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INCREASING MARKET SHARE OF PASSENGER CARS IN AN EMERGING MARKET LIKE INDIA PROJECT REPORT Submitted in partial fulfillment of the requirements for the award of the INTERNATIONAL MBA IN SPECIALIZATION : MARKETING By SUNDARAM NAGARAJAN IYER Enrollment Number : UBI/MBA/I/JUL11/7423 Under the guidance of MR. AMEYA AMBULKAR B.M.S., MBA [Faculty for Strategic Management, JARO Education] JARO EDUCATION MUMBAI April 2012 DECLARATION I, Sundaram Nagarajan Iyer do hereby declare that this project report titled “INCREASING MARKET SHARE OF PASSENGER CARS IN AN EMERGING MARKET LIKE INDIA” submitted in partial fulfillment of the requirement for the International MBA in specialization MARKETING is my original work and it has NOT formed the basis for the award of any other degree. Signed [Sundaram Nagarajan Iyer] Place : Mumabi Datei : 14th April 2012 ACKNOWLEDGEMENT At the outset I acknowledges my thanks to JARO Education for the opportunity given to me to do a project, which is a very interesting topic. I acknowledge the support and cooperation offered by all the staff of JARO Education, who guided me in successfully completing this project. The author expresses profound thanks and appreciation to Mr.Ameya Ambulkar, Faculty for Strategic Management, JARO Education, who is the guide for this project, and who read the project report completely and offered lot of valuable suggestions for its betterment. Most of his suggestions have been incorporated in this project report. The author of this project report places on record sincere thanks and gratefulness for all other people who helped, directly and indirectly, in successfully completing this project work. Some of the suggestions offered by various people could not be fully incorporated, due to paucity of space. However, these suggestions’ and their logic have been incorporated in its spirit and it is reflected in several pages of this project. Table of Contents S.No Topic Page No. 1 Need for the Study 1 2 Objectives of the Study 2 3 Industry Profile 4 4 Research Methodology 14 5 Literature Survey 16 6 Analysis 18 7 Conclusions 32 8 Recommendations 42 9 Definitions 44 10 References 56 : 1 : 1. 0. Need for the Study Probing the dynamics behind market share of various Indian Automobiles in general and Passenger Cars vis-à-vis Two Wheelers in particular, this project work explores need to increase the Market Share of Passenger Cars by reducing the Share of Two Wheelers. This requires awareness, attitude and usage – major factors in the decision-making process by which customers select one brand (Passenger Car) over another (Two Wheeler). It discusses customer satisfaction with products and dealers, the quantification on which is growing in importance among marketing professionals. Finally, it explores metrics measuring the depth of consumer preferences and satisfaction. Including customers’ willingness to search if a brand is unavailable and their disposition to recommend that brand to others. Increasingly, marketers rely on these as leading indicators of future changes in share. . : 2 : 2. 0. Objectives of the Study : The Indian Automobile market, though in existence since 1940s, its volume basically comes from Two Wheelers [2W] segment. Three fourth [76%] of the total Automobile sales is Two Wheelers., followed by Passenger Cars [PCs]. [Ref. Table ] This Project Work explores the possibility to increase the Market Share of Passenger Cars, in volume terms, which when implemented can give impetus and the steps/plausible course of actions which could help in curbing the demand for two wheelers. That is, by increasing the Market Share of Passenger Cars from the current Market Share of 16.25% to 25% and proportionately reducing the Market Share of Two Wheelers from the current figure of 76%. This can be achieved mainly by 1. Reducing the contribution of 2Wheelers [in volume terms] and 2. Creating New Segment for Passenger Cars 2.1 Need for reducing Two Wheelers’ Market Share: 1. Studies have proved that a Two Wheeler is 5 times riskier than Four Wheeler for the driver. Because, entire body of the user is exposed while driving. Every life is precious and it is our responsibility to protect each and every life. Hence the need for reducing the share of Two Wheelers. 2. A Two Wheeler is a seasonal vehicle; that means it is extremely difficult and risky to be used during monsoon, extreme cold and hot weather. 3. A Two Wheeler engine produces 50% more emission [4.5 g/KM] than a Passenger Car [3 g/KM].This is because, the Two Wheeler engine is too small [mostly below 150cc] and hence is not capable of burning the fuel efficiently. I have given a brief note, including the formula to calculate, on emission, elsewhere in the report. 4. The Noise level of a Two Wheeler [say Motor cycle] is higher [75 – 78 dB (A)] than a Passenger Car [69 – 70 dB (A)]. These figures are only norms [European : 3 : Community norm]. In reality, in India, noise produced by Two Wheelers is much higher. 5. A Two Wheeler can run only on Petrol whereas a Passenger Car can run on alternate fuels like Diesel, environmentally friendly Compressed Natural Gas [CNG] or Liquefied Petroleum Gas [LPG]. 6. A Two Wheeler is designed only 2 persons whereas in a Passenger Car 4 or more people can travel at a time. As a typical Indian family has 4 or 5 members, Two Wheeler is not the right mode for commuting. [In fact, it is a common sight in India that an entire family of 4 travel in a Two Wheeler, which is perilous] 7. A Two Wheeler generates only 0.5 Jobs per vehicle manufactured, while a Passenger Car generates 5.3 Jobs per vehicle produced [Ref. Table IV] 8. More Passenger Cars sold means, better contribution to GDP and more taxes to the exchequer as well. However, this study does not aim to totally eliminate Two Wheeler segment but to graduate considerable number of Two Wheeler users to own a Passenger Car. When the above happens there will be some apprehension in the Two Wheeler industry, as to what one should do with the already installed production capacity in the country. The solution lies in exporting the excess capacity to the countries [like Africa, Latin America etc.] where people still cannot dream of owning a car and using Motor cycle. Today China has captured the lower end of the Motor cycle market in Africa. 2.2 Creating New Segment for Passenger Cars: Apart from taking away some share of the Two Wheeler market, this study also looks at creating a New Market for Passenger Cars. The targeted audience for this segment for the future includes * New Job entrants in the Junior Executive, who can be lured directly to buy a Passenger Car rather than first Two Wheeler then graduating to Car * New entrepreneurs like Professionals, Shop keepers * Ladies segment; mostly urban ladies [there are about 150 Million women living in our cities. Though only 15% of them are working, many others are doing : 4 : something of their own or Home makers.] They do need transport equipment. Car is a solution What type and specification for the Passenger Cars are needed to capture this segment is discussed in detail under the heading Recommendations 3.0. Industry Profile: 3.1 Global scenario: Table I, below, gives the number of Four Wheelers produced in the countries of the world for the last 11 years; 2000 to 2011 Table - I Rank | Country | 2010 | 2005 | 2000 | TOTAL |  World | 77,857,705 | 66,482,439 | 58,374,162 | 01 |  China | 18,264,667 | 5,708,421 | 2,069,069 | — |  European Union | 17,102,459 | 18,176,860 | 17,142,142 | 02 |  Japan | 9,625,940 | 10,799,659 | 10,140,796 | 03 |  United States | 7,761,443 | 11,946,653 | 12,799,857 | 04 |  Germany | 5,905,985 | 5,757,710 | 5,526,615 | 05 |  South Korea | 4,271,941 | 3,699,350 | 3,114,998 | 06 |  Brazil | 3,648,358 | 2,530,840 | 1,681,517 | 07 |  India | 3,536,783 | 1,638,674 | 801,360 | 08 |  Spain | 2,387,900 | 2,752,500 | 3,032,874 | 09 |  Mexico | 2,345,124 | 1,624,238 | 1,935,527 | 10 |  France | 2,227,742 | 3,549,008 | 3,348,361 | 11 |  Canada | 2,071,026 | 2,688,363 | 2,961,636 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | : 6 : As it can be seen that top 11 countries account for nearly 80% of the Four Wheeler production, worldwide. [Two & Three Wheelers excluded] It is also heartening to note that India is one among these 12 countries, occupying SEVENTH position in the world. Over the last 10 years, India’s Four Wheelers’ production and hence the Sales, has grown 4 folds [from mere 800,000 vehicles in 2000 to over 3.5 Million vehicles in 2010].During the same period, the overall world production grew only by 33%. This indicates a large pent up demand for cars, which is still to be tapped in India 3.2 Indian Scenario: The Indian Automobile industry has emerged as “Sunrise Sector” in our Economy within 15 years of its liberalization. India is emerging as one of the world’s fastest growing Passenger Car markets. The Industry has a turnover of US $ 28 Billion, Auto Component Industry $ 10 Billion and Tyres $ 3 Billion. It is really amazing that from a production of just 2 Million vehicles [including 2 & 3 Wheelers] in 1991 to 15.52 Million vehicles in 2010, India has come a long way. With the end of “License Raj” in 1991 and subsequent opening up for 100% FDI thro’ Automatic approval route, all the Global majors has set up facilities in India, since then. India, with its rapidly growing Middle class of 450 Million in 2007, as per National Council of Applied Economic Research (NACER) report, Market oriented economy, availability of trained man power at competitive cost, fairly well developed financing facilities and local availability of almost all the raw materials at competitive prices has emerged as one of the favourite investment destination for international Auto manufacturers. : 7 : Table II below gives the leading manufacturers of Passenger Cars and Sports Utility Vehicle [SUVs] in India. Table – II 3.3 Major Car Manufacturers in India There are 27 Car manufacturers in India. Following is the partial list of Indian car manufacturers 1. Maruti Suzuki 2. Hyundai India 3. TATA 4. FIAT 5. Audi 6. BMW 7. Chevrolet 8. Ford 9. Hindustan Motors 10. Honda 11. Toyota 12. Mahindra & Mahindra 13. Skoda 14. Mercedes Benz 15. Nissan 16. And many more As it can be seen that barring global players, all the Indian manufacturers are “old boys”. This is because, automobile industry is highly capital intensive and hence offers high level of entry barriers for new and small players. It is difficult even for existing Two Wheeler manufacturers to “graduate” themselves to be a : 8 : Four Wheel manufacturer because of high investment in Passenger Car manufacturing. The other major entry barrier is the type of Car (Car segment). In order for a new manufacturer to sustain, he needs to produce small cars (like NANO or the erstwhile MARUTI 800). The “Critical Mass” for this segment being (1) Price (2) Volume (3) Dealer/distribution & network and (4) Service back up. This is a very tall order for a new entrant. Because already 3 well established manufacturers [Maruti, Hyundai, TATA] are sitting with pretty good Market Share. Penetrating into such segments need lot of time, patience and above all money. However, liberalization which started in 1991 lead to the delicensing of Passenger Car segment in 1993. Starting 2000, several landmark policy changes like Quantitative Restrictions [QR] and 100% FDI thro’ automatic route were introduced. Indigenously developed vehicles were introduced in the domestic market and exports were given a thrust. Auto companies started tie ups with financing and insurance companies as “single window clearance” policy to serve the customer better. In view of the increase in manufacturing and sales trends, Indian automobile industry [which includes 2 & 3 wheelers and component industry] has been growing at a spectacular Compounded Annual Growth Rate [CAGR] of 17% in the last few years. The industry also provides more than 13 Million jobs [both direct & indirect]. The auto industry has both backward linkage [metal, paint, component, tyre, glass etc. industries] and forward linkages [dealers, petroleum products, finance companies etc.]. These factors act as multiplier of Industrial Growth and hence contribute for increase in GDP The sales of Passenger Cars and Sport Utility Vehicles (SUVs) have grown at 12% CAGR over the last decade. Sale of Passenger Cars post 2000 has been driven due to the following reasons [not necessarily in that order] : : 9 : 1. Increase in the number of models 2. Increase in the purchasing power of people 3. Easy availability of car finance 4. Favourable government policies 5. Growth of used/pre owned cars A further reduction in the cost of Passenger Cars would fuel demand for this segment Automotive retail trade, which consists of dealers/distributors/agents etc, and its service facility comprising of a network of over 6,500 dealers and their service stations across the country. This segment has an investment of over Rs. 22,000 crores and provides direct employment to about 400,000 people. It has significant spin-off on insurance, auto finance and oil sector. 3.4 AUTO COMPONENET INDUSTRY: It is pertinent to mention here about Indian Auto Component industry, which is playing a vital role in the growth of auto industry in general and Passenger Cars in particular. Indian auto components industry manufacturers a wide range of components, spare parts and accessories both for domestic consumption and for exports. The total size of the component industry, in India, is close to USD 14 Billion; out of which USD 9.4 Billion is the domestic OEM market [automobile manufacturers]. USD 2.6 Billion is domestic “Replacement Market” [or after sales service market] and USD 2 Billion are the direct exports. More than 60% of exports of auto components are to Europe and USA. More than 70% of the exports go to the OEMs and Tier – I suppliers. The rest goes to global replacement market. : 10 : The Phased Manufacturing Programme [PMP] suggested by Government of India was introduced in Indian automotive component sector in the 1980s for localization of components for Light Commercial Vehicles [LCVs] laid the foundation for the development of auto component industry. Today, the Indian Auto component sector has over 500 organised players and about 5000 players from the unorganized sector. The organized sector players [who are 500 in numbers] have a combined turnover of USD 14 Billion [which is mentioned above]. It is difficult to estimate the turnover of 5000 plus unorganized players, due to practical difficulties. The turnover mentioned above excludes that of * Tyres * Batteries and * Imported Components 3.5 Growth Drivers: Raising per capita income and the changing demographic distribution are conducive for growth. India has highest proportion of population below 35 years. This translates into 130 Million people will be added to the working population in the next 6 to 7 years. It is predicted that 70% of this population are potential buyers for Passenger Cars. This trend indicates that small and medium cars would remain dominant and a shift towards high end of Passenger Cars is expected at a faster rate. The Sports Utility Vehicle [SUV] market is also developing at a faster rate. The examples of some of the SUVs in the Indian market are TATA SAFARI TOYOTA FORTUNNER MAHINDRA & MAHINDRA XYLO : 11 : Almost all the SUVs are 4 X 4 drives Thus, we can conclude that higher disposable income coupled with availability of easy finance options have driven the Passenger Cars segment. These are the growth drivers and they continue to drive the auto industry in the near future as well. 3.6 Future for Indian Auto Industry: The projected size of the Indian auto industry, in monetary terms, in 2016 will be between US$ 122 to 159 Billion. This is based on the study done by NCAER. This figure includes US$ 35 Billion in exports. This translates into 10 to 11% contribution to GDP by 2016, which is double the current contribution. Table III gives the approximate break- up of the above figures. Table III S.no. | Description | Projected Turnover by 2016 | | | (US$ Billion) | 1 | Vehicles | 82 to 119 | 2 | Exports[incldg.Tractors] | 12 | 3 | Auto Components | 20 to 25 | 4 | After Market | 5 | 5 | Engineering Service | 2 to 2.5 | : 12 : Obviously, in order to achieve above turnover, the auto industry needs additional investments for production and infrastructure. It is estimated that an additional investment to the tune of US$ 35 TO 40 Billion, which is equivalent to Rs. 160,000 to Rs 180,000 crores, needs to be deployed. The Indian auto industry also promises significant employment opportunities, both skilled and unskilled, in order to sustain. A large portion of this will be indirect employment; meaning pre and post production, in view of the industry’s both forward and backward linkages which is mentioned above. 