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CHAPTER – I

INTRODUCTION

 

Export of commercial quantities of goods normally requires involvement of thecustoms authorities in both the country of export and the country of import. The advent of small trades over the internet such as throughAmazon and eBay have largely bypassed theinvolvement of Customs in many countries because of the low individual values of thesetrades. Nonetheless, these small exports are still subject to legal restrictions applied by thecountry of export. An export's counterpart is an import. 

IMPORTANCE OF EXPORTING

  Ownership advantages are the firm's specific assets, international experience, and the

ability to develop either  low-cost or differentiated products within the contacts of its value 

chain. The locational advantages of a particular market are a combination of market 

 potential and investment risk . Internationalization advantages are the benefits of retaining

a core competence within the company and threading it though the value chain rather than

obtain to license, outsource, or sell it. In relation to the Eclectic paradigm, companies that

have low levels of ownership advantages either do not enter foreign markets. If the

company and its products are equipped with ownership advantage and internalization

advantage, they enter through low-risk modes such as exporting. Exporting requires

significantly lower level of investment than other modes of international expansion, suchas FDI. As you might expect, the lower risk of export typically results in a lower  rate of  

return on sales than possible though other modes of international business. In other words,

the usual return on export sales may not be tremendous, but neither is the risk. Exporting

allows managers to exercise operation control but does not provide them the option to

exercise as much marketing control. An exporter usually resides far from the end consumer 

and often enlists various intermediaries to manage marketing activities.

Disadvantages of exporting

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  Small-and-Medium Enterprises (SME) with less than 250 employees, selling goods and

services to foreign markets seems to be more difficult than serving the domestic market.

The lack of knowledge for trade regulations, cultural differences, different languages

and foreign-exchange situations as well as the strain of resources and staff interact like a

 block for exporting. Indeed there are some SME's which are exporting, but nearly two-third

of them sell in only to one foreign market. The following assumption shows the maindisadvantages:

Financial management effort : To minimize the risk of exchange-

rate fluctuation and transactions processes of export activity the

financialmanagement needs more capacity to cope the major effort.

Customer demand: International customers demand more services from their 

vendor like installation and startup of equipment, maintenance or more delivery

services.

Communication technologies improvement :  The improvement of 

communication technologies in recent years enable the customer to interact with moresuppliers while receiving more information and cheaper communications cost at the

same time like 20 years ago. This leads to more transparency. The vendor is in duty to

follow the real-time demand and to submit all transaction details.

  Management mistakes: The management might tap in some of the

organizational pitfalls, like poor selection of oversea agents or distributors or chaotic

global organization.

Ways of exporting

The company can decide to export directly or indirectly to a foreign country.

Direct selling in export strategy

  Direct selling involves sales representatives, distributors, or retailers who are

located outside the exporter's home country. Direct exports are goods and services that are

sold to an independent party outside of the exporter’s home country. Mainly the companies

are pushed by core competencies and improving their performance of value chain.

Direct selling through distributors

It is considered to be the most popular option to companies, to develop their 

own international marketing capability. This is achieved by charging personnel from thecompany to give them greater control over their operations. Direct selling also give the

company greater   control over the marketing function and the opportunity to earn more

 profits.

In other cases where network of sales representative, the company can transfer them

exclusive rights to sell in a particular geographic region.

A distributor in a foreign country is a merchant who purchases the product from the

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manufacturer and sells them at profit. Distributors usually carry stock inventory and service

the product, and in most cases distributes deals with retailers rather than end users.

 Evaluating Distributors

The size and capabilities of its sales force.

Its sales record.

An analysis of its territory.

Its current product mix.

Its facilities and equipment.

Its marketing polices.

Its customer profit.

Its promotional strategy.

Direct selling through foreign retailers and end users

Exporters can also sell directly to foreign retailers. Usually, products are limited to

consumer lines; it can also sell to direct end users. A good way to generate such sales is by

 printing catalogs or attending trade shows.

 Direct selling over the Internet 

  Electronic commerce is an important mean to small and big companies all over the

world, to trade internationally. We already can see how important E-commerce is for 

marketing growth among exporters companies in emerging economies, in order toovercome capital and infrastructure barriers.

E-commerce eased engagements, provided faster and cheaper delivery of information,

generates quick feedback on new products, improvescustomer service, accesses a global

audience, levels the field of companies, and support electronics data interchange with

suppliers andcustomers.

NEED OF THE STUDY

• The need of the study is to make study on the performance sales and production of automobiles in the ashok Leyland limited of the export finance department.

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• The also helps to analysis the future produtions and export sales of each year of Ashok Leyland.

