AUTOMOBILE INDUSTRY

STRATEGIES

PRESENTED TO:
MR. P.P.SINGH PRESENTED BY:
(FACULTY, P.C.T.E.) HIMANSHU SOOD
RAJAT GUPTA
SONU NATH
SUMIT THAPAR
RESTRUCTURING

@
PROBLEMS WITH NISSAN
 No shared vision or common long term plan
 Lack of a clear profit orientation;

 Insufficient focus on customers and too much focus on

chasing competitors
 Culture that embodied the Japanese style of management

 Lack of a sense of urgency

 Absence of good product development and marketing,

with little control over finances
 Lack of cross-functional, cross-border, and intra-
hierarchical lines of work in the company
IMPLEMENTING THE NRP
 One of the objectives of the NRP was to reduce the
purchasing costs by 20% by 2002.
 Supply better products and services , raise new expectations
from customers, employees, and other stakeholders.
 In order to reduce purchasing costs, the NRP stated that it
would focus on:
 Centralizing purchasing activity
 Including services in global purchasing strategy
 Decreasing the number of suppliers
 NEW MANAGEMENT
 Clear about the objectives that he wanted the company
to achieve

 Flexible on giving his teams great freedom in choosing

the best courses of action

 Several cross-functional teams with people from

different functional areas, to spearhead the turnaround
 PROFITABLE AT LAST
 Targets achieved before time

 After the implementation of the NRP, Nissan saw its market

share slowly increasing with the launch of new products.

 Increasing its capacity in the U.S and Restoring its once

debt-ridden balance sheet.

 Achieved a minimum consolidated operating margin of 4.5

percent

 Consolidated net automotive debt reduced to less than 700

billion yen by the end of FY 2002
 NO

PRIORITY

FOR

ELECTRIS VEHICALS
 New Fiat-Chrysler strategy is based on important points:
 Group consolidation with review of the entire value
chain, to increase efficiency in operations and
administration

 Increase of production volumes of the key technologies

 Exchange and further development of key technologies

 Global market presence and growth of the brands value

and consumers' perception.
 Fiat-Chrysler will limit investments in electric vehicles in
2011

 Strategy based on integration with Fiat, which includes

exchange of key technologies and market development
target

 Chrysler had already dedicated resources to the

development of electric vehicles

 It gives clear indications of a solid strategy based on

priorities and risks/benefits analysis
 The electric vehicles will be introduced by almost all the
major makers in the next years

 The market of electric vehicles is still very uncertain, both

for the necessary technological developments and for the
unclear acceptance from the consumers

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

will be defined, and this will require more investments in
research and development
 The strategy of Fiat-Chrysler, focuses on creating a
solid group that owns important technologies, which
will continue to be used well beyond 2020

 There will be risks associated to late research and

development of alternative vehicles; however, these
risks can be managed with the view of future
acquisitions or joint ventures, which will always be
possible supposed that the company can offer financial
solidity and innovative technologies. 
 TATA

ACQUISITION

OF

JAGUAR & LAND ROVER

 JLR - HISTOR
 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.
 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)

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

Rover] are worth some $1bn to $1.5bn,” Mr Dorris an
analyst said. “Add a control premium, and the final sales
price could come in at about $2.5bn.”
WHAT MAY HAMPER TATA’S?
 Union leaders of both Jaguar and Land Rover have already
raised concerns about their job security because of the sale

 Jaguar’s sales were down nearly 32 percent for 2006 in the

United States, the company’s largest market

 Jaguar lost more than $715 million in 2006 and was expected
to lose $550 million in 2007
ZERO EMISSION PROGRAM

IN

MADRID
 The Renault-Nissan Alliance is continuing to develop
the plan to promote its future electric vehicles, through
the signing of an agreement with the Madrid city
council

