Automobile Industry Strategies

8/9/2019 Automobile Industry Strategies

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AUTOMOBILE INDUSTRY

STRATEGIES

PRESENTED TO:

MR . P.P.SINGH(FACULTY, P.C.T.E.)

PRESENTED BY:HIMANSHU SOOD

R AJAT GUPTA

SONU NATH

SUMIT THAPAR



R ESTRUCTURING

@



PROBLEMS WITH NISSAN

No shared vision or common long term plan

Lack of a clear profit orientation;

Insufficient focus on customers and too much focus on

chasing competitors Culture that embodied the Japanese style of management

Lack of a sense of urgency

Absence of good product development and marketing,

with little control over finances Lack of cross-functional, cross-border, and intra-

hierarchical lines of work in the company



IMPLEMENTING THE NRP One of the objectives of the NRP was to reduce the

purchasing costs by 20% by 2002.

Supply better products and services , raise new expectations

from customers, employees, and other stakeholders. In order to reduce purchasing costs, the NRP stated that it

would focus on:

y Centralizing purchasing activity

y

Including services in global purchasing strategyy Decreasing the number of suppliers



NEW MANAGEMENT

Clear about the objectives that he wanted the company

to achieve

Flexible on giving his teams great freedom in choosing

the best courses of action

Several cross-functional teams with people from

different functional areas, to spearhead the turnaround





PROFITABLE AT LAST

Targets achieved before time

After the implementation of the NRP, Nissan saw its marketshare slowly increasing with the launch of new products.

Increasing its capacity in the U.S and Restoring its oncedebt-ridden balance sheet.

Achieved a minimum consolidated operating margin of 4.5

percent

Consolidated net automotive debt reduced to less than 700 billion yen by the end of FY 2002



NO

PRIORITY

FOR

ELECTRIS VEHICALS



New Fiat-Chrysler strategy is based on important

points:y Group consolidation with review of the entire value

chain, to increase efficiency in operations and

administration

y Increase of production volumes of the key technologies

y Exchange and further development of key technologies

y Global market presence and growth of the brands value

and consumers' perception.



Fiat-Chrysler will limit investments in electric vehicles in2011

Strategy based on integration with Fiat, which includesexchange of key technologies and market developmenttarget

Chrysler had already dedicated resources to thedevelopment of electric vehicles

It gives clear indications of a solid strategy based on priorities and risks/benefits analysis



The electric vehicles will be introduced by almost all the

major makers in the next years

The market of electric vehicles is still very uncertain, both

for the necessary technological developments and for the

unclear acceptance from the consumers

Being a new market, new standards, also safety-related

will be defined, and this will require more investments inresearch and development



The strategy of Fiat-Chrysler, focuses on creating a

solid group that owns important technologies, which

will continue to be used well beyond 2020

There will be risks associated to late research and

development of alternative vehicles; however, theserisks can be managed with the view of future

acquisitions or joint ventures, which will always be

possible supposed that the company can offer financial

solidity and innovative technologies.



TATA

ACQUISITION

OF

JAGUAR & LAND ROVER



Ford bought Jaguar for £1.6bn in 1989

Ford have invested about $10bn in Jaguar since it

bought

Ford bought the Land Rover from BMW for £1.7bn in

2000.

JLR - HISTOR



PRICE OF THE

LUXURY BRANDS Analyst believe anything between $2.5bn to $3bn for jaguar

and Land Rover

Meryll Lynch analysts suggest that Jaguar and Land Rover

may fetch about $1.5bn (£735m)

³If you look at the financial position, [Jaguar and Land

Rover] are worth some $1bn to $1.5bn,´ Mr Dorris ananalyst said. ³Add a control premium, and the final sales

price could come in at about $2.5bn.´



WHAT MAY HAMPER TATA¶S?

Union leaders of both Jaguar and Land Rover have already

raised concerns about their job security because of the sale

Jaguar¶s sales were down nearly 32 percent for 2006 in theUnited States, the company¶s largest market

Jaguar lost more than $715 million in 2006 and was expected

to lose $550 million in 2007



ZERO EMISSION PROGRAM

IN

MADRID



The Renault-Nissan Alliance is continuing to develop

the plan to promote its future electric vehicles, throughthe signing of an agreement with the Madrid city

council

The agreement has been inked by Alberto Ruiz-Gallardon, City Councilor, Olivier Paturet, Nissan

Europe Zero Emission Business Unit General Manager

and Jean Pierre Laurent, Managing Director and

President of Renault España S.A.