3.7 FUTURE OF AUTO COMPONENT INDUSTRY: It is estimated that the World production of auto components would reach USD 1.7 Trillion by the year 2015. About USD 700 Billion worth of auto components shall be sourced out from Low Cost Countries [LCCs] like India. If India targets to get a meager share of 10% of this potential, it would mean a turnover of USD 70 Million; which is 5 times the current total size of the entire organized auto component sector in India. However, Government of India has projected a very conservative turnover of USD 25 Billion by 2016 for the auto component industry. 3.8 Meaning of Employment: This necessitates to define what is direct and indirect employment is. Direct employment is by way of engaging people in the production of Automobiles and Components. Indirect employment is generated in feeder and supplier industries to Original Equipment Manufacturers [OEMs] such as vehicle drivers [called Convoy : 13 : Drivers] tyre industry, auto dealers, repair & maintenance personnel, petroleum products dispensation at filling stations, finance, insurance etc.etc. 3.9 Employment Potential: Table IV, below, gives some interesting details on the employment potential of Indian auto industry. Table – IV S.No | Type of vehicle | Jobs per unit of production | Production in 2010 (Million units) | 1 | Two Wheeler | 0.5 | 11.8 | 2 | Three Wheeler | 3.9 | 0.53 | 3 | Passenger Cars | 5.3 | 2.52 | 4 | Commercial Vehicles | 13.3 | 0.67 | Total | 23.00 | 15.52 | The above figures translate into approximately 25 Million New jobs by 2016 : 14 : Table V gives the breakup of this figure, which is interesting Table - V Category | No. of New Jobs by 2016 (Million) | Contribution to Total Employment | Skilled | 15.5 | 62 % | Managerial | 7.0 | 28 % | Unskilled | 2.5 | 10 % | Total | 25.0 | 100 % | 3.10 Exports: Exports are growing at 39% CAGR for the last 5 years. This growth is lead by Passenger Cars which has grown at 57% CAGR. While the Two Wheelers grew by 37% in the same period]. The competitiveness of the industry depends on the capacity and the speed of the industry to innovate and upgrade. The most important indices of competitiveness are productivity of [1] Labour and [2] Capital. 4.0. Research Methodology: 1. The fundamentals have been clarified. Because, many have different notions about various marketing terms like Market, Market Analysis. Market Share etc and the metrics used thereof. These definitions have been explained at the end of this report, under a separate heading Definitions. 2. With these clarifications, Market shares for different Passenger Cars, both Global and domestic, players have been studied and analysed. : 15 : 3. Extensive literature survey [secondary research] thro’ Internet was done. Primary research has problems like the companies will not be comfortable with parting their own Marketing data. Also, thro’ internet one can access wide spectrum of topics; ranging from basic definition to complicated analysis. One can also have access to latest research findings, thro’ internet, on the subject. 4. The data thus obtained were collated, analysed and the rest provided in the form of Tables and Graphs. 5. Based on the data analysis, personal experience of the writer and the advice of the Project Guide [Mr.Ambulkar] the results have been given in 6. the form of Recommendations, so that there is a practical approach to the Project work. 7. To re-emphasise the point # 5, a detailed list of Recommendations have been made based on # 5 so that the findings of this project can b put to practical use. 8. Case studies of different countries for different products have been studied. Out of many case studies have been incorporated in this project; A] British Airways – Airlines - UK B] Optimus – Mobile operator - Portugal I have deliberately chosen these 2 companies, because * They are world renowned Companies * They are in the service industry, which is different from Auto industry but service to car owners is of prime importance * Both these companies had similar problems like the one discussed in this project; viz. Increasing Market share 9. As an industry strategy to increase the market share for Passenger Cars, I have used Michael Porter’s 5 Forces model of competition : 16 : 10. I have also included Business Model in Alex’s canvas format about the various aspects of this strategic decision to increase the market share of Passenger Cars. 5.0. Literature Survey: Following literatures were surveyed thro’ secondary research (internet) 1. Examtutor.com : For definitions on the fundamentals like market, market analysis, market classification, market size & trends market share. They are given at the beginning of this report 2. Futurenowinc.com. An interesting article titled “Grabbing market share in recession” was cited. Some of the points mentioned therein have been incorporated in this project. 3. [Financial Times] FT Press.com This is website of the world renowned Business daily from UK, viz. Financial Times. This author has taken liberty to incorporate some of the concepts mentioned therein viz. “Marketing Metrics : Understanding market share and related metrics 4. Society of Indian Automobile Manufacturers [SIAM] This is Indian auto industry’s own body which gives various statistics on Indian made autos like installed capacity, Production trend, sales trend etc. The data are available for the past several years. As this project is on market share of Passenger Cars, only statistics relating to sales trend has been considered. 5. Automobileindia.com This is a portal acting as a guide to the consumers. Various general topics like list of models of Passenger Cars and their manufacturer in India have been taken 6. Deloitte.com Deloitte Touche Tohmatsu is a world renowned consultant on various management issues like strategy, marketing, : 17 : 7. finance, auditing etc. Deloitte has done a study on the future of automobiles in the world. The title of the study results is “A new era accelerating toward 2020 – An Automotive industry transformed”. Some of the study concerning future trends and the customer expectations has been incorporated in this project. Particularly 2 of India’s well known auto industry veterans [Mr. R.C.Barghava, Chairman. Maruti Suzuki and Mr. Ravi Sud, CFO, Hero Group] have contributed in Deloitte’s study. This report gives good perspective on the future of sales trend of automobiles in emerging markets like India. Some of the relevant points related to customer preferences for a Passenger Car have been incorporated in this project work. This will give a good perspective to the reader how future sales trend in similar countries [like China, Brazil, Thailand etc.] is likely to change, apart from India. 8. Automotive Mission Plan [2006 to 2016] This report is the published by Government of India [Ministry of Heavy Industries]. It is a study on Vision for the Indian auto industry. This study was done by 5 expert groups over a period of 15 months. It is an excellent study for Indian auto industry scenario. The study has made various recommendations to boost auto sales in India. Relevant points pertaining to this project report have been incorporated in various sections of this project report. 9. Differentiateyourbusiness.co.uk The strategy guru Mr. Michael Porter’s famous “5 Forces Analysis” have been discussed in this site. Also discussed in this site is the PEST Analysis. The main model of the above analysis has been incorporated in this project work, separately for Two Wheelers and for Passenger Cars. : 18 : 10. Wikipedia [Google.com] : The figures relating to sale of Four Wheelers which are manufacutrered by different manufactured in the world has been published in this site. The relevant figures [top 12 manufacturers] have been mentioned in this project report. 