 The agreement has been inked by Alberto Ruiz-

Gallardon, City Councilor, Olivier Paturet, Nissan
Europe Zero Emission Business Unit General Manager
and Jean Pierre Laurent, Managing Director and
President of Renault España S.A.
 Both sides will develop a team that will use Renault’s
Madrid headquarters as a test point for recharging
systems, make efforts to turn Madrid into one of the
first cities to offer a Renault “car sharing” EV
mobility system, promote electric mobility, develop a
car parts charging infrastructure (through a third party
company), involve local institutions in the process,
present the program to fleet owners and analyze
potential incentives.
 This development will be part of the more than 50
agreements signed by the Renault-Nissan Alliance
worldwide in an effort to become the zero emissions
mobility leader.
 COST

REDUCTION

STRATEGY
 Tata Motors was dependent on Ford for a bulk of supplies
of components after it was sold in early 2008

 Tata Motors, which was recently sanctioned an expensive

European Investment Bank loan of £340 million at Libor
plus 6 per cent, is working towards making the two brands
as cost competitive as possible in the long run.
 Tata Motors has put in place an aggressive cost reduction
strategy for its luxury brands Jaguar Land Rover (JLR),
which it acquired from Ford in 2008, involving a substantial
increase in sourcing vehicle parts from low-cost countries

 As part of the plan, a third of JLR’s component

requirements will be sourced from countries such as India,
China and eastern Europe within the next 12 months

 The company plans to introduce some of its long-term

suppliers to a team of executives from JLR visiting India in
search of partners.
 The low cost of skilled labour and cheaper raw material
costs give these countries a 30 to 40 per cent cost advantage
on component prices, which is key to JLR’s new drive to
reduce manufacturing costs

 Apart from the component sourcing plan, Tata Motors is

also working on reducing costs on every front such as in
areas like pension restructuring, employment costs for new
recruits, a plant closure and improved focus on IT
infrastructure\

 The company has already reduced the employee headcount

to 14,000 from 16,000 since the takeover
 BAJAJ AUTO LTD.:

OVERTAKEN IN THE
INDIAN SCOOTER MARKET
 INTRODUCTION TO BAL
o Founded in 1926 by Jamnalal Bajaj

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

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

o Business continued till 1959.

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

three-wheelers.

o In 1960, BTCL was renamed Bajaj Auto Ltd

o Entered into a technical collaboration with Piaggio for the
manufacture of scooters

o started manufacturing Vespa brand scooters at its plant near

Pune, Maharashtra

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

early 1970s, BAL started manufacturing scooters under the
Bajaj brand.

o The Chetak, BAL's first scooter model under the Bajaj brand,
was introduced in 1972
 GROWTH OF TWO WHEELER
MARKET
o In the 1970s and 1980s, scooters dominated the Indian two-wheeler
market

o Most middle-class Indians preferred scooters because of their

durability, low maintenance costs, and versatility

o The Bajaj Chetak name became synonymous with scooters

o motorcycles available in India were heavier and not as fuel efficient

as scooters and were also costlier.
 BAL AND THE INDIAN
TWO-WHEELER MARKET
o Between the mid-1950s and 1980s, the Indian industry
operated under “License Raj”

o Entities were required to secure licenses from the GOI

o The production capacity was also determined by the GOI.

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

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

in 1992

o Period also saw a steep rise in fuel prices

o Even as late as 1997-98, the scooter segment was the largest

sub-segment in the two-wheeler market

o Scooters, with 42% of the market (in terms of unit sales), were
followed by motorcycles (37%), and mopeds (21%
 FOLLOWING THE
'MOTORCYCLE WAY'
o Late 1990s, the Indian two-wheeler market witnessed a shift in
consumer preferences

o Popularity of geared scooters began to wane while that of

motorcycles soared

o There were various reasons for the shift -India was undergoing
a demographic change, with the proportion of younger people
in the population growing significantly
o While these changes were taking place in the market, the
features of scooters, especially those of the Bajaj Chetak,
remained essentially unchanged.

