entry LOW

Supplier Power
LOW

Buyer Power MED - HIGH

Internal Rivalry HIGH

Substitutes LOW

Industry Attractiveness

New Player

LOW
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Existing Player HIGH

Automotive clusters in India

North / Central
Ashok Leyland Force Motors Hindustan Motors Honda SIEL Kinetic Majestic Piaggio Swaraj Mazda Eicher Hero Honda Honda ICML LML Maruti Suzuki Yamaha Tata Motors
Rajkot-Halol Pitampur Jamshedpur Kolkata Ludhiana Delhi-Gurgaon-NoidaGhaziabad Haridwar

East
Hindustan Motors Tata Motors

West
Ashok Leyland Atul Auto Bajaj Auto FIAT GM Kinetic Daimler Chrysler Force Motors Greaves M&M
Mumbai-Pune-Nasik Aurangabad Hyderabad

South
Ashok Leyland Ford Hindustan Motors Mahindra & Mahindra Toyota Kirloskar Volvo Enfield Greaves Hyundai Tatra TVS Motors

Piaggio
Skoda

Premier
Tata Motors

Chennai Bangalore Hosur

Major automotive clusters - Mumbai-Pune-Nasik-Aurangabad (West), Chennai Bangalore-Hosur (South) and Delhi-Gurgaon-Faridabad (North)
Source: SIAM, IMaCS analysis

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Competitors in the Commercial Vehicle Segment

Tata Motors Eicher Swaraj Mazda

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Strategic Maps
TATA

LEY
Track Record
Eic her

Distribution Network
Swaraj Mazda
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Strategic Maps
Research and Development
TATA
Eic her

LEY

Range of Products
Swaraj Mazda

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Strategic Maps
Eic her

TATA

Technology

LEY

Service Centers and Work Bays

Swaraj Mazda

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KSF
1. 2. 3. 4. 5. Distribution Network Track Record Brand Recall Range of Products Technology Innovative designs No. of Service levels - Service Centers and Work-bays for repair and maintenance 6. Research and Development
Threshold KSF
1. 2. 3. Accelerated infrastructure development Compliance of all emission norms. Vendor Base Skill and Quality of Labor

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KSF Matrix
Weights Tata Swaraj Motors Ashok Leyland Eicher Mazda

Distribution Network
Track Record Range of Products Technology Service Levels Research and Development Total Score

40%
20% 10% 10% 15% 5% 100%

10
10 10 9 9.5 9.5 58

9
8 8 7 6.5 7 45.5

7
7 7 8 5 8 42

6.5
6 6 6.5 5 7 37

Present Market Share

Weighted Score

62%
9.8

27%
8.025

7%
6.85

3%
6.15
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Competencies
1. Continuous Value engineering culture through Customer Centric Approach 2. Supply Chain Management through E-sourcing 3. R&D driven 1.5% of total turnover spent on R&D 4. Hub and Spoke Model 5. Brand 6. Technical Center to train and equip with technical knowledge to drive innovation. 7. Strategic acquisitions 8. Continuous enhanced infrastructural capacity 9. Constant employee enrichment through learning centers Empowering each employee through knowledge and technical expertise Industry - Academic Institute partnerships
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Competitive Advantage Model

Sustainable Comp. Adv.
Distinctive
- Empowering culture - Value engineering and customer centric culture

Competitive Adv.
Peripheral
- Hub and Spoke model - Research and Development driven

Threshold

Competencies

- Strategic Acquisition - Enhanced infrastructural capacity.

Resources

Strategic
Global Sourcing E sourcing

In-competencies

Limited distribution restricted to south of India.

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Value Proposition
-

Distribution Network Track Record Range of Products Technology Service levels R&D

Value engineering culture through Customer Centric Approach Supply Chain Management through E-sourcing. R&D driven Hub and Spoke Model Brand Technical Centers Strategic acquisitions Continuous enhanced infrastructural capacity. Constant employee enrichment through learning centers

Ashok Leyland will deliver throughout India, most modern range of vehicles that are technically advanced and aesthetically designed. Ashok Leyland will continuously seek improvement through empowerment of employees and well distributed service centers - 20 all adding value to the shareholders.

SWOT
Opportunity
1.Improving GDP 2.Improving infrastructure 3.Global Market

Threats
1.Opening of the Indian Market 2.Spoilage of Brand Image 3.Price Wars

Strengths
1.Well established for more than 50 years 2.Big customer base 3.New technical centers 4.E-sourcing

SO
Leverage on years of experience and big customer base to bring out new range of cost effective and technically advanced vehicles

SW
Concentrate on marketing to create a distinct positioning while meeting customer demand and improving market share.

Weakness
1.Poor Brand Image in comparison to TATA 2.Lack of established service center throughout the geography. 3.Less range of products

WO
Increase the number of service stations throughout India. Acquire companies and implement changes. Improve product image and service levels.

WT
Full focus on marketing through advertisements. Increase product range providing higher options to customers
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Recommendations
1. Successful mergers and tie-ups with technology majors. Improve Fuel efficiency and output. 2. Higher Power and Tonnage products to address emerging market needs. 3. Strengthen in-house R&D 4. Increase in number of service centers and service work bays throughout India. 5. Improve distribution of Spare parts. 6. Improve degree of product sophistication. 7. Improve Comfort and aesthetics hence improving brand image. 8. Continued focus on Value engineering to improve margins in existing products. 9. Improve operational efficiency through global sourcing 10. Improve Brand recall through upfront marketing.
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AL Share Price vs. BSE Index

[Professional]

Daily QASOK .B O [Line], Q.B SESN [Line]

4/1/2005 - 4/27/2006 (GMT)

Price INR
11500

11000
10500

QASOK.BO, Close(Last Trade), Line 4/27/2006 48.10 Q.BSESN, Close(Last Trade), Line 4/27/2006 11,858.24

Price INR
44 42

10000
9500

40
38 36 34 32

9000
8500

8000
7500

30
28 26 24 22

7000
6500

A pr

M ay

Jun

Jul

A ug Sep 2005

Oct

No v

Dec

Jan

Feb

M ar 2006

A pr

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