6.0. Analysis: 6.1 Installed Capacity: The Indian automobile industry’s installed capacity for vehicles is given in the Table VI Table – VI S.No | Category | Installed Capacity [Million Units] | 1 | Two & 3 Wheelers | 14.31 | 2 | Four Wheelers [including Passenger Cars] | 3.88 | 3 | Engines | 0.49 | Please note that the figures are not additive :19 : 6.2 Sales Trend: The Table VII gives the sale of various automobiles in Indian domestic market, from 2004 to 2011. Table - VII Automobile Domestic Sales Trends [India] | (Number  of Vehicles) | | | | Category | | 2004-05 | 2005-06 | 2006-07 | 2007-08 | 2008-09 | | 2009-10 | 2010-11 | | | | | | | | | | | PCs | | 1,061,572 | 1,143,076 | 1,379,979 | 1,549,882 | 1,552,703 | | 1,951,333 | 2,520,421 | CVs | | 318,430 | 351,041 | 467,765 | 490,494 | 384,194 | | 532,721 | 676,408 | | | | | | | | | | | 3 Ws | | 307,862 | 359,920 | 403,910 | 364,781 | 349,727 | | 440,392 | 526,022 | | | | | | | | | | | 2 Ws | | 6,209,765 | 7,052,391 | 7,872,334 | 7,249,278 | 7,437,619 | | 9,370,951 | 11,790,305 | Grand Total | | 7,897,629 | 8,906,428 | 10,123,988 | 9,654,435 | 9,724,243 | | 12,295,397 |  15,513,156 | | | | | | | | | : 20 : LEGEND: PC Passenger Cars CV Commercial Vehicles 3W Three Wheelers 2W Two Wheelers As it can be seen that the sale of Passenger Cars have grown by a whopping 137.7%, between 2004 and 2011, while the sale of Two Wheelers have grown only by 89.8%. In the same period, the Indian auto industry has grown by 96.5%. That means the growth of Passenger Cars is more than that of the entire auto industry. This indicates that the Two Wheeler industry is either getting saturated or people [middle class] prefer Passenger Cars over Two Wheelers. This is the argument put forth at the beginning [Object of study] of this project report, that the future of Indian auto industry is in Passenger Cars. : 21 : 6.3 Market Share: Table VIII below gives the market share of various automobiles in India, during 2010-11 Table – VIII S.NO | CATEGORY | MARKET SHARE | 1 | Passenger Cars | 16.25 % | 2 | Commercial Vehicles | 4.36 % | 3 | Three Wheelers | 3.39 % | 4 | Two Wheelers | 76.00 % | TOTAL | 100 % | : 22 : Graphically, the above figures can be translated into a Pie Chart, which is given below From the graph, it can be inferred that though the Two Wheelers have got the lion’s share, the trend is changing. The purpose of this project work is to double the share of Passenger Cars [to 30%] in the next 3 to 5 years. The Action Plan for achieving this has been discussed under the heading a) Recommendations and b) Areas to focus : 23 : 6.4 Five Forces Model: Michael Porter’s 5 Forces Model of competition is given below, which are self explanatory, for this project; the first one is for Two Wheelers and the second one is for Passenger Cars. Porter’s Five Forces of Competitive Position [FOR TWO WHEELERS] New Market Entrants * Moderate entry /barriers * geographical factors * incumbents resistance * new entrant strategy * routes to market . Not to be sold or published. More free online training resources are at www.businessballs.com. Alan Chapman accepts no liability. | Product and Technology Development * alternatives price/quality * market distribution changes * fashion and trends * legislative effects Buyer Power buyer choice buyers size/number change cost/frequency product/service importance volumes, JIT scheduling Competitive Rivalry * number and size of firms * industry size and trends * fixed v variable cost bases * product/service ranges * differentiation, strategy Supplier Power * brand reputation * geographical coverage * product/service level quality * relationships with customers * bidding processes/capabilities : 24 : COMPETITIVE STRATEGY [FOR PASSENGER CARS] As it can be seen from the above model, under “Threat of New Entrants”, all the 3 points which are mentioned earlier (under Industry Profile-Indian Scenario) satisfy. They are 1. Economy of Scale 2. Capital Requirements 3. Access to distribution channels : 25 : 6.5 PEST Analysis: Various factors of PEST pertaining to increase the market share of Passenger Cars have been incorporated in the model and analysed for the same. | Political * No political interference * Govt. Encourages small cars * Environmental norms must be adhered to * Govt may increase duty & taxes if sales goes up * No international pressure * Home market pressure from medium car manufactures will be there | Economical * Home economy trend is positive * GDP growth expected to be above 8%, in the near future * Exchange rate will have some impact on small cars, as still India imports number of items.Stablity of exchange is vital * Market routes may change; for example more “virtual” Show rooms may come up in future * Oil prices hold key for the success of small car segment, as it is price elastic. * Competition is the KEY | | | Social * Life style is the key * Demographic is vital * Consumer attitude is also vital * Media view is important but “word of mouth” is vital * Brand/company image important * Fashion not important * Role Model/opinion leaders are important * Advertising & publicity [Educating the public] is important * Religious/ethnic factors not important, except more demand during “auspicious months” | Technological * Technological development will help with better engines & less emission * Manufacturing Technology will have influence; new is better * Information & Communication are vital in future * Consumer may opt more for Internet buying * Global communication will not have impact in this segment | | 6.6 Emission Levels: Pollution of all types will play a major role in future, when customers want to buy a particular brand of car. For automobile, two pollutants are important criteria. 1. Emission and 2. Noise. Hence the author has discussed only these 2 pollutants; though there are many. 6.6.1.Exhaust Pollution: The emission of an automobile is nothing but “fuel indigestion”. When the fossil fuel [petro, diesel] is not fully burnt inside the engine, the residual fuel comes out of exhaust as emission. : 27 : The major threat of emission is [1] Carbon Monoxide (CO) and [2] Nitrogen Oxide (NO). I have given the formula to calculate the emission in an automobile, called Lambda calculation, at end of the report The TableIX gives the norms for emission for various vehicles Table -IX S.NO | CATEGORY | NORM | 1 | Passenger Cars | 3 g/km | 2 | Two Wheeler | 4.5 g/km | Norms for other vehicles [like Trucks etc] are beyond the scope of this project and hence not studied As mentioned in the Objective of Study, above, the Two Wheelers emit 50% more than a Passenger Car. This is vital when people are environmentally very conscious nowadays 6.7 Noise Level : The Table-X gives the norms for noise level for various vehicles. These norms are fixed by European Community. They are called EC norms. : 28 : Table - X S.NO | CATEGORY | NOISE LEVEL [EC Norm] | 1 | Motorcycle | 75 to 78 dB(A) | 2 | Passenger Cars | 70 dB(A) | 3 | Vans | 70 dB(A) | 4 | LCVs/ Buses | 75 dB(A) | These are all EC norms. In reality, the noise level for Indian made vehicles, particularly Two Wheelers, are much higher. [If we include the blaring of Horn by Indians, the above levels will go through the roof] As it can be seen that the Two Wheelers produce more noise than a Passenger Car. Though it looks just 5 dB (A) more for Two Wheeler than for a Passenger Car, the actual effect is much more. Studies have proved that, staying in a noise level surrounding of 100 dB (A) just for 15 minutes, is equal to staying in a surrounding having 85 dB (A) for 12 hours! 