• The study also helps to know more about various producedures and activities of the

export finance depart

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE:

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The primary objective is to study and analysis of production and sales performanceof automobiles in ashok Leyland limited.

SECONDARY OBJECTIVES: To study the future trend in sales of passenger and commercial vehicles.

To study the trend in export of automobiles.

To study the trend in export domestic sales.

To identify the relationship production and sales.

 

LIMITATIONS OF THE STUDY

Time value of money is not taken into account.

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The study is limited to a period of 5 years from 2006-2011.

Importance is given only to sales and productions performance of automobiles.

The study is based only upon the secondary data.

REVIEW OF LITERATURE

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The turn of the twentieth century witnessed the dawning of the automobile industry.Tinkering by bicycle, motorcycle, buggy, and machinery entrepreneurs in Europe andthe United Statesled to the first prototypes of automobiles in the late nineteenth century.French woodworking machinery makers Rene Panhard and Emile Levassor built their first

car in 1890 with an engine designed in Germany by Gottlieb Daimler and WilhelmMaybach. Armand Peugeot, a French bicycle maker, licensed the same engine and sold hisfirst four lightweight cars in 1891. German machinist Carl Benz followed the next year with his four-wheeled car and in 1893 Charles and Frank Duryea built the first gasoline- powered car in the United States. Ransom Olds is credited as the first mass producer of gasoline-powered automobiles in the United States, making 425 “Curved Dash Olds” in1901. The first gasoline-powered Japanese car was made in 1907 by KomanosukeUchiyama, but it was not until 1914 that Mitsubishi mass-produced cars in Japan.

Each region in the triad—North America, Europe, and Asia—has made significantcontributions to process, product, and organization throughout the twentieth century. These

innovations together have shaped the competitive structure of the automotive industry thatexists today. The organization of production inputs—such as labor and suppliers of components and materials—as well as the configuration of distribution channels are alsoimportant dimensions of the growth and evolution of the industry. Furthermore, variousforces outside the industry shape industry structure and strategies: trade flows; regional andinternational movement of capital; regional and global policies on trade, environmentalregulation, and intellectual property, particularly in emerging economies; and the infusionof information technology throughout the procurement, production, and distributionsystems.

The automotive industry is dynamic and vast, accounting for approximately one in ten jobs in industrialized countries. Developing countries often look to their local automotivesector for economic growth opportunities, particularly because of the vast linkages that theauto industry has to other sectors of their economy.

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INDUSTRY PROFILE

  INDUSTRY PROFILE

The origin of Ashok Leyland, a Hinduja group company can be traced to the urge for self-reliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime

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Minister persuaded Raghunandan Saran, an industrialist, to enter automotivemanufacture. In 1948, Ashok Motors was set up in what was then Madras, for theassembly of Austin Cars. The Company's destiny and name changed soon withequity participation by British Leyland and Ashok Leyland commencedmanufacture of commercial vehicles in 1955.

Since then Ashok Leyland has been a major presence in India's commercial vehicleindustry with a tradition of technological leadership, achieved through tie-ups withinternational technology leaders and through vigorous in-house R&D. Access tointernational technology enabled the Company to set a tradition to be first withtechnology. Be it full air brakes, power steering or rear engine busses, Ashok Leyland pioneered all these concepts. Responding to the operating conditions and practices in the country, the Company made its vehicles strong, over-engineeringthem with extra metallic muscles. 'Designing durable products that make economicsense to the consumer, using appropriate technology', became the design philosophy of the Company, which in turn has moulded consumer attitudes and the

 brand personality.

The Hinduja Group is a transnational conglomerate that provides a wide range of productsin over fifty countries worldwide. Today, the Hinduja Group has become one of thelargest transnational business conglomerates in the world with diversifiedoperations, spanning all the continents. The Group employs over 25,000 people andhas offices in many key cities of the world and all the major cities in India.

Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 5,00,000vehicles we have put on the roads have considerably eased the additional pressure placed on road transportation in independent India.

In the populous Indian metros, four out of the five State Transport Undertaking (STU)  buses come from Ashok Leyland. Some of them like the double-decker andvestibule buses are unique models from Ashok Leyland, tailor-made for high-density routes.

In 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. (Since July 2006, the HindujaGroup is 100% holder of LRLIH). The blueprint prepared for the future reflectedthe global ambitions of the company, captured in four words: Global Standards,Global Markets. This was at a time when liberalisation and globalisation were notyet in the air. Ashok Leyland embarked on a major product and process upgradationto match world-class standards of technology.

For over five decades, Ashok Leyland has been the technology leader in India's commercialvehicle industry, moulding the country's commercial vehicle profile by introducingtechnologies and product ideas that have gone on to become industry norms. From18 seater to 82 seater double-decker buses, from 7.5 tonne to 49 tonne in haulage

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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!