Both sides will develop a team that will use Renault¶s

Madrid headquarters as a test point for recharging

systems, make efforts to turn Madrid into one of the

first cities to offer a Renault ³car sharing´ EV

mobility system, promote electric mobility, develop acar parts charging infrastructure (through a third party

company), involve local institutions in the process,

present the program to fleet owners and analyze

potential incentives.



This development will be part of the more than 50agreements signed by the Renault-Nissan

Alliance worldwide in an effort to become the zero

emissions mobility leader.



COST

REDUCTION

STRATEGY



Tata Motors was dependent on Ford for a bulk of

supplies of components after it was sold in early 2008

Tata Motors, which was recently sanctioned an

expensive European Investment Bank loan of £340

million at Libor plus 6 per cent, is working towards

making the two brands as cost competitive as possible

in the long run.



Tata Motors has put in place an aggressive cost reduction

strategy for its luxury brands Jaguar Land Rover (JLR),which it acquired from Ford in 2008, involving a substantial

increase in sourcing vehicle parts from low-cost countries

As part of the plan, a third of JLR¶s component

requirements will be sourced from countries such as India,

China and eastern Europe within the next 12 months

The company plans to introduce some of its long-term

suppliers to a team of executives from JLR visiting India insearch of partners.



The low cost of skilled labour and cheaper raw material

costs give these countries a 30 to 40 per cent cost advantageon component prices, which is key to JLR¶s new drive to

reduce manufacturing costs

Apart from the component sourcing plan, Tata Motors is

also working on reducing costs on every front such as in

areas like pension restructuring, employment costs for new

recruits, a plant closure and improved focus on IT

infrastructure\

The company has already reduced the employee headcount

to 14,000 from 16,000 since the takeover



BAJAJ AUTO LTD.:

OVERTAKEN IN THE

INDIAN SCOOTER MARKET



INTRODUCTION TO BAL

o Founded in 1926 by Jamnalal Bajaj

o In 1945, Kamalnayan Bajaj, Jamnalal's son, set up Bachraj

Trading Corporation Ltd. (BTCL) to import and sell two- and

three- wheelers

o Business continued till 1959.

o In 1959, the company secured a license to manufacture two- and

three-wheelers.

o In 1960, BTCL was renamed Bajaj Auto Ltd



o Entered into a technical collaboration with Piaggio for the

manufacture of scooters

o started manufacturing Vespa brand scooters at its plant near

Pune, Maharashtra

o With its collaboration with Piaggio coming to an end in the early

1970s, BAL started manufacturing scooters under the Bajaj

brand.

o The Chetak, BAL's first scooter model under the Bajaj brand,

was introduced in 1972



GROWTH OF TWO WHEELER MARKET

o In the 1970s and 1980s, scooters dominated the Indian two-wheeler market

o Most middle-class Indians preferred scooters because of their

durability, low maintenance costs, and versatility

o The Bajaj Chetak name became synonymous with scooters

o motorcycles available in India were heavier and not as fuel efficientas scooters and were also costlier.



BAL AND THE INDIAN

TWO-WHEELER MARKET

o Between the mid-1950s and 1980s, the Indian industry

operated under ³License Raj´

o Entities were required to secure licenses from the GOI

o The production capacity was also determined by the GOI.



THE TURNING POINT

o Early 1990s saw a recession in the Indian two-wheeler market

o Overall sales of two-wheelers declined by 15% in 1991 and 8%

in 1992

o Period also saw a steep rise in fuel prices

o

Even as late as 1997-98, the scooter segment was the largestsub-segment in the two-wheeler market

o Scooters, with 42% of the market (in terms of unit sales), were

followed by motorcycles (37%), and mopeds (21%



FOLLOWING THE

'MOTORCYCLE

WAY

'o Late 1990s, the Indian two-wheeler market witnessed a shift in

consumer preferences

o Popularity of geared scooters began to wane while that of

motorcycles soared

o There were various reasons for the shift -India was undergoing

a demographic change, with the proportion of younger peoplein the population growing significantly



o While these changes were taking place in the market, the

features of scooters, especially those of the Bajaj Chetak,

remained essentially unchanged.

o By the early 2000s, motorcycle sales surpassed that of scooters

o BAL lost its title of India's largest two-wheeler company to

Hero Honda

o Scooters were BAL's main products, and when market

preferences shifted to motorcycles, the company was facedwith declining sales and revenues



o In an attempt to recapture market share, BAL decided to

reorient its business, launching a series of new motorcycle

models, which halted the downward trend in sales

o It did not want to give up on scooters either. It launched new

scooter models and upgraded existing ones.

o However, with the introduction and subsequent popularity of

Honda Motorcycle and Scooter India (HMSI)7 scooters,

especially the Activa, a gearless8 scooter, BAL lost itsdominance over the Indian scooter market as well.



o In January 2006, Bajaj Auto Limited (BAL), a major Indian

manufacturer of two- and three-wheelers, announced that it had

stopped production of Bajaj Chetak, its flagship scooter model.