6.8 Case Study: As mentioned earlier, 2 case studies have been incorporated, relating to increasing the market share. They are 1. British Airways – U.K. [Airlines Industry] 2. Optimus - Portugal [Mobile Operator] : 29 :[1] Case Study : British Airways | | Club WorldIn 2000 British Airways introduced 'Club World' which offered a horizontal bed in business class. Market research had identified that customers wanted the opportunity to sleep when they were travelling in business class. Following product development the new flat bed seat was introduced on the London to New York Route in April 2000. British Airways then monitored changes in Market Share over the period Jan 2000 to Jan 2001 as shown below | Following the introduction of the 'Club World' bed in April 2000, British Airways Share of the market steadily increased. In March 2001 the Marketing Director of British Airways presented the above Market Share data as evidence of the success of this particular strategy. | | : 30 : [2] Case study [Optimus, a Mobile operator in Portugal] I highlight below the successful case of Optimus, a Mobile operator in Portugal . I have also included their Business Model in Alex’s Canvas format. How to Increase Market Share with Innovative Customer Value Proposition' How to increase my market share and create new revenue streams' This is a question that keeps many CxO awake! And I believe the answer is not simple. Telecom Market– In the very competitive Telecom Market, The operators are facing price erosion and revenue decline in their traditional voice business, due to, the emerging over-the-top players offering free of charge voice service over the Internet on one hand, and the change in consumer behavior adopting  new communications means on the other hand. This challenging market situation has pushed many operators to think about innovative solutions to address and fight this new threat. I highlight below the successful case of Optimus, a Mobile operator in Portugal. I also include their Business Model in Alex’s Canvas format. Company- Optimus Portugal is an operator in Portugal’s mobile marketplace. As an innovative challenger, it is compelled to think outside the box in attempting to capture new customers as it competes with incumbent market leader TMN and Vodafone. Objective- Optimus wanted to increase both its brand attractiveness and its market share within the youth segment. The goal was to address the unique requirements of the market with an innovative offering in terms of pricing, devices and social community. : 31 : Customer Value Proposition- The solution, which the company calls TAG, bundles a consumer’s mobile and fixed Internet services on the same mobile number for a single monthly fee. The TAG concept was launched – a holistic value proposition with dedicated pricing and services, targeting the teenagers segment The Value Proposition comprises Voice calls among TAG members are free of charge, and TAG users receive truly converged communications. Everything the TAG subscriber can do on the mobile is accessible via the PC: voice calls, SMS, MMS, video calls, instant messenger, voice mail with the same look and feel and the same user experience. At the same time Optimus builds up a new TAG community, in fact a new Social Network, within the offering. This allows Optimus to move in the value chain and compete with the emerging : 32 : 7.0 Conclusions It can be concluded that the Car Manufacturers, or OEMs in the international parlance, must grapple with the reality that customer demand in emerging economies is changing fast. By 2020, lot of consumers in emerging markets like India, will move from Two Wheelers to “Peoples’ Car” and the current small vehicles’ owners will embrace luxury vehicles and green technologies. These customer trends will create tremendous challenges for Indian OEMs, some of them are adduced below. : 33 : 7.1 Challenges for Indian Car Manufacurers: The future belongs to the Indian [Car] customers. Gone are the days when Indian OEMs “dictated” terms. Also, gone are the days that quality is no longer an “USP”, but a “prerequisite” to sustain the demand and to satisfy the customers. This will pose enormous challenge to the car manufacturers, as they have to invest in physical infrastructure, testing facilities (including proving grounds) and importantly in Human Resource development like Training etc. Over the next ten years, the automotive industry, worldwide, will likely see the most dramatic changes in customer buying preferences in its 100-year history. Profound in their nature and implications, these changes will play out differently according to the dichotomy between mature and emerging markets. Customers will fragment into distinctly different segments by 2020. Customer attitudes altered by the recession, of 2008, will continue to evolve in mature markets, while 2 Tier segment shift, as mentioned under 7.0 above, will occur in emerging markets, including India 7.2 The customer dichotomy Segmentation of customers is nothing new to marketers in the automotive space. However in future, the fragmentation of customer needs across the world means that automakers will have to pay more attention to local/domestic demand 7.3 Eight major trends to stimulate demand for Cars In both developed and emerging markets, OEMs should be conscious of the following trends in order to take advantage of the most important opportunities to create demand for cars emerging towards, in the medium term, say by 2020: : 34 : 7.3.1. Conscious consumption – a growing emphasis on value “In India the majority of people want vehicles to commute. They are customers who look for utility.” — Ravi Sud, CFO, Hero Group “Economic crises imbed themselves in the memories of those who live through them”, says Matt O’Leary of Ford. “The global recession will have a lasting impression on consumer behavior.” Even as prosperity returns, the value of money takes on new meaning. As such, the current economic crisis will leave more value-oriented car customers in its wake. In fact, a recent Deloitte Consulting LLP survey indicated there will be a significant shift of purchase priorities. Value and safety will become the most important features. As a result, smaller car models with enhanced safety features will enjoy stronger sales leading up to 2020. Short-term trends support this thesis: most participants in the United States’ ‘cash for clunkers’ program have exchanged SUVs and small trucks for smaller cars. In emerging markets, car ownership is becoming more widespread, and yet the gap between car ownership in major markets such as Brazil, Russia, China, India, and the developed world remains significant. In the United Kingdom, for example, there are 511 cars on the road for every 1,000 citizens. But in high-growth China there are only 22 per 1,000, while in equally booming India, there are only 11 per 1,000 Car ownership in the developing world is set to : 35 : rise. The largest purchasing segment by 2020 will be those customers buying a car for the first time. They, too, are expected to be value conscious. India provides a telling example. “India will have a growing set of young people who will need transportation solutions,” says RC Barghava, Chairman of Maruti Suzuki India. “The needs of these young people are the most critical and OEMs will have to fine-tune their portfolio accordingly”. That said, as in the developed world, cost will not be the only consideration. The expectations of first time buyers in developing markets will likely increase rapidly. Value-oriented models will need to offer safety and technology features commonly associated with today’s premium brands. A variation of this value-perception phenomenon is being seen in China, says Ford’s Matt O’Leary. “In the interior of the country, there has been movement from motorcycles to small cars but price remains the most important factor. But individuals in coastal areas are willing to spend money on the latest and greatest and on a global product. They see themselves as part of the global market.” 7.3. 2. Moving up — the emergence of new wealth in emerging markets The growth of the middle class (and subsequent jump in the number of high-net-worth individuals) in the developing world has been staggering and creates new opportunities for luxury brands whose demand in the developed world is in decline. A recent Deloitte Consulting LLP survey indicated the upper end of the customer base, those individuals with high levels of disposable income, will seek luxury brands with performance features as well as luxury add-ons, such as leather seats, sunroofs, top end audio systems etc. : 36 : 7.3.3. Finance, Finance, Finance ------ Future name of the game: Good financing options, either by the Car manufacturers or by their associates, with affordable interest rates and longer installment period, up to 48 months, will help to fuel the future demand. This will be one of the drivers of demand for Passenger Cars, particularly at the entry level models. 