AUTOMOBILE

INDUSTRY
(INDIA)ANALY
SIS USING
PORTER’S
MODEL

MARKETING
MANAGEMENT
(MGT -514)

Submitted To:-
MS. Kanika Jhamb
Submitted By:-
Prateek Mahajan
Sec-A17B1
Roll No.16
Reg.No-7470070109
AUTOMOBILE INDUSTRY:-

The Automobile industry in the Republic of India is one of the largest in the world. It is the
world's second largest manufacturer of motorcycles, with annual sales exceeding 8.5 million in
2009. India's passenger car and commercial vehicle manufacturing industry is the seventh largest
in the world, with an annual production of more than 2.6 million units in 2009. In 2009, India
emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea and
Thailand.
Following India's growing openness, the arrival of new and existing models, easy availability of
finance at relatively low rate of interest and price discounts offered by the dealers

and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian
automobile industry.

INTRODUCTION TO COMPANIES:-

MARUTI UDYOG LIMITED:-

Maruti Suzuki India Limited (Hindi: मारुति सुज़ूकी इंडिया लिमिटे ड) a partial subsidiary of
Suzuki Motor Corporation of Japan, is India's largest passenger car company, accounting for
over 45% of the domestic car market. It was the first company in India to mass-produce and sell
more than a million cars. It is largely credited for having brought in an automobile revolution to
India. It is the market leader in India and on 17 September 2007, Maruti Udyog Limited was
renamed Maruti Suzuki India Limited. The company's headquarters are located in Delhi.
PRODUCT LINE:-

1. 800 (Launched 1983)

2. Omni (Launched 1984)
3. Gypsy (Launched 1985)
4. Alto (Launched 2000)
5. Swift (Launched 2005)
6. Estilo (Launched 2009)
7. SX4 (Launched 2007)
8. Swift DZire (Launched 2008)
9. A-star (Launched 2008)
10. Ritz (Launched 2009)
11. Eeco (Launched 2010)
12. Maruti New Wagon R (Launched 2010)

HYUNDAI:-

Hyundai Motor India Limited is a wholly owned subsidiary of the Hyundai Motor Company in
India. It is the 2nd largest automobile manufacturer in India after Maruti Suzuki.
Hyundai Motor India Limited was formed in 6 May 1996 by the Hyundai Motor Company of
South Korea. When Hyundai Motor Company entered the Indian Automobile Market in 1996 the
Hyundai brand was almost unknown throughout India. During the entry of Hyundai in 1996,
there were only five major automobile manufacturers in India, i.e. MUL, HM, PAL, TELCO and
M&M. Daewoo had entered the Indian automobile market with Cielo just three years back while
Ford, Opel and Honda had entered less than a year back.
HMIL's first car, the Hyundai Santro was launched in 23 September 1998 and was a runaway
success. Within a few months of its inception HMIL became the second largest automobile
manufacturer and the largest automobile exporter in India.
HMIL has two manufacturing plants in Sriperumbudur, Tamil Nadu capable of producing
600,000 vehicles annually.

PRODUCTLINE:-

1. Hyundai Accent (Launched 1999)

2. Hyundai Santro Xing (Launched 2003)
3. Hyundai i10 (Launched 2007)
4. Hyundai i20 (Launched 2008)
5. Hyundai Sonata Transform (Launched 2009)
6. Hyundai Verna Transform (Launched 2010)
Porter’s Five Forces Model:-

Porter's five forces is a framework for the industry analysis and business strategy development
developed by Michael E. Porter of Harvard Business School in 1979.

The five forces are:-

 The threat of entry of new competitor

 The threat of substitute product

 Bargain power of suppliers

 Bargain power of buyers

 Intensity of competitive rivalry

COMPETITORS:- This describes the competition between the existing firms in an industry.
The current scenario, the small car market in India is very competitive with players like Maruti
Suzuki, Tata Motors, Hyundai etc. which was pretty much dominated by Maruti with the launch
of 800 which played a great role in putting India on wheels. Now to be competitive in market
other companies have to either slash rates of their existing model or have to go back to the
drawing board and build again.

BARRIERS TO ENTRY :-

Time and cost of entry – Time is most essential thing while launching a product in any market.
The launch of the small cars is quite viable as the demand of the small car is on the rise in the
market. By the cost of the entry we mean the initial capital required to set up a new firm, and if
the cost is less the chances of the new entrant becomes low to compete with the existing product.

Here Mul and Hyundai are both established brands in the Indian market which has a big product
line and both concentrates on the small segment fuel efficient cars.

Knowledge and Technology - Ideas and Knowledge that provides competitive advantage over
others when patented, preventing others from using it and thus creates barrier to entry.
The HYUNDAI/MARUTI UDYOG have great knowledge/ experience in the automobile
industry . Therefore if the new company such as Bajaj have to launch its car in the 2.5 to 3lakh
segment it will be very difficult to compete in knowledge and technology with the giants like
Maruti and Hyundai who have a lot of experience in this car making industry.
Product Differentiation and Cost Advantage – The new product has to be different and
attractive to be accepted by the customers. Attractiveness can be measured in the terms of the
features , price etc.
At this level the price of the Santro in the case of HYUNDAI and MUL 800 that have been
already successful in attracting so many customers in India with its price and reliability and
above all this, the image and trust the name HYUNDAI/MARUTI carries with itself.
These both companies have adapted cost leadership technique as the price of the cars are
economical and have also expanded manufacturing of the cars to achieve economics of sale.