TOYOTA'S

GLOBALIZATION STRATEGIES



INTRODUCTION TO TOYOTA

o Toyota's history dates back to 1897, when Japan's Sakichi

Toyoda (Sakichi) diversified from his traditional family

business of carpentry into handloom machinery

o He founded Toyoda Automatic Loom Works (TALW) in

1926 for manufacturing automatic looms.

o Sakichi invented a loom that stopped automatically whenany of the threads snapped.



o This concept (designing equipment to stop so that defects could

be fixed immediately) formed the basis of the Toyota ProductionSystem (TPS) and later became a major factor in the company's

success.

o In 1933, Sakichi established an automobile department within

TALW

o Tthe first passenger car prototype was developed in 1935.

o Sakichi's son, Kiichiro Toyoda (Kiichiro), convinced him to enter

the automobile business, and this led to the establishment of

Toyota in 1937.



EARLY GLOBALIZATION EFFORTS

o In June 1995, Toyota announced the 'New Global Business

Plan,' aimed at advancing localization (of production) and

increasing imports

o Major objective of this plan was to increase Toyota's offshore

production capacity to 2 million units by 1998

o As part of the localization efforts, Toyota focused on increasingoverseas production significantly by establishing new plants and

expanding the capacity of the existing plants



o Apart from this short-term global business plan, Toyota also

came up with a long-term global business vision in June 1996,named the 'Global Vision 2005.

o The major components of "Global Vision 2005"were, asserting a

competitive edge in technology and accelerating globalization,

while sustaining market leadership in Japan, by reclaiming its

above 40% market share

o As part of its globalization efforts, the company focused more

on increasing the production of automobiles in the areas wherethey were sold...



DOMESTIC PROBLEMS & SOLUTIONS

o Domestic sales has started declining

o In 1998, Japan sales accounted for a mere 38% of the

company's total sales, as compared to 52% in 1990

o According to industry observers, the above scenario was due

to a host of reasons such as excessive capacity, choosy

customers, surplus workforce and intensified competition

within Japan.

o In 1998, Japan sales accounted for a mere 38% of the

company's total sales, as compared to 52% in 1990.



o Also, Toyota's Japan sales contributed to a very small share of its total profits.

o US sales contributed to the majority share (80%) of the profits,

followed by Europe.

o By the late 1990s; young buyers accounted for 30% of the

customer base as compared to over 45% in the late 1980s.

o In 1998, models from rival companies such as Honda and BMW

were more popular than the ones offered by Toyota.



o According to reports, Japanese youngsters felt that Toyota cars

'lacked attitude.

o Toyota realized that by losing its young customers to other

companies, it ran the risk of losing its future market as well.

o Analysts claimed that despite its efforts to cater to the young,

the company had failed to give them zippy compact minivans

and sports utility vehicles.



THE SECOND PHASE OF

GLOBALIZATION

o Cho decided to focus more on localization

o Decided to provide its customers with the products they

needed, where they needed them

o Besides focusing on increasing the number of manufacturing

centers and expanding the sales networks worldwide, Toyota

also focused on localizing design, development and purchasing

in every region and country...



THE 2010 GLOBAL VISION

o In April 2002, Toyota announced another corporate strategy to

boost its globalization efforts.

o This initiative was aimed at achieving a 15% market share(from the prevailing 10%) of the global automobile market by

early 2010, exceeding the 14.2% market share held by the

leader GM.







GM TRADEXCHANGE

Lacking in innovation

Huge stock at factory premises and dealer¶s doorsteps

Pioneer in e-supply chain management

Launched in 17th Jan, 1999





TATA DAEWOO

Management conflict in Daewoo

Threat over Daewoo¶s technology

Strategy 1: humble attitude

Strategy 2: appointment of excellent management

Strategy 3: efforts for mutual prosperity



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