7.3.4. Shades of Green — cost vs. consciousness Higher fuel prices and concerns over global warming have focused attention on cars that either rely less on traditional fossil fuels or use renewable sources of less expensive energy. But there is a notable discrepancy in the perception of the value of these cars. While a majority of U.S. drivers (52 percent) claim a preference for alternative fuel vehicles, only 28 percent would be willing to pay a premium. In India, even fewer respondents (20 percent) were interested in paying an upfront premium for cheaper long-term fuel costs most customers, it seems, do not feel that the savings at the pump are sufficient to offset the higher price of today’s alternatively fueled car. This will prove especially true among first-time car buyers in emerging markets who will always be sensitive to purchase price and lifetime costs. The challenge for OEMs is to achieve manufacturing efficiencies with alternative power train by bringing down the cost of batteries. With considerable government support, many companies are pouring resources into researching this issue. The OEM that develops a battery that is either cheaper or powerful enough to get the customer to pay a premium will find itself with a technology that may become the standard and that OEM will enjoy all the corresponding advantages of being the first mover. In emerging, high-growth markets, consumer preference for green : 37 : vehicles are shaped by local environmental issues and government policy, as well as relative costs of different fuel options. For example, Brazil’s enthusiastic adoption of flex fuel is a direct result of a government initiative to relieve the country of its reliance on petroleum imports. A BMW China senior executive points to an acquisition tax cut on vehicles with engines smaller than 1.6 liters that spurred growth in sales of small-engine cars 7.3.5. Safety first – consumers to be attentive to innovations As technologies evolve, safety remains a primary customer need across all markets. Indeed, a 2008 Consumer Reports survey on car brand perception found that U.S. car buyers view safety and quality as the most important considerations to their final purchase decision. In India, while price and fuel economy are most important, safety falls right behind. It comes as no surprise, then, that consumers surveyed in both the U.S. and India indicated a willingness to pay a premium for features and options such as skid control, telematics, safety devices, and blind spot mirrors. By comparison, the least-valued features are conveniences not associated with safety, such as power lift gates, soft close, or cap-less fuel door systems Consumer interest in safety has prompted government involvement. In the U.S., for example, the National Highway Traffic Safety Administration has introduced a proposal to mandate Electronic Stability Control on all passenger vehicles by the 2012 model year. To meet increasing consumer demand for safety, OEMs will need to focus on developing and providing safety-related features. This will present several challenges to engineers as they try to improve crash safety standards while meeting the need for cheaper, more efficient cars (e.g., smaller and lighter) among value-conscious drivers. These consumers will : 38 : reward car makers who make best use of advanced materials and innovative design 7.3.6. Staying connected — the need to be networked Safety is also an important consideration when it comes to choosing electronic options that enable the driver to keep in touch. Features like automatic crash notification, emergency assistance, and remote vehicle diagnostics spurred strong interest among customers surveyed. Of course, being connected offers several other benefits in addition to safety. Consumers also professed interest in features that: • Reduce distractions (via hands-free calling and access to managed content • Improve navigation (through GPS and traffic updates) • Enhance entertainment (with satellite radio, MP3 connections, and access to digital music) Because of these tendencies, as the economy improves over the next two to three years, an increase in demand for safety-related connectivity will likely be seen across all global markets. OEMs must realize that vehicles exist within an evolving technology ecosystem, one that extends beyond the traditional car. In a decade’s time, for example, the cell phone may contain many of the same navigation, communication, and tracking features currently being developed for automobile use. iPod and MP3 player connectivity are already common features. The car will have to interface with other tools to keep pace with (and leverage) the fast moving consumer electronics industry. The number of potential options is dizzying and OEMs will : 39 : find themselves in the difficult position of having to bet on some at the expense of others. Unfortunately, their ability to bet right will be compromised by the fact that these components increasingly belong to the high-tech industry and not among the core competencies of automakers. To lessen the chance of getting it wrong, it will be essential for OEMs to work with players in high tech to combine their expertise and develop the features customers are willing to pay for. 7. 3.7 The web – mixed reviews for internet as a sales channel “To be successful, car marketers must use the internet to develop virtual showrooms that can be easily navigated by customers.” — RC Bhargava, Chairman, Maruti Suzuki India More and more customers are turning to the internet to purchase cars. The past five years have seen a steady increase in sales volume, with a compound annual growth rate of 14.6 percent in the United States and 20.1 percent in Western Europe. As a percentage of total sales, however, more individuals still prefer to see, touch, and test drive their car before buying. Only 4 percent of total car sales in the United States take place online. While the need to test drive is the major barrier to growing online sales, customers are also hampered by: • An inability to access accurate and complete product and pricing information online : 40 : • Unsuitable interface to negotiate on pricing with dealers • Concerns about delivery • Lack of integration with related services, such as financing and insurance • Low connectivity rates and internet access in emerging markets. Additionally, in many markets dealers wield considerable economic and political clout. Another source of hope for online sales resides in emerging markets such as India and Brazil, where the commoditization of vehicles at the entry-level will reduce the need to compare and contrast or negotiate with a dealer over options and price. But companies should not neglect the web as a sales tool. “Parts and after sale service purchases are already strong online and will continue to grow,” says Daimler’s Jerome Guillen, Director, Business Innovation 7.3.8. Changing preferences — older, more urban consumers As the median age of the populations of Japan, Western Europe, the United States, and Russia creeps upward, car makers will need to address the changing priorities of older drivers in order to gain and retain their business. A recent Deloitte Consulting LLP survey showed that the mature demographic segment in the United States value quality, price, and safety above fuel economy, styling, brand, and even the warranty .In Japan and Russia, ergonomic features have been cited as a selling point for the same segment To reach the mature driver, OEMs will need to focus on the development of user-friendly, intuitive, low-cost vehicles. Vehicles targeted for the older driver will need to be designed with human factors in mind: Easier vehicle entrance and exit, larger displays, improved lighting, and augmented night driving. With : 41 : features designed to augment safety and reliability, these cars will improve the ownership experience compared with current low-cost options. The other important demographic trend is urbanization. Around the world, cities are experiencing strong population growth. In developed countries, the proportion of the population living in urban centers is