Product range of the company includes:

Buses

Trucks

Engines

Defence & Special Vehicles

Associates Companies:

Automotive Coaches & Components Ltd (ACCL)

Lanka Ashok Leyland

Hinduja Foundries

IRIZAR-TVS

Ashok Leyland Project Services Limited

Milestones:-

1966 - Introduced full air brakes

1967 - Launched double-decker bus

1968 - Offered power steering in commercial vehicles

1979 - Introduced multi-axle trucks

1980 - Introduced the international concept of integral bus with air suspension

1982 - Introduced vestibule bus

1992 - Won self-certification status for defence supplies

1993 - Received ISO 9002

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1997 - India's first CNG powered bus joined the BEST fleet

2001 - Received ISO 14001 certification for all manufacturing units

2002 - Launched hybrid electric vehicle2003 - Dheeraj Hinduja Elected Vice

Chairman of Ashok Leyland Board

2004 - The Government of National Capital Territory of Delhi and Ashok Leyland

signed an agreement for setting up a 'state-of-the-art' Driver Training

Institute at Burari

2005 - State-of-the-art Driver Training Institute opens in Delhi

2006 - Ashok Leyland and Bosch have joined hands with the Indian Institute of 

Technology Madras (IITM) to set up the Ashok Leyland and Bosch Centre of 

Excellence in Engineering Design at the IITM campus

2007 - The company unveiled 4921 TT, a 6x4 tractor with a gross vehicle weight of 49

tonnes

2008 - The company signed an agreement for a joint venture with John Deere, for

manufacturing and marketing of construction equipment.

2009 - Ashok Leyland and Bank of Baroda signed a MoU wherein Bank of Baroda

will fund Ashok Leyland’s end-customers as well as finance its dealers’

inventory

2010 - Ashok Leyland has bagged an order for 600 vehicles from VRL Logistics thatcomprise 500 numbers of 3123 Multi-Axle Vehicle (MAV) in the 8x2

configuration, a newly developed, first of its kind for the Indian commercial

vehicle industry, along with 100 nos. of the Company’s 12-metre buses

2011 - The company launched DOST - its first entry in India’s fast expanding LCV

segment

Awards/Achievements

In the journey towards global standards of quality, Ashok Leyland reached a major 

milestone in 1993 when it became the first in India's automobile history to win theISO 9002 certification. The more comprehensive ISO 9001 certification came in1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturingunits in 2002. It has also become the first Indian auto company to receive the latestISO/TS 16949 Corporate Certification (in July 2006) which is specific to the autoindustry.

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COMPANY PROFILE

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  COMPANY PROFILE:

Ashok Leyland Limited is an India-based company. The Company is engaged in themanufacturing of commercial vehicles and related components. The Company’s products include buses, trucks, engines, defense and special vehicles. From 18 seater to82 seater double-decker buses, from 7.5 ton to 49 ton in haulage vehicles, fromnumerous special application vehicles to diesel engines for industrial, marine andgenset applications, Ashok Leyland offers a range of products. Ashok Leyland had acollaboration with the Japanese company Hino Motors from whom the technology for the H-series engines was bought. Many indigenous versions of H-series engine weredeveloped with 4 and 6 cylinder and also conforming to BS2 and BS3 emission normsin India. These engines proved to be extremely popular with the customers primarilyfor their excellent fuel efficiency. Most current models of Ashok Leyland come with H-series engines.

 VISION:

Achieving leadership in the medium and heavy duty segments of the domestic

commercial vechicle market and a significant presence in the world market through

solutions that best anticipate customer needs with the highest value to cost – ratio.

MISSION:

To be a leader in the business of commercial vehiles excelling in technology quality and

value to the customers fully supported by customers service of the high order and meetingnational and international environment and safety standards.

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OBJECTIVES OF ASHOK LEYLAND:

To identify the customer.

Being the lowest cost manufacturer.

Global bebch-marking of our products,processes and people against the best in the

industry.

In 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. Ashok Leyland’s long-term plan to become a global

 player by benchmarking global standards of technology and quality was soon firmed up.

Access to international technology and a US$200 million investment programme created a

state-of-the-art manufacturing base to roll out international class products. This resulted in

Ashok Leyland launching the 'Cargo' range of trucks based on European Ford 

Cargo trucks. These vehicles used Iveco engines and for the first time had factory-fitted

cabs. Though the Cargo trucks are no longer in production and the use of Iveco engine was

discontinued, the cab continues to be used on the 'ecomet' range of trucks.