Access to Distribution Channels – When a new product a launched a well developed

distribution is must for its success. The MUL motors had a advantage of well established
distribution channel across the world.
 600 New car sales outlets covering 393 cities.
 265 ‘Maruti True Value’ outlets spread across 166 cities.
 2628 Maruti Authorized Service Stations, covering 1220 cities

BARGAINING POWER OF BUYERS:-

Number of customers/ Volume of sales - If there are few buyers then they are able to dictate the
terms. They pull down the cost by Bargaining. The bargaining power of buyer is high as there
are lot of choice available to the buyer and the service do not vary from one manufacturer to the
other. They force the manufactures to improve the quality.

As the automobiles companies in India knows that maximum Indian population is middle class
and therefore almost all the companies target this middle class people . Therefore there is a huge
competition in this segment and a big bargaining power is available to the buyers.

HYUNDAI and MUL both very old automobile brands in India almost around 30 years old who
have already captured middle class hearts by their reliability and economic cars. Therefore there
is a very tough competition for other car brands like NISSAN,CHEVROLET etc to come up to
the level and build their belief in the heart of middle class people.

Due to this big competition and lot many new companies coming to the Indian market there is a
huge bargaining power for buyers and therefore every company is tending to give a lot more at
genuine prices and takes the help of various promotion techniques like:-

 Reintroducing of new models with new interiors and shape

 like free insurance, services, accessories on purchase
 gifts like luggage bag, gold coin ,watches etc
 trade shows
 number of workshops like Maruti has 2628 no of workshops in 1220 cities.
  Persuading advertisements in TV, radio, internet etc.
 Sponsorships
 Introduction of driving schools

BARGAINING POWER OF SUPPLIERS :-

Number and Size of Suppliers – A company to manufacture its products requires raw material,
labor etc. If there are few suppliers providing material essential to make a product then they can
set the price high to capture more profit. Powerful suppliers can squeeze industry profitability to
great extend.
The Maruti/Hyundai car has more than 128 suppliers in all and the major portion of the building
cost of the car is the parts supplied by the suppliers.

Unique Service / Product – Supplier’s products have few substitutes. Supplier industry is
dominated by a few firms. The some parts of the car are obtain from the supplier who
themselves are big enough and limited substitutes are available against them. So the entire
production line depends upon them only.

Ability to substitute – Supplier’s products have high switching costs. In many case even when
substitute are available it’s not that easy to opt for substitute as the next product in the assembly
line depends upon it. If the change in any part is brought, then the long list of depended parts
also have to be changed , which in most cases is not feasible to do.

THREAT OF SUBSTITUTES :-

Price band - The threat that consumer will switch to a substitute product if there has been an
increase in price of the product or there has been a decrease in price of the substitute product. If
the price of the ACCENT/ESTEEM car will increase the main expected customers ie the one
switching from economical cars like SANTRO/800 might not move .

Substitutes performance -The performance of the substitute sector will also play a important
role in the success of these cars . for ex
The success of the electric car segment with player like REVA can effect the demand of such
cars.

Buyers willingness – Products with improving price/performance tradeoffs relative to present

industry products. It will determine the willingness of the buyer to buy the Maruti or Hyundai
car. They might be willing to go for the test products like spark which is from CHEVROLET
family

THREAT OF NEW ENTRANTS:-

As already discussed, a large number of companies are entering in Indian market as India is one
of the fastest growing automobile market. Companies such as NISSAN,GM,VOLKSWAGEN
etc have all entered INDIAN market and trying their best to increase their market share.

For ex if the new company such as Bajaj have to launch its car in the 2.5 to 3lakh segment it will
be very difficult to compete in knowledge, pricing, experience and technology with the giants
like Maruti and Hyundai who have a lot of experience in this car making industry.

Entry barriers for new companies:-

Maruti and Hyundai are very old brands of the Indian market . They have well established
network of distributors, service centers and moreover the spare parts of these two brands are
quite cheap as compared to the other car brands.

These two brands have highly hit the hearts of the Indian middle class because of their reliability
and economisibility.

Therefore these two companies have created a huge entry barrier for the new entrants.

Exit Barriers for present companies:-

These are barriers that the companies have to face when they want to leave a market or industrial
sector.

Firstly the high investment which these two companies have made in the Indian market such as
numerous number of service centers , outlets , share market etc

Secondly a numerous number of cars of these companies are running on Indian roads which
require maintenance, spare parts , servicing etc. So this is a big hindrance as the company have to
provide all these services to it’s customers.

For ex the case that happened with Daewoo . When the company dropped, the customers with
cars matiz and cielo had to face many problems.
REFERENCE:-

http://www.economywatch.com/business-and-economy/automobile-industry.html

http://www.scribd.com/doc/20230666/Maruti-Suzuki-India

http://en.wikipedia.org/wiki/Maruti_Suzuki

http://en.wikipedia.org/wiki/Hyundai_Motor_India_Limited