currently 75 percent, while in the developing world urban dwellers represent 45 percent of the population. However, by 2020, those numbers are expected to rise to 78 percent and 55 percent, respectively. By that same year, there will be 24 megacities with populations of at least 10 million. Since improvements in infrastructure usually lag population growth, increasing urbanization will make city streets more congested, noisy, and polluted. Commute times will lengthen. Those who continue to drive in cities will look for smaller, more fuel-efficient vehicles. But as congestion increases, many customers will abandon car ownership (or leasing) in favor of public transport. Even in these cities, however, consumers will need periodic access to vehicles for trips to outlying areas and other special occasions Where public transit is inadequate, a car will still be the preferred day-to-day option. In many Latin American cities, for example, public transportation is poor enough that people who currently own cars are unlikely to abandon them. In these markets, 70 to 80 percent of vehicles on the road are small and this is not expected to change over the next decade. OEMs will need to evaluate alternate models of mobility and rethink typical vehicle packaging, proportions, and use options for their urban customers. Different markets will need alternatives to the traditional single-owner model. Smart, flexible, user-friendly rental options, such as Daimler’s Car2Go in Germany (launched in 2008)53 and Zipcar in North America, will have to be considered. : 42 : 9.0. Recommendations: Over the next decade, the Indian automotive industry as a whole will experience dramatic transformation. The economic crisis of 2008 has acted as an accelerant, placing pressure on many companies to change; example: introduction of low budgeted car like NANO. Consolidations will leave the industry with fewer global players, from the current 27 manufacturers. Those that remain will look to shift substantial engineering and production to lower cost centers. This move will not only help contain costs (principally, variable labor costs), but it also means that automakers will be able to access valuable talent and respond more easily to the demands of the fastest growing segment of car buyers in emerging markets like India. The cost of manufacturing a Passenger Car in India is 23% higher vis-à-vis China. The reasons being * Lower labour productivity * Higher infrastructural cost * Higher taxes * Cascading impact due to higher taxes The above reasons are reflected in the total production of Four Wheelers in China, as compared to India. China produced, in 2010, 18.3 Million Four Wheelers. While India’s production was just 3.5 Million, in the same period. : 43 : It is sad, that in the Global Competitiveness Survey of 104 countries, India languishes in the 55th place. The concept of attaining competitiveness on the basis of low cost, abundant labour, favourable exchange rates, low interest rates is becoming inadequate and therefore not sustainable. A greater emphasis is required on the development of factors which can ensure competitiveness on a long term basis. Hence, it is the responsibility of all the stake holders (Government, Industry, Dealers, Other institutions like Finance, Insurance) to ensure that the required direction and thrust are given to boost Passenger Car sales in future. Following are some of the specific recommendations that need to be focused on, to increase the market share for Passenger Cars in India; both to Stimulate and Sustain the demand. 8.1 Areas to Focus: The future of Indian auto industry would depend on 1. Developing sustainable supplier base [Components Industry] 2. Lower Cost [as per the above comparison between India and China] 3. Stimulate domestic demand for Passenger Cars [using 8 reasons given under heading 7.3] 4. Economies of scale 5. Conducive Government policies to encourage more investment flow 6. Duty concessions/waivers to import latest “Green” Technology 7. Rationalising duties/taxes on small cars [Refer 7.3.4/ P 34] 8. Rationalising/reducing prices of petroleum products commensurate with international crude oil prices 9. Overcoming infrastructural bottlenecks 10. Technical and Human capabilities development, suitable for Indian conditions 11. Exploit international opportunities for Export : 44 : The key to success is to achieve the “critical mass” that would make Indian auto market competitive and profitable. On the Marketing side, the challenges for the industry, in a nutshell, are 1. Flow of Technology 2. Demand generation 3. Financing arrangement, up to even 48 months, with affordable interest rates 4. Brand building 5. Cost effective “Peoples’ car” which are small, rugged and low cost for rural market 6. Participation in infrastructure building, in conjunction with the Government, for post production activities like distribution of vehicles, dealer development, spare parts back up, service facilities etc.etc. All the above challenges have already been discussed in great detail under various headings, above 11.0 Definitions: Through out this project report, many Marketing terms, metrics and definitions have been used extensively. However, many have different notions and interpretations about various marketing terms like Market, Market Analysis,Market Share etc. Hence the author felt the need to clarify these terms. This project work [analysis, methodology etc.] is based on these definitions. Also the Marketing Metrics have been clarified to have a comprehensive view of the entire concept. : 45 : Market: A Market is defined as a place where buyers and sellers meet. Market Analysis: Market Analysis is a process that seeks to identify and quantify the key features of a market by using a range of Market Research techniques. Based on a clearer understanding of consumers, customers, competitors, distribution channels etc, the business is then able to market more effectively. Market Size: It is measured by the total volume and or value of all sales in the market. Sales volume is measured in terms of the number of units of goods purchased, whilst sales value measures the total amount spent by the customers on the volume of goods sold. Estimating Market size is an essential first step to calculating the Market Share of a business, and of its competitors. . By comparing changes in market size over a selected period, trends in the market can be identified. Consider the below providing actual and forecast figures for the size of the leisure market , expressed in terms of value | The figures suggest a Growth Market with an average annual growth rate of approximately 6%.In the short term growth markets tend to favour the supplier, because there is usually a time lag before the supply side catches up with increases in demand. This in turn tends to reduce the level of competition in the market as buyers focus more on obtaining the product/service rather than shopping around,and suppliers focus less on each other and more on meeting customers' requirements. In the long term a growth market will attract new businesses, and thus increase competition.In a static or declining market, competition is fiercer, and companies can grow only at the expense of others. The result may be price wars, low profits and low (or no) business growth. Using sales value figures by themselves, to identify market trends, can however be a misleading measure of growth or decline, and it is more useful to compare changes in both sales value and volume over time. | | | | | | | | | | Market segmentation is the process of dividing a market into groups, known as segments, of customers with similar needs or characteristics who are likely to exhibit similar purchase behaviour. In segmenting the market the business is acknowledging that different 'types' of buyers may require different products or marketing approaches / marketing mixes.Whilst a mass marketing approach will treat the market as a whole providing one version of the product and one marketing mix for all buyers in the market. Market segmentation enables the business to target different groups of buyers by adapting its product and marketing mix to best suit each targeted segment. A good example of this approach