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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
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R ESTRUCTURING
@
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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
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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
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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
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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
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NO
PRIORITY
FOR
ELECTRIS VEHICALS
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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.
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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
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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
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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.
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TATA
ACQUISITION
OF
JAGUAR & LAND ROVER
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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
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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.´
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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
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ZERO EMISSION PROGRAM
IN
MADRID
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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.
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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.
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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.
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COST
REDUCTION
STRATEGY
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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.
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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.
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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
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BAJAJ AUTO LTD.:
OVERTAKEN IN THE
INDIAN SCOOTER MARKET
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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
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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
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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.
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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.
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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%
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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
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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
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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.
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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.
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TOYOTA'S
GLOBALIZATION STRATEGIES
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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.
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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.
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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
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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...
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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.
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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.
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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.
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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...
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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.
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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
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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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