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

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

Hero Honda

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

preferences shifted to motorcycles, the company was faced
with declining sales and revenues
o In an attempt to recapture market share, BAL decided to
reorient its business, launching a series of new motorcycle
models, which halted the downward trend in sales

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

scooter models and upgraded existing ones.

o However, with the introduction and subsequent popularity of

Honda Motorcycle and Scooter India (HMSI)7 scooters,
especially the Activa, a gearless8 scooter, BAL lost its
dominance over the Indian scooter market as well.
o In January 2006, Bajaj Auto Limited (BAL), a major Indian
manufacturer of two- and three-wheelers, announced that it had
stopped production of Bajaj Chetak, its flagship scooter model.
 TOYOTA'S

GLOBALIZATION
STRATEGIES
INTRODUCTION TO TOYOTA
o Toyota's history dates back to 1897, when Japan's Sakichi
Toyoda (Sakichi) diversified from his traditional family
business of carpentry into handloom machinery

o He founded Toyoda Automatic Loom Works (TALW) in

1926 for manufacturing automatic looms.

o Sakichi invented a loom that stopped automatically when

any of the threads snapped.
o This concept (designing equipment to stop so that defects could
be fixed immediately) formed the basis of the Toyota Production
System (TPS) and later became a major factor in the company's
success.

o In 1933, Sakichi established an automobile department within

TALW

o Tthe first passenger car prototype was developed in 1935.

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

enter the automobile business, and this led to the establishment
of Toyota in 1937.
 EARLY GLOBALIZATION
EFFORTS

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

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

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

production capacity to 2 million units by 1998

o As part of the localization efforts, Toyota focused on increasing

overseas production significantly by establishing new plants and
expanding the capacity of the existing plants
o Apart from this short-term global business plan, Toyota also
came up with a long-term global business vision in June 1996,
named the 'Global Vision 2005.

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

competitive edge in technology and accelerating globalization,
while sustaining market leadership in Japan, by reclaiming its
above 40% market share

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

on increasing the production of automobiles in the areas where
they were sold...
 DOMESTIC PROBLEMS &
SOLUTIONS
o Domestic sales has started declining

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

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

o According to industry observers, the above scenario was due

to a host of reasons such as excessive capacity, choosy
customers, surplus workforce and intensified competition
within Japan.

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

company's total sales, as compared to 52% in 1990.
o Also, Toyota's Japan sales contributed to a very small share of
its total profits.

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

followed by Europe.

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

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

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

were more popular than the ones offered by Toyota.
o According to reports, Japanese youngsters felt that Toyota cars
'lacked attitude.

o Toyota realized that by losing its young customers to other

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

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

the company had failed to give them zippy compact minivans
and sports utility vehicles.
 THE SECOND PHASE OF
GLOBALIZATION
o Cho decided to focus more on localization

o Decided to provide its customers with the products they

needed, where they needed them

o Besides focusing on increasing the number of manufacturing

centers and expanding the sales networks worldwide, Toyota
also focused on localizing design, development and purchasing
in every region and country...
 THE 2010 GLOBAL VISION

o In April 2002, Toyota announced another corporate strategy to

boost its globalization efforts.

o This initiative was aimed at achieving a 15% market share

(from the prevailing 10%) of the global automobile market by
early 2010, exceeding the 14.2% market share held by the
leader GM.
THE GLOBALIZATION PAY-OFF
o Toyota was present in almost all the major segments of the
automobile market

o while global vehicle production increased by 3.3 times since the

early 1960s, Toyota's production had increased by 38 times.

o As a result of its localization initiatives, Toyota had 45

manufacturing plants in 26 countries and regions by this time,
and sold vehicles in 160 countries
 GM TRADEXCHANGE
 Lacking in innovation

 Huge stock at factory premises and dealer’s doorsteps

 Pioneer in e-supply chain management

 Launched in 17th Jan, 1999

 TATA DAEWOO
 Management conflict in Daewoo

 Threat over Daewoo’s technology

 Strategy 1: humble attitude

 Strategy 2: appointment of excellent management

 Strategy 3: efforts for mutual prosperity