In the journey towards global standards of quality, Ashok Leyland reached a major 

milestone in 1993 when it became the first in India's automobile history to win the ISO 

9002 certification. The more comprehensive ISO 9001 certification came in 1994, QS 

9000 in 1998 and ISO 14001certification for all vehicle manufacturing units in 2002. In

2006, Ashok Leyland became the first automobile company in India to receivethe TS16949 Corporate Certification.Editor’s note: This is part of a series of articles

 peeking into clean car industries and car manufacturers of China, India, South Korea and

Germany.

Among many other goals, Ashok Leyland aims to expand its operations to penetrate into

overseas markets. Included in the company’s plans is to acquire smaller car manufacturers

in China and in other developing countries. In October 2006, Ashok Leyland bought a

majority stake in the Czech based- Avia. Called Avia Ashok Leyland Motors s.r.o., this

will give Ashok Leyland a channel into the competitive European market. According to the

company, in 2008 the joint venture sold 518 LCVs in Europe despite tough economic

conditions. Furthermore, the company will expand its product offers into constructionequipment, following a joint venture with John Deere. Newly formed in June 2009, the

John Deere partnership is a 50/50 split between the companies. The company says

negotiation is progressing on land acquisition, and the production plans are in place. The

venture is scheduled to start rolling out wheel loaders and backhoe loaders in October 

2010. Aside from the full expansion planned for the company, Ashok Leyland is also

 paying close attention to the environment. In fact, they are one of the companies showing

the strongest commitment to environmental protection, utilizing eco-friendly processes in

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their various plants. Even as they thrust into different directions, Ashok Leyland maintains

an R&D group that aims to uncover ways to make their vehicles more fuel efficient and

reduce emissions.

In fact, even before laws were placed on car emissions, Ashok Leyland was already

 producing low-emission vehicles. Back in 1997, they have already released buses with

quiet engines and low pollutant emission based on the CNG technology. In 2002 itdeveloped the first hybrid electric vehicle. Ashok Leyland has also launched a mobile

emission clinic that operates on highways and at entry points to New Delhi. The clinic

checks vehicles for emission levels, recommends remedies and offers tips on maintenance

and care. This work will help generate valuable data and garner insight that will guide

further development.

INDUSTRY STATISTICS-PRODUCTION TRENDS

Automobile Production Trends(Number of Vehicles)

Category 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Passenger

vehicles

1,309,300 1545223 1777583 1838593 2351240

commercial

vehicles

391083 519982 549006 418870 566608

Threewheelers

434423 556126 500660 497020 619093

Two

wheelers

7608697 8466666 8026681 8419792 10512889

Grand total 2,435,876 2771999 2713483 2793569 3512457.5

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INDUSTRY STATISTICS-EXPORT TRENDS

Automobile Exports Trends (Number 

of Vehicles)

Category 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Passenger

vehicles

175572 198452 218401 335729 446146

commercial

vehicles

40600 49537 58994 42625 45007

Three

wheelers

76881 143896 141225 148066 173282

Two

wheelers

513169 619644 819713 1004174 1140184

Grand total 806222 1011529 1238333 1530594 1804619

DOMESTIC SALES TRENDS

Automobile Domestic Sales Trends

(Number of Vehicles)

Category 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Passenger

vehicles

114307 1379979 1549882 1552703 1949776

commercial

vehicles

351041 467765 490494 384194 531395

Three

wheelers

359920 403910 364781 349727 440368

Two

wheelers

7052391 7872334 7249278 7437619 9371231

Grand total 8906428 10123988 9654435 9724243 12292770

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Commercial Vechile Manufacturers in India

Indian brands

Force

Hindustan Motors

Permier

Tata

Joint Venture Brands

Ashok Leyland – originally a joint venture between Ashok Motors andLeyland Motors, now 51% owned by Hinduja Group

Mahindra Navistar – a 51:49 joint venture between Mahindra Group and

Navistar International

SWARAJ Mazada – originally a joint between Punjab Tractors and Mazda,

now 53.5% owned by Sumitomo Group

Foreign brands

Volvo makes Trucks and Buses in Bangalore, Karnataka.

Tatra

Hino

Scania

Mercedes-Benz sells luxury buses in India

Electric car manufacturers in India

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Ajanta Group

Mahindra

Hero Electric

Tara International

Tata

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INDUSTRY STATISTICS-PRODUCTION TRENDS

Automobile Production Trends (Number of Vehicles)

Category 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Passenger vehicles

1,309,300 1545223 1777583 1838593 2351240

commercialvehicles

391083 519982 549006 418870 566608

Threewheelers

434423 556126 500660 497020 619093

Two wheelers 7608697 8466666 8026681 8419792 10512889Grand total 2,435,876 2771999 2713483 2793569 3512457.5