can be seen in the mobile phone industry. | | | Market Share:   It measures the proportion of the total market held by a business, product or brand. The formula for calculating Market Share is presented below Market Share (%) = sales of the business, product or brand / total sales in the market (Sales can be measured either in volume or value to calculate market share) : 47 : By measuring changes in Market Share the influence of variable factors such as economic growth are excluded, and the business is compared directly against its competitors, allowing us to judge more accurately the success or failure of the businesses marketing strategies At first glance, market share appears to involve a relatively simple calculation: “ us/ (us + them)”. But this raises a host of questions. Who, for example, are “they”' That is, how broadly do we define our competitive universe' Which units are used' Where in value chain do we capture our information' What time frame will maximize our Signal-to-Noise-Ratio [SNR] In a metric as important as market share, and in one as closely monitored for change and trends, the answers to such questions are crucial. In this project, I have addressed them and also introduced key components of market share, including penetration share, heavy usage index and share of requirements. The Table-XI is a comprehensive list of definitions, which have been used extensively in this project work. Table – XI   | Metric | Construction | Considerations | Purpose | 2.1 | Revenue Market Share | Sales revenue as a percentage of market sales revenue. | Scope of market definition. Channel level analyzed. Before/ after discounts. Time period covered. | Measure of competitiveness. | 2.1 | Unit Market Share | Unit sales as a percentage of market unit sales. | Scope of market definition. Channel level analyzed. Time period covered. | Measure of competitiveness. | 2.2 | Relative Market Share | Brand market share divided by largest competitor’s market share. | Can use either unit or revenue shares. | Assesses comparative market strength. | 2.3 | Brand Development Index | Brand sales in a specified segment, compared with sales of that brand in the market as a whole. | Can use either unit or revenue sales. | Regional or segment differences in brand purchases and consumption. | 2.3 | Category Development Index | Category sales in a specified segment, compared with sales of that category in the market as a whole. | Can use either unit or revenue sales. | Regional or segment differences in category purchases and consumption. | 2.4 2.5 2.6 | Decomposition of Market Share | Penetration Share * Share of Requirements * Heavy Usage Index. | Can be based on unit or revenue shares. Time period covered. | Calculation of market share. Competitive analysis. Historical trends analysis. Formulation of marketing objectives. | 2.4 | Market Penetration | Purchasers of a product category as a percentage of total population. | Based on population. Therefore, unit/revenue consideration not relevant. | Measures category acceptance by a defined population. Useful in tracking acceptance of new product categories. | 2.4 | Brand Penetration | Purchasers of a brand as a percentage of total population. | Based on population. Therefore, unit/revenue consideration not relevant. | Measures brand acceptance by a defined population. | 2.4 | Penetration Share | Brand penetration as a percentage of market penetration. | A component of the market share formula. | Comparative acceptance of brand within category. | 2.5 | Share of Requirements | Brand purchases as a percentage of total category purchases by buyers of that brand. | Can use either unit or revenue shares. May rise even as sales decline, leaving only most loyal customers. | Level of commitment to a brand by its existing customers. | 2.6 | Heavy Usage Index | Category purchases by customers of a brand, compared with purchases in that category by average customers in the category. | Can use either unit or revenue sales. | Measures relative usage of a category by customers for a specific brand. | 2.7 | Hierarchy of Effects | Awareness; attitudes, beliefs; importance; intentions to try; buy; trial, repeat. | Strict sequence is often violated and can be reversed. | Set marketing and advertising objectives. Understand progress in stages of customer decision process. | 2.7 | Awareness | Percentage of total population that is aware of a brand. | Is this prompted or unprompted awareness' | Consideration of who has heard of the brand. | 2.7 | Top of Mind | First brand to consider. | May be subject to most recent advertising or experience. | Saliency of brand. | 2.7 | Ad Awareness | Percentage of total population that is aware of a brand’s advertising. | May vary by schedule, reach, and frequency of advertising. | One measure of advertising effects. May indicate "stopping power" of ads. | 2.7 | Knowledge | Percentage of population with knowledge of product, recollection of its advertising. | Not a formal metric. Is this prompted or unprompted knowledge' | Extent of familiarity with product beyond name recognition. | 2.7 | Beliefs | Customers/consumers view of product, generally captured via survey responses, often through ratings on a scale. | Customers/consumers may hold beliefs with varying degrees of conviction. | Perception of brand by attribute. | 2.7 | Purchase Intentions | Probability of intention to purchase. | To estimate probability of purchase, aggregate and analyze ratings of stated intentions (for example, top two boxes). | Measures pre-shopping disposition to purchase. | 2.7 | Purchase Habits | Frequency of purchase. Quantity typically purchased. | May vary widely among shopping trips. | Helps identify heavy users. | 2.7 | Loyalty | Measures include share of requirements, willingness to pay premium, willingness to search. | "Loyalty" itself is not a formal metric, but specific metrics measure aspects of this dynamic. New product entries may alter loyalty levels. | Indication of base future revenue stream. | 2.7 | Likeability | Generally measured via ratings across a number of scales. | Often believed to correlate with persuasion. | Shows overall preference prior to shopping. | 2.8 | Willingness to Recommend | Generally measured via ratings across a 1–5 scale. | Nonlinear in impact. | Shows strength of loyalty, potential impact on others. | 2.8 | Customer Satisfaction | Generally measured on a 1–5 scale, in which customers declare their satisfaction with brand in general or specific attributes. | Subject to response bias. Captures views of current customers, not lost customers. Satisfaction is a function of expectations. | Indicates likelihood of repurchase. Reports of dissatisfaction show aspects that require improvement to enhance loyalty. | 2.9 | Willingness to Search | Percentage of customers willing to delay purchases, change stores, or reduce quantities to avoid switching brands. | Hard to capture. | Indicates importance of distribution coverage. | : 55 : Calculation of Lambda: [for emission] Lambda is a derived parameter. Its calculation requires four components of the exhaust gas to be measured simultaneously viz.: 1. Carbon monoxide (CO %) 2. Hydrocarbons (HC ppm)  3. Carbon dioxide (CO2 %) 4. Oxygen (O2 %). and the following Brettschneider Equation) is used to arrive at the final value ********************************* : 56 : 11.0 References: 1. Principles of Marketing by Philip Kotler 2. Marketing Management by Philip Kotler 3. Competitive Strategy by Michael Porter 4. Business Model Ontology by Alexander Osterwalder 5. Financial Times, London 6. Society of Indian Automobile Manufacturers [SIAM] 7. Deloitte Touche Tohmatsu 8. Government of India [Ministry of Heavy Industries]. 9. Google.com 10. Automobilwoche. June 30, 2009 (German) 11. Frankfurter Allgemeine Zeitung. June 22, 2009.(German) 12. Automobile Component Manufacturers’ Association (ACMA) 13. Times of India 14. Cost of Labor – Economist Intelligence Unit, Data Dictionary, 15. World motor vehicle production by manufacturer”. 16. International Organization of Motor Vehicle Manufacturers. 17. Customer preferences based on 2009 Deloitte Internal Automotive Survey (U.S. and India) conducted by Deloitte Consulting LLP. 18. Various other sources