Automobile sector-Mc kinsey

8/7/2019 Automobile sector-Mc kinsey

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AutomobileSector

In

India


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Executive Summary

The study covers introduction to automobile sector

porters five forces model

The Drivers of Change

Companies in the Strongest/Weakest Positions Industrys

Attractiveness and Prospects for Long-Term Profitability.


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Players In two wheeler sector

Hero Honda

Bajaj

TVS

Honda Motorcycle

Scooter India (Pvt.) Ltd.

Yamaha


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Introduction to the Automobile sector in

India

Automobile Industry in India has witnessed a tremendous

growth in recent years and is all set to carry on the momentum in

the foreseeable future.

Indian automobile industry has come a long way since the firstcar ran on the streets of Bombay in 1898.

Today, automobile sector in India is one of the key sectors of the

economy in terms of the employment.

Directly and indirectly it employs more than 10 million people

and if we add the number of people employed in the auto-

component and auto ancillary industry then the number goes

even higher.


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The automobile industry comprises of heavy vehicles

(trucks, buses, tempos, tractors); passenger cars; and two-

wheelers.

Heavy vehicles section is dominated by Tata-Telco, Ashok

Leyland, Eicher Motors, Mahindra and Mahindra, and

Bajaj.


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The Major Players in four wheelers

Hindustan Motors

Maruti Udyog

Fiat India Private Ltd.

Ford India Ltd.

General Motors India Pvt. Ltd.

Honda Siel Cars India Ltd.

Hyundai Motors India Ltd.

Toyota Motors, Tata Motors

The dominant players in the two-wheeler sector are Hero Honda, Bajaj,

TVS, Honda Motorcycle & Scooter India (Pvt.) Ltd., Yamaha etc.


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Some of the major characteristics of Indian

Automobile sector are:

Second largest two-wheeler market in the world.

Fourth largest commercial vehicle market in the

world.

11th largest passenger car market in the world

Expected to become the world's third largest

automobile market by 2030, behind only China

and the US.


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Porters Five Forces Analysis:


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The great diversity of rivals in terms of cultures and

Associated philosophies have intensified rivalry in the

industry.

China and India; in these booming markets, companies could

take advantage of the opportunities to reap handsomerewards.

The degree of rivalry in the automotive industry is further

heightened by high fixed costs associated with

manufacturing cars and trucks and the low switching costs

for consumers when buying different makes and models.


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2.Threat of Substitutes:

The threat of substitutes to the automotive industry is fairly mild.

Numerous other forms of transportation are available, but none

offer the utility, convenience, independence, and value afforded by

automobiles.

The switching costs associated with using a different mode of

transportation, such as train, may be high in terms of personal time

(i.e., independence), convenience, and utility (e.g., luggage

capacity), but not necessarily monetarily (e.g., round trip train fare

on MARTA would most likely be less expensive than the cost of fuel

consumed on a similar round trip, daily parking, car insurance, and

maintenance).


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3) Barriers to Entry

The barriers to enter the automotive industry are substantial. For a

new company, the startup capital required to establish

manufacturing capacity to achieve minimum efficient scale is

prohibitive.

All of the large automotive companies have globalized and entered

foreign markets with varying degrees of success.

Although the barriers to new companies are substantial,

established companies are entering new markets through strategic

partnerships or through buying out or merging with other

companies.


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In the relationship between the automotive industry and itssuppliers, the power axis is substantially tipped in the

industrys favor.

There are specific characteristics that make members of the

automotive industry powerful buyers

There is not a grand proliferation of companies

Consumers wield the greatest power in this relationship due to

the fairly standardized nature of the automotive commodity (a

vehicle) and the low

Switching costs associated with selecting from among

competing brands


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General Motors (GM) proceeded to acquire seven companies by the

end of 1909. Today, the companys brand names include many of the

beginning acquisitions including Buick, Cadillac, Chevrolet, GMC,

Oldsmobile, and Pontiac, as well as newer acquisitions and

creations

GM is focusing on increasing market share in growing countries such

as India and China.

GM can reign in escalating costs and offer cost-competitive

products, the automobile giant will be in position to once again

assert its dominance of the market.


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Maruti Udyog Limited (MUL).

A license and Joint Venture agreement was signed between the government

of India and Suzuki Motor Company (SMC) in Oct. 1982 to launch Maruti

Udyog Limited (MUL).

MUL offers 11 models, including the Maruti 800, Omni, premium small car

Zen, international brands Alto and WagonR, offroader Gypsy, mid size

Esteem, luxury car Baleno, MPV, Versa, Swift, and Luxury SUV the Grand

Vitara XL7.

MULs dominant position in the Indian car market and its ability to satisfy

its customers have made it the success it is today MUL has been the leader in

the Indian car market for two decades.

. As the dominant player in the Indian automobile market, MUL is focusing

on entering new markets in India to increase market share.


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Attributes of Successful Companies

Todays successful automobile companies possess at least some of the

following attributes:

Production efficiency has played a significant role in

making MUL the most successful of todays automobile

manufacturers. Toyota has continually sought to improve

efficiency through a number of Innovative operational

strategies such as the JIT paradigm and the Total Quality

Management (TQM) view of design and production.

Production efficiency has played a significant role in

making MUL the most successful of todays automobile

manufacturers. Toyota has continually sought to improve

efficiency through a number of Innovative operational

strategies such as the JIT paradigm and the Total Quality

Management (TQM) view of design and production.


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Todays successful automobile companies possess at least some of the

following attributes:

Well planned cost structures: The companies without

strong labor unions have more flexible cost structures in

addition to having lower overall labor costs.

Manageable size :is obviously not an attribute of todaysstruggling auto manufacturers. MUL and other companies

like ford upheld this to a very great extent.

Distributed management :of brands seems to positively

influence the prestige and marketing success of Large,

conglomerate corporations.


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These Attributes helped MS to peak up its Sales


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TV Advertisement strategy gains Market Share


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segment wise growth in Automobile sector


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Projected growth in Automobile Sector


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Know where Maruti Udyog Stands


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Conclusion

Taken as a whole, the individual company analyses in the preceding

section lead to several general conclusions about the automotive

industry.

Finally, since automobiles are expensive long-term consumerinvestments, it is necessary that automotive Companies produce well-

respected brands and products.

Another important aspect to be considered here is that the criticalsuccess of the firm depends on its strategy formulation.

Porters five forces analysis definitely provides a great insight into this.


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Presented By

Everil Fernandes

Sahyadri College ofEngineering & Management


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Automobile sector-Mc kinsey